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Legislative Ltrs - Gaming TaxCIG City Manager's Office City Hall 50 West 13th Street Dubuque, Iowa 52001-4864 (563) 589-4110 office (563) 589-4149 Pax ctymgr~cityofdubuque.o~g March 26,2003 VIA E-mail and 1st Class Mail mike_connolly@legis.state.ia.us The Honorable Mike Connolly Iowa State Senator 3458 Daniels Dubuque, IA 52001 Dear Senator Connolly, As you are aware, the tracks are attempting to negotiate a settlement to the gambling tax lawsuit. I had recently sent you a letter dated March 19 addressed to Speaker Rants that talked about the many benefits that the Dubuque Greyhound Park & Casino has brought to Eastern Iowa (copy attached for your convenience). Senator Iverson has advised us that all three tracks must accept a 30% tax rate. The financial models that the Dubuque Racing Association has used for the economic future of Dubuque Greyhound Park & Casino have been built on a tax rate of no higher than 25%. The City of Dubuque has built our Five-Year Capital Improvement Program based on a tax rate of no higher than 25%. This 25% figure was used because it was anticipated that the tax on both boats and tracks would be increased this year to be revenue neutral, so that the State would lose no revenues, and that revenue neutral number was slightly less than 25%. We understand that the larger facilities like Bluffs Run, run by Harrah's Entertainment, Inc., and Prairie Meadows in Des Moines, have a greater capacity to absorb a higher tax rate. In discussions last week, Bluffs Run and Senator Iverson seemed receptive to Dubuque having a rate lower than 30%. While Harrah's is still supportive of that position, Senator Iverson has changed his mind on this issue. Would you be willing to approach Senator Iverson to ask him to reconsider his position and put the larger facilities at the 30% tax rate, but putting Dubuque at 25% or less? I have made a similar request to the other elected officials who represent our area. The Honorable Mike Connolly March 26, 2003 Page 2 We would very much appreciate any help you can give us on this very important matter. Sincerely, MCVM:jh Enclosure Michael C. Van Milligen City Manager City Manager's Office City Hall 50 West 13th Street Dubuque, Iowa 52001-4864 (563) 589-4110 office ¢63) s~9-4~49 f~ ctymgr@cityofdubuque.org March 19, 2003 THE crrY O~ VIA E~Mail and 1st Class Mail christopher ra ntSCrrle.qis.state.ia, u s The Honorable Christopher Rants Speaker of the House Iowa House Chamber State Capitol Building Des Moines, IA 50319 Re: Impact of Gaming Tax ~)ear~ peake r ~,ants: It was a pleasure meeting you at Dubuque Night. Thank you for taking your valuable time to attend. Also, thank you for being willing to listen to our efforts to resolve the gaming tax issue with a win-win scenario, before the courts create one winner and one loser, or even two losers if the Dubuque Greyhound Park and Casino is forced to close. As the Legislature continues to discuss alternative gaming taxes, I believe it is .imperative that you understand fully the impact these changes would have on the City of Dubuque. The City of Dubuque owns Dubuque Greyhound Park and Casino and it was built with a General Obligation Bond issue approved by a referendum, then leased to the not-for- profit Dubuque Racing Association. As part of that lease, the DRA pays 50% of its annual operating surplus to the City of Dubuque to support capital improvement projects. The remaining 50% is split 25% for grants to not-for-profit organizations, and 25% is kept by the DRA for needed capital improvement projects at Dubuque Greyhound Park and Casino. Since its inception, DRA has paid to the City $30,105,500 for capital improvements after the DRA retired the City's G.O. debt that built the facility. Some of the major improvements accomplished with these funds include: · $8,314,000 for industrial park development (5 separate industrial parks totaling 950 acres) · $9,070,000 for Riveffront Development (including leveraging the $40 million Vision Iowa grant to partially fund the $188 million America's River project) · $1,457,000 for Five Flags Civic Center maintenance projects The Honorable Christopher