A study by an economic research institute has found that the economic impact from approving Arkansas’ casino ballot measure could result in 6,000 additional jobs for the state and $39 million in annual state and local revenue.


The Arkansas Economic Development Institute, an independent research group, said Friday that the study shows an increase of $5.8 billion in economic activity over 10 years for the state.


The study was commissioned by Driving Arkansas Forward, a group which advocates for the casino expansion ballot measure known as Issue 4.


The proposed constitutional amendment would allow two new casinos, one in Jefferson County in Pine Bluff and the other in Pope County near Russellville, and would expand gambling in Oaklawn Jockey Club in Hot Springs and Southland Racing Corp. in West Memphis.


Meanwhile, a Little Rock judge has been appointed to fill in for the Arkansas Supreme Court chief justice in a pair of challenges to a ballot measure that would legalize four casinos in the state.


Arkansas Gov. Asa Hutchinson in late September appointed Little Rock District Court Judge Hugh Finkelstein as a special justice for the two lawsuits challenging the proposed constitutional amendment on the November ballot. Chief Justice Dan Kemp has recused from each of the ballot measure challenges.


The lawsuits are trying to get the proposal disqualified from the ballot.


The second of those suits was filed by a group called Citizens for Local Choice. The lawsuit claims the proposal doesn’t inform voters it would effectively overturn the Arkansas constitution’s ban on monopolies.


Another group led by Pine Bluff pastor Derick Easter filed the first lawsuit against the measure with the high court and also makes claims that the proposal is misleading to voters, including its ability, if passed, to allow alcoholic beverages to be served on Christmas Day, which is currently against state law.


Easter said he doesn’t support a casino coming to Jefferson County.


“One, I think that the industry as a whole targets those who can least afford to lose their income,” he told The Commercial in a previous interview. “I also do not think that casinos are a profit to communities. That is the main focus. Casinos don’t revive local communities, they act as parasites upon those communities.”


Following is an explanation of the issue, provided by the University of Arkansas Extension Service.


POPULAR NAME: An Amendment to Require Four Licenses to be Issued for Casino Gaming at Casinos, One Each in Crittenden (to Southland Racing Corporation), Garland (to Oaklawn Jockey Club, Inc.), Pope, and Jefferson Counties.


What does your vote mean?


FOR: A FOR vote means you are in favor of authorizing four casinos, one each in Jefferson and Pope counties, one at Oaklawn in Hot Springs, and one at Southland in West Memphis.


AGAINST: An AGAINST vote means you are not in favor of authorizing four casinos, one each in Jefferson and Pope counties, one at Oaklawn in Hot Springs, and one at Southland in West Memphis.


What is being proposed?


This amendment asks voters to add a section to the Arkansas Constitution authorizing four casinos to operate in


the state. If approved by voters, this amendment would:


1. Authorize four casinos to operate in the state, one in Jefferson County within two miles of Pine Bluff, one in Pope County within two miles of Russellville, one at or adjacent to Oaklawn Jockey Club in Garland County, and one at or adjacent to Southland Racing Corporation in Crittenden County.


2. Define what type of casino gaming may occur at the four casinos.


3. Prohibit people under 21 from gambling.


4. Assign the Arkansas Racing Commission to regulate licensing and operation of the casinos.


5. Require the legislature to enact laws and appropriate funds for use by the Arkansas Racing Commission.


6. Establish minimum requirements for who can receive casino licenses in Jefferson and Pope counties and require licensees to conduct casino gaming for as long as they have a license.


7. Require the Arkansas Racing Commission to fund and work with Department of Human Services to implement and administer compulsive gambling disorder educational programs.


8. Authorize the Arkansas Department of Human Services to make rules to administer compulsive gambling disorder educational programs.


9. Establish tax rates on casino gaming net receipts and how that revenue is distributed.


10. Require greyhound and horse racing operators to contribute to racing purses and awards and for Southland to set aside money for capital improvements to its racing facilities.


11. Allow the casinos to operate any day, all day.


12. Allow the casinos to serve alcohol during all hours in which gaming takes place, regardless of whether the casino is located in a dry city or county.


13. Require the casinos to purchase alcohol from a licensed Arkansas wholesaler.


14. Permit the shipment of gaming devices to the casinos.


15. Establish that the amendment would not affect current laws regarding greyhound and horse racing, other gambling, bingos and raffles, the state scholarship lottery, or electronic games of skill.


16. Declare any state laws in conflict with this amendment would not apply to this amendment.


How did this issue get on the ballot?


Sponsors collected signatures from at least 84,859 Arkansas voters, equal to 10 percent of the people who voted for governor in the last election, to put Issue 4 on the statewide General Election ballot.


Who were the main sponsors of this amendment?


Driving Arkansas Forward and Arkansas Jobs Coalition have filed Ballot Question Committee paperwork with the Arkansas Ethics Commission to support this measure. Their statements of organization and financial filings are online at the Arkansas Ethics Commission website, www.arkansasethics.com.


Aren’t casinos already allowed in Arkansas?


