Budget & Tax

Oklahoma tribes pursue casinos in states with higher rates

December 16, 2019

Ray Carter

In arguing against Gov. Kevin Stitt’s call for the State of Oklahoma to receive higher exclusivity payments for monopoly casino rights, Oklahoma’s tribal casino operators often argue that the benefits of the state’s low rates accrue to Oklahoma anyway because they have nowhere else to go with their earnings.

The “United for Oklahoma” website, funded by tribal casino operators, includes several quotes making that point.

“Tribes have been relocated here officially since 1832, they were here long before that, and we’re not leaving the State of Oklahoma for better investments,” said former state Rep. Lisa Billy in one quote posted on the “United for Oklahoma” website.

“I don’t want to try and help the state of Texas or Arkansas or Missouri—they’re doing well on their own, they don’t need our help,” said Gary Ridley, former secretary of the Oklahoma Department of Transportation, in another quote highlighted on the website. “What we need to do is help Oklahoma.”

Yet Oklahoma’s tribal casino operators are increasingly looking to use more of their Oklahoma earnings on casino investments in other states—including Arkansas and Missouri—and are often doing so despite the fact they will pay significantly higher tax rates or fees to those other states’ governments.

The most notable recent example occurred on Oct. 22 when the Choctaw Nation’s plan to develop and manage a 2,000-gaming-positions casino in Matteson, Illinois, gained unanimous approval from the Matteson Village Board of Trustees.

That plan, done in partnership with an investor, includes a $300 million casino, 200-room hotel, restaurants, and a convention center. The Choctaw Nation also plans to partner with two entities to build an indoor golf facility and a family entertainment facility next to the casino.

The new Illinois casino was authorized by legislation signed into law this year. Illinois currently has no tribal casinos operated on land placed in federal trust, and there is no indication from public reports that the Choctaw’s Illinois facility would be exempt from the typical tax rates imposed on commercial casinos.

That indicates the tribe is prepared to enter a market with tax rates five-times greater than the highest fee rate imposed in Oklahoma.

In Oklahoma, tribal governments pay a state “exclusivity fee” of 4 percent to 6 percent on slot machines, and 10 percent on table games. Those fees are paid in return for the state barring competitors from the market and granting tribes monopoly rights within their territories.

But Oklahoma’s rates are a fraction of those charged in Illinois.

According  to the Illinois Gaming Board, that state’s wagering tax, which is levied on annual adjusted gross receipts, starts at 15 percent and ramps up to 50 percent on revenue over $200 million. That tax is imposed on all gambling games other than table games. The tax on table games in Illinois starts at 15 percent and then rises to 20 percent on revenue in excess of $25 million on those games.

The Choctaw’s casino proposal must still gain approval from Illinois regulators, and the Choctaw Nation is just one of five out-of-state tribal casino operators reportedly seeking to enter Illinois’ gaming market. The other four are the Ho-Chunk Nation of Wisconsin, the Forest County Potawatomi of Wisconsin, the Poarch Creek Indians of Alabama, and the Seminole Tribe of Florida.

The Choctaw Nation and other Oklahoma tribes have sought to enter other state markets aside from Illinois, and many of those efforts long precede the current dispute over Oklahoma’s exclusivity fees.

In 2017, the Osage Nation sought to launch a casino in Missouri, and hired the former Speaker of the Missouri House of Representatives to lobby on their behalf. The potential casino site was roughly 80 miles from St. Louis.

News accounts indicate the Osage hoped to place land into federal trust and enter a compact with the state to provide casino gaming. (Like Illinois, Missouri currently has no tribal casinos.) The Osage also provided more than $50,000 to underwrite the Missouri governor’s inaugural activities. The governor’s support would have been required to enter into a gaming compact.

Had the Osage succeeded in their effort, they would have operated the only land-based casino in the state of Missouri—the other 13 sites are riverboat facilities—which suggests the tribe could have been required to pay exclusivity fees to Missouri despite the existence of other forms of non-tribal casino gambling.

While no details were made public on what level of payment the Osage would have offered for the rights to the state’s only land-based casino, the American Gaming Association shows that Missouri’s casino tax is 21 percent tax on gross gaming revenues.

The difference in the rates imposed by Missouri and Oklahoma result in substantial differences when it comes to state funding.

In November, the Missouri Gaming Commission reported that the 13 casinos in that state had generated $150 million in state taxes from July to November. That means 13 casinos generated more revenue for Missouri in a five-month period than 131 tribal casinos did for Oklahoma in an entire year. According to the state Office of Management and Enterprise Services’ Oklahoma Gaming Unit Compliance annual report for 2018, the most recent available, the state of Oklahoma collected just $139 million in tribal gaming exclusivity fees for all 12 months of fiscal year 2018.

Other Oklahoma tribal casino operators have already invested millions of dollars in other states, or have sought to do so.

Tribal Government Gaming magazine reported that the Quapaw Tribe and Cherokee Nation spent more than $6 million on a successful initiative campaign that legalized four casino sites in Arkansas. The Quapaw have since received one of the available licenses, and the Cherokee Nation and Choctaw Nation are competing for another.

The tax rate on Arkansas casinos is 13 percent of the first $150 million of net casino gaming receipts and 20 percent on receipts above $150 million. All casinos in the state are subject to that tax rate, with no exemption or special lower fee for tribal casino entities.

In 2014, the developers of a proposed casino in Albany, New York, agreed to make the Chickasaw Nation in Oklahoma the facility’s operators. (The plan for an Albany casino was ultimately scrapped). And the Seneca-Cayuga Tribe of Oklahoma has made repeated efforts over several years to build a casino in the state of New York. In 2008, the federal Bureau of Indian Affairs rejected the Seneca-Cayuga Tribe of Oklahoma’s effort due in part to the 1,500-mile distance between the tribe’s Oklahoma headquarters and the proposed New York casino site.

Gaming compacts in New York require tribal casino operators to pay state exclusivity fees that run as high as 25 percent of the “net drop” on a game, which is defined as “money dropped into machines, after payout but before expense.”

In New York, the American Gaming Association reports that the tax rate on commercial casinos runs between 39 percent of gross gaming revenue from slot machines to 45 percent, with a 10-percent rate applied to other games.

In 2017, the United Keetoowah Band of Cherokee Indians in Oklahomaexplored opening a casino on ancestral lands in Georgia, a state that currently has no casinos. Discussions to legalize casino gambling in Georgia in 2015 included proposed tax rates of 12 percent to 20 percent. Had the United Keetoowah Band obtained exclusive gaming rights through a compact, the tribe could have been required to pay the state an exclusivity fee.

The Eastern Shawnee Tribe of Oklahoma has made repeated efforts to obtain ancestral land in Ohio and open a casino in that state, including in 2008 when the tribe proposed building a 123-acre casino complex that would cost between $300 million and $350 million.

According to the American Gaming Association, Ohio currently has no tribal casinos, and imposes a 33-percent tax on all gross casino revenue.

The pace of such out-of-state excursions by Oklahoma’s tribal casino operators could accelerate based on national trends. This year “Tribal Government Gaming” magazine, a casino industry publication, reported that tribes “are parlaying skills and experience gained through 30 years of operating tribal government casinos on Indian lands with a growing list of commercial casino ventures in the United States and overseas.”

“Rather than operating casinos under the Indian Gaming Regulatory Act (IGRA) of 1988, which exempts tribes from state taxes and allows them primacy in regulating their gambling operations,” “Tribal Government Gaming” reported, “tribes are wading into the commercial gaming sector.”