Casino deal means extra $110 million for Ohio

A rendering of the casino in Cincinnati
A rendering of the casino in Cincinnati

COLUMBUS, OH (FOX19) - CLEVELAND (AP) - Ohio Gov. John Kasich laid out rules for legalized racetrack slot machines on Wednesday as part of an agreement that settles a dispute with Cleveland and Cincinnati casino operator Rock Ohio Caesars.

"I don't know how many times I came down here [to Cincinnati] and people said, 'Do you understand this is important?' Yes," Kasich said. "I've always thought it was important, but I think the extra weight and effort we did results in 110 million dollars for the people of the state."

"I have to tell you that when we entered into these discussions we were a bit skeptical based on how quick things happened," Rock Gaming's Dan Gilbert admitted. "But we believe everything turned out well for everybody and it's best for the long term productive partnership that ourselves, the community, the governor and the whole state of Ohio will hopefully have going forward."

[CLICK HERE to read the comprehensive gaming review agreement.]

The deal frees ROC from paying the state's commercial activity tax on all wagers, a sticking point between the company and state budget writers in Columbus. The Republican-controlled Ohio House had added a provision to Kasich's nearly $56 billion, two-year state budget that said the so-called CAT tax applies to wagers plus payouts, a definition casino operators said would cost tens of millions in extra taxes and violate terms of a constitutional amendment approved by voters in 2009.

The deal taxes the company on wagers minus payouts. In exchange, it requires an additional $110 million in payments from ROC over the next decade and an increase in the company's overall investment in the state from $500 million to $900 million. The casino application fee would be $1.5 million.

An even bigger surprise in the pact was Kasich's decision to open the door to slots-like video lottery terminals at Ohio's seven horse tracks. Licenses to operate VLTs would cost $50 million each, for a total of $350 million at seven tracks, plus 33.5 percent of sales revenue. The deal requires VLT sales agents to invest at least $150 million in their facilities, including VLT machines, with a maximum credit of $25 million for the value of existing facilities and land. Sales agent commissions couldn't exceed 66.5 percent.

Racetrack betting parlors, often called racinos, would have to open within three years of being licensed. Through its joint venture with Caesars, Rock Ohio Gaming would control one track: northeast Ohio's Thistledown. Five of the other six are also controlled by casino interests. By putting the VLT rules in a memorandum of understanding with ROC, Kasich skirted one legal conundrum faced by his predecessor, Democratic Gov. Ted Strickland.

Strickland's proposal to legalize video lottery terminals at the tracks was sidelined by a court challenge and ultimately dropped. Opponents were swift to attack the move by Kasich, a Republican, as an end-run around voters.

"If John Kasich were a commentator on Fox News right now, and some governor somewhere was trying to do this, he would be on a rant about how they were stepping on voters' constitutional protections," said David Zanotti, whose Ohio Policy Roundtable has led the charge against legalized gambling in the state for more than a decade.

Zanotti said Penn National, which is building casinos in Columbus and Toledo, was required to pass a constitutional amendment just to move its location from one part of Columbus to another - so a total overhaul of the casinos' financial arrangements with the state should also go to voters.

"So the Kasich people are going to put VLTs in the racetracks, in essence grant casino licenses to these facilities without a statutory amendment, without a public hearing. How does that work?" he said. "Is this King George III? Did we just lose out whole form of representative government?"

The $110 million in extra casino revenue from ROC would come in the form of $10 million more annually for the first five years and $12 million annually for the five years after that.

Not everyone is convinced the deal was in the

"What did it cost to get that 110 million dollars?" questioned local businessman Dan Berger. "I mean, [with] the delay surely there's been a cost. The casino is not going to be opened for x number of months. How much money would they have generated?"

Berger wonders what lost opportunity costs could have added up to in the time it took to reach an agreement.

"Was he chasing dimes and stepping over dollars to get there? I don't know," Berger admitted. "I've got serious doubts about it."

The administration noted that portions of the agreement would have to be approved by lawmakers, and in some cases by the Casino Control, Lottery and Racing commissions.

Portions of the agreement only apply to ROC, while other provisions are general, the governor's office said. Penn National has not yet agreed to terms with the governor.

According to developers the delayed construction will not affect the size or scope of the casino. They say Horseshoe Cincinnati is slated to be complete in the Spring of 2013. Plans include 2,300 slot machines, 73 table games, lounges, a buffet restaurant, and food court.

During construction, developers estimate the project will create 2,000 jobs. The casino, once complete, is expected to employ nearly 1,700 people.

(Copyright 2011 by The Associated Press. All Rights Reserved.)