Ohio Gaming Law: 2011 News

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December

24 Hour Slots?
December 22, 2011

The Ohio Lottery Commission will govern video slots at the horse racing tracks while the Ohio Casino Control Commission will govern the casinos. Earlier this week, the Ohio Lottery Commission approved preliminary rules that would allow Ohio’s seven horse racing tracks to operate video slots 24/7. This is an option, not a requirement, designed to allow the tracks to be competitive with the casinos currently being built.

Other proposed rules approved:

No racetrack can have more than 2,500 video lottery terminals, unless approved by the lottery director;
Slots and horse racing wagering areas must be kept clearly separate;
Security camera video must be retained a minimum of 14 days.

These proposed rules will now be subject to a public hearing before the Joint Committee on Agency Review sometime in the next two months. If okayed, the rules will go back to the lottery commission for final approval.

Cleveland, Toledo Casinos Opening Times in Jeopardy
December 12, 2011

The Cleveland casino was expected to open March, 2012 and the Toledo casino was expected to open April, 2012. Those dates may have to be pushed back. The problem is the required background checks. With the Cleveland casino, the process was delayed when Rock Ohio Caesars contended that employees of casino vendors should not be subject to the background checks. Eventually the application was filed in December, but the state is now uncertain they will be able to complete the background checks by March. Spectrum Gaming Group, one of the consultants hired to advise the Ohio Casino Control Commission, has stated that at least 4 months are required to complete the background checks, a process that normally takes 9 months.

With the Toledo casino, Fortress Investment Group, a New York LLC that is a holding company for Penn National, has refused to submit an application for background checks on its board of directors. The Ohio Casino Control Commission contends that individual board members as well as the entity are subject to background checks. The entity has submitted its application.

Recently, HB 386 was introduced to Ohio’s lawmakers. Among its provisions is a change in the definition of a holding company. The new definition states that a holding company must have an ownership stake and voting rights of at least 5% in a company. Penn National maintains Fortress would fall below the 5% threshold. But it is unclear if legislators will pass this bill before the holidays recess next week.

Lawsuit Against Racetrack Slots
November 4, 2011

The Ohio Roundtable, an advocacy group opposed to casino gaming, has sued Governor John Kasich, the Ohio Casino Control Commission, the Lottery Commission and the Ohio Department of Taxation. The Ohio Roundtable alleges that offering video lottery terminals (VLTs) at Ohio’s horse racing tracks violates the Ohio Constitution and that voters should have the final say. It also argues that the deal struck in June between Governor Kasich and casino developers exceeded the governor’s authority. In all, there are 17 claims in the lawsuit.

The lawsuit comes a day after the State Racing Commission approved emergency rules that lay out the process for track owners to VLTs up and running. The Commission’s goal was to expedite the process for placing VLTs at the racetracks. Without the emergency rules, the racetracks would have had to wait until the Joint Committee on Agency Rule Review completed its process, which could take up to two and a half months, before they could even apply for a VLT license.

More on Internet Sweepstakes Cafes
November 3, 2011

Columbus City Council has approved a six month moratorium on new Internet sweepstakes cafes. Under the moratorium no permits, which are required to operate such a business, will be issued. Columbus has joined a number of cities that have enacted these moratoriums, hoping that the state will soon issue some guidance in the form of regulations.

Meanwhile, the city of Cleveland has extended their moratorium an additional six months, also hoping the state will create permanent rules governing these businesses.

Lastly, the city of Middletown had a motion for a six month moratorium die on the floor of City Council. Passage required approval from all six Council members. Two members voted against the moratorium, and one member was absent. So for now, such businesses can operate in Middletown.

Casino Police
November 2, 2011

The Bureau of Criminal Investigation (BCI) has been selected by the Ohio Casino Control Commission to police casinos in Cleveland and Toledo, which are set to open next year. A decision for the casinos in Columbus and Cincinnati will come later. Cost for the first year will be $5.1 million.

Cincinnati Casino
November 1, 2011

Casino developers have awarded over $82 million in construction contracts. Thirty five percent of those contracts have been awarded to minority- or women-owned companies.

VLT Rules Effective Immediately
October 18, 2011

Governor John Kasich signed Executive Order 2011-22K last Friday, making the proposed rules regarding video lottery terminals at Ohio’s horse racing tracks effective immediately. The Joint Committee on Agency Rule Review (JCARR) still has the final say, a process that can take up to 65 days. The Executive Order suspends the normal rule-making process, allowing track owners to get slots up and running more quickly. The order is in effect for 90 days.

