Gaming Expansion Under Act 42 of 2017: Memo from the Chair

By Wendy Lewis , Senior Budget Analyst | 7 years ago

This is a basic summary of the fees and tax rates ordered in Act 42 of 2017 (HB 271 Printer’s Number 2652). Because this is a very comprehensive and extensive law, more information will be provided after our in-depth analysis is completed.

Revenue estimates reflect total possible revenues, assuming full participation. Eligible licensees might not take full advantage of all opportunities provided in the measure. Also, it is unknown how these various components will interact with each other. The cannibalization of certain revenue streams is possible.

The largest portions of revenue are one-time fees from newly created Category 4 satellite casinos and internet gaming. Recurring revenues to the General Fund are severely limited to, mostly, just table games taxes and video gaming terminals, while a majority of new taxes imposed would go to the Property Tax Relief Fund.

Category 4 Satellite Casinos

• Up to 10 licenses available via auction; first to current Category 1 and 2 casino licensees.
• Minimum bid of $7.5 million for slot machines. Additional $2.5 million for table games.
  • Total of $100 million if all 10 licenses are auctioned for the minimum bid.
• 25-mile halo from other existing casinos; 15-mile halo from other Category 4 casinos.
• Each location may operate between 300 and 750 slot machines (without exceeding current complements) and 30 table games.
• Tax rates: 50% of gross terminal revenue from slot machines will be divided as follows:
  • 34% deposited into the Property Tax Relief Fund
  • 5% to the Commonwealth Financing Agency for project grants in the public interest in any county.
  • 5% distributed to counties whose local share funding levels decrease below 2017/18 levels.
  • 6% to the PA Gaming Economic Development and Tourism Fund.
• Local Share assessment of 4% on slot machine revenue, distributed as follows:
  • 2% to the host county through CFA.
  • 2% to the host municipality.
• Local Share assessment of 2% on table games revenue, distributed as follows:
  • 1% to the host county through the CFA.
  • 1% to host municipality.

Interactive Gaming (iGaming)

• Three categories for iGaming: Internet-based gaming for poker, slot machines and table games-style online games.
• First 90 days: licensed casinos can apply for all three categories of games -- fee $10 million.
• 91 to 120 days: licensed casinos can opt for one or more categories of games -- fee $4 million per category.
• After 120 days: If any category of games is unclaimed, any gaming entity from other jurisdictions can apply -- fee $4 million per category.
• $1 million fee for operators of iGaming. Operators are companies the casinos may contract with to implement iGaming on their behalf and in conjunction with a casino.
  • Total of $120 million if all 12 casinos purchase three categories of games within 90 days.
• Tax rates:
  • 14% for online poker – deposited into the General Fund.
  • 14% for table games style online games – deposited into the General Fund.
  • 52% for slot machine style online games, distributed as follows:
    • 34% to the Property Tax Relief Fund.
    • 5% distributed to counties whose local share decreases below 2017/18 levels.
    • 13% to the CFA for grants in any county for projects in the public interest.

Airport Gaming

• Internet-based gaming on tablets at international and other qualified airports.
• Fees are $2.5 million in first-class county, $1.25 million in 2nd class, $500,000 in all other counties with an international airport. For other qualified airports, $125,000.
  • Total of $6 million if all qualified airports participate.
• Tax rates are the same as iGaming and revenue is deposited into the General Fund.

Fantasy Sports

• License fee of $50,000.
• Tax rate of 15%
• This provision is expected to generate nominal revenue.

iLottery

• Includes a retail incentive program in which 0.5% of retail sales would reward retailers participating in recommended best practices.

Category 3 Fee Changes

• $1 million to waive the patron of the amenities requirement.
• $2.5 million for an additional 250 slot machines.
• $1 million for an additional 15 table games (poker).
• Eliminates the allowance for a third Category 3 casino.
  • Total of $9 million if both Category 3 casinos participate in all of the available options.

Simulcasting

• This bill allows for licensed casinos to broadcast horse racing simulcasts, at no fee.

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