Hick “Goon Squad” Reverses Gaming Tax Relief

Denver Post file photo

by Rick Langenberg:

 

Local leaders disappointed

The Colorado Gaming Commission has displayed their pro-John Hickenlooper political colors by reversing a previous $6 million tax cut granted to local casinos. And once again, the actions of the governor’s administration are raising a red flag among elected leaders, who are questioning Hickenlooper’s so-called business-friendly platform. One critic even referred to the commissioners as Hick’s “Goon Squad.” In a decision that left local political and business leaders disappointed but not that surprised, the Colorado Limited Gaming Control Commission last week reversed the five percent tax reduction and set the annual rate at what it was prior to a verdict made by a previous board.

These earlier commissioners received their red slips by Hickenlooper due to their decision to offer Colorado casinos tax relief last year. The governor was outraged over this move, and in an unprecedented move, fired all the commissioners and replaced them with a new board in early July 2011 The new commissioners then decided not to make any changes until the regular tax hearings occurred this spring. But apparently, the tax relief party is now over. In a sternly worded decision, Commission Chairman Robert Webb maintained that the original tax rate, which slams large gaming establishments with possibly a 20 percent levy on their accumulated winnings, maintained that the annual tax rates are below that of other states. “We have packaged a very, very attractive regulatory and taxing environment for the industry, especially when you look at other jurisdictions, other states, where the taxes are as high as 50 percent,” said Webb.

The commission’s decision was greeted locally with disappointment, but not too many surprises. “I am not surprised. Let’s face it. This was a commission appointed by the governor after he fired a previous commission because they decided to offer the casinos tax relief,” said Teller County Commission Chairman Jim Ignatius, who serves on the state’s gaming impact advisory committee. At the same time, Ignatius, who testified at last week’s hearing, expressed much disappointment. “This is about jobs We are talking about hundreds of thousands of dollars now (for Cripple Creek businesses) that will be going into the state coffers instead of for jobs.”

In addition, Ignatius says the decision clashes with Hickenlooper’s economic development message. Since he became governor, Hickenlooper has emphasized the importance of generating more jobs and reducing fees and red tape. And in essence, the Teller commission chairman stated that the tax break is working. According to various reports, the Colorado gaming industry is on a rebound, with adjusted gross proceeds increasing, and overall casino play showing positive signs. In addition, the casino industry collectively is in the black for the first time in a number of years, according to figures released for 2012. As a result, officials are worried about tampering with the current tax structure. “Our big concern is how this will affect local casinos,” said Cripple Creek City Administrator Ray White. “We are experiencing the first sustained increase in gaming revenue we have had for quite a while. We hope it will last.” And like Ignatius, White worries that casinos may have to allocate more tax money, instead of using the extra funds for personnel and marketing. From a total tax perspective, the impacts for Cripple Creek are actually much less than Black Hawk, which sports most of the mega, Las Vegas-style casinos. About 96 percent of the tax revenue generated from Colorado gaming comes from casinos in Black Hawk. In addition, many of the casinos in Cripple Creek are in the middle-tier tax bracket. Still, the higher tax rate will impact business, argues Ignatius. He estimates that hundreds of thousands of dollars are at stake locally. As a result, he said proponents of the tax cut orchestrated a strong campaign. “We were just asking to maintain the status quo rate,” said the commissioner, who emphasized that lower taxes will actually stimulate more growth within the industry and generate more jobs. “We gave it the old college try,” said Ignatius, who admitted that proponents of the 2011 tax cut faced a tough audience. “It wasn’t for lack of trying that we didn’t get to keep the tax reduction.”

During last week’s hearing, representatives from the three gaming towns and county leaders encountered much skepticism from the commission, and especially from Webb. The gaming commissioners argued that the extra taxes really won’t make that big of a difference to the industry, since most of these will be paid by the huge, highly successful casinos, such as Ameristar in Black Hawk. Moreover, they said this extra tax money is really needed to support community colleges, one of the big recipients of Amendment 50, the law that raised the betting limits and allowed for 24/7 gaming activity and new games. The original tax cut was granted, as detailed testimony indicated that the industry got clobbered by economic recession and the state’s smoking ban. The industry collectively posted a $12.5 million net profit loss in 2010 and had bad showings for several previous years. By comparison, the industry has generated a $7.5 million profit figure for the first half of 2012, when the tax break was in effect. The state basically taxes individual casinos on a graduated basis from .25 of one percent to 20 percent, based on their annual accumulated total of adjusted gross proceeds, or casino winnings. Last year, an across-the-board five percent reduction was implemented that benefitted casinos in virtually all six tax brackets. The new tax rate, which eliminates this reduction, will go into effect in early July.