Governor fires gaming commission; Move raises ire of local leaders and legislators

The battle lines have been drawn between Colorado Governor John Hickenlooper and the Colorado gaming industry.

As a result, some local legislators are raising questions about the governor’s agenda, and his assertions of a business-friendly administration. Already, his actions have prompted outrage by industry officials, local leaders and lawmakers. In addition, political and legal observers are concerned about violating the checks and balances of the current system.

In an unprecedented move, Hickenlooper last week fired the entire Colorado Limited Gaming Control Commission and announced new replacements. These actions are linked to his displeasure over the previous commission’s decision to provide a slight tax cut on casino winnings. With these terminations, the stage is now set for the tax cut action, which amounted to five percent on various levels of winnings, to get reversed. The tax cuts, which would amount to about $5 million, took effect July 1.

In announcing the move, Hickenlooper maintained that these cuts are outrageous, considering that a number of new casino projects are moving forward and millions of gaming-related investment is occurring throughout the gambling towns.

“We don’t believe the Colorado gaming industry should be judged reasonably unprofitable or unhealthy at a time when some casinos are making major multi-million-dollar investments in one of the worst economic periods in our nation’s history,” said Hickenlooper in an prepared statement. “Gaming should be subject to the same risks and rewards of operating and expanding as other industries that don’t have the same ability to change their tax rate based on market conditions. Colorado casinos pay among the lowest tax rates in America, and to lower them even further in these times of unmet needs in local communities makes it appear they are diverting their fair and rightful obligation onto their neighbors in the rest of the state.”

As a former business owner, Hickenlooper also stated that the tax cut move offended him.

But the governor’s actions, the first time an entire gaming commission has been removed in the history of limited stakes gambling, have generated much controversy.

State legislator Carole Murray, who represents Teller and Douglas counties, strongly opposed the move.

“This appears to be an arbitrary move by Gov. Hickenlooper,” said Murray. “What should always be of concern to whoever is serving on the gaming commission is the health and welfare of the Colorado gaming communities –the jobs that are created there, the families that are supported by those jobs and the economies that rely on the gaming industry.”

Michael Smith of the Double Eagle casino, who serves as president of the Colorado Gaming Association, expressed similar sentiments and questioned the merits of judging an entire commission based on one decision. He also advised the new commission members to evaluate the plight of the gaming industry, prior to changing the tax rates.

Industry proponents note that the commission’s original decision, which occurred in May, followed hours of testimony. The main evidence that swayed the commission dealt with statistics, indicating that casinos are incurring an average annual loss of $11 million. Although a few casinos have fared quite well, the industry has gotten clobbered by the smoking ban, economic recession and more competition from other states. In Cripple Creek, the town’s betting device lineup has shrunk by nearly 30 percent.

But some major entities that take a portion of the casino taxes, such as the Colorado Historical Society and community colleges, weren’t convinced. They tried to get the commission to reverse its tax cutting decision. The commission, though, rejected their request, saying the industry needed a tax break.

Locally, Hickenlooper’s decision has posed many question marks, especially with area governments planning for 2012 expenses. Local government leaders had previously supported the commission tax-cutting action, citing the desire to have a strong industry. And this support was expressed, even though several local governments would receive less money through the changes.

“I don’t like the way he (John Hickenlooper) handled this at all,” said Jim Ignatius, the chairman of the Teller County Commissioners, who also serves on the advisory board that evaluates gaming impacts. “He can do whatever he wants, but I don’t agree with this. This is a pretty blatant move. I guess we have different philosophical views about how to raise revenue. Their (casino) proceeds could go up with the lower taxes.”

And contrary to Hickenlooper’s statements, Ignatius, who attended several hearings that determined the tax rate reduction, said a pressing point was made to try to make Colorado casinos more competitive with gaming establishments in other states. “They (the gaming commission) made this decision following two months of testimony. And for doing their job, they were fired,” added Ignatius.

As for impacts to Teller County with less casino tax money, Ignatius said the reduction would be extremely small.

Cripple Creek City Administrator Ray White told the council last week that this tax cut is now in limbo. And as the city enters its budget season, he said the town isn’t sure whether it needs to make plans for going without an additional $100,000 (money it would lose under the tax cuts).

The new commission members include: Charles Murphy of Colorado Springs, Adams County Sheriff Douglas Darr of Thornton, Jannine Mohr of Loveland, Robert Webb of Golden and Lowell Hutson of Denver.

Of the new appointees, Murphy is the most well-known in the local region. He is a key leader of the El Paso County Democratic Party and has done development work in Woodland Park.