Budget & Tax

Low casino fees a problem for Henry administration too

December 6, 2019

Ray Carter

Gov. Kevin Stitt has said Oklahoma casinos are not paying market rates for geographic monopoly rights to operate gambling facilities, which significantly reduces state government funding. Stitt isn’t the first statewide officeholder to raise this issue.

In 2008, former State Treasurer Scott Meacham, who negotiated the state’s gaming compacts on behalf of former Gov. Brad Henry, opposed the opening of a tribal casino because it would result in a loss of revenue to state government, pointing to the lower fees paid by tribal casinos compared to the rates paid by state racetrack casinos, or racinos.

In a June 9, 2008 letter sent to the U.S. Department of the Interior, Meacham wrote that if the Shawnee Tribe was allowed to open a casino in Oklahoma City, the state would “be harmed” because of a loss in “direct gaming revenue” as gambling shifted from the racetrack to the tribal casino.

“The state receives 4 to 6% of tribal gaming receipts but receives 10 to 30% of horseracing gaming receipts,” Meacham wrote. “Therefore, state dedicated gaming revenues for education will also be harmed.”

In 2000, Congress passed the Shawnee Act, which restored the Shawnee Tribe’s federal recognition and gave it the right to secure land outside the assigned lands of other Oklahoma tribes. That meant much of the state was off-limits to the tribe, but property in Oklahoma County was available.

In 2005, tribal officials publicly discussed their desire to purchase land and build a casino in downtown Oklahoma City or Bricktown. By 2007, the tribe had a contract to buy property and announced plans to build a casino on 104 acres fronting Interstate 35 between Britton Road and Wilshire.

That effort drew opposition from the Remington Park racetrack and casino.

In a Feb. 28, 2008 letter sent to Meacham by Scott Wells, the general manager at Remington Park, Wells said the racetrack’s “business was negatively impacted by the opening of the Riverwind and Fire Lake Grand casinos in 2006.”

While that competition had been expected, Wells said racetrack officials did not expect to face competition from “a giant tribal casino 1.7 miles away from Remington Park ...”

Under legislation approved in 2004, slot machines at Oklahoma racetracks are taxed at rates between 10 percent and 30 percent. In contrast, under the various gaming compacts signed with tribal governments, the state receives only an “exclusivity fee” of 4 percent to 6 percent for slot machines at tribal casinos. The fee paid by tribal casinos is provided in exchange for the state barring competition in an area, which gives a tribal government monopoly rights to casino activity in that area.

In his letter opposing tribal casino operation in Oklahoma City, Meacham noted that if the proposed Shawnee Tribe casino lured gamblers away from Remington Park’s slot machines, state government would receive much less money due to the lower fee imposed on tribal slot machines.

The Shawnee Tribe’s effort to open an Oklahoma City casino fell by the wayside and the tribe eventually opened a casino near Guymon in the Oklahoma panhandle, more than 300 miles from the tribe’s headquarters in northeastern Oklahoma.

Meacham and Wells’ letters are both preserved in state archives.

The large gap in rates paid to the state on slot machines continues to be an issue and plays a large role in the current dispute between Stitt and tribal casino operators.

Tribal gaming compacts include language stating that each compact “shall have a term which shall expire on January 1, 2020.” Stitt says the compacts must be renegotiated before that expiration date, and has said the exclusivity fee paid by tribes should be increased to more closely match the rates paid in other states with similar casino markets. According to one estimate, 44 percent of tribal gaming compacts nationwide involve fees of 10 percent or greater, and Oklahoma’s casino market is far larger than most. Oklahoma is currently the nation’s third-largest state casino market and home to the world’s largest casino.

Despite the expiration date Stitt notes, tribal casino operators claim the compacts auto-renew every 15 years and have refused to negotiate.

United for Oklahoma, a publicity campaign funded by the state’s tribal casino operators that opposes renegotiation of the fees paid on slot machines, estimates tribal casinos’ total combined payments to Oklahoma state government since 2006 are more than $1.5 billion.

In addition to exclusivity fees, United for Oklahoma states that tribal casino operators also provided $80.5 million for tribal education programs, scholarships, and donations to Oklahoma education institutions in 2017. Combined with the share of exclusivity fee payments earmarked for education, the tribes report providing $198 million for education in 2017.

However, the amount paid through exclusivity fees and other forms by tribal casino operators is dwarfed by the payments that would have occurred had tribal casinos and racinos been placed on equal footing, records show.

In 2018 the 1,000 racino slot machines paid $24 million to state government. In contrast, the estimated 42,000 class III tribal casino slot machines paid a total of $119 million in state revenue share.

Broken down, that averages about $24,000 for each racino machine, but just $2,833 per Class III slot machine in tribal casinos. And tribal casinos pay no state fee on more than 28,000 Class II (Bingo-style) slot machines in their facilities.

Those figures indicate the state of Oklahoma would today receive payment of more than $1 billion annually from tribal casino operators had the fee on Class III slot machines in tribal casinos been equal to the rates imposed on the same slot machines in Oklahoma racinos, based on current per-machine averages.

In response to Stitt’s call for renegotiating compacts, officials with 29 tribal governments in Oklahoma signed a letter saying they believe the compacts “automatically renew” on Jan. 1, 2020 and that “rates under the present Gaming Compact should not change.” The chief of the Shawnee Tribe was among the signatories.