Pennsylvania limits on player spending, booze sales, are strict for a casino state

A 2 a.m. last call, $2,500 ceiling on personal checks and ban on credit card cash advances taken from gaming floor ATM’s make the Commonwealth an outlier when it comes to casino regulation.

 

A 2 a.m. last call, $2,500 ceiling on personal checks and ban on credit card cash advances taken from gaming floor ATM’s make the Commonwealth an outlier when it comes to casino regulation.

Those are just a few of the findings in a report from Philadelphia-based Econsult commissioned by state lawmakers.

The document was released in May, and got attention for its recommendations about online gaming and small games of chance. But it also compared laws and policies of the 23 states with legalized casino gambling.

Here’s how they stacked up:

Pennsylvania is the only state besides Mississippi that prohibits casinos from allowing credit card cash advances through gaming floor ATMs or accepting personal checks greater than $2,500.

The Econsult report noted the “risk of robbery or other criminal activity to the player” who might be carrying cash, and deterrence to the “high profile player”, as a result of those policies and recommended changing them.

Peter Angelides, an economist and principal at the firm, says he’s not sure whether Pennsylvania’s existing policies were enacted for security reasons, to limit financial risk to gamblers or both.

“We know the casinos don’t think that’s necessary, but don’t have the (information) from the state as to why it’s there,” Angelides says.

Las Vegas-based gaming analyst Mark Lipparelli says Nevada law allows cash advances from casinos, but prohibits cash access from gaming terminals themselves.

“The idea being that the physical separation required to go to another device allows people to make a rational decision,” Lipparelli says.

But smart limits – which are set by the operator, gambler or both – would address both security and financial risk concerns, says Lipparelli, who formerly headed the Nevada State Gaming Control Board.

None of the states with casinos has mandated smart limits, he says.

Casino alcohol sales are more tightly restricted in Pennsylvania than any other state except Delaware.

Delaware lets properties pour drinks between 9 a.m. and 1 a.m.; the Commonwealth’s cut off is 2 a.m., the same as most bars. Other states allow properties to pour drinks for at least an hour longer, with five markets – Nevada, New Jersey, Louisiana, Maryland and Mississippi – permitting 24-hour service.

Analysts recommended changing this and a few other practices to improve gaming’s performance in Pennsylvania, noting that three of five 24-hour markets don’t have a last call for casinos while continuing restrictions on non-casino establishments.

The report failed to mention that litigation – and the continued threat thereof – over unfair business practices has yielded casino licenses available to non-gaming bars and restaurants in New Jersey and Nevada, which allow them to serve 24/7.

Angelides says he’s not sure whether Pennsylvania should make 24-hour liquor licesnses available to non-gaming esablishments, either generally or within a certain radius of a casino. That “hotly contestable political issue” should be left in the hands of state offiicals, he says.

“That went beyond the scope of the report,” Angelides says. “More than one casino noticed that business drops off significantly at 2 a.m., and some – but not all – want the ability to serve alcohol (24 hours). That would likely increase gaming somewhat, but I’m not sure by how much.”

Pennsylvania ‘s $10,000 or higher fine for casinos where underage gambling occurs is mid-range.

Markets with higher minimum penalties are Nevada ($100,000 for nine instances, or $11,111 per instance) and West Virginia ($25,000 per instance). New York and Missouri’s rates range between $5,000 and $15,000, depending. Louisiana and New Jersey are the same as the Commonwealth. Maryland’s is $5,000. Similar sanctions are extremely rare in Delaware, where the government owns most properties, and also are rare in Michigan.

The casino revenue tax rate is lower in Pennsylvania (55 percent) than in West Virginia (56.7 percent), New York65), Maryland (67) and Delaware (67.9) and Rhode Island (72). It’s higher than the 22 other states with casino gaming.

The report notes that rates are competitive compared to surrounding states, but that to survive, casinos might need to invest more in amenities than in the past – but that might not always be doable in the immediate economic climate.

Econsult acknowledges that if lawmakers cut tax rates, it’s a toss-up whether companies would use the recaptured revenue to improve their Pennsylvania properties, spend it on hiring, boost the marketing budget – or take it as profit.

Ultimately, Econsult recommends the Commonwealth keep the tax rate as it is, and encourage investment in casino properties in other ways.

Regulatory costs are mid-range in Pennsylvania relative to gross gaming revenue. They were $33.9 million in 2012, or 1.1 percent of the market’s $3.1 billion haul.

Louisiana’s costs were listed as 0 percent, while nothing was reported from Delaware and Maryland. The other nine markets ranged between 0.4 percent (Nevada) and 10.1 percent (New York).

The Econsult report recommended scaling back on the size of its regulatory body because “when normalized by the number of casinos, … there are almost 15 times more gaming board employees … in Pennsylvania than in Nevada.”

Analysts didn’t advise how much Pennsylvania should scale back, but estimated it would result in a quarter of one percent in recaptured revenue for the industry statewide.

“Our point is that it’s an area to look into, to reduce cost and reduce burden on the operators,” Angelides says. “It’s hard to start up a brandnew industry and regulate it appopritately. But most casinos already licensed and start-up costs are gone. (The Gaming Control Board has) accomplished that, and done a great job, but do you need that going forward?”

The potential for expansion to online gaming, however, might make it advisable to hold off on reductions, Angelides says.

“How complicated will it be? I don’t know,” Angelides says. “But I can conceive of it introducing a whole new set of issues, and being difficult.”

Pennsylvania doesn’t require minimum security staffing, but Econsult recommended a scaleback and loosening of rules anyway to save the industry up to $24 million.

The Commonwealth doesn’t have statutory requirements about security presence at licensed casino facilities. Instead, the law requires prospective operators to submit plans to the Gaming Control Board, which has discretion to consider that information in its decision on whether to issue or renew a casino license.

Econsult references New Jersey as a model in developing alternative security protocols in Pennsylvania.

The report doesn’t mention that the Garden State’s Division of Gaming Enforcement and Casino Control Commission typically request verbal and documented information about security from applicants, and get some details indirectly through the licensing process – even though the law doesn’t spell out staffing levels.

Typically, regulators impose security staffing requirements as part of the resolution to an infraction at a particular property, Lipparelli says. 

Angelides says regulators might consider making those newly imposed levels temporary.

“There are times when heavy security is needed,” he says. “But the question out there is: are the standards so high that you basically have people working, and not really doing anything, or increasing the security level?”

Angelides coudn’t provide details on how his team calculated the reports estimate of industry savings – between $20 million and $24 million – in the event Pennsylvania lawmakers change security rules.

Read the rest of the report here.

 

Editor’s Note: This story was updated to include comments from Econsult Principal Peter Angelides.