Views On Proposed VGT Expansion In PA Are As Varied As Can Be

A Senate committee heard from all sides on a controversial proposal that would add thousands of VGTs in bars and clubs around the state.
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The one thing clear from a Pennsylvania Senate committee hearing on a proposal to once more expand the state’s legalized gambling options is there is nothing close to a consensus about it.

The Senate’s Community, Economic and Recreational Development Committee heard Tuesday morning from 15 different presenters with widely divergent views on a bill to legalize and tax VGTs and so-called “skill” machines at bars and clubs with liquor licenses throughout Pennsylvania.

The measure, SB 1256, has an influential Republican sponsor in Senator Majority Leader Jake Corman, who sees it as a way to bolster both state revenue and the incomes of businesses and organizations struggling as a result of the COVID-19 crisis.

Its chance for a Senate vote or eventual passage in the legislative session that ends after the November election, however, is uncertain because of heavy resistance from the casino industry, the Wolf administration, and conservative lawmakers who believe the state already has more than enough legalized gambling.

VGTs are already here, but without oversight

Strong advocacy for SB 1256 was offered by spokesmen for clubs and taverns, and especially, from those representing the companies involved in distributing VGTs, which are virtually identical to the slot machines within casinos.

The state has about 180 VGTs currently within the truck stop operations that were permitted to begin hosting them under the most recent gambling expansion legislation of October 2017, and more trucking locations are to be added. Corman’s bill would allow many thousands of those machines and skill games — without specifying a number — in widespread establishments with liquor licenses.

The bill’s advocates suggested that it would not actually represent new access to gambling in Pennsylvania, as so many machines already exist either illegally — as with VGT or slot devices outside of a casino — or under a gray area of law as pertains to the skill games.

“This is by no means a gaming expansion,” said Rob Miller, founder/partner of Commonwealth Gaming, a VGT operator that supplies machines to the legal truck stop locations. “The revenue impact the casinos are fearing, it’s already here.”

Various estimates were offered at the hearing that untaxed, unregulated VGTs and skill games currently in use in the state could number 20,000 to 30,000. Casino representatives suggest the bill might allow as many as 85,000. Miller said that with municipalities having an option under the legislation to prohibit machines within their limits, the number resulting from the bill’s passage would be far less, perhaps 12,000 to 14,000.

Paul Jenson, a Chicago-based lawyer representing the Pennsylvania Video Gaming Association, said Pennsylvania could learn from the experience of Illinois having allowed VGTs in small businesses in a way that both added to state revenue and “allowed many locations to keep their doors open. … Pennsylvania already has a form of [VGT]  model but doesn’t generate any taxes or revenue from it in any way.”

Opposing the bill is one thing uniting casinos

The state’s casino industry is more unified than is common among the operators for purposes of fighting the legislation, and three executives and a lawyer representing different companies offered testimony.

As stated in the industry’s prior letters to legislative leaders on the topic, they consider any gambling expansion to be an unfair change in the rules under which they began operating in the state. The casinos have long generated more than $1 billion annually in tax revenue for state and local governments.

Joseph Weinberg, CEO of Cordish Gaming Group, noted that his firm with its Live! brand is investing a total of $900 million in developing a mini-casino in Westmoreland County to be opened in November and large hotel-casino to open in Philadelphia in February.

“In making the investment we have and continuing to proceed in this unprecedented environment [due to COVID-19]  we counted on having a rational partner in the commonwealth,” Weinberg said, in reference to state government and its existing policies surrounding gaming.

He noted four other mini-casinos are planned besides his company’s own such project, and they could all be harmed in addition to existing casinos by unforeseen competition in clubs and bars.

“The old adage ‘If it ain’t broke, don’t fix it,’ I think, really applies here, because the industry is working and it’s about to undergo a new massive expansion now … all based on the legislature and state being a rational partner with us,” Weinberg said.

Skill games want to be treated differently

To demonstrate how complicated the topic is, the casino industry was joined in its opposition by the primary supplier and manufacturer of Pennsylvania skill games, even though the legislation’s language states they could be newly regulated just the same as VGTs.

Representatives of the games’ developer, Pace-O-Matic, and manufacturer, Williamsport-based Miele Manufacturing, maintained there are important differences in their games’ profitability that would make it wrong to treat them the same as VGTs.

Their representatives said the skill games have an element of player involvement and decision-making that are different from VGTs and slots, which are pure chance driven by random number generators.

Because of that, they said, more money is returned to players and they can’t be taxed the same. They also contend the “skill” element means their machines aren’t actually illegal now, an issue that is awaiting a Commonwealth Court determination.

“We support efforts to regulate our industry, that would allow us to provide tax revenue to the state at a fair rate,” said Paul Goldean, chief accounting officer for Pace-O-Matic, which is based in Georgia.

SB 1256 in its present form does not specify a tax rate, but Goldean suggested whatever the state develops ought to have a different rate for skill games from that for slots and VGTs. The slots tax rate of 54% for casinos is among the highest in the nation, and Goldean said the skill games’ tax should be similar to the 16% tax for table games.

Bars, clubs say they’re imperiled without such revenue

A subtext throughout discussion of the legislation by presenters and questioning of them from senators was that so many machines already operate outside of casinos with no oversight.

John Getz, state adjutant and quartermaster for the Pennsylvania State VFW, said the organization does not condone clubs’ hosting questionable machines and would like to see the issue cleared up by a measure such as SB 1256. Many fraternal clubs or organizations maintain they cannot survive without such revenue.

“As we travel throughout the state, we go into many of the clubs, and we do see that many have what I would call the illegal machines, and they’re at corner grocery stores and everywhere else,” Getz said. “We want to see something legal.”

Jim DeLisio, a tavern owner who is president of the York County Tavern Association, said liquor establishments across the state are desperate due to COVID-19 and state-imposed restrictions resulting from it.

The taverns, like clubs, have been seeking more access to gambling opportunities like legal VGTs for many years. The legislature has rebuffed those efforts while several years ago passing a largely ineffective bill to allow small games of chance in taverns, DeLisio said.

“We believe it’s very important for small businesses to find additional revenue streams to replace lost business,” DeLisio said in support of Corman’s bill.

It was the first public airing of the proposal, which was discussed behind closed doors of the Senate Republican caucus in June without garnering sufficient support for Corman to bring it to a vote. If it is to move forward for action before the 2019-20 legislative session ends, it would likely be in the few session weeks that remain in November following the general election.

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