Ohio casinos are not hitting the revenue heights they were expecting to reach when they became legal in 2009.
Casinos were legalized in Ohio through a public vote. In the campaign for legalization, advocates for casinos claimed that the state’s four casinos would bring in almost $2bn (£1.6bn) in revenue before taxes.
It is now almost ten years since legalization and the figures are not adding up. A lot of people are asking why.
What are the reasons?
The actual revenue figures to date from casinos are below the $1.4bn (£1.1bn) projection for 2018.
That projection was made after the installation of video lottery terminals at seven racetracks across the state. Governor John Kasich approved these terminals are now competing directly with the casinos.
The casinos are in Cleveland, Cincinnati, Toledo, and Columbus. The racetrack terminals are cutting into the casinos’ tax contributions.
Some people say that the recession that hit the country a decade or so ago has had a major effect on the gambling habits of Ohio residents. However, the racino revenues are increasing, which contradicts that idea.
In 2017, about $818m (£636m) went to the state coffers from the four casinos. The seven racetracks with video lottery terminals produced revenues of $987m (£768m) for the year.
All of the taxes on the video lottery terminal go directly to school budgets. Therefore, the local governments do not get any of these funds. Only the taxes from the casinos are available to local governments.
What are the critics saying?
The Ohio Casino Control Commission executive director, Matthew Schuler, believes that the projections of casino revenues made before casino legalization were all inaccurate. He says: “All of the early projections were wrong. It wasn’t just the campaign (for the amendment) that overestimated.”
Many believe that the potential tax revenues were exaggerated to help get the public to vote in favor of legalization.
Others disagree. A spokesperson for Penn National Gaming, Bob Tenebaum, believes that the creation of these gaming facilities from scratch made forecasting difficult. They went from zero gambling establishments in the region to 11 gambling facilities and four casinos.
He also says that the early projections are not very inaccurate, that they are actually close to the actual revenues. Currently, Penn National operates three of the state’s casinos.
The other casino operator in the region is JACK Entertainment, which operates the Jack Cincinnati Casino. Their senior vice president believes that splitting gaming among 11 establishments rather than just the four casinos plays a significant role in the difference between the forecasts and the actual revenues.
The future of gambling in Ohio
Despite the inaccuracies in the forecasting, Ohio is still benefiting handsomely from casino legalization. The state is getting a lot of money from taxes on these establishments, which also created more than 20,000 new jobs.
Some major casino operators believe that there is a lot of potential in the Ohio casino sector. MGM Resorts recently took over the Hard Rock Rocksino, the largest resort casino in the state.
This is well located between the state’s two major cities, Cleveland and Akron. The casino has over 2,300 video lottery terminals and all the usual trappings of a resort casino.
MGM bought this property from Milstein Entertainment for about $1bn (£780m). It is the best performing casino in the state, with a net turnover of $293m (£228m), according to the latest figures.
There is a lot of hope that sports betting will become legal in Ohio in 2019. There were attempts to introduce it this year, but the legislative session ended before that happened. Sports betting would lead to more tax revenue and would be welcomed by the state’s casino operators.