Category Archives: gambling

Whose Money Is It?

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—OR, how a $2 fee is having a multi-million dollar negative economic impact in Missouri.

This entry will be lengthy because we have to use a lot of numbers to make our point.

A number of bills changing Missouri’s gambling laws have been filed for this year’s legislature. But we wonder if any of them should be considered until a significant problem with one of our existing laws is corrected because it has turned into a growing economic drain on our state.

Regular consumers of these pages know that the author has been advocating a fee increase for the casino industry to pay for the creation of a National Steamboat Museum.

As we’ve researched that issue we have come across a lot of interesting other issues and concerns. We passed some of them along to the House Interim Committee on Gaming that met this fall. In some cases we think we have some answers but here’s one where we don’t. Maybe some of our lawmakers will try to provide some. Or maybe somebody will ask the court system to do look into things. Our voice, however, is puny compared to the politically influential voices of a large, wealthy, and politically persuasive industry.

First, the scenario.

In 1993, the legislature required the casinos to pay the state two dollars for each admission on their proposed riverboats. Our first two casinos opened for business in the spring of ’94 and they paid the two dollars, no problem.

Our casinos have paid the two dollars in each fiscal year since. They are obeying the law.

But there’s this thing called inflation.

In the second fiscal year of casino gambling in Missouri, the inflated value of two dollars was $2.05 and the purchasing power of two dollars dropped to $1.95. In the fiscal year after that the equivalent value of two 1993 dollars was $2.11; purchasing power was down to $1.90. (Our numbers come from the Federal Bureau of Labor Statistics.)

We get into some higher mathematics now. Our casinos paid the state in fiscal 1994-95 a total of $25,216,862, a very healthy increase in state general revenue. But if they had paid the state the inflated value of the two dollars, they would have paid the state an additional $702,172.

Whose money was the $702,172? The 1993 law does not say anything about casinos being able to keep what we refer to as “windfall profits.”   In fairness, the law does not prohibit casinos from keeping that money, either.

We were around then, covering the legislature, and don’t recall any concerns that the day would come when two dollars wouldn’t be worth two dollars. Trying to determine legislative intent at this great distance could be difficult although there are a lot of people still around who were serving in 1993 and voted on that bill who might recall what it was.

Fast forward to fiscal year 2018-19 that ended last June 30. Our thirteen casinos paid the state $75,000,634. But the inflationary value of the 1993 two dollars had risen to $3.48 (and it’s $3.53 for this fiscal year). Had the casinos paid the state in contemporary equivalent dollars, they would have paid the state about $55.6 million more than they did. Instead, they kept the money. The total windfall profits after twenty-six years of unadjusted two-dollar payments had reached $888.5 million as of June 30.

Whose money is it?   And whose money SHOULD it be?

Neither side seems to be protected by that 1993 law.

Compounding this question is the continued decline in purchasing power of the two dollars our casinos pay the state. It was down to $1.15 in the most recent fiscal year. The total loss of purchasing power since our casinos opened had reached $944.2 million.

The combined total of dollars the casino industry has kept because of windfall profits and the loss of purchasing power of the two dollars the industry did pay represented an economic deficit to the state during those twenty-six years since the two-dollar fee was established of almost $1.833 Billion as of June 30.

Now the question becomes even more acute: Once again, Whose. Money. Is. It?

There are some other questions, too. Why wasn’t anybody paying attention, either at the gaming commission or in the legislature? The casino industry probably was because it was reaping the benefits but should the industry have stepped forward and said, “Hey, legislature, this two-dollar fee thing is making us a lot richer while the programs intended to be funded by the two dollars are getting poorer and poorer?”

It was under no legal obligation to do so.

Now, with the accumulated negative economic impact after more than a quarter-century of casino gambling nearing Two Billion Dollars, shouldn’t somebody start trying to determine whose money this really is?   Should these windfall funds have been set aside in some kind of an escrow account until somebody decided who is entitled to them? Nothing in the law requires that.

A complicating factor is that the customers of casinos do not pay the fee. It comes out of casino revenues, the money casinos win from the customers. When the law was passed in 1993, it was still assumed there would be boats on the rivers making two hour cruises for which customers paid two dollars. They would get off the boat at the end of two hours and a new group would get aboard (and those wishing for another two hours on the boat would get back on board), each paying two dollars. But when the present system of boats in moats ended any thoughts of customers paying to enter the casino, the decision was made for casinos to pay the state two dollars per person with a new count being made every two hours. That’s how casinos wound up with 37.5 million admissions last year in a state of only six million people, most of whom don’t go to casinos. No customer pays anything.

That means the two dollars is not a pass-through from customers to the state, in effect a user fee. It is now a fee charged to the casinos and it is paid out of their money. (Their adjusted gross receipts in the last fiscal year were more than $1.735 Billion.)

