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www.mybaycity.com July 8, 2007
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State Leaving Money On The Table: Cardinal Sin of Gambling

Budget Problems Could Be Eased By Following Pennsylvania's Lead

July 8, 2007       Leave a Comment
By: Dave Rogers

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The State of Michigan, in the wisdom of the Governor and State Legislature, is leaving $20 to $40 million a year on the table in the three Detroit casinos.
 

Any gambler knows the cardinal rule: Don't leave money on the table!

Obviously the State of Michigan has never heard of this rule.

The State of Michigan, in the wisdom of the Governor and State Legislature, is leaving $20 to $40 million a year on the table in the three Detroit casinos.

That money could go a long way toward easing the state's severe budget crisis.

And, there is a lot more gambling money out there the state could rightly claim.

In Pennsylvania, Gov. Ed Rendell has a good idea. He assessed a "license fee" of $50 million on each of that state's 14 casinos. Figure it out -- $600 million. Roughly half of the budget shortfall the State of Michigan is facing for Fiscal Year 2008.

Obviously, with an estimated $12 billion a year take from Michigan casinos we are leaving lots more desperately needed cash on the table.

Local governments are cash-strapped and local taxpayers are squeezed for property taxes way out of proportion to benefits. Jobs are scarce and businesses are closing like dominoes. Somebody needs to get a clue: all the money is going into the casinos and the sharing is totally unfair.


To be sure, Gov. Rendell is still under fire in Pennsylvania for failing to raise enough dough to cut property taxes as he promised.

But his attitude toward the casinos strikes us as very business-like and taxpayer friendly. If the casinos are raking in the cash, skim off a little for the dealer. It won't break them; and no one will get hurt.

Kansas is considering charging a 22 percent tax on casino revenues and 40 percent of the slot machine take with local governments to get 3 percent.

In Rhode Island Harrah's Club built a $1 billion casino and agreed to pay a tax of 25 percent of gross revenues, escalating to 40 percent. New York charges a tax of 60-70 percent.

Obviously, there is room for Michigan to negotiate a higher tax and/or annual license fee. All we need are legislators with the will to stand up for the taxpayers and demand what the market will bear.

Michigan's biggest mistake came when it cut a deal with the three Detroit casinos, MGM, Greektown and MotorCity. The deal was for a tax of about 12 percent until the casinos opened their permanent locations. Then the tax dropped to 8 percent.

Why? In November 1996 51.5 percent of Michigan voters approved Proposal E which allowed the three Detroit casinos. Originally the casinos were to pay an 18 percent tax on gross revenue. The State School Aid Fund was to get 45 percent and 55 percent was to go to Detroit for public safety and economic development.

Under a 1997 legislative act, if a 9.9 percent Detroit wagering act was passed by voters, the state's tax rate would drop to 8.1 percent and all the money would go to the School Aid Fund. Detroit voters approved the new tax Nov. 4, 1997.

Another part of the problem is the penny-ante licensing fees charged by both the state and Detroit. Each casino paid the state a one-time application fee of $50,000 and an annual licensing fee of $25,000 and a services fee of perhaps $8 million, adjusted for inflation. Detroit gets an annual fee of $4 million from each casino.

Obviously, THIS IS CHUMP CHANGE! And the suckers are us -- the taxpayers. WHO MADE THIS DEAL, AND WHY???

With 23 casinos, and more coming on line almost every quarter, it seems the Legislature needs to go back to the drawing board.

The patrons of these casinos are mainly formerly hard-working industrial retirees who get a pension plus Social Security and so may have a thousand or two a month to drop in a casino. If losing most of your disposable cash is entertainment it doesn't strike me as that much fun.

And what happens when these retirees are asked to increase their income or other taxes just a little to pay for state services? They scream, of course. They'd rather pull handles mindlessly for another few days than pay for vital services.

Experience with casinos has shown that the economic development beneifts are vastly over sold. Often, the restaurants and hotels run by casinos merely depress local business and jobs.

And state costs to manage and police casinos go up. In Fiscal Year 2006 the state paid about $4 million extra, mainly for state police, to oversee gaming and guard against organized crime and counterfeit currency. Nearly 400 arrests included those for embezzlement, cheating, fraudulent activities, larceny, dealer-patron collusion and conspiracy. Other offenses connected with gaming included underage gambling, minor in possession of alcohol and trespass by disassociated persons.

To be fair, the Saginaw Chippewa tribe does give 2 percent of its revenue semi-annually to local governments and schools. But this is totally at their option and only goes to the immediate area around the casino or reservations. Isabella and Arenac receive the benefit of these dollars, a tribal-supported sheriff's deputy in the case of Arenac. Governments in the region whose residents support the casino, like Bay-Saginaw-Midland, receive little or nothing.

We have seen in this column recently what happens to people who live around casinos like the one in Mt. Pleasant that takes in perhaps $600 million a year.

Isabella County, the home base of the Soaring Eagle Casino, has recently won the title as the poorest county in the state. Twenty-four percent poverty is nothing to sniff at.

It's something to cry about.

Or call your state legislator and raise hell.

###

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Dave Rogers

Dave Rogers is a former editorial writer for the Bay City Times and a widely read,
respected journalist/writer in and around Bay City.
(Contact Dave Via Email at carraroe@aol.com)

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