Rants Mamh 19, 2003 Page 2 · $1,000,000 for opening of the Town Clock Plaza · $1,593,000 for park maintenance and development projects · $754,000 for swimming pool related improvements · $1,987,000 for replacement of the City Garage facility · $380,000 for Airport improvements Over that same time frame, not-for-profit organizations have benefited from the distribution from the DRA of $15,052,750 for one time expenditures. Due to uncertainty regarding the final outcome of court decisions relative to gaming taxes, the City of Dubuque, through the Fiscal Year 2004 budget process, made certain gaming revenue assumptions related to the gaming tax to develop revenue projections for the next five years. These assumptions were used in a model to determine the estimated surplus distributions that would be made by the Dubuque Racing Association (DRA) in the upcoming five years. Looking to the future, the City of Dubuque has budgeted $29,337,422 in anticipated surplus distributions over the next five years for capital projects. These distribution funds are nnf , ,.~.c] f~or~pmp~_d_yjL&~: J'~lief. Ho~,e.y~tb_eCi_tyjs J=~Jgalj~_e_.~p~en~dJtu_r.e~ and has not had a property tax increase for the average homeowner in nine years. In fact, in five of those years, there has been a property tax decrease. These distribution funds have been programmed as follows: · to provide $9,306,000 for the Port of Dubuque projects (including Amedca's River project), · $6,671,500 for stormwater projects to address flooding problems - this will help protect over 1,150 homes that have flooded three times in the last ten years, · $1,443,500 for street construction costs, ' · $1,102,000 for fiber optics extensions, · $1,146,500 for fire department pumpers and related improvements, · $1,612,000 for Airport terminal replacement, · $3,945,000 for continued industrial park development, · $2,571,000 for park maintenance and development projects, and · $2,516,0000 for Five Flags Civic Center renovation projects. To the extent the Legislature decides to change the gaming tax to the maximum rate of 36%, this will mean a reduction in the City's capital improvement budget of $16.5 million or almost a 50% reduction in programmed expenditures over the next five years. That would gut the above listed anticipated expenditures. Some of the most likely targets for reduction would be Port of Dubuque support projects and stormwater management projects. Although only a portion of the $9,306,000 Port of Dubuque projects are part of the required match for the Vision Iowa funds, all of these projects support and expand on the development opportunities in the Port of Dubuque. These projects would certainly be in jeopardy with any significant reduction in BRA distribution monies. The Honorable Christopher Rants March 19, 2005 Page $ Stormwater management projects have been a high priority for City Council and over the past six months, Council has adopted a stormwater management program, created a Citizen's Advisory Committee, and adopted a stormwater user fee, and created a stormwater utility that is subsidized with gaming revenues. City Council would need to revisit the stormwater utility fee and/or reduce or slow down implementation of needed stormwater projects. The majority of these projects addressed areas within the city where residences face significant flooding each year. Finally, I would also point out that although the not-for-profits don't budget in advance for receipt of DRA d, istdbution funds, they have become an excellent source for needed capital improvements for these agencies who struggle each year to raise enough funds to cover annual operating expense. These agencies would lose over $7 million over the next five years. These service agencies provide an invaluable community service, and need to maintain their facilities and equipment in adequate operating order. Each year the DRA goes through a review process to try to meet critical needs for t~ese agencies. They historically have requests far exceeding available resources. To reduce available funds for distribution to these agencies will only cause these facilities to deteriorate further and the agencies to operate with obsolete