Is a New York City Casino License Worth $1 Billion?

written by I. Nelson Rose
2022

No government has ever asked $1 billion just for the right to build a casino.

That still is true.  But that’s how much New York Governor Kathy Hochul had originally wanted for casinos in New York City.

Casino executives and lobbyists were able to get the leaders of the State Legislature to put pressure on the Governor.  Now the state’s $220 billion budget for 2023 includes only a $500 million fee for each of three downstate casinos; although, that might rise to as much as $750 million.  This is in addition to minimum gross gaming revenue taxes of 25% on slots and 10% on table games.

The question is whether any casino, even one in Times Square, is worth a license of half or three-quarters of a billion dollars.  Although the answer to that might be, “Yes,” I would advise against writing that check unless it comes with legislation guaranteeing that the state and city won’t come back later asking for more later.

In 2009, I was hired by the State of Delaware to recommend the tax rate for its new sportsbooks.  I looked at every jurisdiction I could find everywhere in the world.  What I discovered was that every government had raised its tax rates or fees on casinos, once they were open and successful.

When I mentioned this during a speech before leaders of state legislatures, one of the Mississippi delegates challenged me.  “We never raised our casino tax rates,” he said.

“That’s true,” I responded.  “You just imposed a $1 per head fee on every patron entering a casino.  Since no casino is going to stop and ask every patron for $1, they just accepted it as a new tax.”

One legislator bragged to me that his state raised the gambling tax every year until a third of the casinos went bankrupt.  Then they lowered it.

Illinois even raised its highest tier casino tax to 70%, before the governor went to jail.  Casino owners rightly feel that a tax above 50% makes the state the senior partner.

The only jurisdiction I am aware of that did not raise gambling taxes in Singapore.  Before the two casinos opened in 2010, the government locked itself into not increasing its take for 12 years.  By 2019 the government couldn’t stand it anymore.  So, starting in March 2022 mass-market tax went from a flat 15% to a tiered 18% and 22%; premium player tax from 4% to 8% and 12%.

The lesson for every casino company about to write that $500 million check to New York is to make sure that all tax rates and fees are locked into the gaming legislation.

Remember the proposed NY casino tax rates are minimums.  And governments always get greedy.

 

© Copyright 2022, all rights reserved worldwide.  Gambling and the Law® is a registered trademark of Professor I. Nelson Rose, www.GamblingAndTheLaw.com.

I. Nelson Rose

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