Less than 24 hours later, the Ohio Roundtable indicated they would challenge the slots in court. Ohio Roundtable has maintained that slots at Ohio’s racetracks require a constitutional amendment. A spokesman has indicated details of the lawsuit will be announced at a press conference this week.

Additional legal action is also brewing in the Youngstown area. The Mahoning Valley Development Group opposes Penn National’s desire to move its Toledo horse racing track to Youngstown. Mahoning Valley Development Group contends that Penn National could wind up with four gambling venues which would create a “monopolistic situation”. The group is also interested in a track of their own, either by becoming Ohio’s eighth horse racing track or purchasing the license from an existing track.

Meanwhile, all this may be put on hold because of stalled negotiations over one of the components of the agreement reached between Governor Kasich and casino owners. HB 277 takes effect this month. Part of that legislation requires track owners and the horse racing industry to reach agreement over how to share the gambling revenues. Such agreement, required before a single bet can be placed, has not yet been reached, despite prodding from state officials.

Internet Cafes
October 18, 2011

Columbus City Council members Zach Klein and Michelle Mills have expressed a desire to place a six month moratorium on new Internet cafes with the hope that during this time the state will issue guidelines on regulating these industries. A vote could come as early as the Council’s October 24th meeting.

Casino Police
September 30, 2011

The Bureau of Criminal Investigation (BCI) and the State Highway Patrol have both bid to be the security for the casinos. BCI bid was $5.1 million and the State Highway Patrol $4.6 million. Whoever gets the bid will deal with all crimes committed within the casinos.

Casino Control Commission
September 29, 2011

The Ohio Casino Control Commission has appointed their first executive director. Matt Schuler, chief of staff for Senate President Tom Niehaus, was appointed to the position last week. Schuler did not apply for the position. The Commission was unable to attract experienced casino regulators from other states so they redirected their focus to someone within Ohio’s borders that understood how government works. Schuler oversaw 125 Senate employees and was involved with lawmakers in crafting the casino regulations.

Update on VLTs
September 29, 2011

Racinos became a step closer to reality when the state Controlling Board agreed to waive competitive bidding and award a contract to Intralot, a Greek company with U.S. offices in Georgia, to implement a monitoring system for tracking video lottery terminals (VLT’s). Intralot is already the vendor for the Ohio Lottery. The contract is for two years and Intralot will be paid $9 million.

By waiving competitive bidding, Intralot could have their system up and running at Ohio’s racetracks by January, four months earlier than had the contract gone out to bid.

Casino Annexation
August 24, 2011

As expected, Franklin County commissioners approved the annexation of Penn National’s casino site to the city of Columbus. All that remains for the annexation to become official is a final vote by Columbus City Council. By law, that can’t occur for at least 60 days. A vote is expected in mid-November.

Video Lottery Terminals
August 24, 2011

The Ohio Lottery Commission has amended certain rules that were adopted last year relating to video lottery terminals (VLT’s) at horse racing tracks.

Changes made:

Elimination of the requirement that only individuals 21 and older would be permitted in the ‘area of the slots’. Other rules still in effect require you to be 21 or older to play the slots;
Elimination of the requirement that horse racing tracks send at least 10% of their contracts related to VLT’s to minority contractors;
Elimination of the requirement that horse racing tracks sign at least 50% of VLT-related contracts with Ohio-based companies or that 50% of their employees be local residents.

The amended rules will now go to the Joint Committee on Agency Rule Review (JCARR).

Internet Cafes
August 24, 2011

The city of Cheviot has opened the possibility for the first Internet café in Hamilton County with the passage of a local ordinance regulating such businesses. This is unusual on two counts. First of all, up until now, Internet cafes have been primarily confined to northern Ohio. Hamilton County is in southwestern Ohio. Secondly, most Ohio communities that have addressed Internet cafes have passed temporary moratoriums while they await guidance from the state.

But a possible Internet café in Cheviot is still on hold as the owners may not be able to meet the parking space requirements set forth in the newly passed city ordinance.

Columbus Takes First Step in Casino Annexation
August 4, 2011

As expected, Penn National Gaming applied for annexation of its Columbus casino to the city. In its last meeting before a 30 day summer recess, City Council certified that the city is capable of providing water and sewer service to the casino site.

The Franklin County commissioners will next vote on annexation at their August 23rd meeting. If approved, City Council will then take a final vote. By law, a 60 day wait period is required before final approval can be granted so if all goes well, annexation should take place by the end of October. This will enable Columbus to begin collecting income taxes from the construction workers.

Nationwide Realty Investors will pay Penn National $11 million for the former casino site in the Arena District. That land is expected to be developed as residences.

