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Rock Ohio Caesars Construction Delayed

Political jostling at its finest.

Last week, the two Rock Ohio Caesars casino construction projects in Cincinnati and Cleveland halted because of a tax battle between the state governor and Caesar’s Entertainment.  The casinos’ projected openings have been delayed from 2012 to 2013.

On November 3, 2009, Ohio Issue 3, also known as the Four Casinos Initiative, was approved by state voters to amend the Ohio Constitution, permitting one brick and mortar casino to operate in each of the state’s four most populous cities, Cincinnati, Cleveland, Columbus and Toledo.  One notable component of Issue 3 is the 33% tax on gross casino revenues.

When on the ballot, Issue 3 was opposed by current Ohio governor John Kaisch, who narrowly defeated incumbent Ted Strickland in the 2010 election.  Strickland was the biggest backer of Issue 3.  Now forced to tangle with Issue 3, Kaisch is demanding for the state to receive an even larger chunk of casino revenues.  One measure that Kaisch introduced to and was subsequently approved by the state’s House has resulted in a casino construction stoppage.

Governor Kaish seeks to impose, in addition to the 33% gross revenue tax, a .26% tax on all casino bets wagered via the state’s commercial activity tax.  As the local ABC affiliate network points out:

So, say someone comes to the casino with a $10 roll of quarters and between winning and losing, winds up putting $100 worth of quarters in the machine but walks away with their original $10.

Even though neither the casino nor the customer made money, the casino would have to pay the tax on the $100 bet.

“You’re taxing money over and over again,” said Roger Gros, publisher of Global Gaming Business magazine. “It really is not going to be very fair to the casinos.”

The commercial activity tax is different from the 33% gross revenue tax, which is imposed on all bets wagered less amounts paid for winning wagers.  All other states with legal gambling levy winnings by the gross revenue tax.  In other words, Kaisch’s introduced measure is unprecedented in the U.S. gaming industry.  And Caesar’s believes the additional tax would far too significantly cut into the casino’s after-tax profits.

Caesar’s publicly stated that the construction hiatus will continue until a resolution between the gaming giant and the state governor is reached. The governor’s budget currently sits in the state’s Senate.  If approved, the casino companies are likely to take the measure to court and argue that the commercial activity tax violates the state constitution.

In the meantime, construction workers remain sidelined indefinitely, and the likely boost to state revenues from Issue 3 will have to wait longer than initially expected.  Anything but “winner winner, chicken dinner” will be heard in the state of Ohio for now, it seems.

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