Pennsylvania State Sen. Jay Costa Announces Plans for New Online Poker Bill

Updated: January 6th, 2017 by Dev Ops

Pennsylvania State Senator Jay Costa, Jr. (D), has announced his plans to introduce a new bill authorizing both online gambling (including online poker) and daily fantasy sports (DFS) within the commonwealth.  Costa, a veteran Pennsylvania lawmaker whose district encompasses parts of Pittsburgh and Allegheny County, announced his plans in a memo sent on Monday to all of the state’s senators.

Costa’s newly announced measure will likely be the first of several such bills introduced in Pennsylvania in the coming weeks, as the state’s legislators struggle to patch a gaping budget hole created by the failure of last year’s legislature to authorize such activity and create an already-anticipated revenue stream.

pennsylvania-postcardCosta’s memo also makes clear that the upcoming bill will re-implement a form of the revenue distribution plan from the state’s land-based casinos.  The prior agreement through which the casinos sent a slice of their slot-machine profits into a state-revenue coffer, which was then distributed statewide, was abandoned after being ruled unconstitutional.  Costa’s memo states that the initial flat-rate fee of $10 million per casino (20% of the first $50 million in revenue) will be re-authorized, but does not address the escalator clause that then taxed the state’s larger casinos an additional amount.

The planned measure, which begins with parts of last year’s failed HB 1887 bill, offers an aggressive framework for introducing several forms of online gambling.  The bill would authorize the offering of all casino-style games (slots, able games, poker), with the singular exception of within the land-based casinos themselves, to alleviate possible money-laundering concerns.  DFS would also be formally legalized.

Operators would be limited t those applicants already possessing a Pennsylvania casino license.  The casinos who choose to offer online services would have to pony up another $10 million each in license fees, and third-party vendors, such as software providers, would also have to be licensed, at $5 million each.

Overall, Costa’s plan claims to produce $137 million annual in new revenue for the state, which would largely plug the current budget gap.

Here’s the complete text of Costa’s inter-Senate memo, which contains several additional details:

MEMORANDUM

Posted: January 2, 2017 02:29 PM
From: Senator Jay Costa
To: All Senate members
Subject: Proposed Changes to PA Gaming Act

In the near future, I plan to introduce legislation amending the Pennsylvania Race Horse Development and Gaming Act to allow the Commonwealth’s gaming industry to continue to evolve and remain competitive in a responsible manner, respond to the Pennsylvania Supreme Court’s September 2016 ruling that declared the slot machine local share provisions of the Act unconstitutional, and generate an estimated $137 million in revenue for the FY 16-17 budget. My bill uses HB 1887, PN 4145 of last session as the base and does the following:

Re-enacts the slot machine gaming local share provisions declared unconstitutional by the Pennsylvania Supreme Court in September 2016.

When the Pennsylvania Supreme Court ruled the municipal local share assessment unconstitutional, the court cut off a vital source of funding used by counties and local municipalities to defray the costs associated with hosting a licensed facility. While some municipalities have entered into agreements with their casinos to ensure the funding continues, legislative action is necessary to ensure that communities are made whole.

Under this proposal, counties and municipalities would receive the same dollars they were receiving before the court decision was handed down. Category 1 and 2 licensed facilities would be required to pay an annual slot machine license renewal fee equal to 20% of the cost of the $50 million original slot machine license. The distribution of the money for both the counties and municipalities will remain the same with minor changes that were included in HB 1887.

Legalizes internet gaming and fantasy sports in the Commonwealth

The bill authorizes the Commonwealth’s casinos to offer internet gaming. All categories of casinos will be eligible for an internet gaming license. A license fee of $10 million will be imposed. Vendors that contract with a casino to host the casino’s internet gaming platform will be subject to licensure and a licensing fee of $5 million. License fees will be deposited into the General Fund.

Internet gaming revenues will be taxed at a rate of 25%. Of that 25%, 15% will be deposited into the Property Tax Relief Fund to provide school property tax reductions to taxpayers under the Taxpayer Relief Act and to avoid potential cannibalization of property tax relief dollars through the legalization of internet gaming. The remaining 10% will be deposited into an account within the Commonwealth Financing Authority for economic development projects. Fifty percent of the funds in the account will be set aside for projects in counties contiguous to a county that hosts a casino, the remainder will be available for projects in all 67 counties.

All casino games (i.e., slots and table games) will be made available for internet play. Players will have the option to sign up online or in person at a casino. To deter tax avoidance by casinos, internet gaming will be prohibited on casino property.

The bill also will authorize multi-use computing devices (i.e., tablet gaming) at the Philadelphia and Pittsburgh airports in the form of a five-year pilot program. Operators will be required to pay a $2.5 million license fee, which will be deposited into the General Fund. Tablet gaming revenues will also be taxed at 25%.

The bill will also authorize daily fantasy sports games in the Commonwealth. A license fee of $2.5 million will be imposed. Daily fantasy sports revenues will be taxed at a rate of 25%, and all tax revenues will be deposited into the State Lottery Fund.

Authorizes the State Lottery to offer iLottery to increase revenues for senior citizen programs paid out of the State Lottery Fund.

The Commonwealth’s fiscal challenges have placed increased strain on the State Lottery Fund, and I believe it is imperative that we provide the lottery with the tools it needs to adjust and remain solvent in the future.

Other updates to the Act

The bill allows the Pennsylvania Gaming Control Board (PGCB), upon application of the holder of a Category 3 license and after payment of a fee of $1 million a year for five years, to waive the “patron of amenities” requirement contained in the current act.

The bill also makes several regulatory and technical changes supported by PGCB to ensure the vitality of the gaming industry for years to come.

Revenues

Source Assumed Participation Rate Projected General Fund
Revenue for FY 16-17*
Internet Gaming License Fee –
$10 million 10 (of 12) $100 million

Internet Gaming Vendor Fee –
$5 million 5 (of 10) $25 million

Airport Tablet Gaming Fee –
$2.5 million 2 (of 2) $5 million

Daily Fantasy Sports License Fee –
$2.5 million 2 $5 million

Patron of Amenities Fee –
$1 million 2 (of 2) $2 million

* Assumes PGCB can conduct proper licensing process prior to conclusion of FY 16-17 fiscal year

I hope that you will join me in cosponsoring this legislation. If you have any questions, please contact my office.

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