Penn National will now switch its focus to getting the casino built and workers hired. The new general manager, Ameet Patel, stated that he expects the Columbus casino to become the “flagship of Penn National”. The 300,000 square foot casino will house 3,000 slot machines, 70 table games and a poker room. There will be 3,500 temporary construction jobs and 2,000 permanent jobs. Hiring for the permanent positions is expected to begin in the summer of 2012 and the casino still hoping to open in the fourth quarter of 2012.

Columbus Casino Settlement Finalized
July 21, 2011

Just yesterday the settlement agreement entered into by Penn National and the city of Columbus back in May appeared to be off. Federal Judge Gregory Frost had imposed a July 19 deadline to agree to the terms of the settlement. There were two roadblocks. The original casino site in the Arena District had to be sold for at least $11 million and the lawsuits between Penn National and The Dispatch Printing Company had to be settled. Nationwide Realty Investors admitted they had been in discussions with Penn National about purchasing the Arena District site but no deal was struck. The Dispatch Printing Company had agreed to drop all legal claims, but Penn National wanted a guarantee that the publisher would not interfere any further with the construction of the casino.

With the deal appearing dead, what it meant was that the casino had no water and sewer service and the federal lawsuit filed by Penn National against Columbus and Franklin County was again open.

But this morning Penn National said they had agreed in principle to a settlement with Columbus that would drop the lawsuit, annex the casino site into the city and secure water and sewer services. Penn National is expected to petition for annexation on Friday. City Council would vote on Monday to verify water and sewer services can be provided to the casino site. A vote by Franklin County commissioners and a final vote by City Council will take place over the next several weeks. Penn National still expects to open the Columbus casino in the fourth quarter of 2012.

In other news, the Casino Control Commission has agreed to keep private the salaries of casino operators and other top employees making more than $150,000.

Kasich Signs Racetrack Bill
July 11, 2011

Governor Kasich signed into law HB 277 which implements portions of an agreement reached with casino owners. This law will make it easier for horse racing tracks to relocate.

Among the provisions of this new law:

Establishes the process for racetrack owners to request relocation from the Ohio State Racing Commission. Under the new law, preferential treatment will be given to applications involving moves to areas that don’t have existing casinos or horse racing tracks. Although no specific racetracks were named, it is widely believed owners of racetracks in Columbus and Toledo will ask to move to Dayton and Youngstown;
Allows for video lottery terminals (VLT’s) at Ohio’s seven horse racing tracks. However, the final authorization must come from the Ohio Lottery Commission;
Racinos may move to within 20 miles of an existing racetrack. The Ohio House had originally proposed 50 miles;
Creation of the Casino Operator Settlement Fund. This will hold the extra $220 million that Governor Kasich secured through negotiations with the casino operators. The money will be used for workforce and economic development, job creation, training, food banks, education and other expenses;
Casinos are no longer subjected to a central record-keeping system unless they are in violation of the law;
Only those persons having a 5% or more interest need to be identified. Current law states 3%;
Casino licenses are renewed every three years. Renewal fees will be what it costs to review the renewal application;
Casinos may be opened in phases such as Cleveland plans to do;
Promotional or ‘comped’ betting (free chips usually reserved for valued customers) will be exempt from taxes.

In other news, Spectrum Gaming Group, one of the consultants hired to advise the Casino Commission, has set target dates for the opening of Ohio’s four casinos. They are March 26, 2012 for the Cleveland site, April 2, 2012 for the Toledo site, November, 2012 for the Columbus site and February, 2013 for the Cincinnati site. Spectrum also outlined a timetable for licensing the casinos.

And Penn National has asked Judge Gregory Frost for a two-week extension to meet the terms of the federal court settlement. Under the terms of the settlement, each party is entitled to ask for one extension, although Columbus and Franklin County officials don’t believe they will need any additional time.

House Clears Way for Relocation of Racetracks
June 27, 2011

The Ohio House has approved a fast-tracked bill that will permit relocation of horse racetracks that have video lottery terminals. A vote is expected in the Senate next week.

The Ohio State Racing Commission still has the final say, but this legislation streamlines the process.

Several Congressmen had indicated that relocation requires legislative approval, not by administrative rule. This bill addresses that issue.

Under current law, relocation would require the signatures of at least 51% of the voters from the last general election in the township where the racetrack would be relocated. This bill eliminates that requirement.

This bill also requires the Racing Commission to “give preference to transfer proposals involving moves to locations in which neither horse-racing meetings nor casino gaming have been authorized by July 1”.

Penn National Agrees to Casino Deal
June 21, 2011

Governor Kasich and Penn National agreed to a deal similar to that with Rock Ohio. Penn National will also pay the state an additional $110 million. In return, the state will assess the commercial activity tax on total wagers minus payouts. This agreement also opens the door for Penn National to move its Beulah Park horse racetrack from Grove City to the Dayton area, although the final decision will be determined by the Ohio State Racing Commission.

