A BAD BUDGET BET

While raising revenue by taking a larger share of gambling income from the Bangor racino, which the Democratic budget proposal would do, appears attractive because it will raise a lot of money, this is a shortsighted approach. Without reducing spending, the state will run out of fees to increase and funds to raid.

Further, increasing the state’s share of revenue from the racino sends a dangerous message: Build a successful business in Maine and the government will find a way to take a growing share of your revenue, even if it means unilaterally rewriting the rules.

“The biggest crime and the biggest problem that could come out of this is that we will be sending a clear message that in Maine, we don’t keep our word,” says Peter Vigue, president and CEO of Cianbro, which is handling work at the Bangor site.

After voters approved a racino for Bangor in 2003, lawmakers negotiated and passed LD 1820, which laid out in detail how much money the state and city of Bangor would collect and where that money would go – to harness racing purses, prescription drugs for the elderly and college scholarships, for example.

Under LD 1820, the state collects 1 percent on gross slot machine income or “coin in” from Hollywood Slots at Bangor. Maine is the only jurisdiction to collect such a tax, which is in effect a tax on every pull of a slot machine lever (which, these days is really the push of a button). The state also collects a 39 percent tax on the racino’s net income.

Democratic lawmakers have proposed increasing the “coin in” tax to 2 percent, which would bring in an additional $14 million over the next two years. Penn National calculates that the increase would translate into a 10 percent reduction in its revenues. It would also make Maine’s gambling taxes the third highest in the country, behind Rhode Island and New York, which have larger areas from which to draw visitors.

Lawmakers must ask if $14 million is worth the negative consequences, real or symbolic.

Threatening to stop construction on a permanent slots facility in Bangor, as Penn National Gaming Inc. has done, may appear as posturing, but the company is right to re-examine its investment when the economics of the project may change, not just now, but any time lawmakers need money to plug a budget hole.

The company is currently at work building a $131 million hotel and gaming complex on Main Street in Bangor. It is the largest construction project in the city’s history and the largest currently under way in Maine.

In touting a bond for transportation projects, lawmakers said the $113 million bond would create hundreds of jobs and boost the economy. The same economic spin-off rationale applies to the Bangor project.

Because there is a lot of money involved, racino revenue is an easy place to look for solutions to the state’s budget shortfalls. Easy solutions, however, won’t solve the state’s budget problems and this tax increase carries a risk of discouraging development that outweighs its short-term benefits.