If it is the casino industry’s money, is it the industry’s responsibility to make sure the two dollars going to the state are worth two dollars to the programs and entities that the fee was intended to pay for? If the two dollars are worth only $1.15 to the receiving entity, are they really the “two dollars” promised them by the statute?

The law says two dollars. Period. No inflationary adjustments are mentioned. And the casinos have done what most of us would have done (and what we might have done in certain circumstances)—if there’s money left on the table and nobody else claims it and if it’s MY table, it’s my money.

It is time to answer the questions. Here are the main reasons why.

The two dollar admission fee is split with one of the dollars going to the host city of the casino and the other dollar going to the state gaming commission which takes its budget out of those funds and then divides the remainder among a handful of worthy causes. The biggest worthy cause is the Missouri Veterans Commission Capital Improvements Trust Fund that provides money for nursing homes and cemeteries for our veterans.

Last fiscal year, each of those dollars had the purchasing power of 57.5 cents. The value is down another penny this year. Five years ago, the figure was 61 cents. At this rate, it won’t be long before the casinos are making more money from the two-dollar admission fee that was intended to offset the additional costs to host cities of a casino’s presence and to fund the gaming commission and its worthy causes benefiting veterans, college students, and programs for people who get in trouble because they gamble.

Nothing in the law says they can’t.

Nothing in the law says they can.

Whose. Money. Is. it? And—

Whose. Money. SHOULD. It. Be?

Who can answer the question? The state auditor? The attorney general? The legislature?

No matter what happens with our steamboat museum idea, isn’t it time to find an answer for our veterans, our college students getting scholarships under a program funded by admission fees, problem gamblers looking for help from a program financed by these fees, and our casino host cities?

Here are some additional figures that seem to bold-face the need to address this situation. It has been a long time since our high school bookkeeping class so we hope there is not a flaw in this reasoning. But here it is.

The state received $75,000,634 in admission fees in the last fiscal year. But because of the lack of inflationary adjustment in the two-dollar fee, it did NOT receive $55,600,438 more. That was the windfall profits that the casinos kept. The inflation-caused loss of buying power meant the $75 million the state did get was worth only $42,375,358, a loss of $32,625,276. Here is what it all adds up to:

If we add the amount of money that the casinos kept to the amount of lost purchasing power in the money the state got, the total is $88,225,744.

That means the state of Missouri and the home dock communities in the last fiscal year saw an economic DEFICIT of $13,225,110. Our analysis shows the unadjusted admission fees have produced annual economic losses to the state for the past five years totaling almost forty-eight million dollars.

That economic deficit is on track to almost DOUBLE in the current fiscal year.

In the first six months of this fiscal year (July-December) the economic loss was $$12,201,732—almost as much as all of last fiscal year. Why? Although admissions are down four percent from last year, the value of the two-dollars in contemporary money is more and the purchasing power of the money the state has received is less. The windfall profit so far this year is $28,285,835. The purchasing power loss for those six months is $20,890,844, a combined total of $49,176,680. The two-dollar fee has produced a payment of only $36,974,948.

At least, that’s how it appears from our calculator. And that’s why it is time for the General Assembly to take corrective action, despite this being a campaign year in which the well-financed casino industry can exert great pressure to keep millions flowing into its accounts while the programs the admission fee was created to pay for are victims of a rapidly rising negative economic impact. As long as that $2 fee is not adjusted, the casinos get richer and the programs and entities the fee was intended to finance get poorer.

The casinos want the legislature to let them take bets on sporting events, a new type of wagering that some expert testimony in last autumn’s committee hearings say could increase their revenues by hundreds of millions of dollars a year. Why should it be unrealistic to think the admission fee problem should be solved before these thirteen businesses are allowed to haul in even more dollars through sports wagering?

The casino industry probably would prefer this boat not be rocked, this sleeping dog not be awakened, this pot not be stirred. Its reasons are understandable. But for the others, isn’t it time somebody rocked the boat, awakened the dog, and got busy stirring?

A good time for a critical review

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As we have researched issues related to funding for construction of a National Steamboat Museum and a State Museum building, we have come to the conclusion that somebody should empanel a commission, task force, or committee to see if the laws and regulations on casino gambling in Missouri are best serving the interests of the six-million people who live here or are best serving the interests of the owners of thirteen businesses, all of which are headquartered in other states.

Frankly, we think things have evolved to the advantage of the latter and to the disadvantage of the best interests of the people of Missouri.

We don’t know if there has developed some kind of mysterious mental vortex on this matter, but it’s good to see that Speaker of the House Elijah Haahr has established an interim committee on gaming headed by Representative Dan Shaul of Imperial.

