2014 Government Regulations & Business Summit
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Casino gambling is front and center in the minds of a great many Rhode Islanders. Efforts are afoot to add table games to our existing gambling facilities in Lincoln and Newport, and everyone casts a wary eye toward Massachusetts as that state contemplates allowing up to three gambling facilities to be built.
The Ocean State receives close to $300 million annually from our gaming operations – a significant and difficult-to-replace revenue stream. When Massachusetts builds its casinos, Rhode Island’s casinos and the state treasury will see a decline in revenue, regardless of any actions that we take.
The addition of table games to our existing casinos makes some economic sense. By offering table games, we can hope to retain our local gamblers who might be enticed to travel outside our borders to find table games. But don’t think for a minute that by adding table games Rhode Island can prevent a decline in gaming revenue. “Convenience gamblers” will travel the shortest distance possible to lose their money – and a great many of Rhode Island’s current gaming customers (as much as 40 percent) come from Massachusetts.
If voters approve table gaming at Twin River and Newport Grand on November’s ballot, there are substantial issues to be negotiated, the most important of which is the tax rates for both slot and table-game revenue.
In general, roughly 70 percent of a casino’s gambling revenue comes from slot machines, while 30 percent comes from table games. Rhode Island currently has a 61 percent tax on slot revenue, among the highest rates in the country. Since we can count on overall gaming revenue to fall in the near future, it is in the best fiscal interest of the state to keep the advantageous slot tax rate in place. If necessary, it would be in our best financial interest to give a bit more away on the table games to preserve our current share of the slot revenue.
A more esoteric, but no less important, contract clause has to be addressed in the negotiations as well. The issue is known as “slippage,” and it goes like this.
In exchange for the high tax rates that Rhode Island enjoys on gaming revenue, our two casinos are guaranteed exclusivity. The slippage clause stipulates that if our casinos experience a revenue loss due to competition from a new casino built in the state, Rhode Island taxpayers must make up the loss to the existing casinos.