Cincinnati
Enquirer...
Construction halted
on Cincinnati, Cleveland casinos
May 11, 2011
DOWNTOWN – Developers indefinitely halted construction of casinos in
Cincinnati and Cleveland on Wednesday as an impasse with Ohio officials
over future taxes escalated.
Casino developer Rock Gaming and its partner Caesars Entertainment said
it makes no sense to continue construction without knowing how much in
taxes they ultimately will have to pay.
“This is not an ultimatum – it’s just where we are,” Rock Gaming
president Matt Cullen said. “We’re doing this very reluctantly, but
felt we needed to do it given the uncertainty. There’s no sense in
spending money that could be wasted money.”
Last week, the Republican-led Ohio House of Representatives approved a
proposed budget that includes a key tax rule that would mean a much
larger bill for casinos under the state’s commercial activity tax (CAT).
Casinos also are facing off against Republican Gov. John Kasich, who
has criticized the 2009 constitutional amendment that legalized casinos
as a “raw deal” for Ohio. Kasich has hired consultants to explore his
tax strategy and other gambling policies.
The constitutional amendment specified that casino tax proceeds –
estimated then at $650 million a year – would go to Ohio’s cities,
counties, school districts and law enforcement efforts. Jurisdictions
already have discussed spending the money on everything from parks to
textbooks to sports stadium costs to Cincinnati’s streetcar.
Cullen said Wednesday that uncertainty over future taxes makes it
unwise to establish a physical footprint for Cincinnati’s downtown
casino at Broadway Commons. Depending on how the tax questions are
resolved, Rock Gaming could be forced to cut back the size of the
planned $400 million, 350,000 square-foot complex, Cullen said.
The announcement idles hundreds of construction jobs. Construction
teams were set to begin installing pilings and pouring concrete for the
foundation in the next several days.
Last month, Rock Gaming canceled a key steel order that delayed the
2012 opening date of Cincinnati’s casino until early 2013.
The next step will be for Kasich’s consultants to devise the governor’s
gambling strategy for the state and the General Assembly to complete
its budget process, Cullen said. He said Rock Gaming will oppose
lawmakers’ bid to tax betting with the CAT tax, but stopped short of
saying the developer will sue.
Ohio’s other casino developer – Penn National Gaming Inc., which is
building casinos in Columbus and Toledo – said last week it might file
a lawsuit to fight the measure, which hasn’t been considered yet by the
state Senate. Construction is continuing on those casinos.
Cullen said Rock Gaming hopes to end the dispute as soon as possible
and resume construction.
Ohio voters authorized the four casinos in 2009 via an amendment that
stipulated casinos would pay a 33 percent tax on gambling revenue,
traditional business taxes and a one-time $50 million license fee each.
Legal experts say the amendment is carefully worded to block additional
taxes and fees, but Kasich and other Ohio officials have advocated
getting more money from the casinos.
Kasich’s office said Wednesday that it’s awaiting the findings of its
consultants.
“The state has hired gaming consultants to ensure that Ohio taxpayers
are being treated fairly, and we look forward to hearing their
recommendations,” spokesman Rob Nichols said in a statement.
“The governor doesn’t oppose gambling and wants the casinos to be
successful, and we are confident that a resolution can be reached that
will be in the best interest of Ohioans. Ohio’s gaming laws have been
cobbled together over decades, without regard for how different types
of gaming fit in with or impact others, and therefore a comprehensive
policy will help inform the governor’s decisions moving forward.”
Rock Gaming officials have become increasingly vocal in the past two
months as Ohio officials have raised questions about how to get more
taxes out of casinos. The developers say the questions have complicated
financing for the casino construction projects.
Specifically, the House seeks to apply the 0.26 percent CAT tax to
total betting at Ohio’s four planned casinos rather than just net
losses by gamblers, the industry’s standard definition of revenue. If
Ohio enacted the proposal, it would mean a CAT tax bill for all four
casinos possibly 10 times higher than the $5.2 million developers
envisioned.
On Wednesday, Rock Gaming said the House vote and discussions of higher
taxes “have created an environment of uncertainty concerning the
projected economic vitality of our planned developments in both
Cincinnati and Cleveland.”
Read it at the Cincinnati Enquirer
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