The committee already has held a hearing on Video Lottery Terminals. Efforts are being made to legalize them. Some people in the casino industry see them as illegal competition and folks in the home-dock cities of our casino boats are concerned those terminals will further erode patronage at casinos and the steadily-eroding financial support those cities draw from casino admission fees.

About two months ago, Platte County Prosecutor Eric Zahnd sued a company that provides VLTs. He says the company has put a couple of the illegal machines in stores in Parkville, where police seized five of the machines last year. The company says the machines are not “betting devices” because lottery results already are determined before the player uses the machine. The case apparently is set for hearing in December.

We understand from talking to Rep. Shaul that the committee also will examine issues such as proposed sports wagering and other things.

We’ve had casinos in Missouri since the spring of 1994. There is ample evidence that at least one part of casino law is badly outdated, allowing the casinos to make large profits at the expense of their home dock cities, veterans, and others. And there are some serious questions about proposed sports wagering legislation.

Speaker Haahr has taken an important initiative and members of the committee and members of the legislature next year might be asked to exhibit courage during an election season in the face of a politically-powerful industry to tilt the tables back to a more fair level for the all of the people of Missouri rather than thirteen businesses.

There is nothing wrong with casinos making a lot of money. The problem is how they keep it. And after a quarter-century, it’s time for a fair but critical look at an industry that seems (from this perspective at least) to have only one goal: to take as much money out of Missouri as possible—by obeying the law. But are laws passed in the early 90s valid a quarter-century later?

They are to the casinos, who correctly note they are obeying laws and regulations. But are they fair to the people who elect members of the legislature to watch out for the welfare of all of the people of Missouri?

Speaker Haahr has appointed the committee to answer that important question.

Why wait to become a victim?

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We have talked to about 115 members of the legislature about the bill to build a national steamboat museum in Jefferson City that will house the holdings of the Arabia Steamboat Museum when its lease runs out in Kansas City in 2026

A few of them have told us casino interests have talked to them, too. That’s not unexpected because the primary financing for the museum projects we’re talking about comes from increasing the casinos’ admission fee by a dollar—which would eat into the annual windfall casinos get because the fee has not changed since it was established in law a quarter-century ago although the value of the dollar has.

We’ve been told of a couple of the messages given to some of these lawmakers.

First: that the casinos will come after them in 2020 if they vote for our bill.

Second: for those with casinos in their districts, that they’ll be blamed for any employee layoffs at their casinos if they vote to increase the admission fee.

As far as the second issue goes: That’s so much dishwater.  And we have the numbers to prove that casino employment has nothing to do with admission fees; it’s a function of the number of people playing casino games—-and that number hit its lowest level in twenty years in the last fiscal year, leaving casinos with about 25% fewer employees than they had a few years ago—something we’re pretty sure they’ve never mentioned to their home communities.

And that gets us to—-

Some advice for legislators who have gotten these messages or will get them—or some other message intended to influence their votes on our issue. And it holds true any time someone threatens retaliation for your vote—on whatever issue.

Go after THEM. First.

Don’t keep it a secret.  Don’t wait to become their victim.

Remember who you are.  You are the one who writes the laws, not them.  You are the one charged by your constituents with watching out for their broader interests, which might not be the best interests of a smaller but influential interest.

You are the one who supports something good for all Missourians rather than bowing to pressure from a few very well-to-do special interests whose only concern is how much money they can take out of the state.

You are the one who goes home for long weekends during the legislative session. You are the one who is in your district every day seven months of the year.  You are the one who talks to folks at the coffee shop or the restaurant.  You are the ones who speak to the civic clubs. You are the ones who send out a newsletter to your constituents. You are the ones likely to be interviewed on the hometown radio station or by the local newspaper—which might print your newsletters.

You are the one who can tell the folks at home the things the industry won’t.

You control the message every day, every week, not just at campaign time. You are the one who has every opportunity to explain why you have supported the broad public interest in the face of the narrower interests that think they can force you to let them write the laws that govern their operations.

Opponents of legislation such as our steamboat museum bill hope you won’t tell your constituents what they’ve said to you.  But you have every opportunity to do it.  And we can’t think of a single reason why you shouldn’t.

A few years ago, several legislators were told that if they didn’t vote the way a powerful private citizen wanted them to vote, they would find themselves facing well-financed opponents backed by the private citizen’s checkbook.  All of them won—after telling their constituents about the effort to bully them.

Let’s also be clear that there is nothing wrong with someone supporting a candidate that has views different from your own, views that might be more favorable to those who differ with you politically and philosophically. You should have to defend yourself in the competition of ideas.

But you don’t have to wait silently for someone to make you the victim they say you will become because you cast your vote for a greater public good than theirs.

Remember who you are.

-0-

They never give up, do they?

