COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION



FISCAL NOTE



L.R. No.: 2330-01

Bill No.: SB 3

Subject: Taxation and Revenue; Sales and Use; Taxation and Revenue - General; Gambling.

Type: Original

Date: September 10, 2003



FISCAL SUMMARY



ESTIMATED NET EFFECT ON GENERAL REVENUE FUND
FUND AFFECTED FY 2004 FY 2005 FY 2006
General Revenue ($4,087,125) $0 $0
Total Estimated

Net Effect on

General Revenue

Fund

 ($4,087,125) $0 $0



ESTIMATED NET EFFECT ON OTHER STATE FUNDS
FUND AFFECTED FY 2004 FY 2005 FY 2006
Gaming Proceeds for Education $28,884,000 to $32,900,000 $57,769,000 to $65,800,000 $57,769,000 to $65,800,000
Gaming Commission $1,279,000 to $3,200,000 $2,558,000 to $6,300,000 $2,558,000 to $6,300,000
Total Estimated

Net Effect on Other

State Funds *

 $30,163,000 TO $36,100,000 $60,327,000 TO $72,100,000 $60,327,000 TO $72,100,000

* Assumes the proposal is passed by the voters of the state.



Numbers within parentheses: ( ) indicate costs or losses.

This fiscal note contains 8 pages.







ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 2004 FY 2005 FY 2006
Total Estimated

Net Effect on All

Federal Funds

 $0 $0 $0



ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 2004 FY 2005 FY 2006


Local Government*		 $3,801,000 to $6,750,000 $7,602,000 to $13,500,000 $7,602,000 to $13,500,000

* Assumes the proposal is passed by the voters of the state.







FISCAL ANALYSIS

ASSUMPTION



In response to a similar proposal from the First Special Session in June, officials from the Missouri Gaming Commission (GAM) stated that an increase in gaming taxes and admission fees stem from the assumption that removing the loss limit will increase gaming revenue and customer visits to Missouri casinos. GAM believes that gaming revenue and customer visits will increase due to following three factors:



  1. Removing the loss limit will eliminate the need for boarding cards, which track the loss limit. GAM estimates that by eliminating the boarding card requirement, customer volume will increase.


  2. Removing the loss limit will increase efficiency at the front gate, table games and slot machines. Currently, when a customer arrives at the casino, they must stop at ticketing to obtain a boarding card, which monitors the loss limit. In addition, each time a customer buys in at a table, play stops while the loss limit controls are initiated (swiping the card to check buy-in status). Likewise, at the slot machines play is often interrupted due to loss limit controls. All these factors combine to reduce gaming revenue and drive customers to other more convenient gaming markets.




ASSUMPTION (continued)



  1. Finally, removing the loss limit will attract high-end customers to Missouri casinos. These are gamers who typically buy-in well above the $500 level. Removing the loss limit would make Missouri a potential destination market for the out of town high-end customers.


In response to this proposal, GAM assumes that removing the $500 loss limit and imposing an additional 1% to the gaming tax rate on AGR in excess of $20 million will result in additional annual gaming taxes of roughly $72.1 million per year.



FY 2004 * FY 2005 FY 2006

State Revenue

Gaming Taxes for Education $32,900,000 $65,800,000 $65,800,000

Admission Fees to MGC Fund $ 3,200,000 $ 6,300,000 $ 6,300,000

Total $36,100,000 $72,100,000 $72,100,000

* Assumes a January 1, 2004 start date.



GAM states the estimated impact on the repeal of the $500 loss limit was revised in the Summer of 2002 down to the estimates above. GAM further estimates that the total fiscal impact to the home dock cities and counties from this proposal would be a positive $13.5 million annually.



Officials from the Office of Administration - Budget and Planning (BAP) did not respond to our request for fiscal impact. However, in response to a similar proposal from the First Special Session in June, BAP stated they reviewed the proposal and offered the following:



FY 2004 * FY 2005 FY 2006

State Revenue

Gaming Taxes for Education $46,334,000 $61,778,000 $61,778,000

Admission Fees to MGC Fund $ 5,180,000 $ 6,906,000 $ 6,906,000

Total $51,513,000 $68,684,000 $68,684,000

(plus)

1% Gaming Tax Increase $ 9,770,000 $13,026,000 $13,026,000

Total $61,283,000 $81,710,000 $81,710,000



ASSUMPTION (continued)





Home Dock Revenue

Gaming Taxes $ 5,148,000 $ 6,864,000 $ 6,864,000

Admission Fees $ 5,180,000 $ 6,906,000 $ 6,906,000

Total $10,328,000 $13,770,000 $13,770,000



* Assumes an October 1, 2003 start date.



In response to a similar proposal from the First Special Session in June, officials from the Office of the Secretary of State - Elections Division stated that statewide newspaper publication of constitutional amendments cost approximately $1,161 per column inch based on estimate provided by the Missouri Press Service. For the 3 printings as required by the Constitution and state statute, this would total $3,485 (3 x $1,161) per column inch. The estimated total number of inches for this amendment is 25 inches, which includes title header and certification paragraph. Therefore, this proposal is estimated to cost $87,125 ($3,485 x 25 inches). The Elections Division assumes this cost would be incurred in FY 2005.



Since this legislation is subject to voter referendum, Oversight assumes this proposal would have no positive state fiscal impact without voter approval. Oversight assumes the proposal would be on the ballot in November 2003, in a special election (with an estimated expense to the Office of Administration of $4 million). If approved by voters, Oversight assumes this

proposal would be effective on January 1, 2004.



