Gov. John Kasich and casino developers are playing a high-stakes game of poker over how to divide gambling revenues in Ohio. With tens of millions of dollars on the table, Mr. Kasich will serve taxpayers better if he's willing to go all in and is not just bluffing.
Penn National Gaming and Quicken Loans owner Dan Gilbert won the first hand more than two years ago, before Mr. Kasich even took a seat at the table. They persuaded Ohio voters to give them a gambling monopoly and the right to build casinos in Toledo, Columbus, Cleveland, and Cincinnati.
Their winning bid: $50 million for each site, a pledge to invest at least $250 million at each location, a 33 percent tax on profits, and the promise of thousands of temporary and permanent jobs.
Candidate Kasich said during last year's campaign that he would seek a new deal as governor. He claimed the existing casino arrangements stacked the deck against Ohioans.
Governor Kasich raised again when he got the Republican-controlled state Senate to throw out former Gov. Ted Strickland's appointees to the Casino Control Commission, which determines the rules under which the casinos will operate.
More recently, he said he would hire a gaming expert to advise state officials on how to make gambling successful in Ohio and protect the interests of taxpayers.
The state also introduced a side bet in the form of the Commercial Activities Tax, which companies pay to do business in Ohio. The state tax department has suggested the tax should be paid on every dollar wagered. Casino operators want to pay on bets minus payouts. The potential difference is worth several million dollars for each casino.
This week, Rock Gaming, the company Mr. Gilbert set up to build the Cleveland and Cincinnati casinos with Caesars Entertainment Corp., raised the stakes. It said millions of dollars in taxes for cash-strapped schools and local governments, as well as thousands of jobs for unemployed Ohioans, were in jeopardy because Mr. Kasich's pronouncements were making investors nervous. Construction could be delayed, projects scaled back, and orders for steel and slot machines canceled, the company warned.
Don't bet on it. Rock Gaming already has shelled out $100 million on its casinos. Penn National, which is paying construction costs for the Toledo and Columbus casinos, has made similar spending.
At the same time, Ohio schools and state and local governments already are counting on the jobs and tax money the casinos will generate. So neither Governor Kasich nor the casino owners will quit the game.
The question now: Does any player have an ace up his sleeve?
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