equipment that is expensive to maintain. Dubuque voters supported the DRA with an 80% positive vote in the 2002 referendum. The voters recognize the value of the 950 jobs and over $21 million in annual payroll that gaming provides in Dubuque. But they also realize the negative impacts of gaming, while believing that the millions of dollars that go to the State, City and charities help to offset those negative effects. Governor Vilsack formed a Gaming Tax Task Force that recommended a graduated tax · bn boats and tracks that is revenue neutral. I urge you to support that recommendation. Sincerely~,,~ ~ , Michael C. Van Milligen City Manager MCVM:jh cc: Governor Tom Vilsack Senator Mike Connolly Senator Julie Hosch Senator Roger Stewart Representative Pam Jochum Representative Steve Lukan Representative Pat Murphy Representative Robert Osterhaus Representative Gene Mantemach The Honorable Christopher Rants March 19, 2003 Page 4 Mayor Terry Duggan Dubuque City Council Angela Simon, Chair, Dubuque Racing Association Bruce Wentworth, General Manager, Dubuque Racing Association City Manager's Office City Hall 50 West 13th Street Dubuque, Iowa 52001-4864 (563) 5894110 office (563) 5894149 fax ctymgr@cityofdubuque.org Apd19,2003 VIA E-mail and 1st Class Mail mike_connolly@legis.state.ia.us The Honorable Mike Connolly Iowa State Senator 3458 Daniels Dubuque, IA 52001 Re: Gaming Tax Issue Dear Senator Connolly: I am wdting asking for your support of a compromise the three racetracks submitted to the Legislative leadership on the gaming tax issue. This compromise fits the parameters established by Governor Tom Vilsack, Speaker of the House Christopher Rants and Senate Majority Leader Stuart Iverson. This compromise offer has been titled the Tax Equity Model (TEM). Elements of the TEM are: Tracks would be taxed at 30% (effective July 1, 2002), boats at 20%. State Revenue neutral is defined as $210,000,000, which is the '02/'03 total revenue from all gaming (both tracks and boats). This proposal is revenue neutral retroactive to July 1, 2002. The TEM uses all gaming industry tax dollars from boats and tracks (including revenues from any new licenses) in excess of $210,000,000 to give tracks an annual tax credit, proportionate to their revenues, to reduce the 30% rate over time, until 20% is reached as a base. After the tracks reach 20%, the State then again begins to see revenue growth. This addresses the tax inequity issue between the boats and the tracks over time. Both plans assume lawsuit is settled and refund ($112 M) is forgiven. Tracks would agree not to sue State for two years. All tracks are in agreement to this one specific plan. Senator Connolly Apd19,2003 Page 2 The natural growth in the industry at 3% a year would be revenue neutral to the State and the State would actually start seeing revenue growth from gaming within six years, the same year the three tracks get to a 20% tax rate. However, any expansion of gambling at individual facilities or by additional licenses would greatly accelerate this time frame. This concept has already been submitted to Senator Iverson, Senator Kramer, Senator Gronstal and Senator Lamberti. Any support you can provide would be greatly appreciated. The future of Dubuque Greyhound Park and Casino and the future of many projects planned by the City of Dubuque and local charities rests on this issue being successfully resolved. Please call me if you have any questions. Thank you for considering this request. Sincer~ Michael C. Van Milligen City Manager MCVM:jh Enclosures cc: Mayor Terry Duggan Dubuque City Council Bruce Wentworth, General Manager, Dubuque Racing Association .04/08/2oo3 lo:41 FAJ~ , ~003 Legislative Tax Modeling Summary - Apdl 2003 G_EF Revenue Available for .Fiscal Year Model Neutral Rebate GF Increase 2003 A TEM Yes $419,795 No B T~M Yes $0,084,753 No 2004 A TEM Yes $6,749,350 No ' B TEM Yes $16,6:34,027 No 2005 A TEM yes B TEM Yes' 2006 A TEM Yes A + Boat TEM Yes 2008 A TEM Yes A + Boat 'FJEM Yes BT EM Yes $58,831.123 $19,865,980 20.00% 20.00% 20.00% $18,367,378 $16,126,622 $4,471,142 B + Boat TENI Yes $79,401,123 $40,435,980 20.00% 20.00% 20.00% $18,367,378 $16,126,622 $4,471,142 2609 A TEM Yes $38,3970t81 $2,768,196 20.00% 20.