State Fiscal Highlights
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STATE FUND |
FY 2011 |
FY 2012 |
FUTURE YEARS |
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Casino Tax Revenue Fund (new fund) |
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Revenues |
- 0 - |
- 0 - |
Possible gain in the hundreds of millions of dollars |
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Expenditures |
- 0 - |
- 0 - |
Receipts to be transferred to other funds created by the bill for distribution according to Ohio Constitution, Article XV, Section 6(C) |
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Casino Control Commission Fund (new fund) |
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Revenues |
Potential gain from casino operator fee |
Potential gain from casino operator fee |
Potential gain from share of casino tax receipts |
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Expenditures |
Potential increase |
Potential increase |
Potential increase |
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General Revenue Fund |
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Revenues |
- 0 - |
- 0 - |
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Expenditures |
Potential incarceration cost increase, annual magnitude uncertain |
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General Reimbursement Fund (Fund 1060 - Attorney General) |
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Revenues |
Potential gain in background check fee revenue |
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Expenditures |
Potential increase in workload expenditures and costs incurred for FBI checks, likely commensurate with revenues gained |
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Note: The state fiscal year is July 1 through June 30. For example, FY 2011 is July 1, 2010 – June 30, 2011 |
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· Casino Control Commission. The bill creates the seven-member Ohio Casino Control Commission (OCCC), which will incur expenses estimated at $2.3 million prior to the opening of the casinos and $11.2 million after they open.
· License fee. In implementing Ohio Constitution, Article XV, Section 6(C), the bill specifies the upfront license fee to obtain a license as a casino operator of $50 million for each of four casinos.
· Application fee. The fee for an application for a casino operator, management company, or holding company license is $2 million per application, deposited into the Casino Control Commission Fund.
· Tax on casino revenue. A 33% tax is levied on gross casino revenue, and deposited into the Casino Tax Revenue Fund, created by the bill. The Department of Taxation estimated this tax might raise about $643 million annually. In the table, LSC assumes this tax will be received and distributed to various other funds created by the bill in years after FY 2012.
· Transfers from Casino Tax Revenue Fund. In implementing Ohio Constitution, Article XV, Section 6(C), the bill establishes the following new funds in the state treasury, and requires the Treasurer of State to transfer the percentages shown of the balance in the Casino Tax Revenue Fund to the receiving fund: (1) Gross Casino Revenue County Fund (51%), (2) Gross Casino Revenue County Student Fund (34%), (3) Gross Casino Revenue Host City Fund (5%), (4) Ohio State Racing Commission Fund (3%), (5) Ohio Law Enforcement Training Fund (2%), (6) Ohio Problem Gambling and Substance Abuse Fund (2%), and Casino Control Commission Fund (3%).
· Background checks. The Office of the Attorney General (Bureau of Criminal Identification and Investigation, or BCII) will be required to perform background checks on Commission members, staff of the Commission, and certain employees of the casinos and related industries. The cost of the background check is $22 for a statewide check and an additional $24 for the FBI check, of which $22 is forwarded to the FBI. All fees are deposited to the credit of Fund 1060, General Reimbursement.
· Disclosure statement. Members of the OCCC and specified employees must file disclosure statements with the Ethics Commission.
· Court cost revenues. With each conviction for the bill's prohibitions, the state may gain locally collected state court cost revenue that is deposited in the state treasury to the credit of the Indigent Defense Support Fund (Fund 5DY0) and the Victims of Crime/Reparations Fund (Fund 4020). The magnitude of any resultant revenue gain is unknown.
· GRF incarceration costs. The available data does not permit a reasonably accurate estimate of the number of persons that will be convicted of one of the bill's prohibitions and subsequently sentenced to prison. The magnitude of the potential resulting increase in the Department of Rehabilitation and Correction's annual GRF-funded incarceration costs is uncertain.
Local Fiscal Highlights
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LOCAL GOVERNMENT |
FY 2010 |
FY 2011 |
FUTURE YEARS |
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Counties, School Districts, and Cities |
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Revenues |
- 0 - |
- 0 - |
Potential gain in the hundreds of millions |
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Expenditures |
- 0 - |
- 0 - |
- 0 - |
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Counties (criminal justice systems) |
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Revenues |
Potential, likely negligible, annual gain in court cost and fine revenues |
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Expenditures |
Likely increase to adjudicate offenders |
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Note: For most local governments, the fiscal year is the calendar year. The school district fiscal year is July 1 through June 30. |
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· Tax on casino revenue. Counties, school districts, and eight cities are to receive 90% of the proceeds from the tax on casino revenue. Specifically, they receive transfers from the Gross Casino Revenue County Fund, the Gross Casino Revenue County Student Fund, and the Gross Casino Revenue Host City Fund. LSC assumes these cash flows will not start until after FY 2012.
