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7/10/2017 7:03:00 PM
Lake Michigan casinos produce strong June 2017 with tax changes on horizon

Andrew Steele, Times of Northwest Indiana

Northwest Indiana's casinos posted a strong month of June, increasing their gaming revenue to $75.2 million, nearly 6 percent more than a year ago. It was the largest year-over-year gain since February 2016.

June also marked the end of the state's fiscal year, during which state government enacted legislation intended to soften casinos' tax burden and make operations more efficient.

'A solid month'

"June was just a good, solid month," Ameristar Senior Vice President and General Manager Matt Schuffert said of the East Chicago casino's performance. "It was good to see growth in both tables and slots."

Horseshoe led the way with a 10.8 percent gain to $32.3 million, according to statistics from the Indiana Gaming Commission. Ameristar netted an 8.7 percent increase to $17.8 million and Michigan City's Blue Chip increased its win by 4.5 percent to $13.1 million. Gary's Majestic Star boats took a step back, declining 7.1 percent to $12 million.

"We're very pleased with the results this month," Horseshoe Senior Vice President and General Manager Dan Nita said. "We had growth in all the key metrics — slots, table games, poker and visitor count."

June was the second straight month of growth in a calendar year still slightly down. Northwest Indiana's casinos are down about 1.6 percent for the year, with $481.5 million in gambling revenue.

The state's 13 gambling establishments increased their year-over-year win in June by 4.9 percent, to $178.8 million. They paid $56.6 million of that in wagering taxes, and $3.7 million in admissions taxes.

Taxing changes

The latter tax was addressed by this year's General Assembly, which scheduled changes that will link it more closely to changes in gambling revenue. Beginning July 1, 2018, the current $3-per-patron admission tax will be replaced with a new tax on wagering income.

The admissions tax was created when the boats left their docks on a set schedule, making admissions more regularized. With casinos remaining docked, and with nongaming amenities being added and improved regularly, patrons come and go from the gaming floor more frequently, and casinos pay a tax each time they enter.

The change will immediately mean lower taxes for Blue Chip, which paid a higher proportion of its gaming revenue, 4.4 percent, than the other casinos.

"In our view, the admissions tax penalized us for the significant investments we’ve made in nongaming amenities, such as hotel rooms and restaurants," said David Strow, vice president of corporate communications at Blue Chip parent Boyd Gaming. "We incur a separate admissions tax each time a customer moves between the casino and those amenities."

The ratio of admission tax to wagering revenue is now the rate casinos will pay instead of the flat-rate admissions tax. The law sets a maximum rate of 4 percent for fiscal 2019, and 3.5 percent after that.

Horseshoe's rate was about 2.6 percent; Ameristar's, 3.2 percent; and Majestic Star's, a combined 3.7 percent for its two boats.

Ameristar's Schuffert said the change will allow more flexibility in integrating gaming and nongaming operations "away from the traditional gaming boat model" which had the casino leaving restaurants and other amenities behind as they sailed.

Horseshoe's Nita said the change could allow his casino the flexibility to attract larger group events to its meeting space and different acts to its Venue theater, since it will no longer pay tax on nongambling visitors.

The law also granted casinos a longtime wish regarding state income taxes — a phasing out of what they call the "addback." For federal purposes, casinos always have reduced their income by the amount they paid in wagering and admissions taxes, but the state required them to add that amount back into their income for state tax purposes.

That amounted to paying a tax on a tax, they argued. The state agreed, and the addback will be phased out over eight years.

Local impact

The admissions tax is essentially the source of local governments' casino revenue. Supporters of the law argued local governments should share — along with the state and the casinos themselves — in revenue losses brought about by a decline in gaming, which peaked statewide in 2009. And casino operators suggest it will help promote new investment as competition increases.

Opponents, particularly some Democrats in the legislature, were rankled by the changes, especially in light of the fact the state's gas tax was raised in the major road-and-bridge legislation enacted in the 2017 session.

"As you prepared to pay more," Rep. Scott Pelath, D-Michigan City, wrote in The Times in May, "casino owners in Las Vegas still figured out how to get a tax cut."

During the first four years after the admissions tax is replaced, the Legislative Services Agency estimates distributions in Lake and LaPorte counties will drop about $3.5 million in total, ranging from a four-year loss of about $1,100 for the Northwest Indiana Law Enforcement Academy to about $1.1 million for Lake County.

City losses over fiscal 2018-2021 would amount to about $320,000 for East Chicago, $480,000 for Gary, $280,000 for Hammond and $590,000 for Michigan City. LaPorte County is also expected to lose about $590,000 over the four years.

Further, a $48 million supplemental distribution to casino host communities, topping out their receipts at 2002 levels, and a $33 million wagering tax "set aside" for noncasino communities throughout the state, will each be reduced in proportion to any decline in casinos' gaming revenue. The Legislative Services Agency has not estimated the impact of that.

Copyright 2017,, Munster, IN

Editor, John C. DePrez Jr.; Executive Editor, Carol Rogers; Publishers: IBRC and IAR

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