COLUMBUS — Casinos under construction in Toledo and Columbus will pay an additional $110 million over 10 years to the state in exchange for a lower tax burden under a deal struck Friday with Gov. John Kasich.
The deal with Penn National Gaming Inc. is similar to one reached with Rock Ohio Caesars, which is developing casinos in Cleveland and Cincinnati.
“I’m proud that Ohioans are getting $220 million more from gaming companies — funds that will help improve education and job training as well as support food banks,” Mr. Kasich said. “I know that many thought it was futile to push the gaming companies for a better deal, but the governor’s job isn’t just to enforce laws. It’s also to make sure they benefit Ohioans in the greatest possible way.”
In exchange, Penn, like Rock, would face a lower level of taxation than Mr. Kasich and lawmakers had threatened under the $55.7 billion, two-year budget proposal now being debated.
The deal also puts in writing Penn’s commitment to make $700 million in on-site improvements combined at its two sites, $200 million more than the constitutional amendment required.
The company had indicated that it planned to spend $300 million at its riverfront site in Toledo and $400 million at its Columbus site.
The deal indicates that the state will consider, case by case, Penn’s plans to move its licenses for Raceway Park in Toledo and Beulah Park near Columbus to the Youngstown and Dayton areas, respectively.
Now that Mr. Kasich is ready to add racetrack slot machines to Ohio’s growing menu of gambling options, Penn has indicated that its own “racinos” would compete for customers with its new stand-alone casinos.
Like Rock, Penn would pay the additional $110 million at the rate of $10 million annually for five years and then $12 million a year for the next five.
Penn’s obligation to continue those payments would cease if Ohio approves a slot-machine license within 50 miles of its tracks.
Penn’s two proposed license transfers would be exempted from this, given that its proposed Dayton site would be within 50 miles of Lebanon Raceway.
Construction of Penn’s casinos has continued during the dispute.
Rock, however, halted construction of its casinos to protest Commercial Activity Tax language that was added to the budget to give Mr. Kasich leverage in his talks.
The budget plan called for the tax to apply to casinos’ “gross receipts” before winnings were paid out instead of after such payouts.
Penn was initially reluctant to sign on to the deal agreed to by Rock.
That led to questions of whether the state could constitutionally follow through with its threat to hold Penn’s casinos to a different tax burden from Rock’s.
“While we continue to believe in the strength of our state constitutional protections, any further delay caused by uncertainty would benefit no one, particularly the thousands of construction workers building our two projects, the 3,200 permanent casino jobs that will be generated, as well as every community across Ohio that will benefit from the hundreds of millions of dollars in new tax revenues,” Penn President Tim Wilmott said.
“With this matter behind us, we look forward to working cooperatively with the governor’s office and the General Assembly to bring this new industry to life,” he said.
The deal was announced hours after the Ohio Roundtable, an ardent gambling opponent, said it would sue the state over what it called “widespread corruption” in the negotiation of “backroom deals” with casino operators outside the legislature and state constitution.
It said it may sue over the legislature’s proposal to privatize operations of the Ohio Lottery, as well as any attempt to introduce slot machines at racetracks without a vote of the people.
“Of course we’re going to litigate, and so are a bunch of other people,” David Zanotti, president of the roundtable, said. “You can rest assured that what they’re opening up is a Pandora’s box of lawsuits that is going to go on and on and on.”
But he said that first, the group plans to file public-record requests with the Kasich administration seeking all the “fingerprints” on the negotiations with Penn and Rock, which is led by Dan Gilbert, majority owner of the Cleveland Cavaliers. “Why Dan Gilbert is giving away $110 million, I don’t know,” Mr. Zanotti said. “Maybe he ought to have given it to LeBron [James] in the first place.”
Kasich spokesman Rob Nichols wouldn’t comment on the threat of litigation.
“Regardless, the governor is very pleased with the deal reached with Rock, with the additional $110 million coming to the state, and with the significant number of jobs and substantial economic development provided for under the agreement,” he said.