Officials with casinos at Indiana's two pari-mutuel horse racing tracks told lawmakers that taxes imposed on them are too high and are threatening their viability.
Officials with Indiana Live Casino near Shelbyville and Hoosier Park Casino in Anderson on Monday told a legislative committee on gambling issues that their initial licensing fee of $250 million each was excessive. They argued the tax structure puts them at a disadvantage with the state's riverboat casinos.
"It's becoming clear that the model does not work," said Jim Brown, general manager of gaming for Hoosier Park. "We'd like to see that opportunity to survive. Right now we see a dead end road with the first payment and ongoing payments."
The testimony came during the first meeting of the committee studying legalized gambling in Indiana and make recommendations on ways to keep the industry competitive. Lawmakers say it's especially timely because of new or possible expansions of gambling in neighboring states.
Illinois, for example, has made it legal to bet on video poker machines found in many bars, restaurants and truck stops. Ohio is moving to put slot machines at seven of its pari-mutuel tracks.
Democratic Rep. William Crawford of Indianapolis, co-chairman of the Gaming Study Committee, said casinos have been a boon for economic development in Indiana. Casinos and the lottery bring in about $1 billion a year in state and local tax revenue.
"I think it's important to sustain that economic engine," Crawford said.
The General Assembly passed legislation in 2007 allowing Hoosier Park and Indiana Live 2,000 slot machines each at their pari-mutuel venues.
Track officials said revenue from the slots was needed to keep their tracks and horse racing viable in Indiana. They agreed to pay $250 million each over two years to get the slots, and spend at least $100 million each to build the new casinos.
The state imposed a graduated tax on revenue from slots at the so-called "racinos," which opened in the summer of 2008.
Besides the graduated income tax on revenue, the casinos must pay 15 percent of their adjusted gross revenue — the amount they get after paying out winnings — mainly to prop up horse racing purses. They have another 3 percent local tax and 1 percent tax to help subsidize a casino in southern Indiana's French Lick.
The racinos said they should not have to pay taxes on money they are not allowed to keep — including that for purses — saying it amounts to double taxation not imposed on riverboat casinos. Revenues from the slots are coming in below original expectations as well, and both racinos were saddled with paying the licensing fees.
Both operations said they were losing money as a result. Indiana Live said it has lost $50 million since its racino opened. Hoosier Park officials did not provide a figure, but said they were losing significant money.
Ross Mangano, chairman of the board of Indiana Live, said lawmakers should not only lower taxes, but allow table games at the racino just like other casinos.
Sen. Luke Kenley, R-Noblesville and the other co-chairman of the interim committee, said lawmakers do not want the racinos to fail.
But, he said, "We need to remember that they voluntarily entered into this agreement and all of the terms and conditions were known at the time they did that."