CLGCC Unanimously Rejects Colorado Tax Proposal Change

Posted on May 22, 2020

The impact of the COVID-19 pandemic on Colorado casinos and the communities they’re in is, without a doubt, massive.

We just didn’t know the extent. Now we do.

After a sobering Colorado Limited Gaming Control Commission (CLGCC) meeting on Thursday (May 21), representatives from the three Colorado casino towns, counties and the gaming industry painted a dire picture.

Still, the CLGCC unanimously rejected a tax break that would have taken effect on July 1.

Colorado tax rate

Under the Colorado State Constitution, the commission is required to set the gaming tax rate on an annual basis. The next opportunity to consider a tax rate adjustment won’t come until next year with Thursday’s vote.

Colorado Gaming Association (CGA) officials spoke in favor of a change to the state’s tax structure that requires casinos to pay a higher tax rate, the more money they make.

The CGA backed a proposal that would have increased the minimum level of gaming proceeds needed to move to a higher tax level.

Colorado casinos pay the gaming tax on a monthly basis, based on a graduated scale ranging from 0.25% to 20% of adjusted gross proceeds.

“Obviously, we would have preferred they consider the change in the tax brackets to provide some relief to the casinos as they gear up to put additional resources into ensuring that we have above standard safety precautions, that we’re able to hire back our employees and provide a safe gaming environment for both our employees and customers,” Peggi O’Keefe said to PlayColorado after the roughly four-hour meeting.

O’Keefe is the executive director for the CGA, the voice of Colorado’s casino industry. “We understand that the commission’s mission is to balance the needs of the beneficiaries and gaming community as well as the ability for casinos to provide a business environment.”

An economic blow

Black Hawk, Central City and Cripple Creek have suffered a devastating economic blow after casinos there were ordered to shutter by Gov. Jared Polis in mid-March.

It’s still unknown when Colorado casinos will get the all-clear to reopen to patrons.

Cary Walker, a senior financial analyst for the public accounting firm RubinBrown, estimates Colorado casinos have lost $100 million in revenue through the end of April. And that was a “conservative” projection, he said.

Over that same time span, the state has likely lost $17 million in taxes.

Nationally, the industry has suffered a 30% decline in gaming revenues, Walker said.

Since gaming is the primary economic engine for the three Colorado gaming towns, the financial fallout has been brutal as visitors stay away.

“Overnight, we were really turned into a ghost town,” said Paul Harris, the finance director for the City of Cripple Creek.

In Cripple Creek, Harris said the city’s April revenues are down 70% compared with the same month a year ago. Unemployment has also skyrocketed in the town, where the casinos employ many of the locals.

“It’s had a devastating impact on everyone,” Harris said.

More economic anxiety

The situation is equally bleak in Gilpin County, home to Black Hawk and Central City.

Gilpin County Commissioner Gail Watson said there are few economic opportunities beyond gaming. Black Hawk alone generates 82% of gaming revenues for the entire state, she said.

More than half of the county residents work at casinos and most are now furloughed or unemployed.

“With casinos shuttered, it’s just devastating to our economy,” Watson said during the meeting.

As revenues have plummeted, the county has been forced to close its community center and furloughed 52 full-time employees and is considering a 25% cut to its budget.

And while it has ceased many non-statutory services, there are still essential services that must be funded, such as road maintenance and a county jail that can hold up to 84 inmates.

Uphill battle

A few other areas can generate revenues for Gilpin County beyond gaming.

“The county already has no paved roads. We have no landfill. No grocery store. We have no bank,” Watson said. “So, it’s going to be a real hit to the public safety (with a tax cut). That’s what it comes down to.”

When casinos do reopen, they still face an uphill battle.

That is, in large part, due to the increase in financial obligations that come with implementing new safety protocols. They also face a reduction in revenues as they implement social distancing policies that reduce slot machines and space for players at table games.

O’Keefe said the CGA will continue to work on its best-practice policies so that Colorado casinos can return to business as soon as they’re allowed.

“There’s not much time to ponder on (the decision), we have got to move on,” she said to PlayColorado. “Our biggest thing now is to get casinos opened and create a safe gaming environment for our customers and employees.”

Could sports betting help?

What Colorado does have to its advantage that many other states do not is legalized sports betting, according to Daniel Holmes, a gaming partner with RubinBrown.

Colorado’s casinos began taking wagers on sporting events on May 1 after getting the go-ahead from voters in November 2019.

Holmes said when the gaming industry does bounce back, it can reap the full benefits of that. He also said he was against a change to the tax rates for now.

But others view the economic benefits of sports betting as minimal at best.

Mark Grueskin, the legal counsel for the CGA, said he doesn’t see sports betting as serving as a significant buffer against the economic realities now faced by the gaming towns.

Grueskin said for most casinos, the sports betting margins are thin — especially for those that have not partnered with national or international sportsbooks that pay out a one-time payment upon sign up.

“You have some haves and have nots,” Grueskin said.

With the launch of the Fox Bet app this week, there are now six apps that offer sports betting in Colorado since the launch on May 1. That is out of 17 that will launch in the future.

  • DraftKings: Partner with Golden Mardi Gras
  • FanDuel: Partner with Golden Gates Casino
  • BetMGM: Partner with Midnight Rose Hotel and Casino
  • BetRivers: Partner with J.P. McGill’s Hotel and Casino
  • BetMonarch
  • Fox Bet: Partner with Lady Luck Casino

No new tax change

Commissioners acknowledge the severe economic plight the gaming towns and casinos are in but said a tax change now isn’t the right way to resolve it.

“A lot of people spend a lot of time thinking about what would be the best course of action based on wisdom and experience,” Commissioner Shawn Coleman said before the CLGCC vote. “Unfortunately, in this particular instance, that wisdom and experience aren’t necessarily the best thing to rely on because we just don’t know what’s going to happen.

“It’s important and imperative that we focus and take action when we can. When we know that action would be meaningful. That it will be supportive of the direction that we’re going in and ensuring that the communities that are the beneficiaries, as well as the industries that create revenues, are best positioned to operate in an environment in which they find themselves.

“The problem is we don’t know what that environment is going to be yet. I just feel at this point it’s premature to take any actions that we don’t know the result of pulling that lever.”

Commissioners were also taken aback by the fact they had to decide such critical issues without sufficient time for thoughtful consideration. They said they only learned of the proposal a few days before the meeting.

“I run a small business as well,” CLGCC Chairwoman Kristen Blessman said before the vote. “I understand how things are moving so fast and how we have to decide (quickly). But whenever possible, we need more time. Having said that, I do think that we’ve had some rich conversation. Everyone has worked really hard to put together information and make a decision.”

Colorado casinos reopen

For now, the CGA will continue to communicate and work with the CLGCC to resolve those issues in the future.

They’ll also do whatever they can to prepare for Colorado casinos reopening at some point in the near future.

“Unfortunately, there was only one bite at this apple for providing tax relief for the casinos,” O’Keefe said to PlayColorado. “But we’ll continue to work with the Division on looking to reopening and what that new regulatory structure looks like.”

License approval

As is now customary for the CLGCC, each license that came before the commission at the meeting was approved.

In total, 35 licenses got the green light.

Catena Operations Limited was among those that gained license, as did Denver Sports Betting and Win Daily.

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Ian St. Clair

Ian St. Clair is an award-winning sports journalist. He is a University of Northern Colorado graduate, Colorado native and has over a decade of experience covering college and professional athletics. Ian does a segment each Saturday on Klahr and Kompany on Denver radio station ESPN 1600 AM.

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