PA Study: Negative Impact of Table Games

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Edited Pennsylvania Equine Coalition release

A study commissioned by the Pennsylvania Equine Coalition contends that the introduction of table games at Pennsylvania casinos and racinos will result in a decline of slot machine wagering of between 8% and 13%, potentially resulting in a decline in state revenues. 

According to a release from the organization, the study noted that different tax structures for slot machines and table games could adversely impact overall state revenues as well as funds designated for the Pennsylvania equine industry. The study by Thalheimer Research Associates was expected to be presented to legislators Aug. 12 at a House of Representatives’ Gaming Oversight Committee hearing.

"An earlier study funded by some casino operators utilized projections to suggest that slots revenue would increase with the introduction of table games," said Joe Santanna, president of the National Horsemen's Benevolent and Protective Association, in a statement accompanying the announcement of the study results.  "In fact, a comparative analysis of other jurisdictions utilizing actual outcomes clearly shows that the introduction of table games will decrease slot machine play by between 8% and 13%. 

That decline, combined with the tax structure contained in SB 1033, will result in adverse impacts on state revenues and funds designated for the state and the state’s equine industry, while substantially increasing the revenues retained by facility operators. Table games legislation which does not maintain the state’s share and protect the Race Horse Development Fund is a loser for the state and it is a loser for the equine industry."

The study, titled "An Analysis of Slot Machine and Proposed Table Gaming Legislation," was prepared by Thalheimer Research Associates at the request of the Pennsylvania Equine Coalition. Members of the Coalition include the Pennsylvania Thoroughbred Horsemen’s Association, the Pennsylvania Horsemen's Benevolent and Protective Association, the Pennsylvania Horse Breeders Association, the Pennsylvania Harness Horsemen’s Association, Standardbred Breeders Association of PA, and the Meadows Standardbred Owners Association. 

"Current table games legislation misguidedly sets different tax rates for slot machines and table games, creating the potential for lost state revenues and declines in funds for the equine industry," said Santanna.  "Legislators need to take a long, hard look at how these tax structures will adversely impact state revenues and the horse racing industry in Pennsylvania."

According to the release, Under Act 71, a percentage of gross terminal revenues from slot machines go to the Race Horse Development Fund, which supports an array of programs that underwrite various aspects of thoroughbred and harness racing in Pennsylvania, including increased purses and breeding incentives.  Current table games legislation contain no provisions to fund the equine industry from table games.

"The study also found that the horse racing industry faces projected declines in on-track wagering with the addition of table games at racinos," said Santanna.  "Decreased on-track wagering and decreased slot machine wagering – which funds the Horse Race Development Fund – means current table games legislation, could be disastrous for the horse racing and breeding industry in Pennsylvania."

The study found that only one of the 13 states that permit both slot machines and table games –West Virginia -- makes a distinction between taxes on table games and slot machines.  Part of the study examined the recent history of Mountaineer Casino Racetrack and Resort in West Virginia and highlighted the hazards of assigning different revenue shares.  According to the study, "if revenue shares to recipients from table game revenues are different that those from slot machine revenue, the addition of table game revenues may not be beneficial to those slot machine revenue recipients receiving a lower share of table game revenues than they currently receive from slot machine revenues."

Santanna also noted that because the projected 8% to 13% declines in revenue were based on comparative analysis in other jurisdictions that did not have electronic table games – among popular "slot machines" in Pennsylvania – slot machine revenues decreases could be even greater in Pennsylvania as players migrate away from those machines to true table games.  He noted that the proposed differing tax rates could even provide an incentive for casino operators to eliminate virtual table games and replace them with standard table games, which would be taxed at a lower rate and a greater loss to the state.

Santanna also took aim at operator claims that table games require increased infrastructure investment and increased manpower costs, an argument they have made in an effort to obtain lower tax rates for table games. 

"Operators claim that a lower tax rate is needed to offset the higher costs associated with table games but fail to quantify the incremental operating costs for table games above those in place for slots," said Santanna. "Operators also claim that lower taxes are needed to provide them with incentives to expand their facilities with hotel, convention center, retail stores, and other amenities.  But in many cases, these are the same amenities these operators announced as part of their applications to obtain slot licenses.  If the build out of these facilities were promised under their original slots license applications, why are they now conditional on table games and low tax rates?"