In addition to the terms of the deal with Rock Ohio mentioned in our News of June 16:

Both developers will be required to invest a minimum of $700 million into their casinos. Rock Ohio had agreed to $900 million, an amount which they still plan to invest;
The additional $110 million does not have to be paid should Ohio’s gambling laws change significantly;
Owners installing slots will be required to invest a minimum $150 million into the facilities, including gambling devices. A maximum $25 million credit will be allowed for value of existing facilities and land.

In related news, The Ohio Roundtable has threatened to sue everyone involved with the deal, claiming it is unconstitutional. The Roundtable also filed a lawsuit in 2009 to prevent then Governor Strickland’s attempt to authorize slots at horse racetracks.

Details of the Deal
June 16, 2011

Terms of the deal struck earlier this week between Governor Kasich and Rock Ohio Caesars were disclosed today.

Rock Ohio, developers of the casinos in Cleveland and Cincinnati, have agreed to pay the state an additional $110 million over the next 10 years, $10 million for each of the first 5 years and $12 million for each of the next 5 years. In return, the state will assess the commercial activity tax on total wagers minus payouts.

The agreement would also allow each of Ohio’s seven horse racing tracks to apply for a 10-year sales agent license to operate video lottery terminals (VLT’s) for a $50 million licensing fee plus a 33.5% tax on all VLT revenues. License fees would be paid in three installments - $10 million upon application, $15 million when VLT transactions begin and $25 million one year later.

Before VLT’s can be installed at the racing tracks, an agreement with the horse racing industry must be reached over ‘funds to benefit the industry.’ If such an agreement can’t be reached, the state can step in and impose one.

Other terms include:

Casino licenses are renewed every three years, at a cost that covers the expenses of the Ohio Casino Control Commission;
A license can be transferred if approved by the Casino Control Commission and payment of a $1.5 million application fee;
Rock Ohio will invest a minimum of $900 million into its two casinos, up from $500 million required by the constitutional amendment passed by voters in 2009.

The state will decide at a later date this year on whether horse racing permits can be transferred from a track’s current location to a new location.

Penn National has not yet agreed to the terms of the deal between Rock Ohio and the State. Discussions are ongoing.

Casino Deal
June 14, 2011

The Columbus City Council and the Franklin County Commissioners unanimously approved a settlement agreement with Penn National Gaming. The deal was struck two weeks ago as both parties were preparing to go to trial over water and sewer rights. The city agreed to set aside $15 million to help Penn National with environmental cleanup and road improvements, payable once Penn National annexes their casino site to Columbus. Council also agreed to pay $350,000 in legal fees the city had incurred defending the lawsuit.

The settlement agreement was then submitted to federal judge Gregory L. Frost, who granted approval last Friday.

Penn National now has until July 5 to find a buyer for its former casino site in the Arena District and settle its lawsuits with The Dispatch Printing Company. Once that occurs, Penn National will annex its current casino site to the city and the city will pay the $15 million it currently has set aside to help with environmental cleanup and roadwork. A possible hitch in the deal is already on the horizon: the attorney for The Columbus Dispatch Printing Company has stated his client would rather see annexation occur before dropping its lawsuit.

Meanwhile, Governor Kasich has reached a deal with Rock Ohio Caesars, developers of the casinos in Cincinnati and Cleveland. Financial terms were not disclosed, but it is believed Caesars has agreed to a multi-year “significant payout” on top of the $50 million licensing fees. In return, the language in the proposed state budget requiring casinos to pay the commercial activities tax on all wagers placed will be changed. Penn National had originally agreed to the same deal, but backed out at the last minute. Video lottery terminals, or VLTs, are thought to be one of the sticking points.

Internet Sweepstakes Cafes
June 14, 2011

Medina has extended a temporary moratorium on internet sweepstakes cafes an additional six months. Set to expire in May, this means new establishments will now be prohibited until November. The basis for the extension was to wait until Ohio Attorney General Mike DeWine submits his proposal for statewide regulation of such businesses.

Miamisburg, on the other hand, agreed to regulate internet sweepstakes cafes in spite of forthcoming regulation from the Attorney General's office. Last week, City Council approved new zoning regulations that would address such issues as design, parking and location for these types of businesses. Later this month, licensing requirements will be added.

The city of Springboro is expected to follow the lead of Miamisburg in establishing local regulations for the cafes later this month.