· Assistance to Attorney General. The bill could generate indirect effects in that local criminal justice-related agencies may be requested to assist the Attorney General in investigating casino-related prohibited conduct. However, at this time it is difficult to predict with any certainty how many investigations could be opened annually and to what extent local law enforcement agencies and prosecutors would be involved in those cases.
· Criminal case processing costs and revenues. As the likely number of violations of the bill's prohibitions is uncertain, it is unclear as to whether the resulting increase in an affected county criminal justice system's expenditures will exceed minimal annually. County criminal justice systems, specifically those counties that have a casino facility within their jurisdiction, may realize an increase in court cost and fine revenue collections as a result of persons being convicted of violating the bill's monitoring requirement.
Detailed Fiscal Analysis
The bill provides for Ohio gaming statutes and implements Article XV, Section 6(C), of the Ohio Constitution which authorizes casino gaming in four locations in the state. This fiscal note includes provisions that may have a substantial fiscal effect. Among the major provisions are establishment of the Ohio Casino Control Commission and the permanent Joint Committee on Gaming and Wagering, specification in statute of taxes and fees, and various other programs included in the bill.
The Ohio Casino Control Commission
The bill creates the Ohio Casino Control Commission (OCCC). The Commission is composed of seven members appointed by the Governor. Members serve four-year terms and may be reappointed for up to three terms, and will be paid $60,000 per year. Additionally, they will be reimbursed for actual and necessary expenses incurred in the performance of their duties. OCCC is authorized to license, regulate, investigate, and penalize casino operators. The bill requires OCCC to submit an annual report to the Governor, the Senate President, and the Speaker of the House of Representatives.
OCCC is to appoint an executive director who hires the staff and will receive an annual salary in accordance with pay range 48 of section 124.152 of the Revised Code, i.e., in a pay range of $66,851 to $146,286. OCCC will pay expenses-related to the criminal background checks of its staff, the casino operators, gaming related vendors, and casino employees. OCCC will be reimbursed for the costs of the background checks, except those related to its own staff. The Department of Taxation estimated OCCC staffing cost at $2.3 million in the start-up year prior to the opening of the four casinos, and $11.2 million once the four casinos have been opened. Details regarding the operation of OCCC are available in the bill analysis at http://www.legislature.state.oh.us. Operations of OCCC will be paid from the Casino Control Commission Fund, established by the bill.
Legislative permanent Joint Committee on Gaming and Wagering
The bill creates a six-member legislative permanent Joint Committee on Gaming and Wagering to review laws and rules governing the administration and to study proposed changes to casino gaming in Ohio. The Senate President and the Speaker of the House of Representatives will each appoint three members to this committee. Any study or committee expenses are to be paid for from OCCC funds or other appropriation by law. Members shall receive no compensation, but will be reimbursed for actual and necessary expenses incurred in the performance of their duties. As of this writing, LSC is unable to estimate the costs associated with the Joint Committee on Gaming and Wagering.
Fees and permits
The bill establishes an upfront payment of $50 million per casino facility and an operator fee of $2 million per casino. Other fees for operators, management and holding companies, employees, and vendors will be set by OCCC by rule, subject to the approval of the legislative Joint Committee on Gaming and Wagering.
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Table 1: Summary of Fee Revenues |
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Per Facility |
Number of Facilities |
Total Fees |
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Casino Operator Upfront Fees |
$50,000,000 |
4 |
$200,000,000 |
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Casino Operator Application Fees |
$2,000,000 |
4 |
$8,000,000 |
|
D5-n Permit Fee (casino operator) |
$25,000 |
4 |
$100,000 |
|
D5-o Permit Fee (restaurant) |
$2,344 |
4 |
$9,376 |
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Total |
$208,109,376 |
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As provided in Article XV, Section 6(C), of the Ohio Constitution, the upfront license fee shall be used "to fund state economic development programs which support regional job training efforts to equip Ohio's workforce with additional skills to grow the economy." The bill does not specify where the upfront payment of $50 million per casino will be deposited. The operator fee of $2 million will be deposited into the Casino Control Commission Fund. This fee is shown in the table as a one-time fee for each casino location. New casino operator, management company, and holding company licenses and renewal licenses fees will be set by rule, subject to the approval of the Joint Committee on Gaming and Wagering. LSC assumes that those fees would be deposited into the Casino Control Commission Fund.
