No Safe Wager in Gaming Tax Fight

Cripple Creek and Teller County business and political leaders will have to wait at least another month to learn whether local casino operators will have to fork out an additional $4.9 million in taxes a year.

However, certain gaming proponents are exhaustively putting their chips on the table and mounting a strong defense against a proposition that some say could seal the fate of the Cripple Creek gaming industry.

Due to an administrative error in the filing of a proposed rule change, the Colorado Limited Gaming Control Commission couldn’t make a decision in a hearing last week in Central City regarding the contentious issue of stripping gaming companies of their rights to have multiple licenses. This is part of the original gaming law and a practice that has greatly accelerated expansion activity in Cripple Creek, where large companies have often expanded into adjacent structures.

The commission is considering a plan to do away with the policy due to concerns that multiple licenses could give some operators an unfair tax advantage. The state of Colorado taxes casinos on a graduated basis depending on their accumulated winnings.

According Jim Ignatius, the chairman of the Teller County Commissioners and a big opponent of the proposed change, the gaming commission meeting last Thursday featured a standing-room-only crowd with a considerable amount of testimony that lasted all day. Besides Ignatius, the gaming commission heard from Cripple Creek Finance Director Paul Harris and Michael Smith of the Double Eagle, along with Triple Crown Chief Financial Chief Finance Officer Don Rosen and Bronco Billy’s General Manager/Co-owner Marc Murphy. The latter two, though, addressed the commission during an executive session.

In addition, the Colorado Casino Association has represented Cripple Creek in this tax fight.

Unlike a previous hearing in October, Ignatius expressed cautious optimism. “I thought it went very well,” said Ignatius. “It went better than before. The commissioners seemed a lot more engaged. There was a lot more interaction with those of us who testified. I was very encouraged by their questions.”

And once again, Ignatius believes Teller representatives did a good job of conveying their side of the story.

However, the issue appears to be pitting Cripple Creek against Black Hawk, the perennial revenue champion of limited stakes gaming, with the historic preservation intent of the original law being placed at serious risk. According to an article in the Denver Post, a leading Black Hawk representative questioned the multiple-license rule and whether casinos in their town can obtain the same tax breaks.

Black Hack, known for more Las Vegas-style projects such as the Ameristar Casino Resort, is dominated by huge newer buildings and doesn’t have any multiple licenses. In recent months, both Black Hawk and Gilpin County have squared off with Cripple Creek and Teller regarding how gaming money is distributed and with the gaming commission’s licensing policies.

With the multiple-license law, major Cripple Creek casino companies have split their properties into smaller, adjacent entities. For example, Triple Crown Casinos of Colorado features the Midnight Rose, Brass Ass and JP McGills, all of whom are connected to each other, but who have vastly different characteristics. The same scenario is true with Bronco Billy’s, Buffalo Billy’s and Billy’s.

The current law permits a company to have up to three licenses. This trend has basically determined the expansion activity in the Creek, with larger companies expanding into vacant, historic structures that once prevailed as retail shops and former casinos. This trend does allow for definite tax advantages, but imposes more administrative red tape and responsibilities regarding saving, preserving and maintaining old buildings.

Following the Rules

Cripple Creek gaming proponents have stressed they are following the rules established at the time they went into business. They have staunchly objected to a continual comparison of the multiple-license policy as a tax loophole. If the commission does make a tax change, they are requesting the “grandfathering” of existing licenses.

While acknowledging they have paid a smaller amount of taxes than if they operated under a single company, local operators and city leaders have cited the millions these owners have invested into historic preservation and in maintaining adjacent structures. They also have cited this multi-license trend as a vital component of the town’s development.

And during last week’s testimony, Ignatius, in an attempt to appeal to the new commission, noted that requiring local casinos to pay an estimated $4.9 million more in annual taxes would clash with the economic development pursuits of Governor John Hickenlooper, who appointed the new board. The governor, in his “bottom-up” plan that splits the state into a number of economic regions, has emphasized the importance of eliminating unnecessary regulations and taxes/fees that increase the cost of doing business. The governor has described this economic development blueprint as a pro-business model.

Ignatius, in his presentation, cited the importance of gaming and tourism, based on this economic plan adopted by leaders of a key region comprised of Teller, Park and El Paso counties. If nearly $5 million in taxes are piled onto a handful of casinos, Ignatius believes the economic consequences for the region would be a disaster. According to Ignatius, he spoke extensively with a member of Hickenlooper’s economic team last week.

And in another big plug for Cripple Creek’s interests, economist Fred Crowley, who played a big consulting role in the development of a Wal-Mart development in Woodland Park, testified that if the commission does away with the state’s multiple-license policy, then the Colorado gaming industry would lose nearly 250 jobs, most of which would be located in Cripple Creek.

The gaming commission may make a decision at its next meeting in December. It must make a formal determination of this licensing ruling within the next six months.

In essence, the commission has basically three choices: Do nothing, get rid of the multiple-licensing law altogether or grandfather the current operators that use multi-licenses.

Whatever action the commission takes, it could face a legal challenge.