Oversight reviewed the effect of the repeal of loss limits on the state of Iowa and found that Iowa's win per patron increased by approximately $7.50 when its loss limit was repealed. According to the Gaming Commission, the Adjusted Gross Receipts (AGR) per patron, or win per patron in FY 2003 was $54.98. Oversight assumes this proposal would increase the win per patron in Missouri to $62.48 ($54.98 + $7.50). Assuming a 5% increase in the number of admissions, Oversight estimates the state impact would be an increase in the gaming tax of $45,400,000 and an increase in the admission fee revenue of $2,558,000. The corresponding local increase is estimated to be an increase in gaming tax of $5,044,000 and an increase in admissions fee revenue of $2,558,000 annually. The FY 2003 win per patron in Iowa was $52.73 while in calendar 2002 in Illinois it was $97.31. For fiscal note purposes, Oversight will range the potential fiscal impact of this proposal from Oversight's estimates to the Gaming Commission's estimates.









ASSUMPTION (continued)



Regarding the additional 1 percent tax on licensees with gross receipts over $20 million, all eleven gaming establishments in Missouri would be impacted according to the Gaming Commission reports for FY 2003.



FY 2003 Adjusted Amount over

Boat / Location Gross Receipts $20 million 1 % tax

President / St. Louis $ 73,443,944 $ 53,443,944 $ 534,439

Aztar / Caruthersville $ 22,229,139 $ 2,229,139 $ 22,291

Ameristar / St. Charles $243,273,176 $223,273,176 $2,232,732

Argosy / Riverside $ 95,642,071 $ 75,642,071 $ 756,421

Harrah's / NKC $207,873,039 $187,873,039 $1,878,730

Isle of Capri / KC $ 99,271,902 $ 79,271,902 $ 792,719

Mark Twain / LaGrange $ 25,057,956 $ 5,057,956 $ 50,580

Ameristar / KC $209,781,150 $189,781,150 $1,897,812

Harrah's / MH $236,562,047 $216,562,047 $2,165,620

St. Jo Frontier / St. Joseph $ 25,642,429 $ 5,642,429 $ 56,424

Isle of Capri / Boonv. $ 66,209,745 $ 46,209,745 $ 462,097



Total $10,849,865



With the repeal of the loss limit, Oversight assumes a 14 percent increase in wins per patron ($7.50 / $54.98). Therefore, Oversight assumes an increase of $12,369,000 ($10,849,865 x 114%) in gaming tax revenues from this part of the proposal. Oversight will add this to the increase in gaming tax revenues expected from the repeal of the $500 loss limit per excursion. Therefore, Oversight assumes an increase of $57,769,000 ($12,369,000 + $45,400,000) of revenue from the two variables being changed with this proposal.



Oversight assumes the effective date, depending upon voter approval, would be January 1, 2004. Therefore, Oversight assumes six months of impact in FY 2004.



This proposal would result in an increase in Total State Revenues.











FISCAL IMPACT - State Government FY 2004

(6 Mo.)

 FY 2005 FY 2006
GENERAL REVENUE FUND
Cost - Secretary of State
Publication costs ($87,125) $0 $0
Cost - Office of Administration
Special election costs ($4,000,000) $0 $0
TOTAL ESTIMATED NET EFFECT ON GENERAL REVENUE FUND



($4,087,125)

$0

$0
GAMING PROCEEDS FOR EDUCATION FUND
Income - Gaming tax proceeds from repeal of $500 loss limit as well as from the additional 1% tax on AGR over $20 million



$28,884,000 to $32,900,000



$57,769,000 to $65,800,000



$57,769,000 to $65,800,000
ESTIMATED NET EFFECT TO THE GAMING PROCEEDS FOR EDUCATION FUND

$28,884,000 to $32,900,000

$57,769,000 to $65,800,000

$57,769,000 to $65,800,000
GAMING COMMISSION FUND
Income - Increased admissions from repeal of the $500 loss limit $1,279,000 to $3,200,000 $2,558,000 to $6,300,000 $2,558,000 to $6,300,000
ESTIMATED NET EFFECT TO THE GAMING COMMISSION FUND $1,279,000 to $3,200,000 $2,558,000 to $6,300,000 $2,558,000 to $6,300,000




FISCAL IMPACT - Local Government FY 2004

(6 Mo.)

 FY 2005 FY 2006
HOME DOCK CITIES AND COUNTIES
Income - gaming tax from repeal of $500 loss limit $2,522,000 to $3,600,000 $5,044,000 to $7,200,000 $5,044,000 to $7,200,000
Income - admission fee increase from repeal of $500 loss limit. $1,279,000 to $3,150,000 $2,558,000 to $6,300,000 $2,558,000 to $6,300,000
ESTIMATED NET EFFECT TO HOME DOCK CITIES AND COUNTIES



$3,801,000 to $6,750,000

$7,602,000 to $13,500,000

$7,602,000 to $13,500,000




FISCAL IMPACT - Small Business



No direct fiscal impact to small businesses would be expected as a result of this proposal.







DESCRIPTION



This proposal repeals the authority of the Gaming Commission to enforce a $500 maximum loss per person per gambling excursion.



The proposal also adds an additional tax from licensees with over $20 million in gross receipts at a rate of one percent on the gross receipts over $20 million.



This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.











SOURCES OF INFORMATION



Missouri Gaming Commission

Office of Administration - Budget and Planning

Office of the Secretary of State













Mickey Wilson, CPA

Director

September 10, 2003