~0% 20.00% $16,816,731 $14 758,002 $4,053,572 A + Boat TENI Yes $59,341,181 $23,712.196 20.00% 20.00% 20.00% $16,816,731 $14,758,682 $4,053,572 B 'i'EM Yes $69,380,307' $28,841,595 20.00% 20.00% 20.00% $19,098,816 $16,771,877 $4,66~,109 Boat TEM Yes $01,820,397 $51,281,505 20.00% 20.00% 20.00% $t9,098,816 $16,771,877 $4,668,109 2010 ATEM Yes $44,726,745 $8,t53,565 20.00% 20.00% 20.00% $17,2~_5,593 $15.145,835 $4,171,752 A + Boat TEM Yes $66,231,745 $39,658,565 20.00% 20.00% 20.~0% $17,255,563 $15,145,835 $4,171,752 B TEM Yes $79.929.671 $37,817,209 20.00% 20.00% 20.00% $19,830,254 $17,417,132 $4,865,076 B + Boat TEM Yes $103,304,671 $61 192,209 20.00% 20.00% 20.00% $19,830,254 $17,417,132 $4,865,076 2011 ATEM Yes $51,056,310 $13,538,934 20.00%. 20.00% 20.00% $~17,694,456 S15,532,988 $4,290,932 A + Boat TEM Yes $72,121,506 $35,504,130 20.00% 20.00% 20.00% $17,694,456 $15,532,988 $4,289,932 B TEU Yes $80,478,945 $46,792,824 20.00% 20.00%: 20.00% $20,561,591 $18,062,386 $5,062,043 B + ;~oat TF_M Yes $114,707,542 $71,101,422 20.00% 20.0~/. 20.00% $20,561,661 $18,082,386 $6.062,043 2012 ATEM Yes $57,385,874 $18,924,302 20.00% 20.00% 20.00% $18,133,318 $15,920,141 $4,408,113 A + Boat'rEM Yes $80,011,191 $41,549,619 20.00% 20.00% 20.00% $18,133.318 $15,920,141 $4,408,113 B TEM Yes $101,028,219 $55,768,439 20.00% 20.00% 20.00% ' $21,2.93,129 $18,707,541 $5,.?-59,010 B+8oatTCmM yes $126,273,219 $81,013,G 20.00% 20.00% 20.00% $21,293.129 $18,707,641 $5,259,010 B TEM Yes $48,281,849 $10,890,366 20.00% 20.00% 20.00% $17,635,941 $15,481,368 $4,274,175 B + Boat TEM Yes $67,916,849 $30,525,366 20.00% 20.00% 20.00% $17,635,841 $15,481,368 $4,274.175 BTEM. Yes $37,732,575 $1,914,751 20.00% 20.00% 20.00% $18,904,503 $14,836,113 $4,077,208 B + Boat TEM Yes $56,432,578 $20,614,751 20.00% 20.00% 20.00% $16,904,503 $14,536,1~3 $4,077,2.08 2007 ATEM Yes $25,738,552 No 22.40% 22.34% 21.33% $11,963,059 $10,553,491 $3,221,502 A ~- Boat I'EM yes $44,999,052 $11,2.58,458 20.00% 20.00% 20.00% $15,939,005 $13,984,377 $3,817,212 $19,408,488 No 24.01% 23.96% 22.92% $9.021,075 $7.958,151 $2~429,263 $38,108,488 $5,312,090 20.00% 20.00% 20.00% $15,500,143 $13,597.224 $3,699,031 $13,078,923 No 25.72% 25.66% 24.59% $6,079,500 . $5,362,8'11 $1,637.023 $27,183,301 No 22,10% 22.05% 21.~5% $12,634,812 $11,146,093 $3,402,397 27.52% 27.46% 26.37% $3,137,105 $2,767,470 $844,783 24.79% 24.74% 23.70% $7,731,504 $6,820,526 $2,081,997 $32,067,617 $78,350 20.06*/. 20.81% 20.00% $14,905,044 $t3,148,031 $3,935,392 $51,889,616 $17,204,827 20.00% 20.00% 20.00% $16,3T/',568 .$14,371,529 $3,935,392 PM BR D~G p_.~.~ B~ D~ 29.43% 29.37% 28.24% S195,121 S172,1)0 $52,~, 27.74% 27.68% 26.59% $2,828,196' $2,494,959 $761,598 , 04/08/2003 10:41 FA~ ~oo2. Desciption of Model Designations: A A + Boat B B + Boat Is a 30% racetrack tax with 3% growth per year. Is a 30% racetrack tax with 3% growth per year and a new boat in FY 200§ ($100M) Is a 30% racetrack tax with 5% growth Der year. Is a 30% racetrack tax with 5% growth oer year and a new boat in FY 2006 ($100M). TEM i. the model defined as the Tax Equity Model. I! allows rebates to the extent that the State GF is revenue herin'al at $210 and conditioned upon revenues ir] excess of $210 million and payable uc to an amount which would reduce the tracks effective ~ax ra[e to 20%. Available rebate fuatJs are partitioned to tracks ~ased o~ each tracks Propor+Jonate share of the COmbined tracks AGR. Unused funds accrue to the GF. The Honorable Mike Connolly iowa State Senator 3458 Daniels Dubuque, IA 52001 The Honorable Roger Stewart Iowa State Senator 3936 317 Avenue Preston, IA 52069 The Honorable Pat Murphy Iowa State Representative 155 N. Gmndview Avenue Dubuque, IA 52001 The Honorable Steven Lukan Iowa State Representative 7365 Columbus Street New Vienna IA 52065 The Honorable Julie Hosch Iowa State Senator 22852 Butterfield Road Cascade, IA 52033 The Honorable Pam Jochum Iowa State Representative 2368 Jackson Dubuque, lA 52001 The Honorable Robert Osterhaus Iowa State Representative 216 Austin Maquoketa, IA 52060 The Honorable Gene Mantemach Iowa State Representative 9608 Maple Road Cascade, IA 52033