There are multiple state laws that, combined, prohibit casinos. Arkansas Code 5-66-103 makes keeping of a “gambling house” a felony. Arkansas Code 5-66-104 prohibits gaming devices and Arkansas Code 5-66-106 says betting on any machines prohibited under Arkansas Code 5-66-104 is illegal.


However, in 2005, Arkansas legislators passed a bill that allows racetracks to conduct wagering on “electronic games of skills.” The law, Arkansas Code 23-113-201, required the issue be put before the voters of the city, town or county where the racetrack is located. Voters in West Memphis and Hot Springs subsequently approved electronic games of skill at race tracks in their cities. According to the law, in order to constitute an electronic game of skill, the game must not be completely controlled by chance alone.


Many gaming websites include these two locations in lists of casinos, but there are no traditional casinos in Arkansas.


What types of gambling would be allowed?


The amendment defines “casino gaming” as “dealing, operating, carrying on, conducting, maintaining, or exposing for play any game played with cards, dice, equipment or any mechanical, electromechanical, or electronic device or machine for money, property, checks, credit or any representative value.”


The proposal states that casino gaming also includes accepting wagers on sporting events.


If approved, where would the casinos be located?


The proposed constitutional amendment states a casino would be located at or adjacent to Oaklawn in Hot Springs and at or adjacent to Southland in West Memphis. Oaklawn is the only horse race track in the state and Southland is the only greyhound race track in the state.


The proposal also allows one casino within two miles of Pine Bluff in Jefferson County and another casino within two miles of Russellville in Pope County. A Quapaw Nation representative, who also is the chairman of the Driving Arkansas Forward casino campaign, indicated in an article in the Pine Bluff Commercial that the Tribe would apply to locate a casino inside Pine Bluff city limits if it were to receive one of the licenses.


They are not guaranteed to receive the casino license, and their interest does not mean other entities wouldn’t apply for a license and be accepted. At the time this guide was printed, no other entities had publicly expressed an intent to apply for a license in Jefferson County.


The Cherokee Nation, which also has donated to the campaign, has been mentioned in numerous news articles as having an interest in the Pope County license.


If approved, who could apply for the casino licenses?


Under the proposed amendment, Oaklawn and Southland would automatically receive licenses. The two remaining licenses would be issued by the Arkansas Racing Commission.


The proposal requires applicants to demonstrate experience in conducting casino gaming. The interested party would also be required to pay an application fee of no more than $250,000 and to submit a letter of support from the county judge or quorum court. If the applicant proposes to be within the city limits of Pine Bluff or Russellville, the applicant would have to also submit a letter of support from the mayor.


The amendment would give the Arkansas Racing Commission the authority to adopt other rules necessary to carry out the amendment, including the application process. The amendment would require the commission to accept applications no later than June 1, 2019.


What is the Arkansas Racing Commission?


Created in 1935, the Arkansas Racing Commission is composed of five members appointed by the governor for terms of five years. The commission has jurisdiction over horse and greyhound dog racing and electronic games of skills authorized at the two race tracks. The commission is supported by the Arkansas Department of Finance and Administration’s Division of Racing.


Under this proposal, the commission would oversee the casino licensing process and be responsible for issuing renewals every 10 years. The commission would be required to provide at least $200,000 a year for compulsive gambling disorder treatment and compulsive gambling disorder education programs that could be overseen by the Department of Human Services.


The Commission would also receive a portion of the tax money generated by casinos, and would be required to spend some of the revenue on racing prizes.


The proposal requires the legislature to enact laws and appropriate funds for use by the Arkansas Racing Commission.


How would the casinos be taxed?


The proposal would create a “net casino gaming receipts tax.” This means a tax would be applied to the money that remains after a casino has paid winners or reserved as winnings. The tax rate on each casino would be:


• 13 percent on the first $150 million of net casino gaming receipts, or money remaining after winnings.


• 20 percent on net casino gaming receipts over $150 million. Sponsors anticipate that the tax would replace an existing privilege fee paid by Oaklawn and Southland on proceeds from electronic games of skill as required by Arkansas Code 23-113-501. The proposed amendment does not specify that the privilege fee would end, but sponsors have said the tax structure would change once the race tracks convert their gaming to traditional casinos.


The privilege fee is based on net wagering revenues from the games, and is paid to the state, Arkansas Racing Commission, and the county and city where they are located.


The two companies currently pay privilege fees on their net wagering revenues in the amount of:


• 18 percent to the state general revenue fund


• 14 percent set aside for purse or prize money for live racing


• 1.5 percent to city where track is located


• 1 percent to Arkansas Racing Commission


• 0.5 percent to the county where track is located


How would the tax revenue be distributed?


Under the proposed amendment, taxes collected on net casino gaming receipts would be distributed according to


this formula:


• 55 percent to the state general revenue 28 would receive the share that would have gone to a city as well, for a total of 27.5 percent of the tax revenue.


What are the effects of casinos on public revenue?


Public revenue from casinos would come from a new net casino gaming receipts tax, as well as other taxes typically applied to businesses, such as on the sale of food or drinks, event tickets, and merchandise.