Casino Deal
May 26, 2011

The trial of Penn National’s claim against Columbus and Franklin County over water and sewer rights was to have begun last Monday. Both parties requested a delay. On Tuesday, an out-of-court settlement was reached.

On the surface, things appear to be looking up for the Columbus casino. A closer inspection of the terms reveal that the ride may still be a little bumpy.

Terms of the deal:
Penn National will annex the casino site from Franklin Township to the city of Columbus; Columbus will pay Penn National $15 million to help with environmental cleanup and road improvements. The city is expected to recover the $15 million from tax revenues that the casino will pay once it is operational.

But there are three contingencies that must be met by a court imposed deadline date of June 10, when both parties are expected to report back finalization of the settlement:

Penn National must receive an offer of at least $11 million to purchase its former casino site in the Arena District. They believe a buyer is lined up, possibly Nationwide Realty Investors;
The lawsuits between Penn National and The Columbus Dispatch Printing Company must be dropped. What is unclear is whether the lawsuits must be dropped entirely by June 10 or if the settlement agreement is enough to satisfy the contingency. Steven Tigges, attorney for The Columbus Dispatch Printing Company, has stated that he doesn’t believe their lawsuit will be dropped before annexation occurs, a process that could take 4-6 months;
The settlement agreement must be approved by Columbus City Council and Franklin County Commissioners. No problems expected here.

If all goes well, the Columbus casino could open by late 2012.

Casino Construction Halted
May 12, 2011

Rock Ohio Gaming has stopped construction on its casinos in Cleveland and Cincinnati until the issue of taxes and fees has been resolved. That could still be weeks away as the Senate is currently reviewing the budget amendment passed by the House last week.

While also concerned about this issue, even threatening legal action if higher fees and taxes become a requirement, Penn National continues with their operations in Toledo and Columbus. Construction in Toledo is 45% complete. Equipment is being brought to the Columbus site, even though there are several court battles raging. The latest is a federal lawsuit filed by Penn National against Strata 33 Investments LLC, a subsidiary of The Columbus Dispatch. Strata had purchased a parcel of land next to the Columbus casino site so that they could object to Penn National’s request for a zoning certificate. In its lawsuit, Penn National alleges “unfair competition and deceptive trade practices”. They have asked the judge to stop Strata from further interfering with the casino construction and to stop disseminating “false and misleading” information about Penn National.

Casino Tax Amendment Passes the House
May 6, 2011

The Ohio House of Representatives has approved an amendment to the budget requiring casinos to pay the commercial activity tax on all bets wagered, not gross revenue minus winnings paid out. Penn National is strongly opposed and reiterated its threat to file legal action if this amendment is passed. The budget will now go to the Senate for approval.

In other news, Ohio Casino Control Commission Chairwoman Jo Ann Davidson has indicated that, while trying to work within the time frame of the casino developers, there are no guarantees licenses will be granted to Penn National or Rock Ohio Caesars. Michigan had a similar situation where licenses were denied to certain owners and they ended up selling their ownership stock, after construction had begun.

Davidson went on to say that a rule would soon be filed that outlines instructions for the licensing application, which is the top priority of the Commission.

Casino Delays
May 2, 2011

Penn National officially broke ground on its Columbus casino last week but when it will actually open is still up in the air somewhat.

Days after the groundbreaking, Franklin County officials rejected Penn National’s application for a certificate of zoning appropriateness, a certificate that is needed to begin construction. Planning Administrator Lee Brown cited 11 deficiencies in the application. Penn National officials have vowed to respond quickly so as not to delay construction.

But then House Republicans proposed an amendment to the budget that would substantially impact how casinos would be taxed. The constitutional amendment passed in 2009 requires each casino to pay a $50 million license fee and a casino-specific tax of 33% on gross revenue. They would also pay the state’s commercial activities tax of 26 cents on every $100 in gross gambling revenue, which is what the casino takes in minus what it pays out in winnings. The proposed amendment would tax casinos on money wagered. In other words, a tax on every bet made.

Penn National has hinted that if this amendment were adopted they would have to ‘re-evaluate’ their investment, originally projected at $400 million. They also stated that a lawsuit against the state would be a possibility.

Meanwhile, the opening of the Cincinnati casino has been pushed back to 2013, due to the uncertainty over taxes and fees that may be imposed upon them. Operators there have also hinted at the possibility of scaling back their project.

Officials from Penn National and Rock Caesars Ohio are expected to meet with Moelis & Co., one of the gambling experts hired to advise Governor Kasich. The other expert, Spectrum Gaming Group, is expected to make a presentation to the Ohio Casino Control Commission on Wednesday.

