Panel: $650M in gambling freebies need review

Posted at 8:03 PM, Dec 28, 2015
and last updated 2015-12-28 20:05:05-05

COLUMBUS, Ohio -- Failing to tax more than $650 million worth of promotional freebies at casinos and racinos has been a direct hit to Ohio's school districts and local governments, and the practice should be reconsidered, a legislative panel will recommend Monday.

In its strongly worded report, the Joint Committee on Gaming and Wagering urged state lawmakers to consider revoking tax exemptions to the gambling parlors "to protect the interests of Ohio's schools, local government, and taxpayers." The Associated Press obtained a draft ahead of the report's planned release later in the day.

A technical analysis of spending and revenue data since 2012 didn't bear out industry claims that offering free money to customers ultimately increased taxable income at Ohio gambling houses, the report said. The analysis, conducted by the office of state Sen. William Coley, a Middletown Republican who chairs the committee, showed pattern between how much a casino spent on promotional freebies and its overall revenue.

"The results raise serious questions as to whether it is in Ohio's best interest to continue with the current tax exemption on promotional play," the report said.

Messages seeking comment were left with the casino companies.

Of 26 states that offer commercialized gambling, Ohio is one of nine that neither limit nor tax promotional spending, the report said. Nine others cap promotional spending, and the remaining eight tax promotional spending as they do other dollars wagered.

Tax exemptions for casino operators Penn National Gaming and Rock Gaming were contained in separate memorandums of understanding struck with Gov. John Kasich in 2011, after Ohio voters legalized casinos in 2009. The tax exemption for promotional spending at Ohio's seven racinos, horse racing tracks authorized to operate slots-like video lottery terminals, were granted in 2012 legislation overhauling gambling laws.

The six-member oversight committee said those laws still need improvement. Despite having four separate entities that enforce gambling laws -- the attorney general's charitable gambling office and the state casino, racing and lottery commissions -- the jackpot game Queen of Hearts remains unregulated, the panel found. The state's most popular such game is at Barry Dyngle's Pub in Austintown Township, in Mahoning County.

"The Queen of Hearts has slipped through the cracks of our patchwork regulatory regime," Monday's report said.

The panel is urging the Legislature to temporarily place the game under the authority of the casino commission while it considers the idea of streamlining oversight.

The state "should consider consolidating its myriad agencies into a more unified system of oversight with a broad spectrum of authority to combat criminal activity and properly protect Ohio consumers," the panel said.

The committee said its members -- the Legislature as a whole -- need to spend more time determining how to handle fantasy sports websites, such as DraftKings and FanDuel, which Nevada board dubbed "gambling" in October.

The report said several newer lottery games -- Keno, Keno Booster, Multi-Purpose Next Generation (MPNG) and EZPlay Tap -- are doing well and should continue to be monitored. Since Keno was introduced in 2009, it's shown consistent growth. Keno and Keno Booster sales totaled $329.5 million in fiscal 2015, up 11 percent.