Experts disagree on impact of gambling revenue on school tax bills

In 2004, during the debate over whether to legalize gambling in Pennsylvania, Gov. Ed Rendell predicted that slot machine revenue one day would be able to cut school property taxes by an average of 23 percent.

About 71/2 years and 10 casinos later, many homeowners are still waiting for that day.

While slot machine gambling is delivering promised tax relief, it doesn't appear that many residents locally are getting close to the 23 percent savings predicted by the former governor -- or even the 15 percent to 20 percent estimated when slots gambling was legalized in July 2004.

This year, the average reduction statewide will be $198. It might buy a nice dinner out or a cheap flat screen TV, but chances are it won't come close to covering a school tax bill.

"In reality, I think in the Bucks County area, it might be 7 to 8 percent at most. When you're talking about a $4,000 to $5,000 tax bill and you're getting $250, that's 5 percent," said state Rep. Paul Clymer, a Bucks County Republican who opposed legalized gambling.

In Allegheny County, based on data from the state Department of Education and the Allegheny County website, it doesn't appear as if many property owners are seeing reductions anywhere close to 23 percent.

For instance, a property owner with a $100,000 house in South Fayette is seeing his school tax bill cut by 5.8 percent. In Bethel Park, it's 6.5 percent, and in Moon, 6.2 percent. In McCandless, part of the North Allegheny School District, it's 7.3 percent. In Penn Hills and Plum, it's 7.3 percent and 9.4 percent, respectively. In Carnegie, it's 6.8 percent.

Some, however, are making out better. In the city of Pittsburgh, the reduction is $269. That equals about 19.3 percent of the school tax bill for a $100,000 house.

In Duquesne, it's 16.6 percent on a $100,000 house. But on the median value of a home in that city of $16,700, it's enough to cover the entire school tax bill. In McKees Rocks, part of the Sto-Rox district, it equals 12.5 percent on a $100,000 home.

But for many others, the amount of school tax relief being provided through slots gambling appears to be more of a pittance compared to what originally was promised.

One who won't argue with that notion is state Rep. Bill DeWeese, the Waynesburg Democrat who helped to usher through the bill that legalized gambling in 2004.

Mr. DeWeese said he is "disappointed" that slot machine gambling has not produced more tax relief for residents. He said he is constantly bombarded by complaints from people in his district about not seeing the promised tax relief, including one instance where he was cornered at a high school football game and grilled on the issue.

"I said, 'I don't have a good excuse,' " he recalled.

Likewise, Mr. Clymer doesn't think slots gambling has delivered on the promises made when it was enacted.

"In 2012, we will become Las Vegas east. We will be the [second-highest] state in gross gambling revenue next to Nevada. In spite of all of that, one could not say that we have meaningful property tax relief," he said.

Added Tim Potts, founder of Democracy Rising PA, a watchdog group seeking to transform state government, "What I can say is that gambling was never about property tax relief. It was about gambling. Period. Tax relief was the Trojan horse.

"[Gambling] was not set up to do that. It was set up to give gambling interests a foot in the door so that they could expand."

Last year, tax revenue statewide from slot machine gambling hit $1.3 billion, with roughly $818 million of that diverted for school property tax relief.

That's still below the $1 billion-a-year mark touted by some politicians, including Mr. Rendell, who could not be reached for comment, when gambling was legalized.

Proponents point out that the state has yet to open four of the 14 casinos envisioned under the law. They are expected to generate more tax revenue to add to the tax relief pot. Venues still to be opened include a standalone casino in Philadelphia, another racetrack casino and two resort casinos.

"You've got some more growth in revenue, no doubt," said Doug Harbach, spokesman for the state gaming control board.

Tax relief from gambling comes solely from slot machines. None of the revenue generated from table games currently is used for that purpose.

Despite the critics, state Sen. Jay Costa, D-Forest Hills, said slot machine gambling is providing meaningful property tax relief in myriad ways.

He said that many senior citizens, for example, qualify for additional gambling-related relief above that doled out through their school districts.

In some cases, a property tax rent-and-rebate program, funded in part by gambling revenues, supplements the primary tax relief they receive. In the city of Pittsburgh, for instance, that may be enough to cut the average school tax bill on a $100,000 home in half, he said.

"I think [gambling's] providing significant property tax relief," he said.

Furthermore, the city and the county last year received $10 million and $5.5 million, respectively, as the local share for hosting the Rivers Casino on the North Shore. While that money does not go directly for property tax relief, Mr. Costa argued that it does help keep taxes down.

He also noted another $120.3 million in slots tax revenue last year was deposited into an economic development trust fund that is used to fund projects throughout the state, including a number locally.

That, too, helps to lower the tax burden, he said. In addition, another $25 million is earmarked to help volunteer fire companies throughout Pennsylvania.

"Had we put it all into property tax relief, you would have seen a different percentage," he said.

In addition, Mr. Harbach said many property owners are unaware of the tax relief they do get as a result of gambling. That's because the money goes directly to school districts, which then reduce property tax bills accordingly. The relief is listed on tax bills as a homestead exemption with no mention of gambling.

"Unfortunately, many homeowners either never see their tax bill since it goes to a bank or mortgage company to be paid from an escrow account, or are unaware that the reduction they do see is a result of slot machine revenue," Mr. Harbach said.

Still, some wonder whether taxpayers are losing ground despite the relief they are getting. A study by the Commonwealth Foundation, a conservative think tank, found that between 2004, when slots gambling was legalized, through the 2008-09 school year, school property taxes in Pennsylvania had increased by $2.1 billion while the amount of slots-related tax relief totaled about $700 million.

"I don't think too many homeowners are satisfied with the amount of relief they've gotten," said Nate Benefield, the foundation's director of policy analysis.

First published on February 1, 2012 at 12:00 am