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The newest trick by the casino industry to escape any taxes on another slug of money removed from customers’ pockets has been heard by a House committee.  No action’s been taken and it’s likely too late in the session for this latest scheme to make it into the statute books. But there’s always next year.

If the bill somehow passes this year, that casinos will take another $100,000,000–plus out of Missouri in the next four years. And big boatloads annually after that.

It’s another broken promise by the industry.

Since the day casino gambling was legalized in Missouri, most of the tax on the industry’s adjusted gross receipts has been earmarked for education. For 25 years, that’s been okay with the casinos.

Not anymore.

A trend that could, in time, wipe out all of the gambling money going to education has been gaining momentum in the last four years.  The casinos are giving out coupons to customers allowing them to get free plays at machines and gaming tables. And they seem to be giving out more and more.   The legislative fiscal oversight office says the growth in taxes collected by the state in the last four years from these free play coupons has averaged 8.73%.  In Fiscal 2018, the state collected $37.8 million dollars from those taxes. Thirty-four million went to the “gaming proceeds for education” fund. The rest went to the home docking cities.  More about that later.

The casinos think there should be no tax charged on the money casinos take in from people using those free play coupons. None. They propose completely phasing out the 21% tax on money they make from these promotions in the next five years.

Some if this is kind of technical so I ran it past an accountant who gave me some help. When you read the technical stuff, that is the part from my advisor.

Here’s how it would work.

Suppose you wager $100 at the casino, twenty dollars from the coupon the casino has given you and eighty more out of your own pocket. You win $40 (half of it from the coupon and half of it from your own pocket).  You walk out of the casino sixty dollars in the hole.  The casino, by giving you a twenty-dollar coupon has made sixty dollars.

That’s how the current law works.  The state collects 21% of the sixty dollars you left behind, or $12.60.

The argument from the casino side seems to be that the $20 coupon comes from the casino’s previously-taxed adjusted gross receipts.  So it shouldn’t have to pay tax again when the $20 comes back.

The industry claims it recognizes only $80 in revenue, that it paid out $40, so its adjusted gross receipts are forty dollars, not sixty and therefore owes the state only $8.40, one-third less than the present law requires.

Whatever.

What the casinos want is to pay NO tax. The bill says, “Promotional play receipts shall not be taxed after June 30, 2023.”

Thus, the bill seems from here to say the casino that gets a business tax deduction with its promotional coupon would be excused from paying any gaming taxes on adjusted gross receipts generated by that coupon when it is gambled.

My accountant friend thinks the casinos are creating an un-level playing field (imagine that, casinos have tilted tables!) where the wagers are not taxed but the patron winnings from those wagers are still allowed to be deducted from the casino gross receipts, thus lowering the casino’s AGR taxes.

There’s an even greater hazard here.

The casinos want to pay no taxes on promotional play receipts. There is nothing in this bill that prohibits casinos from issuing promotional play coupons to every customer. And as the oversight division of fiscal research points out, the casinos’ use of promotional play has been increasing.

Fiscal research estimates the state will collect $244,650,481 under the existing 21% tax on promotional play between this fiscal year (FY2019) and FY2023.  If the present tax says in effect—as it has all this time—the state would collect an additional $62,457,772 in FY2024 and each year after that.

BUT if this bill passes this year and the tax rate is gradually reduced to zero, the state would collect only $138,624,390 during that same period, and would collect nothing in FY2024 and every year after that.  That’s a loss of $106,026,891 during that phase-in period plus the $62.4 million each year afterwards. .

But it’s not just the education fund that will get hurt with this demand from the casinos.  Ten percent of the adjusted gross receipts tax goes to the home dock cities that already are seeing their funding reduced because the dollar they get from casino admission fees isn’t worth anywhere near a dollar.  Fiscal research estimates they will lose $10,602,610 by the end of FY2023 and will lose $6,245,777 each year after that.

Many years ago the casino industry agreed that the tax on adjusted gross receipts would go for education with a little bit to the home dock cities.  At that time all of the promotional play was taxed. If this bill passes, hundreds of millions of dollars more will go to casino corporate headquarters instead of being used to underwrite a small percentage of Missouri’s school funding and meet additional costs the home dock communities have because they have welcomed a casino.

As usual, the casinos get richer and richer while the causes that are supposed to benefit from casino taxes get poorer and poorer.

Just another example of an industry that cares not one whit about the people of Missouri, its education system, or even for the communities that think they’re great corporate citizens.

They’re not.

But they never give up, do they?

The man who isn’t there (but he really is)

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Some of the sports wagering bills going through the legislature’s digestive process this year bring to mind Hughes Mearns poem that begins:

Yesterday upon the stair I met a man who wasn’t there…

Some bills establish a process by which someone can bet on sporting events remotely.  But whether in doing so they are the person who isn’t there is open to question.  So today, let’s look at the casino industry’s efforts to avoid paying admission fees for the largest segment of new gamblers it hopes to attract by legalizing sports betting, people the industry thinks should not be considered there.

