The government’s plan to legalise VLTs outside casinos has received a mixed response as Puerto Rico’s Financial Oversight and Management Board calls into question whether or not the economic forecasts supporting the new legislation are accurate and calls for additional evidence in support of the measure.
Puerto Rico’s governor Ricardo Rosselló Nevares has signed off on a new bill which will legalise video lottery terminals outside casinos.
The changes to the territory’s gaming law were introduced as part of the government’s new tax reform legislation, House Bill 1544.
Legislators in favour of the measure argued that it could raise an additional $160m for the territory’s coffers and boost the island’s stagnant economy.
The total number of VLTs outside casinos allowed in Puerto Rico will be initially be capped at 25,000 for the first two years. Following this, the cap might be raised further, pending a review by the Puerto Rico Tourism Company (PRTC), the government- owned corporation which oversees the territory’s gaming industry.
However, the Financial Oversight and Management Board of Puerto Rico (JSF) – responsible for overseeing and monitoring sustainable budgets – has expressed concern about the changes.
The Board has cautioned that the additional income raised by the regulation of VLTs could cannibalise the existing tax revenue currently generated by the casino industry and has requested that the government provide additional evidence in support of the measure.
In a statement following the signing of the new law, Natalie Jaresko, executive director of the J S F, reiterated the Board’s “concern that [the effect of] the provisions made for video lottery terminals included in the legislation will not be neutral for the treasury, given that the government and the legislature have not presented sufficient evidence that these changes will not cannibalise the existing revenues set out in the government’s fiscal plan.”
Following the signing, Rosselló Nevares refused to speculate on what would happen if the JSF ultimately decides not to give its blessing to VLT legalisation, stating that he prefers not to “work on hypotheses”.
Back in 2013, the PRTC commissioned a study by Spectrum Gaming Group to investigate the effects of legalising slots outside casinos.
Spectrum’s calculations indicated that the addition of 30,000 slots to the market would reduce annual tax revenue by around 38 percent.
“The study by Spectrum Gaming Group …evaluated the impact of legalising slot machines outside casinos and concluded that casinos would see between a $149m to $195m fall in revenue,” said Clarissa Jiménez, president of the Association of Hotels and Tourism.
“Even when the slot machines produce some revenue, the projected multimillion dollar losses that have been forecast will unbalance the budget.”
A separate study by economist José Alameda in July 2017, commissioned by the Association of Entertainment Machine Operators (Adome), was provided by the government to the JSF as supporting evidence for its plan.
This analysis suggested that the government could raise between $94m and $154m, based on the legalisation of 40,000 VLTs, if operators paid $20,000 per machine licence and each machine generated $15,000 in revenue a year.