The bill creates four D5-n permits (one for each casino),
and an unlimited number of D5-o permits. The fees for the permits are $25,000
for the D5-n and $2,344 for the D5-o permits. Thus, fee revenues would be
$100,000 from the D5-n permits and at least $9,376 from the D5-o permits. The
table above assumes one permit per location. D5-n and D5-o permits authorize
sales of beer, wine, and liquor at only two fixed counters (serving locations)
on the permit premises. A duplicate permit is required for each additional
fixed counter. The fee for a duplicate D5-n permit is 20% of the fees payable
for D5-n or D5-o permits issued to the same premises while a duplicate D5-o
permit carries a $1,000 fee. In addition, if Sunday
sales are desired, the bill requires a
D-6 permit to be issued to a holder of a D5-n or D5‐o permit, subject
to those sales having been approved by local option election. The fee for a
D-6 permit is $500.
Liquor permit fee revenue is deposited to the Undivided Liquor Permit Fund (Fund 7066) and subsequently distributed to the GRF (45%), the Statewide Treatment and Prevention Fund (Fund 4750) used by the Department of Alcohol and Drug Addiction Services (20%), and the local taxing district where the permits are issued (35%). All permanent liquor permits, in addition to the stated fee, carry a $100 processing fee that covers the Department of Commerce's expenses in fingerprinting and making background checks for permanent license applications. This fee is deposited into the Liquor Control Fund (Fund 7043).
Licensing procedure
The bill describes procedures for obtaining various licenses for operators, management and holding companies, employees, and vendors, and for suspensions, revocation, and renewal of the licenses. Details of the licensure provisions and other requirements are available in the LSC bill analysis.
New funds in the state treasury
Article XV, Section 6(C), of the Ohio Constitution prescribes both a 33% tax on gross casino revenues[1] and the distribution of receipts from the tax. The bill creates the following new funds that will receive those distributions: the Casino Tax Revenue Fund, the Gross Casino Revenue County Fund, the Gross Casino Revenue County Student Fund, the Gross Casino Revenue Host City Fund, the Ohio State Racing Commission Fund, the Ohio Law Enforcement Training Fund, the Problem Casino Gambling and Addictions Fund, the Casino Control Commission Fund, and the Casino Tax Administration Fund.
The Treasurer of State shall credit all moneys collected from the tax on gross casino revenues to the Casino Tax Revenue Fund. From amounts in the Casino Tax Revenue Fund, the Treasurer of State shall transfer 51% of the balance to the Gross Casino Revenue County Fund, 34% to the Gross Casino Revenue County Student Fund, 5% to the Gross Casino Revenue Host City Fund, 3% to the Ohio State Racing Commission Fund, 2% to the Ohio Law Enforcement Training Fund, 2% to the Problem Casino Gambling and Addictions Fund, and 3% to the Casino Control Commission Fund. The Department of Taxation has estimated that the casino gross receipts tax may yield about $643 million a year when all four casinos are built and fully operational. If slot machines are authorized at a later date at Ohio's seven racetracks, potential revenues from the casinos would be lower. Also, increased competition from gaming opportunities outside Ohio, and the business cycle, may reduce the potential yield of the tax. Based on the Department of Taxation estimate and distributions prescribed by the bill, Table 2 below provides potential revenues to the various funds.
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Table 2: Distribution of Potential Casino Tax Receipts |
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Fund |
Share |
Estimated Revenue (in millions) |
|
Gross Casino Revenue County Fund |
51% |
$328.2 |
|
Gross Casino Revenue County Student Fund |
34% |
$218.8 |
|
Gross Casino Revenue Host City Fund |
5% |
$32.2 |
|
Ohio State Racing Commission Fund |
3% |
$19.3 |
|
Casino Control Commission Fund |
3% |
$19.3 |
|
Problem Casino Gambling and Addictions Fund |
2% |
$12.9 |
|
Ohio Law Enforcement Training Fund |
2% |
$12.9 |
|
Total |
100% |
$643.4 |
Of the money credited to the Ohio Law Enforcement Training Fund, the bill earmarks 85% of the money to the Ohio Peace Officer Training Academy ($10.9 million) and 15% to the Division of Criminal Justice Services ($1.9 million), both in the Office of the Attorney General. The Casino Tax Administration Fund is to receive 1% of the money credited to the Casino Control Commission Fund ($0.2 million). The bill requires the Treasurer of State to make payments to counties through the Gross Casino Revenue County Fund and the Gross Casino Revenue County Student Fund using annualized data possessed by the Tax Commissioner.
Casino gaming
The bill authorizes up to 5,000 slot machines per casino, and an unlimited number of table games. Any slot machine or table game authorized in Indiana, Michigan, Pennsylvania, and West Virginia may be conducted in Ohio casinos with the approval of OCCC. Subject to the approval of OCCC, casinos are allowed to determine minimum and maximum wagers for gaming, and slot machine payout must be at least 85%.
State agencie's expenditures
Various state agencies will incur expenditures related to the requirements of the bill. No appropriations are made in the bill to finance the costs related to the requirements included in the gaming statutes. As of this writing, LSC is unable to estimate costs associated with all of these requirements.
