Four Winds South Bend Casino Could Cut Indiana State Revenue by $350 Million

Posted on: December 15, 2016, 06:00h. 

Last updated on: December 16, 2016, 03:34h.

Four Winds South Bend could cost Indiana $350 Million in five years
An artist’s rendering of the Four Winds South Bend Casino, on which the Pokagon Band of Potawatomi Indians broke ground last week. A new study on the potential impact of its arrival doesn’t make pretty reading for Indiana’s existing casino sector. (Image: Four Winds Casinos)

Indiana’s casinos could take an $800 million hit in the first five years following the establishment of a new tribal casino, which would in turn leave state coffers $350 million poorer.

That’s the verdict of new research from the Spectrum Gaming Group, commissioned by the Casino Association of Indiana, on the impact of Four Winds Casino, South Bend.

The Pokagon Band of Potawatomi Indians broke ground on its 140,000 square foot casino last week, marking the beginnings of a fifth casino in the state’s northern end.

And while it will be a class II gaming casino only, with some 1,800 Class II gaming machines, the report believes it will poach enough customers from state’s 11 riverboat casinos and its two racinos to blast a big hole in their revenues.

Ripple Effect

Spectrum Gaming concluded that tax revenue over the five-year period would dip by about $882 million, while roughly 1,800 people could lose their jobs, contributing an extra $73 million to the deficit in lost income taxes.

“The changes in revenue and employment will ripple through the economy, having an impact on indirect and induced jobs, gross state output, personal income, and state and local revenue collection,” claims the report.

While Indiana’s state-licensed casinos pay 35 percent tax rate on their gross gambling yield, the tribe won’t be taxed on its revenue at all.

Instead, it will likely negotiate a revenue-sharing compact with the state under which it will probably agree to share a small percentage of the yield from its gaming machines.

Pokagon GO!

The problem is, there isn’t a great deal the state can do about it. Under the Indian Gaming Act, the tribe can operate a class II casino without its approval. It’s not even strictly legally necessary for it seek a compact with Indiana, other than as a goodwill gesture.

If it were to apply in the future to offer a Class III gaming, which would permit the introduction of table games, then the state would be able to negotiate a revenue-sharing agreement that offers something similar to the amount the state-regulated casinos pay in tax.

But until then, the Four Winds will have an advantage over its competitors, says Spectrum.  

“[The new casino] will pay zero gaming tax to the State of Indiana, giving it an enormous marketing and pricing advantage, particularly in slot payout rates, over the commercial casinos that pay an average 35 percent GGR tax to the State,” says the report.

“I think it’s important for legislators to take a comprehensive look at the industry and the challenges it faces today, and create a vision for the future that we can mold policy around,” Matt Bell, president and CEO of the Casino Association of Indiana told the Associated Press.