This issue is important for the Missouri Gaming Commission’s worthy causes—including veterans homes and cemeteries—and for the casino industry’s home dock cities, which also rely on income from the casino admission fees. And, of course, there’s the museums proposal from Jefferson City that also asks for admissions fee money.

Reading the bills instead of just listening to the casino industry explain them raises or should raise some red flags. We will raise a few today—and we won’t even get much into the industry’s effort to direct the conversation in the direction of how much it is willing to be taxed.

Casino attendance has been declining since its peak in FY 2010-2011, dropping in fiscal year 2018 to its lowest level in twenty years. Casinos hope that opening sports books in the casinos will draw people back, particularly new people, and those new people will discover other kinds of gaming while they’re there for sports wagering.

It’s unlikely to produce a BIG turnaround in attendance, certainly nothing that will return casinos to the halcyon days when they were reporting fifty-million admissions or more (a decade ending in fiscal year 2012). But as the bills are now written, it will add millions to the casinos profits, although a relatively small amount compared to the overall adjusted gross receipts, largely because they don’t think about seventy percent of the sports bettors should be counted as casino admissions.  We’ll confront that strategy in a minute.

The proposed legislation gives our thirteen casinos a monopoly on sports betting. The bills require casinos to have a specific area set aside and staffed within the casino to handle those bets. A person who enters the casino wanting to bet that the Cardinals will beat the Cubs by more than fifteen runs must go to that specifically defined area where that person will offer to make a wager.  The casino will accept that offer and, when the final score is St. Louis 19, Chicago 3, the bettor will be paid.  If the score is 19-4, the casino keeps the bettor’s money.  The acceptance, handling, processing and final resolution of the bet is handled within that prescribed area of the casino.

But the casinos also want to allow betting through use of computer, whether it’s a big desktop tower or a cell phone or maybe the increasingly sophisticated things people put on their wrists these days. And that is likely to be most of the sports bettors.  They call it “remote” betting although some definitions of “remote” are debatable.

A webpage that keeps track of gaming trends in Nevada and elsewhere, playnevada.com, reports that 70 percent of all sports wagering in New Jersey, the first state to legalize online sports betting after last year’s Supreme Court ruling, were placed online.  It also reported Nevada, which seemingly has video gambling machines in every supermarket, business, bathroom, airport terminal, and anywhere else that people go, reports mobile sports wagering is used from twenty-five percent to more than fifty percent of the betting in Nevada’s many sportsbooks.  It’s difficult in Nevada’s case to be more specific because—and this is something we might come back to in a later post for a different reason—Nevada does not separate mobile and on-site wagering. That’s why it’s harder in Nevada than it is in New Jersey to determine what percent of sports wagering is done outside casinos.

Missouri’s proposed legislation would separate on-site wagering from remote wagering, which could be detrimental to veterans services or to home-dock communities that rely on in-person wagering in the sports book area but also could provide a major increase in casino profits. Missouri’s casinos want it that way and expect the legislature to rubber-stamp the idea.

As we compose this, we don’t know the final form sports wagering legislation will have if it makes it to the governor this year.  So we’re going to construct a scenario based on common provisions in the bills and a few differing provisions in some bills.

Missouri’s proposals don’t let just anybody dial a casino, and bet on sports. A bettor first has to go to the casino (where that person presumably will have to enter, thus triggering a two-dollar admission fee for the state) and register, open a betting account, and get a password.  That person then can leave and bet from anywhere in Missouri.  At least one proposal allows betting from other states if the other state lets Missourians place bets there.  It’s called reciprocity. On the other hand is a proposal that allows betting a few feet from the gambling area—-which doesn’t sound very “remote.”

If those provisions are in the bill that gets passed, the way will be clear for Betting Bertie to place a bet in say, Boonville, even if he is in Bevier.  He does. And he loses. Since he was not in the casino personally there is no admission fee paid to the state.  The bucks Betting Bertie of Bevier bet at Boonville go straight to the boat’s bottom line. The casino gets richer. The veterans and the home dock community get no benefit at all from this increased business because Betting Bernie doesn’t set his boots inside the Boonville boat.  At least that’s the way things are proposed.

Now comes the part likely to get the casino industry lathered up.

We argue, and we would bet that a number of members of the legislature might agree, that requiring Betting Bertie to physically go to Boonville to register as a bettor constitutes the creation of a presence within the sports book area. The bills require casinos to keep detailed records in the casino of Bertie’s betting.

If Betting Bertie does not place a bet, it’s as if he’s not present that day. But if he does put down a bet that is accepted by the casino, processed by the casino, and paid off by the casino in the sports book area as required, he has activated that established presence and has electronically entered that casino.  And because the casino has accepted the bet, processed it, and paid it, it has acknowledged that he has had that presence in that casino.

