Kentucky Casino Legislation Offered

Kentucky Casino Legislation Offered
Photo: Amanda Duckworth
Kentucky Gov. Steve Beshear announces legislation to authorize VLTs.

With several Kentucky legislators and chamber of commerce members standing behind him, Kentucky Gov. Steve Beshear unveiled legislation Feb. 14 calling for a constitutional amendment to allow for up to 12 casinos--seven at racetracks and five at non-racetrack locations.

The five non-track gaming halls would be subject to voter approval in the cities or counties in which they are proposed. The racetracks wouldn’t need local approval unless they decided to place casinos in other locations. The free standing licenses will be granted via a competitive bid process.

“For nearly 15 years, this issue has been discussed, debated and yet, deferred,” Beshear, a Democrat elected in 2007, said during a press conference in the state capital at Frankfort.

“Today, I am taking action and responding to the wishes of the vast majority of  Kentuckians by sending to the General Assembly legislation that will give our citizens the opportunity to do as they have demanded--let their voices be heard on whether or not to change the state’s constitution to have limited expanded gaming.

“Public opinion research shows that more than 80% of Kentucky voters want the right to vote on this issue. It’s past time we acted on that demand and be responsive to the people.”

Representative Daryl Owens will sponsor the constitutional amendment legislation for expanded gaming, and Rep. Charlie Hoffman will sponsor an enabling legislation that would translate the amendment into a working plan.

The counties that could get casinos under the legislation are Daviess; Kenton or Campbell; Boyd or Greenup; Christian; and either Laurel or Whitley. Daviess is home to Owensboro, which is located about a half-hour from Ellis Park. Kenton and Campbell counties are adjacent to Boone County, where Turfway Park is located.

The tracks would pay license fees of up to $100 million. There are eight licensed tracks in the state; Keeneland and The Red Mile in Lexington would share a license.

The state’s take would amount to about 35% of gross casino revenue, with the racing industry’s share at roughly 15%. Casino operators would get almost 50%.

Many states lump the amount racing gets for purses, breed development, and other programs into the tax. In that case, the effective tax rate in Kentucky would be 50%.

The legislation allocates the state’s share of revenue. Education would get 50%, health care 20%, 5% would go to cities and counties, 3% to host jurisdictions, and 17% would be allocated for other programs. Treatment programs for compulsive gambling would receive up to $2 million each fiscal year.

The fiscal impact of the proposed gaming legislation indicates total receipts for fiscal year 2009 from racetrack application and license fees would be about $500 million. The estimated gaming receipts for fiscal year 2010, with the addition of free standing facilities, would be about $482 million, with the majority of those receipts from license fees and wagering taxes, according to figures provided by the state budget office.

"In five years, when all the facilities are up and running, we predict we will realize almost $600 million in tax revenue," said Beshear.

There would be a seven-member gaming commission with four-year terms, appointed by the governor and approved by the Senate, which would hire an executive director to oversee the day-to-day operations.

The second source of revenue would come from a fixed percentage of taxes. The tax rate for racetracks is 25% of adjusted gaming revenue for the first five years and 35% thereafter. In addition to the tax rate, there is a 15.65% supplemental charge that would be earmarked for purses, breeders incentives, and other horse related programs.

The tax rate for free standing facilities will also start at 25% for the first five years and will be 35% thereafter. The 15.65% supplement paid by those facilities will go directly to the commonwealth of Kentucky.

"So every facility will be competing on equal terms of the taxes they have to pay," said Beshear. "The bill is structured to give a financial boost to the equine industry. Our signature industry is under increasing pressure, and they need to be able to look forward to bigger purses and bigger incentive bonuses." 

Beshear said track licenses are being sold initially for a 10-year period, after which they will be up for renewal for a small fee. During that time, the facility will be reevaluated to make sure it still meets all the requirements outlined in the original legislation. If a facility wishes to transfer its license, it may be subject to a supplemental license fee. Licenses can also be suspended or revoked if the facility doesn't continue to meet the originally outlined requirements.

"The Governor’s plan launches us on a process of putting Kentucky’s horse industry on equal, competitive footing with racing industries in an increasing number of states that have already implemented casino gaming at racetracks," Churchill Downs Inc. CEO Robert Evans said in a statement. "It will also keep Kentucky revenues in Kentucky and attract new revenues to the Commonwealth from neighboring states that have had gaming for several years. These additional revenues are required to fund important programs and projects throughout Kentucky."

The jury is out on whether there is enough support in the General Assembly to pass the measure. It’s fairly clear that there aren’t enough votes in the Republican-led Senate.

The legislation and companion bill (HB 537 and HB 550) are available at the Kentucky General Assembly Web site.

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