Inspector General
The bill requires the Inspector General to conduct random reviews of the processing of contracts associated with the OCCC. In addition, the bill allows the Inspector General to investigate any wrongful acts or omissions that have been committed by the Commission and, at the conclusion of an investigation, the Inspector General is required to report its findings to the executive director of the Commission and to the Governor. The bill appropriates no moneys in the Inspector General's budget for the purpose of carrying out the requirements of the bill.
Attorney General
The Office of the Attorney General is charged with civil enforcement of Chapter 3772. (or any rule passed pursuant to that chapter) and may pursue a civil action with a court of common pleas. It is uncertain how many civil actions will be pursued annually, but the Office would likely dedicate some staff to the duty of enforcement of these provisions. The Office of the Attorney General (Bureau of Criminal Identification and Investigation, or BCII) will be required to perform background checks on OCCC members and staff, and certain employees of the casinos and related industries. The cost of the background check is $22 for a statewide check and an additional $24 for the FBI check, of which $22 is forwarded to the FBI. All fees are deposited to the credit of Fund 1060, General Reimbursement.
Ethics Commission
The bill requires all members of OCCC, the executive director, all professional employees, and all technical employees of the Commission who perform an internal audit function to file appropriate disclosure statements to the Ethics Commission.
Department of Rehabilitation and Correction
The bill makes several criminal prohibitions, generally related to various prohibited casino-related conduct (e.g., cheating). Violating any of these prohibitions is a felony of the fifth degree on the first offense, punishable by 6 to 12 months in prison and a fine of no more than $2,500, and a felony of the fourth degree on each subsequent offense, which is punishable by 6 to 18 months in prison and a fine of no more than $5,000. The individual could also be barred for life from entering a casino facility.
It is uncertain how many criminal convictions would result annually, or, of this number, how many would be sentenced to prison. Violations will occur, with some persons convicted of a felony offense being sentenced to prison. The magnitude of the potential resulting increase in DRC's annual incarceration costs is uncertain. As of April 2010, the annual average cost associated with housing and providing services to an offender in prison was $25,334, or $69.41 per day.
Other agencies
The bill requires the OCCC to enter into an agreement with the Ohio Department of Alcohol and Drug Addiction Services (ODADAS) to provide a program of gambling and addiction services. The bill specifies that ODADAS will administer the Problem Casino Gambling and Addictions Fund, and prepare an annual report to OCCC, the Speaker of the House, the Senate President, and the Governor, describing the use of the fund. (Currently, the Department of Alcohol and Drug Addiction Services provides treatment to clients with an alcohol or other drug addiction and co‐occurring gambling addiction or pathological gambling addiction with funds received from the Ohio Lottery Commission through an interagency agreement. Expenses are financed with moneys appropriated from Fund 5T90, line item 038616, Problem Gambling Services.)
The State Racing Commission will administer the Ohio State Racing Commission Fund. Under the provision in the Constitution, money in this fund will be used to support purses, breeding programs, horse race track operations, and Racing Commission operations.
The Ohio Peace Officer Training Commission (Office of the Attorney General) will create a gaming-related curriculum for gaming agents and will use money from the Ohio Law Enforcement Training Fund to train gaming agents.
The Department of Taxation will use funding provided from the Casino Control Commission Fund to administer the casino tax. The Department of Taxation had previously estimated start-up costs for administering the casino tax at $400,000, and ongoing operations at $250,000 per year.
Units of local government
Counties
Funds in the Gross Casino Revenue County Fund, estimated at $328.2 million per year, are to be distributed among all 88 counties in proportion to their respective populations. Potential distributions may range from $0.4 million for Vinton County to $40.3 million for Cuyahoga County. If a county's most populated city had a population greater than 80,000, then 50% of that county's distribution will go to that city. According to the 2000 Census, Columbus, Cleveland, Cincinnati, Toledo, Akron, Dayton, Youngstown, and Canton will receive half of the distributions to their respective counties.
School districts
Funds in the Gross Casino Revenue County Student Fund are to be distributed to all 88 counties in proportion to public school district student populations at the time of such distribution. Those funds are to be distributed among all public school districts located (in whole or in part) within such county in proportion to each school district's respective student population who are residents of such county at the time of distribution to the school districts. Each public school district shall determine how its distributions are appropriated, but all distributions shall be used only to support primary and secondary education.
Municipalities
Combined revenue to the Gross Casino Revenue Host City Fund may be about $32.2 million per year. Due to varying gaming market conditions, yearly municipal distributions are estimated to range from $4.1 million in Toledo to $11.5 million in Cleveland. Cincinnati and Columbus may receive $7.1 million and 9.4 million, respectively.
[1] The bill also specifies that the gross casino revenue tax is in addition to any other taxes or fees imposed by the Revised Code.
