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Report: Tribal casino may cut Indiana revenue by $355M

December 13, 2016

A tribal casino set to open in South Bend in 2018 could reduce Indiana's tax revenue by more than $350 million in its first five years, according to a report released Tuesday by a group that represents most of Indiana's commercial casinos.

The report by Spectrum Gaming Group was commissioned by the Casino Association of Indiana to assess the impact of Four Winds Casino South Bend, which is being developed by the Pokagon Band of Potawatomi Indians. That project announced last week is expected to open in early 2018.

Spectrum's analysis found that the tribal casino could cost Indiana's 11 riverboat casinos and its two horse track casinos more than $800 million in gambling revenue over its first five years of operation by siphoning away some of their customers.

As a result of that hit, Indiana's gambling tax revenue is expected to fall about $282 million over those five years, the report concludes. About 1,800 people, including more than 700 workers at Indiana's commercial casinos, will lose their jobs, costing Indiana about $73 million in state income taxes, it found.

Indiana's existing commercial casinos pay an effective 35 percent tax rate on their gambling revenue in wagering and admissions taxes, but the tribal casino won't be taxed on its revenue, said Matt Bell, president and CEO of the Casino Association of Indiana.

He said Indiana's casinos have seen their business shrink over the past decade due to competition from surrounding states and the tribal casino will exacerbate that decline.

The new report suggests several steps lawmakers might take, including reducing taxes on Indiana's casinos, to give a boost to those operations.

"There's no silver bullet," Bell said. "I think it's important for legislators to take a comprehensive look at the industry and the challenges it faces today, and create a vision for the future that we can mold policy around."

The Pokagon Band, which currently runs three casinos in southwestern Michigan, had no comment on the report's conclusions, said spokeswoman Paige Risser.

Ed Feigenbaum, editor of the Indiana Gaming Insight newsletter, hadn't finished reviewing the report, but said Spectrum Gaming Group is respected for its research and there was no reason to question its findings.

He said that because the Four Winds casino will be a federally-recognized tribal operation, it won't be taxed on any of its revenue. As a result, it was widely expected to have a significant negative impact on the gambling tax revenue that flows into Indiana's general fund and is used for road projects and other state needs.

"It's a big hit," Feigenbaum said. "This is potentially a game-changer."

He said the tribal casino, Indiana's first, will eventually reach a compact with the state under which it would share a small portion of its revenue with Indiana.

"I expect that compact will see it most likely giving a small percentage of is revenue to Indiana as kind of a show of good faith to the state," Feigenbaum said.

He said that revenue would likely come from the casino's slot machine proceeds.

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