Kasich Hires Gaming Consultants
April 18, 2011

The Ohio Department of Administrative Services has announced that two firms will be retained to assist Governor Kasich and the Ohio Casino Control Commission in plotting Ohio’s future on various gaming issues such as casinos, VLT’s and horse racing. Spectrum Gaming Group of Linwood, New Jersey was hired to primarily assist with the rules and regulations, as well as whether or not Ohio should allow additional gaming beyond the casinos. Their work could take as long as two years. Moelis & Company of Los Angeles will concentrate on the finances – gambling fees and taxes. The bulk of their work should be complete in six months. Both companies will be paid at the rate of $400 an hour.

Casinos
April 18, 2011

The opening of the Cleveland and Cincinnati casinos could be delayed up to four months, pushing back the completion date to early 2013. According to president Matt Cullen of developer Rock Gaming, this potential delay is all a result of Kasich’s indecision on casino fees and taxes. Kasich thinks the $50 million licensing fee and 33% tax on gross revenues is too low. In order to raise these amounts, either the operators would have to consent or yet another constitutional amendment would be needed.

Then there is the debate over the Commercial Activities Tax. Should the tax be applied before or after winnings are paid out? The Ohio Legislative Service Commission says before. The casino operators disagree.

Sweepstakes Cafes
April 18, 2011

The village of Sheffield became the latest local entity to approve legislation that would allow sweepstakes cafes in their community. These businesses may begin operating on April 25, the day a six-month moratorium expires.

Among the provisions:

A $5,000 annual licensing fee;
A $50 per machine monthly licensing fee;
No one under the age of 18 permitted inside the business;
Location of any such business is limited to C-2 or C-3 commercial districts;
Prohibited from being within 500 feet of churches, schools or playgrounds;
Alcoholic beverages in the businesses are prohibited;
Hours of operation will be 10am-midnight on weekdays, 10am-2:30am on Saturdays and noon-10pm on Sundays.

Several other cities have taken a wait-and-see approach to see what the state plans to do about sweepstakes cafes. Parma has extended their six-month moratorium an additional 90 days; Lakewood extended their six-month moratorium an additional 6 months; and Seven Hills has extended their moratorium an additional 2 months. The attorney general's recent announcement regarding proposed legislation would preempt any municipal legislation authorizing sweepstakes and skill game cafes when the legislation is passed.

Internet Cafes
April 14, 2011

The city of Wadsworth, by a 4-2 vote, approved legislation to regulate sweepstakes cafes. A 6-month moratorium that had been in place was to expire April 22.

Among the new rules:

An annual licensing fee of $2,000. This will fund the required background checks on business owners and employees;
Existing as well as new businesses will have to comply;
A 3-member commission will be established to hear complaints against the businesses;
Sale of alcoholic beverages will be prohibited;
No one under the age of 18 will be permitted on the premises;
Photo ID’s of all winners will be required. If the winnings exceed $600, the operator must keep a file that includes photo ID, name, home address and prize description;
Violators are subject to a $100 fine for each offense;
A $250 fine will be imposed on any business operating without a license.

Meanwhile, the city of Cleveland has extended their moratorium on Internet cafes. Originally set to expire April 18, the moratorium has been extended an additional six months.

And as mentioned in our news of March 28 (see below, ‘Proposed Regulations for Internet Cafes’), Rep. Nan Baker and Rep. Marlene Anielski have introduced HB 195, legislation that would regulate Internet sweepstakes businesses.

Racinos
April 13, 2011

Governor Kasich is expected to hire a consultant any day now to complete a thorough review of Ohio’s gambling market. The racino question will probably be at the top of the list. A final recommendation could take months. Penn National Gaming and Rock Ohio Caesars, developers of the State’s four casinos, have stated that they are in favor of bringing slot machines, or video lottery terminals (VLT’s), to Ohio’s horse racing tracks, despite the fact that they would be competing against one another for the same customers.

Proposed Regulations for Internet Cafes
March 28, 2011

Attorney General Mike DeWine, along with state representatives Nan Baker of Westlake and Marlene Anielski of Walton Hills, have proposed legislation that would regulate Ohio’s Internet cafes, including skill game parlors and sweepstakes cafes.

The proposal calls for the games to be under the control of the newly formed Ohio Casino Control Commission.

Businesses would have to be licensed, and each entity could own a maximum of two licenses;
Machines would have to be certified. Each machine would have a sticker posted that would indicate to law enforcement they are certified and that the operator was licensed;
Cash payouts would be banned;
Merchandise prizes would be limited to $10 or less. Operators could offer gift cards only for merchandise that the operator itself sold on-site;
Licenses for sweepstake terminal devices would be limited in each county, based upon population, with a maximum of 64. There would also be an opt-out for local municipalities who didn’t want these businesses in their community;
The number of sweepstake terminal devices at each location would be limited to a maximum of 5;
Violators would face felony charges.

