Casinos say tax break will ease their financial burdens

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Casino revenue is down in Colorado and most in the industry have posted a net loss for the last three years, so casino operators are looking forward to the relief that will come with a 5-percent tax reduction that goes into effect July 1.

That tax cut will mean less funding for community colleges and historic-preservation groups, which are trying, with help from Gov. John Hickenlooper, to convince the Colorado Limited Gaming Control Commission to reconsider the tax cut.

But casino owners say they need the relief and are operating as if the tax-reduction will happen as planned.

“I think the industry really appreciates what the commission did as far as recognizing the condition the industry has been in,” said Marc Murphy, general manager of Bronco Billy’s in Cripple Creek.

Cripple Creek, 44 miles west of Colorado Springs, is home to strip of eight casinos lining historic Bennett Avenue. Most are in renovated turn-of-the-century buildings constructed during the gold rush.

A new casino, Big Jim’s Gambling Hall and Saloon, is slated to open this summer with 200 slot machines in the former Imperial Hotel and Casino location.

Given the current climate for casinos, it’s a surprise new ones are popping up. But Big Jim’s isn’t the only new show in the state. A music-themed casino featuring a 65-foot guitar-shaped bar will also open soon in Central City.

Casino operators approached the Colorado Limited Gaming Control Commission earlier this year to request a 10-percent tax decrease because times have been hard and the industry has been losing money.

“We’re glad the commission recognized the plight of the industry,” Murphy said. “Since 2007, the industry has suffered significantly.”

While the 10 percent decrease didn’t fly, the commission did approve a reduction half as large.

Murphy said industry woes started with a smoking ban enacted in the summer of 2006.

“As simple as it might sound, the gaming industry is about entertainment and smoking has always been a part of the culture,” Murphy said. “A lot of the people who enjoy gaming are smokers and with the smoking ban, a significant part of their enjoyment was taken away.”

He said the numbers began to trickle downward even before the recession hit because of the smoking ban. Even those smokers who still made their way up the mountain would have to step away from the machines and go outside of the casino where they weren’t participating anymore and weren’t dropping coins into slot machines in order to smoke. Simply losing a gambler for 10 to 15 minutes every hour cut into revenue, Murphy said.

“And then we went into a pretty significant recession,” he said.

Then, in 2008 voters approved Amendment 50 to the Colorado constitution, which allowed casinos to increase limits to $100 and stay open through the night in an effort to compete with Las Vegas and other places that lured away gamblers.

The plan to draw new business with higher stakes and longer hours didn’t work. The year after the legislation went into effect revenues slipped even farther. Last year, it was down 10 percent.

They are still down, yet figures are looking better.

The average daily adjusted gross proceeds (the total bets minus the total payouts per device) rose from $79 in April, 2010 to $87 this April in Cripple Creek.

The 5-percent tax decrease won’t be enough to revolutionize the gaming industry, said Brenda Davis, director of administration for the gaming commission.

“It will just offer some relief to the industry,” she said.

Members of the gaming industry lobbied before the commission for a 10-percent decrease saying that they would be able to make much-needed capital improvements and increase marketing to drive traffic to the mountain gambling towns and thus raise revenue and generate more tax money for the organizations that the gaming tax supports.

Murphy said he doesn’t foresee the money being a windfall for the industry and doesn’t expect that it will permit casino operators to take on big capital projects. It may allow them to invest in some new machines and will definitely help them to loosen their belts and breathe a bit easier.

“I think it’s going to be an opportunity for a lot of places to add new employees to the payroll where they’ve had vacancies for a long time,” Murphy said. “I know we’ve been running with a little fewer employees than we wanted.”

He said the tax decrease will likely be a boon for unemployment in the mountain gambling towns.

The gaming commission is responsible for managing the industry and controls the gaming tax. Previously casinos at the top of the revenue scale could be charged a maximum of a 20 percent tax.

The commission’s decision to lower the tax sets the new maximum at 19 percent.

The commission reevaluates the tax rate each year and could return the tax to previous levels in 2012 or could lower it even more depending on how the market is performing.

“For my company, it’s not a real significant amount of money,” Murphy said. “But any relief in this economy is welcome.”