Paying for Gambling Slippage

Scott Mayerowitz of the Projo gives a concise explanation of the "slippage" formula that applies to Rhode Island's existing gambling facilities...

The deal the state struck with Lincoln Park protects it through 2020; Newport Grand is protected through 2015.

The slippage clause takes the average revenue at each facility in the two years prior to a casino opening [in Rhode Island] and assumes that income there should grow each year by inflation. If revenues drop below that figure, the state has to make up the loss.

The slippage clause was one of two incentives for Lincoln Park and Newport Grand operators considered by the General Assembly in 2005. The other was a deal in which the percentage of revenues paid by Lincoln and Newport would automatically drop if the legislature allowed a new casino to operate in Rhode Island at a lower tax-rate.

In a Projo letter to the editor, State Representative Larry Ehrhardt argues that while the slippage clause remains in effect, the only fiscally sane way to authorize a new casino in Rhode Island is to make the new casino owners directly responsible for the slippage payments...

Since the future is unknowable, the only way the state can protect itself would be to require Harrah's to take full responsibility for the slippage payments to Lincoln and Newport. Deputy Finance Chair Paul Crowley stood and reinforced my remarks, by agreeing that any new operator must be required to take that risk.

From the other side of the aisle, Representative Gordon Fox also believes this is an idea worth discussing...

If this vote should pass, nothing prevents a discussion with the casino, with Harrah's, that if there is slippage . . . that they make it up," Fox said last week.

However, given the language of the current version of the casino amendment, it may not be that simple. Could the real reason that casino supporters are so intent on specifying property-tax relief in the constitution be to block the legislature from being able to make a casino owner take responsibility for slippage payments? In other words, if the General Assembly tries to pass legislation (if the current casino amendment passes) making Harrah's directly responsible for payments to Lincoln and Newport, would Harrah?s (and their lawyers) say "sorry, can't be done". "The Constitution says any revenue you collect from us can only go towards property tax-relief"?

We've now got at least two questions that should be asked if a casino debate happens:

1. If circumstances work out so that Harrah's and the Narragansetts end up taking huge profit checks at the same time their business is driving the state in the shortfall, will their response be "sorry, a deal-is-a-deal". "We got ours, and budget shortfalls are your problem", or is there a contingency plan?
2. Do Harrah's, the Narragansetts, Tim Williamson, Stephen Alves, William Murphy and/or any other casino supporter that would like to chime in agree or disagree that the current language of the casino amendment allows the state to hold Harrah's directly responsible for slippage payments?