Because the casino has decided to admit him to the sportsbook area with his bet, the two-dollar admission fee should apply as surely to him as it would apply to someone who walked in. A bet is a bet whether it is made by someone sitting in a comfortable chair staring at all the big screen teevees or whether it is made by someone sitting in an office chair in Bevier.  Both parties have entered the casino, one physically and the other electronically. Admission is admission—at least if the casino wants either bettor’s money. It cannot get Bertie’s money if it does not acknowledge the presence it as established for him by accepting his application and giving him his password.

Casinos will argue that physical and electronic admissions are different. But the end result is the same—the casino is most likely to win and the principle of winning is the same whether that person walks in or phones in. There is no bet if there is no acknowledged presence.

To put it more directly: The casino recognizes the arrival of the electronic bettor because it maintains a space for that person’s arrival thanks to the required registration and subsequent password issuance.  The password is the equivalent of the turnstile the on-site bettor has to go through to place a bet.

By making the password the electronic equivalent of the turnstile, the legislature can make sure that casinos don’t game the system further than they already do by claiming seventy percent of sports betting is different from the on-site betting, thus benefitting only the casino and not improving funding for veterans (and others) and home dock cities. The casino industry likes to cite Las Vegas practices in advocating a part of this bill and remember: Nevada does not separate mobile and on-site betting.

There is precedent within existing law that argues for our point.

If free passes or complimentary admission tickets are issued, the excursion boat licensee shall pay to the commission the same fee upon these passes or complimentary tickets as if they were sold at the regular and usual admission rate.

The provision kept casinos in the early days when real excursions were anticipated from declaring that everyone entering the gaming floor had been given a free pass or complimentary ticket.  As proposed statutes are written now, electronic entrance to the gaming floor and remote placement of bets is the equivalent of a free pass or complimentary ticket that, without existing law, would be treated as a non-admission. A strong argument can be made that it should not be considered as any kind of a free pass or complimentary ticket. And we suspect there are people who would support the concept—veterans groups and home-dock communities for example—who would be losers because the casinos are proposing an end-run around the admissions issue.  Why shouldn’t these bills consider remotely-placed bets to be “admissions” when the bets are received, processed, and (if necessary) paid in the casino or on behalf of the casino by a third party that conducts the wagering at the casino?

The answer is simple: the casinos don’t want them treated that way because if remote betting is not considered an “admission” there is no admission fee obligation to the state and to the host communities.  The casino thus increases its gross receipts without increasing any payments for veterans homes and cemeteries or home-dock communities and other causes. As we’ve noted before, they’re already getting tens of millions of dollars in windfalls because the admission fees are not inflation-adjusted each year and they fight aggressively if anyone suggests they should be.  By not considering remotely-placed but in-house processed bets as “admissions” their windfall will get windier.

Some additional proposed language that on first blush seems to be fairly benign appears on second blush to be much less than that.  Here’s how that works:

One of the bills appears to make that point when it says, “All sports wagers…shall be deemed initiated, received, and otherwise made on the property of an excursion gambling boat within this state.”  While that language would appear to support the points just made, please note the phrase “on the property.” Another bill seems to clarify that wording by saying sports bettors can wager on sports at “a hotel, restaurant, or other amenity that is operated by the certificate holder and subject to the supervision of the (gaming) commission.” A restaurant twenty feet from the turnstile to the gaming floor is an okay place “on the property” from which to place a bet. We suspect there are some folks who don’t think that quite qualifies as “remote.”

The definition of “on the property” is troublesome.  On one hand, the casino must establish a specific area where sports wagering is done and processed by the casino. On the other hand are suggestions that someone can be anywhere, even right outside the turnstile leading to the casino, or in a room of a hotel owned by the casino. These provisions seem to sanction avoidance of physically entering the specified area or of even entering the broader casino betting floor while on casino property, thus avoiding an “admission” and thus avoiding the two-dollar admission fee..

That is why it is important that the use of the password—from wherever—should constitute entrance to (or admission to) the specific area set aside for sports wagering and thus trigger the admission fee.

We hope the General Assembly’s final version of a sports wagering bill does not allow the casinos to ignore existing standards that require admission fees—that help veterans, home-dock communities and others—for seventy-percent of those the industry hopes to lure inside its specified sports betting areas physically as well as electronically.

—because the man who isn’t there

really will be there.

Casino abuse

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Missouri’s casino industry is feeling abused.

And those of us who want to do something great in Jefferson City are the apparent chief abusers.

Takes one to know one.

