Financial Markets View Pennsylvania Gaming Law Changes As Beneficial For Local Municipal Governments
Financial Markets View Pennsylvania Gaming Law Changes As Beneficial For Local Municipal Governments

Pennsylvania’s new online gaming law has ushered in a number of changes ,including an expansion of the gaming industry with approval given for 10 mini-casinos plus standalone gaming stations across the state. 

Apart from the proposed expansion, the new law Act 42 also tackles how the existing casinos of the state will pay their taxes on gaming revenue to the host municipalities and counties, currently totally to around $140 million on an annual basis.

The changes introduced have already resulted in a positive impact on the municipal bond market, as per a Moody’s Investors’ Service report, as it has reassured the market after months of uncertainty following a court order.

Clarity Provided By Legislation Reassures Municipal Bond Market

Under the earlier law, casinos paid their host municipalities either two percent of the slot machine revenue or $10 million, whichever was greater.

One of the state’s casinos, Mt. Airy Casino of Monroe County filed a suit challenging the law and the State Supreme Court recently ruled that the tax provision was unfair to smaller casinos of the state.

State lawmakers however failed to meet the court’s deadline for modifying the law and got it done only a year later.

In the intervening period, a few casinos continued to make their payments voluntarily to local counties and municipalities, but others such as the state’s biggest casino Sands Casino in Bethlehem, did not do so.

The companies that did not keep their commitments regarding the “local share assessments” as these payments are referred to, will now have to settle with the local authorities under the provisions of the Act 52, which was enacted recently.

In its report, Moody’s has noted that the new rule has restored investor confidence that municipal borrowers will be able to depend on payments from casinos again.

Local Communities Will Receive Similar Payments As Before With Some Changes

According to Doug Harbach, Communications Director for the PA Gaming Control Board, even though some language has been altered in the new law, there is likely to be little change in how tax on slot revenue will be calculated and paid.

For example, the city of Bethlehem, can now expect to continue receiving a similar amount of tax revenue from Sands as before, which is approximately $8.4 million, equalling 12 percent of the city’s overall budget.

The new Act 54 also details how the share assessments will be distributed. Projects within the local communities, as well as those outside will be receiving a portion of the funds. For example, a part of Hollywood Casino slot taxes that was earlier provided to the host Dauphin County will now be diverted to Lebanon County plus some fire/EMS agencies located there. This amounts to around $330,000, roughly three percent less than Dauphin’s typical take.

Several local governments are still analysing the impact of the new share assessment rules, the County Commissioners Association of Pennsylvania said.  But others have assessed the possible effects and are expecting minimal changes, if at all.

Municipalities Reviewing New Rules Related To Gaming Expansion

The Pennsylvania League of Municipalities has said that the new law is also forcing local leaders to understand their options regarding the setup of the mini casinos recently authorized by the new legislation.

While some want to learn ways to prevent their set up in their communities, others are keen to get one in.

In a separate report, Moody’s notes that the gaming expansion in Pennsylvania may result in its gaming industry suffering from growing pains for some time, given new risks of cannibalization and the fact that online gaming is being taxed at a lower rate in the neighbouring state of New Jersey .

The ratings firms also indicated in its report that the recent changes could also heighten the struggles of the gaming industry in Atlantic City.




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