Virginia Senate committee discusses tax rates on potential casinos

The Virginia Senate committee slated to first consider casino legislation next year discussed gaming tax rates and other aspects of the new state gaming study during a meeting this week.

Members of the Senate Committee on General Laws and Technology heard a nearly two-hour presentation Tuesday about the study from members of the Joint Legislative Audit and Review Commission (JLARC) who compiled it, the Bristol Herald Courier reports.

The study was mandated under Senate Bill 1126, as a prerequisite for possibly allowing casinos to operate in certain Virginia cities. The legislation would allow casinos in Bristol, Danville, Portsmouth, Richmond and Norfolk, if approved by voter referenda. A video of the meeting is found on the General Assembly’s website.

The study looked at three potential tax rates on casino profits after prize payouts — 12%, 27% and 40%. The 27% figure, which was the median of all 30 states that allow commercial casino gaming, forecast the state would receive more than $260 million in annual gaming tax revenues. The 12% rate forecasts $122 million in state revenue and 40%, which is comparable to some of the nation’s highest gaming tax rates, could bring the state $378 million.

During the discussion, Chairman Sen. Frank Ruff, R-Clarksville, asked for examples at different levels going forward, but said he doesn’t “think we could go as low as 12%.” Legislation that prompted the study considered rates of 10% to 15%.

“I think the way the analysis has been done, we had to pick the 12, 27 and 40 in order to get the most accurate estimates possible,” commission Associate Director Tracey Smith said. “I think 27, for example, is meant to be illustrative, and it could go down to 22, 21 or 20, and you would still see roughly the same type of economic impact. I think to do full blown analysis on specific numbers that would do economic impact as well as revenue impact, we’d have to work with our consultant to do that.” Study project leader Joe McMahon told the committee it could draw out estimates in between those points.

There was also some discussion about applying different tax rates to different areas so a casino in Bristol, for example, might pay a lesser rate than a larger casino in a more affluent area.

The study was carried out at the behest of Senate Bill 1126, which was signed into law earlier this year, in advance of the matter coming back to the General Assembly. For 2020, legislative language to permit casino gaming is contained in Senate Bill 36, which was recently prefiled by Sen. Louise Lucas, D-Portsmouth, and referred to the committee.

The 200-plus page JLARC report concluded that five possible casinos — including one in Bristol plus another in northern Virginia — could all be financially viable, create more than 1,000 jobs in each market, generate millions in new gaming tax revenue for the state and localities and be overseen by expanding the administration of the Virginia Lottery Board.

At Tuesday’s meeting, Bristol Virginia City Manager Randy Eads expressed support for the study’s findings and urged lawmakers to consider the impact casinos could have on financially challenged areas.

“There are many things in this report that are very good for Bristol, very good for rural parts of Virginia and impoverished areas of Virginia, and I hope this committee will consider those good things and how to best implement gaming in Virginia so that we can take advantage of this opportunity,” Eads told lawmakers.

The JLARC report forecasts that a Bristol resort casino would employ more than 1,000 people and be responsible for creating an additional 400 indirect jobs in its first year of operation. “There are not many opportunities that we have where 1,000 jobs will come to Bristol, and that is huge. We’ve lost 1,000 jobs within the past three years in the city of Bristol due to Bristol Compressors and Ball Corporation closing. To have 1,000 jobs back — with a median income of $33,000 — makes a tremendous impact on many families in our area,” Eads said.

The report estimates that a Bristol casino would generate $3.7 million in local tax revenues — primarily from sales tax and the city’s share of gaming tax revenue. That equates to roughly 8% of the city’s total annual operating budget.