We’ve now had committee hearings in both the House and the Senate on the Steamboat Legacy Fund bill that suggests Missouri’s casino industry be the main funding source for the creation of a National Steamboat Museum in Jefferson City, the construction of a Missouri State Museum that has been needed for ninety years, and the conversion of the present state museum space into a Capitol Museum/Visitor Center that focuses on the history of the capitol and the function of state government.  Our goal is to do all of this without state funds and without any general tax increase.

In each hearing, the casino industry has complained that it’s being picked on because we (a small group of Jefferson City residents who have been working on these goals for more than a year) think the industry has capitalized on—–no, the proper phrase is “taken advantage of”—Missouri’s steamboat heritage for more than a quarter-century.

The casino industry thinks we’re picking on it by telling the truth about it.  We think the casino industry has earned the right to provide the financial base to accomplish these goals. 

We’ll start showing you why today.

The attempt to portray yourself as the victim when you are caught with your hand in the cookie jar is as old as cookies and jars.

The casinos aren’t victims. But there are victims—Missouri’s veterans and the home communities of the casinos in particular.  We’re going to show you how it happens by using numbers from three sources: Missouri Gaming Commission annual reports for the last 25 years, the United States Bureau of Labor Statistics, and the Federal Reserve Bank of Minneapolis.  And one other source: the casino industry itself.

Let’s begin this explanation with the parable of the 1994 pickup truck.  That was the year the first two casinos opened in Missouri. It was near the end of fiscal 1993-1994.  During that year, legislation went into effect establishing the two-dollar admission fee for casinos.

It’s important to understand that casino patrons do not pay that fee.  The casinos do, based on the number of people who gamble.

We won’t go into detail about how that number was established except to note that it goes back to the time when the industry convinced Missourians to allow casino gambling here by selling the image of steamboats cruising our great rivers on two-hour cruises while people could gamble (but lose no more than $500 per cruise). Each time someone went on a cruise, they would pay two dollars. One of those dollars was for the Missouri Gaming Commission and it’s “worthy causes” (more about those in a minute).  The other dollar went to the city and county that had a casino to offset the extra costs of public services because of the presence of a casino.  Leftover funds were used for capital improvements in those towns.  When the image of steamboats on our great rivers turned rather quickly into so-called boats in so-called moats the casinos decided not to charge patrons to enter the gambling floor. Instead the casinos counted noses and wrote checks to the state, probably making up that expense in charges for food and beverage, hotel rooms and the like, which is how the industry says it would make up for the dollar we are seeking for the museums project.

There is no doubt the host cities have made good use of that money.  But in the process they have become victims of their casino.

If the city street department in one of the first two casino towns bought a Ford F-150 four-wheel drive extended cab long-bed pickup truck in 1994, it might have paid the MSRP of $18,607.  By 2018 the truck badly needed to be replaced. But the price of a new Ford F-150 four-wheel drive, extended cab, long-bed truck, was $40,010.

The price of pickup trucks has doubled, and more.  But the city is still getting a dollar.  And it’s not a 2018 dollar.  It’s still 1993 dollar. And it’s not worth a dollar any more

The legislature in 1993 didn’t think to include an inflation adjustment clause when it set that two-dollar fee and the casino industry has successfully insisted the legislature not correct that shortcoming.

The inflation calculators at the BLS and the Minneapolis Fed tell us that the equivalent of $2 in 1993 was $3.41 in 2018.  The host city in 2018 got a dollar per admission at its casino.  Had there been an inflation clause built into that 1993 law they would have gotten a dollar-seventy.  Plus another half cent.

And the situation is worse for the city because those webpage inflation calculators show the dollar they DID get in FY18 had the purchasing power of only 58 ½ cents.

Does the casino industry give a hoot?  Suggesting this avaricious industry should care about making sure its thirteen host communities receive a dollar that is worth a dollar will bring forth claims that such suggestions make the industry a victim somehow.

The other half of the two-dollar admission fee goes to the Missouri Gaming Commission which takes its annual operating costs out and then distributes the rest to a list of “worthy causes.”  Those causes have varied through the years but the biggest beneficiary in 2018 was the Missouri Veterans Commission Capital Improvement Trust Fund, which funds veterans’ homes and cemeteries.  Last year it got about $22 million.   In 1993 dollars.  While the casinos were hauling in 2018 dollars from people who thought they could go to a casino and win, the veterans homes and cemeteries were getting dollars worth 58 ½ cents in purchasing power..

In fiscal year 2018, the difference between a 1993 two-dollar admission fee and its 2018 equivalent value ($3.41) was more than $56 million dollars.

Where did that money go?  Not to veterans’ programs.  Not to the home dock cities.  That $56 million dollars in windfall profits left Missouri and went to casino corporate headquarters in Nevada and in Pennsylvania.