The proposed amendment would tax net casino gaming receipts at a lower rate than the existing privilege fees collected from Oaklawn and Southland. The Arkansas Department of Finance and Administration provided an analysis to legislators indicating the change in structure would result in the two companies paying less money to the state and more to the purse fund, counties and cities in fiscal years 2020-2022 (Arkansas Department of Finance and Administration, 2018).


The analysis assumed electronic games of skill receipts collected by Oaklawn and Southland in 2018 would be the same in future years. It also assumed new casinos in Jefferson and Pope counties would begin operating in 2022 with receipts equaling 80 percent of those collected at Oaklawn and Southland.


The casinos would be exempt from paying any other taxes or fees on casino gaming receipts. The casinos would be subject to the same income, property, sales, use, employment or other taxation or assessments as other for-profit businesses. The casino’s income tax would be based on net income (gross receipts less winnings paid to patrons and less gaming receipts taxes paid).


Some of the public revenue generated by the casinos may be the result of revenue lost from less spending in other businesses. Therefore, the net new revenue could be calculated as: Net new public revenue equals casino tax revenue minus revenue lost from other sources.


There are also public costs associated with casino gaming, including implementing and enforcing rules and regulations and expanding and maintaining public infrastructure and services to meet the demand created by casinos.


This includes the cost of providing compulsive gambling treatment programs. Therefore, these costs need to be considered when calculating the net public benefit from casinos. The economic and social benefits and costs of casino gaming vary greatly among communities and between state and local governments, with local governments often bearing many of the costs.


This is one reason that the National Gambling Impact Study Commission recommended in their 1999 report that “local government agencies should make careful and informed decisions about whether to permit gambling into their respective jurisdictions”


In a report prepared for the Canadian Consortium for Gambling Research, the authors reviewed 492 studies analyzing the social and economic impacts of gambling. The study identifies the most consistent economic impacts across all forms of gambling, which tend to be:


• Increased government revenue


• Increased public services


• Increased regulatory costs (relatively minor


expenses), and


• Either positive or negative impacts on nongambling


businesses


They also identified the most consistent social impacts across all forms of gambling, which tend to be:


• Increased problem gambling, with most of this increase occurring after initial introduction


• Increased crime (to a small extent)


• Increased socioeconomic inequality (to a small extent)


• More negative attitudes toward gambling. However, they also noted that the socio and economic


impacts can vary greatly depending on:


• The size and type of gambling


• Existing competition


• Whether patrons and revenues are locally derived


• The strength of jurisdictional policies and educational programs to mitigate the negative effects of gambling, and


• How gambling revenue is distributed


How would this amendment address compulsive gambling?


The proposal would require the Arkansas Racing Commission to provide at least $200,000 each year for compulsive gambling disorder treatment and compulsive gambling disorder education programs.


The Commission would be required to work with the Department of Human Services to implement and administer the programs. In 2015, a state law eliminated requirements for annual funding that was put into place after the passage of Arkansas’ lottery in 2009. According to the 2016 Survey of Problem Gambling Services in the United States, Arkansas was one of six states in 2016 that did not dedicate funding for problem gambling services.


Who pays the casino gaming taxes?


Many studies have been undertaken to determine who spends money at casinos and, therefore, indirectly pay the casino taxes. An analysis of the many studies, based on site specific data, found that casino tax incidence is regressive and borne disproportionately by lower income, less educated households (Mallach, 2010).


How would winnings received by gamblers be taxed?


Gambling winnings are fully taxable and must be reported on state and federal income tax returns.


What requirements are in this proposal for Oaklawn and Southland?


Oaklawn and Southland would be required to contribute a portion of the money they receive from casino gaming to racing prize money, similar to requirements for revenues from electronic games of skill they currently offer at their locations.


Oaklawn would be required to set aside an amount equal to 14 percent of the money they retain after casino winnings are paid to wagers for live horse racing purses. They would also be required to pay an amount equal to 1 percent of net casino gaming receipts to the Arkansas Racing Commission Purse and Awards Fund to be used for “purse supplements, breeders’ awards, owners’ awards, and stallion awards” in order to “promote and encourage thoroughbred horse breeding activities in Arkansas.”


Southland would be required to set aside an amount equal to 14 percent of the money they retain after casino winnings are paid to wagers. Eighty percent of this money would be for live greyhound racing purses and 20 percent would be for facility improvements at Southland, matched with an equal amount of spending for capital improvements by Southland’s racing operator.


Southland also would be required to pay an amount equal to 1 percent of net casino gaming receipts to the Arkansas Racing Commission Purse and Awards Fund to be used for “breeders awards” in order to “promote and encourage greyhound breeding activities in Arkansas.”


The track is one of six greyhound tracks operating in the United States. If passed, would this amendment make Jefferson and Pope counties wet? Alcohol sales are legal in some parts of Jefferson County but are not allowed in Pope County.


The proposed amendment would allow liquor to be sold or given away in the casinos regardless of whether residents have voted to approve the sale of alcohol. The proposed amendment would not legalize the sale of liquor anywhere else in Jefferson or Pope counties.


If passed, when would the amendment take effect?


Issue 4 would take effect Nov. 14, 2018. The proposal would require initial laws and appropriations enacted by the legislature to be in effect no later than June 30, 2019.