Property Tax Relief Reserve Fund Nearly Drained, Hearing Reveals

Editor's Note: Darwynn Deyo is a reporter for PA Independent and can be reached at 717-920-1819.

HARRISBURG — The hot topic before the House Appropriations Committee Tuesday afternoon was when — or whether — the state Gaming Control Board would pay back funds borrowed from the state’s property tax relief reserve fund.

Halfway through the hearing, state Rep. Doug Reichley, R-Berks, pointed out the PGCB took $20 million from the state’s property tax relief reserve fund to pay for $595 million in property tax relief to state homeowners last year. It is the same amount anticipated for 2011-2012.

That leaves $15 million left in the property tax relief reserve fund for 2012-2013, according to Reichley. Property tax relief is funded in part through the taxes on slot machine gaming.

“The concern is what is the board’s anticipation as to revenue generated from slots?” Reichley asked.

Gregory Fajt, chairman of the PGCB, said the repayment to the fund is linked to the status of all or some of the state-licensed casinos being “up and running.” The state initially planned to license 14 casinos after the law passed in 2004, but only 10 of those have followed through.

There were two separate loans made – one for $36.1 million that went to the PGCB, the state Department of Revenue and the State Police in 2004 to get the casino industry started in Pennsylvania. There was a second loan of $64 million made directly to the casinos.

“That ($36.1 million) is due to be paid back when all of the casinos, and that word ‘all’ is in the statue, are up and running,” said Fajt. “At the time that that loan was made there could be 14 casinos. Obviously we only have 10 up and running now, and then the Legislature, you all added another casino, another (resort casino) in 2017. So we’re not sure if that means the payback starts when 14 are up and running or 15 are up and running.”

Fajt said the repayment would still be a “couple of years off” due to the revoked license originally given to the Foxwoods casino in Philadelphia, and an ongoing auction for the Valley View Downs casino license in the Pittsburgh suburbs.

“That payback of that ($36.1 million) is going to be at some point in the future,” said Fajt.

Another $64 million was taken from the property tax relief reserve fund to get the casinos “up and running” and would be repaid by the casinos. Fajt said the GCB has already met with the casino industry once in December to discuss the terms of repayment, though the schedule is stipulated in part by law.

“The remaining $64 million is the loan that will be paid back in relatively short order,” said Fajt. “That $64 million is required to be paid back when 11 casinos are up and running. We have 10 up and running now (and) there are Valley Forge and a second (resort casino) — we think we’ll have both of those up and running this year.”

Fajt said the board would be meeting with the industry again, but the terms must be decided on by June 30. The Gaming Act stipulates the loan repayment must occur between five and 10 years, and the money can be paid back in quarterly, semi-annual or annual installments.

Appropriations Chairman William Adolph, R-Delaware, expressed irritation that the repayment formula was so complicated.

“I don’t know why that is,” he said. “It seems a lot of things around here get morecomplicated than they should, because it wasn’t very complicated to take the money out. (It’s) very complicated to put it in.”

Fajt also responded to questions about how much the board would be able to generate for property tax relief and whether the casino industry would be able to build on current revenue. The board chairman forecasted $791 million in slot machine taxes for 2011-2012, with an average during the past two years of $772 million.

“We think that that 34 percent rate is going to (be) up to about $824 million,” said Fajt. “What the next latest and greatest thing is for the casino industry — we think it’s going to be entertainment … singing shows, dancing shows, maybe some fights … will be the next thing the casinos look at.”

Fajt also suggested casinos would be adding hotels and indoor malls, referencing the 300 room hotel being attached to the Sands Casino in Bethlehem.

He said the casino industry in Pennsylvania currently employs 14,232 people, most of them full time. Eighty-six percent of those employees live in Pennsylvania, Fajt said. Twenty-six percent of the employees are minorities; 57 percent are male; and 43 percent are female.

The location of a yet-to-be-built casino also was raised during the hearing, though Fajt could not give specifics as the matter is coming before the board.

One proposed site is in Gettysburg, but residents have raised concern over the casino’s proximity to the historic battleground and cemetery