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COLUMBUS -- By striking a deal with the owner of casinos in Cleveland and Cincinnati, Gov. John Kasich may have handed the developer of the casinos in Toledo and Columbus a big part of what it wanted.
The deal struck with Rock Ohio Casino will result in a change in how the state applies a key business tax against the casinos, a change that could save Penn National Gaming, Inc. millions even though it was not a party to the agreement announced Wednesday.
The issue raises the question of whether Ohio could constitutionally tax one casino differently than another.
"Our role as a tax department is to implement and administer the laws, not interpret them,'' said Gary Gudmundson, spokesman for the Ohio Department of Taxation. "That said, we're confident that language can be drafted in a way that that is not a problem.''
Even if it may have surrendered the tax issue, the state will still hold some leverage over the Wyomissing, Pa.-based Penn. If racetrack slots become a reality, the company wants permission to transfer its licenses for Raceway Park in Toledo and Beulah Park near Columbus to new locations in the Youngstown and Dayton areas, respectively.
It has already talked to the Ohio State Racing Commission about this, saying the Toledo racetrack and its new riverfront casino would compete for many of the same gamblers.
"I don't think you can move a track in this state, under the constitution and statutes, without legislative approval,'' House Speaker Bill Batchelder (R., Medina) said Thursday.
He agreed that relocation of the tracks could be a way to keep Penn at the negotiating table.
"It would be a way to do that," Mr. Batchelder said. "I talk to the governor regularly. I try not to give him business advice. It's obviously an issue." Penn, however, insists it has never left the table.
"We are still involved in ongoing discussions with the governor's office, and while the discussions are in progress, we're not going to comment," spokesman Bob Tenenbaum said.
The deal with Rock calls for the casinos to pay an added $110 million to the state over 10 years above what the Cleveland and Cincinnati casinos would pay in license fees and taxes.
It also again attempts to open the door for slot machines at seven racetracks in exchange for a $50 million licensing fee from his track for a total of $350 million. A 33.5 percent tax would be levied on slots revenues.
The deal with Rock announced Wednesday said the state would "consider" at a later date transferring existing racing licenses to new locations. Press materials detailing the plan specifically mentioned sites in Dayton and Youngstown, locations that Penn, not Rock, is interested in.
"Why would [Penn] come back to the table, except for more backroom deals because they want tracks in other locations?" asked Rob Walgate, vice president of the Ohio Roundtable, an ardent gambling opponent. "They want to leave Toledo to go to Youngstown so they can push down their throats something they don't want. This is not about casino gambling. It's about the rule of law and obeying the law."
Lawmakers will recess for the summer by the end of the month; a vote on racetrack slots would not occur until fall at the earliest.
"There are a number of us in the House who do not like gambling," Mr. Batchelder said. "We haven't changed, so I don't want to see that in the budget."
What is expected to happen with this budget is a change in how Ohio would assess its Commercial Activity Tax on the casino revenue. The proposed $55.7 billion, two-year budget currently calls for applying the tax against the casinos' "gross receipts" before winnings are paid.
Under the deal Mr. Kasich brokered, the definition would instead be changed to tax net income after payouts are deducted just as the 33 percent direct tax on wagering would be applied under the 2009 constitutional amendment passed by voters.
Mr. Walgate said Ohio was legally within its rights to hold the four casinos to the strict definition of gross receipts when it comes to application of the CAT, adding that the constitutional amendment called for the casinos to pay all other taxes that apply to other businesses.
"Are we tinkering with the constitution?" he asked.
The ardent anti-gambling organization filed suit two years ago challenging the constitutional authority of then-Gov. Ted Strickland to authorize slot machines at racetracks without putting the question to voters.
The lawsuit, however, was derailed when an organization calling itself LetOhioVote first convinced the Ohio Supreme Court that the slots language could be the subject of a voter referendum. The ballot referendum never materialized, but the march toward slots never regained momentum -- until now.
Contact Jim Provance at: email@example.com or 614-221-0496.