The regulations would go into effect July 1.

Columbus Casino
March 28, 2011

Unrelated to the ongoing battle between Penn National and the city of Columbus, the Kasich administration dealt a financial blow to the casino developers. An amendment to the state transportation budget prohibits the use of state assistance to casinos or any other gambling venue, such as racetracks. This will prevent Penn National from receiving $2.5 million from the State that was to be used to assist in the cleanup of the casino site.

The budget did, however, correct an earlier oversight and earmarked $5.5 million for the Ohio Casino Control Commission. An executive director is expected to be named in the next couple months.

VLTs
March 28, 2011

House Speaker Pro Tempore Louis Blessing Jr. has stated that legislation to legalize video slot machines at Ohio’s racetracks could be introduced in the next 30 days. The holdup has been attributed to the desire by Governor Kasich to speak with a ‘gambling expert’ before making any decisions. Blessing went on to say that approval of this proposed legislation should not be a problem.

Lawsuits
March 21, 2011

First it was The Dispatch Printing Company filing suit in the Franklin County Court of Common Pleas. In their lawsuit, the Dispatch asked Judge Fais to force Penn National to annex its casino site in west Columbus to the city. The Dispatch claims Penn National has reneged on promises made last year.

Two days later, Penn National went to federal court in an attempt to force the city of Columbus to provide water and sewer service to its casino site. In its lawsuit, Penn National pointed out that the casino site has been connected to Columbus water and sewer since at least 1953 and by withholding such services, Columbus and Franklin County have violated the 14th Amendment of the U.S. Constitution, the guarantee of equal protection.

More Internet Cafe News
March 7, 2011

Trotwood became the latest city to adopt a six month moratorium on sweepstakes cafes and skill gaming centers. Currently, the city sees both as games of skill, not gambling. The law director believes these cafes are legal and expects the Franklin County ruling against such cafes to be appealed.

Meanwhile, Summit County has issued eleven licenses under their new regulations. These businesses will be able to legally operate Internet cafes after clearing one more hurdle. Each business must provide a certificate or report from a testing company stating that the devices are a “skill-based amusement machine or a sweepstakes game”. The deadline for providing such documentation is March 18. Seven other applications were rejected, for a variety of reasons.

Kasich Appoints Casino Commission Members
February 28, 2011

Former House Speaker Jo Ann Davidson has been tapped to lead the Ohio Casino Control Commission, which will oversee Ohio’s four casinos. Other appointees:

Sergeant McKinley Brown of Cincinnati, chief of detectives for the Hamilton County Prosecutor’s Office;
Martin Hoke of Lakewood, an attorney and founder of RhinoSystems. Hoke is also a former U.S. Congressman;
Ranjan Manoranjan of Columbus, a certified public accountant and CEO of 3SG Corp.;
Peter Silverman, an attorney from Toledo;
John Steinhauer, an attorney from Akron;
June Taylor of Cleveland, CEO of MWV Pinnacle Advisory Services.

Internet Cafes
February 25, 2011

Racetracks Seek Geographical Move
February 21, 2011

Penn National made it official last week by stating to the Ohio State Racing Commission that they want to move horse racing tracks from Toledo and Columbus to Mahoning Valley and Dayton respectively. The Mahoning Valley site is a vacant 186 acre business park in Austintown. The Dayton site is another former Delphi Corp. automotive plant. These moves would be totally contingent on the legalization of VLT’s. No VLT’s, no move. If all goes well, both tracks would open in 2013.

These proposed moves have their detractors. Another group, the Mahoning Valley Development Group also wants to bring horse racing to the Mahoning Valley area and there is a potential racetrack/casino slated for New Castle, PA, which is less than 20 miles away. Residents and business owners alike point to the problems of existing tracks and contend that another track would be more destructive rather than constructive. Owners of the Lebanon Raceway, a track located in Warren County, cite to a law that prohibits construction of a new track within 50 miles of an existing one. The Dayton site is 40 miles away.

Casinos Scale Back Projected Income
February 18, 2011

Ohio may miss the March 10 deadline for having licensing rules in place. Governor Kasich has not yet made his selections for the Ohio Casino Control Commission. A spokesman has indicated this will occur ‘soon’. Casino developers don’t seem too concerned and have said it is business as usual. They currently have no plans to delay the openings of any of the four casinos.

Cincinnati, like Cleveland, will get a Horseshoe Casino. Projected to open in late 2012, the Cincinnati casino is expected to employ 1,700 people.

