SAN DIEGO – Appearing for the first time at a legislative gaming conference not as Nevada’s governor but as a development executive for MGM Resorts International, Brian Sandoval said he has gained a better understanding of the challenges communities and companies face when considering casino investments.
Sandoval told the National Council of Legislators from Gaming States that high tax rates often translate into fewer development opportunities.
“Gaming properties have to make money as well,” Sandoval, a two-term Nevada governor and now MGM’s President of Global Gaming Development, said Sunday on the final day of the NCLGS’s three-day winter meeting at the Marriott Marquis San Diego Marina. Some 200 participants attended the mid-year conference, including legislators from 18 gaming states.
“It’s a symbiotic relationship,” Sandoval said, “(State lawmakers) don’t want to over-tax because you want to be able to have the finest amenities and finest meeting spaces. I now have the ability to see things from both sides.”
The Nevada contingent at NCLGS included (from left) State Sen. Keith Pickard, Assem. Steve Yeager, Assem. Rochelle Nguyn, attorney Bita Yeager, former Gov. now MGM executive Brian Sandoval, and Alan Feldman of UNLV IGI/Photo by Howard Stutz
Panelists discussed the challenge of creating a regulatory environment that is investment-friendly and a job creator but doesn’t overburden casino companies with a tax structure that could stifle financing.
Gaming tax rates vary from state-to-state, and many jurisdictions limit the number of casino licenses, a factor that often leads to higher tax structure because competition is limited. Sandoval suggested that states seeking to limit the number of casino licenses leave open the opportunity to add properties as a market grows.
Commercial casinos are now operating in more than two dozen states, with others, such as Georgia and Virginia, exploring expansion in 2020. Speakers often cited history as a lesson for those states investigating casinos as an economic driver.
Spectrum Gaming Capital CEO Rob Heller said Atlantic City’s initial push for legal casinos was “the poster child for what not to do.” Today, Atlantic City “now appears to be the poster child for what to do right.”
Heller said the addition of digital and sports wagering were awarded to the existing casino operators, “with several licenses to each to assure that the land-based brands would be rewarded for their investments.”
Retired casino operator and executive Steve Norton, who has worked in many markets, said Georgia’s attempt at casino expansion is a move to try and bring home gambling dollars spent by its residents in other markets, such as Louisiana, North Carolina and Mississippi. He said the high tax rate being discussed will only work if the state restricts the number of licenses.
Florida attorney Steven Geller, who spent 20 years in the state’s legislature, said there are many reasons to consider gaming expansion, but the top two are economic development and creating tax revenues.
“The type of gambling you get is determinative on the tax rate,” Geller said. “With 8%, you get the Bellagio, Wynn or Aria. At 30% you get something nice, like a Hilton or a Marriott. At 70% you get slots in a convenience store, which means less money for reinvestment.”
Geller said the Florida model of allowing pari-mutuel wagering facilities to add casinos created jobs, but not much in the way of expansion. “That ship has sailed,” he remarked. Sports betting, if approved at traditional bricks-and-mortar casinos, creates jobs. However, mobile sports wagering “does not create jobs or economic development, just tax dollars.”
Heller said gaming projects will be built “regardless of the tax rate, but too high a rate will cripple the operations.” Optimistic projections, he said, will lead to poor results, and a lack of reinvestment will sometimes lead to bankruptcies and disruption.
“So what are the legislators to do when contemplating gaming expansion?” Heller said. “Analyze, analyze and analyze some more the economic impacts of each of the decision options. Take your time to do it, and then strike the proper balance.”
Sandoval, who joined MGM a year ago, said his main focus has been on the company’s efforts to land a casino license in Osaka, Japan. But he has also visited Ohio, Michigan, New York, and Massachusetts, states where MGM has current operations and is looking to expand, such as adding sports betting. He’s also visited Georgia, which is debating casino expansion.
He cautioned states not “to aspire to be Las Vegas,” a market where more 60% of all revenues come from non-gaming sources, such as hotels, restaurants, retail and other entertainment attractions. Sandoval cited the current $1.2 billion expansion of the Las Vegas Convention Center, which will allow the city to attract conventions and trade shows that are too large for any other market.
He also touted the $2 billion Allegiant Stadium, which will open this fall as the home of the NFL’s relocated Las Vegas Raiders, the under construction $1.2 billion MGS Sphere, a joint venture between Las Vegas Sands Corp. and Madison Square Garden.
“Nevada is just different. You can’t compare any other state to us,” Sandoval said. “Our lower tax rate (6.75% on gaming revenues) allows for reinvestment.”
The former governor told state lawmakers to “listen to your respective constituencies. Some places flat out don’t want it and some states only want a certain number of licenses.”
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
