Group hopes to legalize video gaming terminals

Rep. says change could produce up to $500M annually

HARRISBURG — Despite past unsuccessful attempts at legalizing video gaming terminals in Pennsylvania, a group of Republican and Democratic lawmakers think they have found the right formula to secure legalization this session.

The legislation being sponsored in the House by Reps. Mark Mustio, R-Allegheny, and Mike Sturla, D-Lancaster, and in the Senate by Sen. Guy Reschenthaler, R-Allegheny, seeks to eliminate much of the currently illegal VGT activity in Pennsylvania and capture significant revenue.

“The Pennsylvania State Police estimate over 40,000 illegal VGTs are now operating in Pa. in an unlicensed, unregulated, untaxed black market,” Reschenthaler said during a state Capitol press conference.

Legalizing VGTs could produce “anywhere from $300 (million) to $500 million (annually), depending on the speed of the rollout,” in addition to an initial $100 million in license fees, Mustio said.

The lawmakers based much of their expectations for the VGT legalization on the experience of Illinois, which began legalizing VGTs across the state, excluding Chicago, in 2012.

“Last year, Illinois gained $322 million without the city of Chicago being involved,” said Richard Teitelbaum, president of the Pennsylvania Video Gaming Association. “Our two states are similar — undoubtedly, by bringing these machines out of the shadows, the commonwealth of Pennsylvania wins.”

“We certainly have to rely on the Appropriations Committee for those determinations, but in looking at what happened in Illinois, I would expect with our tax rate being a little bit higher to be at least $100 million, assuming we get it done with the budget this year,” Mustio said.

As part of those revenues, each of the state’s counties will get to share in upward of $50 million, and $2.5 million will be earmarked to fund volunteer fire departments, with another

$2.5 million to fund substance abuse programs and fight the state’s opioid epidemic. Mustio said under the proposal, the state could see 25,000 to 35,000 VGTs with a limit of five per location in bars and taverns and 10 in truck stops and off-track betting locations.

But this would not be without the 40,000 existing illegal VGTs being replaced and charges levied against those who are running them.

Teitelbaum expressed his association’s support for the process that is required to bring this illegal activity out of the shadows.

“We applaud the billmaker’s requirement that these illegal machines will be automatically seized and a third-degree felony charge will be levied,” Teitelbaum said.

The legislation would require the Pennsylvania Video Gaming Association to purchase, install and service new machines that are regulated and monitored by the Pennsylvania Gaming Control Board.

“Every dollar will be accounted for and posted monthly online,” Teitel­baum said.

Mustio said he had no concerns the expanded gaming would cannibalize the Pennsylvania Lottery.

Mustio said the lottery has continued to grow even with the legalization of casino gambling and the continued illegal VGT gambling. In 2005, the lottery brought in $2.6 billion and last year it was $3.8 billion. He noted Illinois’ lottery revenue has continued to grow since that state’s legalization of VGTs.

And with regard to the potential for legalized VGTs to negatively affect communities due to increased gambling addictions, Reschen­thaler said, “With the amount of betting, we are talking about a maximum of $5 per bet and a maximum of $1,000 payout per individual (per day), so that will keep the play low and hopefully deter an addictive gambling problem with someone just sitting there gambling their paycheck away.”

Several representatives from the gaming industry, taverns and bars expressed how the legislation would help their particular businesses.

“This bill will lower the base tax rate on slot machines by 5 percent,” said Eric Schippers, senior vice president of public affairs and government relations for Penn National Gaming.

Schippers also highlighted the bill would eliminate the final resort license and delay the relocation of the final casino license for three years.

Although Penn National Gaming is in support of the bill, the other 11 casinos in the bill have yet to express their support.

Jerry McCardle, president of the Pennsylvania Tavern Association and owner of three taverns in the state, added: “I’d like to thank the sponsors of this legislation who have the foresight and the willingness to learn from other states what simple video games can do for the commonwealth. We will continue to work with the makers of this legislation and with the General Assembly to ensure the legislation brings hundreds of millions of dollars to the state. VGTs can help preserve our small businesses so we may continue to employ over 100,000 Pennsylvanians annually while maintaining the tremendous economic contributions that our family businesses bring to our local and state coffers.”

McCardle also commented on how the recent legislation to expand the sales of beer and wine has affected taverns and bars in the state.

“I have been a tavern owner for 33 years, and we have seen our business eroded because we have not been on a level playing field with other businesses,” he said. “Recently, grocery stores are now permitted to sell 12-packs and six-packs and singles. This has personally devastated my business.”