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Federal Way Council May Lower Gambling Tax To Give Gambling Activities A Break

Posted on May 28th, 2010

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On May 3, PJ Pockets Casino terminated its operations which resulted to the loss of jobs of all of its 85 employees. The casino, situated at South 324th Street and Pacific Highway had been financially stressed for the last two years because of the economic crisis.

Aside from the economy, casino co-owner Steve Griffiths cited the city’s 20 percent tax on the casino’s gross gambling receipts as another major cause of the shutting down. Griffith said that kind of rate works only when business and economic conditions are favourable, but not in the current economic condition.

The state of Washington authorized the twenty percent maximum rate in 1998 when the city wanted to control the expansion of gambling activities and limit the number of casinos. In view of this recent development, the Finance, Economic, Development, Regional Affairs Committee of the Federal Way City council had a meeting Tuesday to discuss the possibility of reducing the tax rate on card rooms and pull tabs.

The city council members present in the meeting were Mike Park, Linda Kochmar, Jeanne Burbridge and Dini Duclos. It has been recommended to the council that the tax rate on the casinos’ gross receipts be lowered to 10 percent from the current 20 percent, and the tax on pull tabs be set at 4 percent, down from 5 percent.

The council can also introduce an emergency ordinance to hasten the procedure which would enable the new tax rate to go into operation June 6, instead of August 1 if the standard ordinance process is followed. If the lowered rate were to take effect by June 6, Griffiths said the casino could restart operations August 1. He said PJ Pockets would have to recall old employees, hire and train new ones, and coordinate with the gambling commission, which could take the management 30-40 days to complete before it can reopen.

John Foley, owner of a tavern that sells pull tab tickets, asked the council to drop the pull tab tax farther to 3 percent. He said his business can’t continue to exist with the current tax rate. He said he has reached the limit where he has to cut jobs because gambling requires the use of workforce. He said 3 percent tax rate would be better for the business.

The acting city manager for Federal Way, Tho Kraus said for every 1 percent drop in pull tab taxes, the city loses around $55,000. But Foley said the city would benefit in the end by the reduction in taxes because the pull tab business would have a good chance of improving which would mean more income for the city. Federal Way city manager Brian Wilson said the city gets its gambling tax revenue from the 18 gambling establishments in the area, of which PJ Pockets is the highest revenue generator.

For 2010, gambling revenue is projected to be roughly $1.1 million. All the council members were in favour of lowering the gambling tax rate, but there were differences of opinion on how much lower should the pull tab tax be set. Kochmar, Park and Duclos were for the 3 percent tax rate to encourage the local businesses to grow. Kochmar suggested that if the 3 percent tax rate proved to be a bad idea after trying it, they could always reconsider the matter.

Burbridge wants the new tax rate to stop at 4 percent to discourage the launching of new establishments. He said he prefers to stay close to the current rate, and that 4 percent is already a generous offer. Burbridge and Park are the only two members on the committee and were able to vote. They decided to send the motion to the full council for its meeting on June 1, with advice to speed up the process, but no proposal was given on the tax rate.