Casino developers Rock Gaming and Penn National Gaming have revised their economic projections from 2009 – downward. The four casinos will open with 7,400 less seats. Revenues would be $1.2 billion to $1.6 billion, instead of the originally projected $2 billion. Penn National blames the lower numbers on competitive pressures, including the fact that VLT’s are once again on the table. Rock Gaming attributes fewer seats to the involvement of Caesars, who was not in the picture when the 2009 projections were released. Caesars typically operates with fewer slot machines and tables than do competitors of similar size.

Internet Cafes under Scrutiny
February 17, 2011

Internet Cafes under ScrutinyLacking any state guidance, local governments continue their efforts to stall or prevent the operation of these cafes. What started out as a northeast Ohio phenomenon has now spread across the state.

In Franklin County, Judge Harland Hale has ruled that ‘sweepstakes machines’ violate Ohio’s gambling law. This has paved the way for local law enforcement officials to order businesses begin removing these machines.

In Summit County, an ordinance passed last May that regulated Internet cafes, sweepstakes parlors and skill arcades, has been amended. Among the amendments:

Businesses no longer have to provide a certificate indicating they are in compliance with the State’s gambling law. Instead, they must provide a certificate indicating the devices are either a skill-based amusement machine or a sweepstakes game;
Establishments can remain open until 2am on Friday and Saturday. Midnight was the original closing time;
Businesses will be permitted to get photo identification of anyone who wins more than $600. The original threshold was $10;
Liability insurance, which was declared unconstitutional by a common pleas judge last month, language was removed.

Other local governments continue to ponder and tweak. West Carrollton, Springfield, West Chester and Liberty Township have all passed temporary moratoriums on these type businesses so they can further determine if they are legal or not. There are now over 20 townships and cities that have these moratoriums in place. Centerville and Springboro are considering similar moratoriums and Athens is looking at regulating Internet cafes. Going against recent activity, North Ridgeville is contemplating a loosening of their regulations which have been on the books since last September.

Prize Cap
February 5, 2011

The 10th District Court of Appeals has ruled that the $10 prize cap for games of skill is constitutional. On remand from an October decision by the Ohio Supreme Court, the 10th District addressed the question of vagueness. By a 3-0 count, the Court ruled that the prize cap was not unconstitutionally void because of vagueness.

Internet Cafes
February 5, 2011

The city of Lorain recently approved operating rules for its Internet cafes. One of the provisions prohibited serving alcohol. City Council is now considering the removal of that restriction so that veterans groups and ethnic clubs could use sweepstakes machines to help raise money. The Lorain Law Department has stated they will not take a stand on this issue.

Columbus Casino
February 5, 2011

In response to Columbus and Franklin County excluding the casino site from its sewer contract, Penn National Gaming officials may be thinking of alternate ways of disposing of its sewage. A mystery client approached the city of Marysville about whether its sewage treatment plant could handle 120,000 gallons of sewage a day. Local waste haulers indicated this would be a rather daunting task, requiring around the clock hauling at an estimated cost of over $300,000 a year.

Youngstown Racetrack
February 5, 2011

The Mahoning Valley Development Group has proposed a $300 million complex to be built at an undisclosed site in Mahoning county. The complex would include a resort, racetrack, golf course, hotel, and a casino with slot machines. The complex may need as many as 700 acres. The company currently has 200 acres with an option to purchase an additional 200 acres.

Meanwhile, officials from Penn National Gaming plan to meet with the Ohio State Racing Commission next week to discuss the possibility of relocating their Raceway Park from Toledo to a vacant business park in Austintown.

Cleveland Casino
February 5, 2011

Cleveland will be the first Ohio city to open its casino. The Horseshoe Casino is slated to open in early 2012 in the Higbee Building at Tower City Center. This is a temporary site while the permanent casino site is being built just to the south of Tower City Center. The casino will have 2,000 slot machines, 50-60 gaming tables, 25-30 poker tables, 2 bars and a 400 seat buffet style restaurant. The casino is expected to employ 1,500 to 1,600 people.

Sweepstakes Cafes
January 14, 2011

In May 2010, the Summit County Council passed an ordinance intended to regulate skill game arcades, Internet cafes and sweepstakes parlors in the county’s nine townships. See the May 12, 2010 article headed "Summit County Passes Gaming Legislation" below for full details of the ordinance. The constitutionality of the legislation was challenged in court. A Common Pleas judge has ruled that the ordinance is constitutional and can be enforced, with one exception. Judge Tom Parker said that the county cannot require businesses to obtain $1 million in liability insurance.

Meanwhile, the northern Ohio city of Norwalk has become the latest to impose a six month moratorium on Internet cafes.