And each year, because there’s no inflation adjustment in that two dollar admission fee, the windfall gets bigger and bigger.  In the twenty-five years that Missouri has had casinos, the industry has had windfall profits of more than $830,000,000.  That’s as of last June 30.

That’s $830-million that has not gone to programs for veterans, early childhood education, college tuition assistance programs, programs for problem gamblers—and to the host cities.

And when representatives of Jefferson City suggest that about two-thirds of the windfall going forward remain in Missouri to keep a treasure trove of American history from being purchased by a museum in Pennsylvania and moved there, and to satisfy a 90-year need for a state museum that can REALLY tell the story of Missouri and its people and its resources, the casinos whine that we are abusing them.

The casinos will attack any proposal to make two-dollar admission fees worth two dollars.  And anybody who suggests it, or who suggests (as we have) that using part of the huge annual windfall profit casinos realize for something benefitting Missourians is making the casinos victims somehow, and we should be ashamed to suggest it. .

Reviewing every annual report of the Missouri Gaming Commission makes this clear: The casinos get richer ever year by paying the state in 1993 money.  The state gets poorer because the programs and services that admission fee goes for cost 2018 dollars to operate.

We know that casinos are not built because their patrons have an even chance of winning.  The tables are always tilted in the casinos’ favor.  The tables tilt even more with each passing year that they pay the state two dollars in admission fees.

An industry spokesman has accused those of us supporting this measure of suggesting the casinos make too much money.  As is often the case with statements from the industry, it’s less than truthful and is intended to deflect attention away from the issues. It’s not the amount of money the casinos make, it’s how much they KEEP, how they keep it, and how they are adamantly opposed to any idea that the two-dollar admission fee should be changed so that veterans and home dock communities get dollars that are worth dollars.

Now, having beaten up on these “victims,” let’s acknowledge some important things.

The casinos have broken no laws. They are paying what the law requires them to pay.  Whether they are keeping faith with Missourians who voted to have majestic steamboats cruising our rivers or keeping faith with those who thought two dollars was going to be worth two dollars is another issue.  But they have not broken any laws.

They have said in the committee hearings that they have met every obligation the state has put on them.  And they have. And they sure don’t want the state to update any laws that make one of their obligations be that dollars be worth dollars.

They say they provide thousands of Missourians with jobs.  And they do.  Not nearly as many as they used to—which they don’t talk about publicly—but they do provide thousands of jobs that pay millions and millions of dollars in wages and benefits.

They pay a lot of property taxes and in some places they pay for leases of city or county land for their boats in moats. Not much to sympathize about there. Those are costs of doing business.

Here’s another indication that the casinos don’t much care about anything but how many dollars they can take out of Missouri:

Last year, Missouri’s casinos had almost one-and-three quarters BILLION dollars in adjusted gross receipts (income minus payouts for the minority of customers who won anything).  And by the time they deducted the expenses the gaming commission forces them to report, the industry still had about $820-million left, including the $56-million in windfall profits from the admission fees.

Here’s another example of how our casinos don’t really care for much more than taking as many dollars out of Missouri pockets as they can:

The gaming commission requires the casinos to report their charitable giving each year.   Last year the thirteen casinos donated about $940,000 to charities.  If asked, they’d probably point to that number with a lot of emphasis and pride.  They like to do that kind of thing.

But it’s not what they say. It’s what they DON’T say that is important in understanding their avarice.

The charitable contributions last year were just .00054% of their adjusted gross receipts.  Remember than .01 percent represents one penny per dollar.

One casino with more than $70-million in adjusted gross receipts in FY2018 reported charitable giving of $915.

Your observer seems to be the chief casino abuser, I guess, because I came back from a meeting at the Steamboat Arabia museum in Kansas City a year ago with the idea that Jefferson City would be a great place for the museum’s new home when the museum’s lease runs out on its city-owned building in Kansas City in 2026. And our working group thinks an industry that has taken advantage of our steamboat heritage to make billions and billions of dollars should help preserve the heritage of the steamboats.

If the plan that our working group has developed in the last year constitutes casino abuse, all of us willingly plead guilty.

So the casinos accuse of abusing them, of making them some kind of victims.  Read the numbers again. And think about who is—and wants to remain—an abuser.

The question then becomes: Who really is abusing the system: a citizens group that wants to use casino money to create something good—great—for our state or the group that wants to truck as much money as it can out of the state for its own enrichment?

The problem can be corrected.  All it takes is 82 courageous members of the Missouri House and eighteen courageous members of the Missouri Senate who will vote for boats that are not in moats but whose cargoes are instead in museums or are waiting under farm fields for their stories to be brought to the surface.

The casinos have made billions of dollars from the heritage of those boats.  Giving back a relative few million to honor the importance of steamboats to America—and to casino development in Missouri—isn’t going to make any casino executives jump off the top floor of Wynn’s in Las Vegas.

More later.