Ohio governor proposes controversial gaming tax

COLUMBUS, Ohio -- A controversial gaming tax proposal from Ohio’s new governor could stall construction of four casinos approved by voters in the Buckeye State, including one each in Cincinnati and Cleveland involving Caesars Entertainment Corp.

Any construction delays could also hurt projected sales by Nevada’s largest slot machine manufacturers.

It’s anticipated the four casinos would house at least 8,800 new slot machines. Manufacturers, such as International Game Technology, Bally Technologies and WMS Industries, were counting on gambling equipment sales in Ohio to shore up sagging revenue figures.

Gov. John Kasich’s move to get more money out of Ohio's potential gaming operators has not gone unnoticed by analysts who follow slot machine makers.

Kasich supports a commercial activity tax, which would effectively tax every dollar wagered at an Ohio casino, on top of a 33 percent gaming tax the operators would pay on revenues. The Ohio House of Representatives have approved the proposal, but it’s unclear if the Senate will back the bill.

Roth Capital Partners gaming analyst Todd Eilers told investors slot companies were expected to record sales figures for about 3,500 machines in the first half of 2012 and 5,300 games later in the year.

“Any changes to the timing or scope of the first two projects would cause us to remove any associated equipment sales,” Eilers said. He added that Bally faces a larger hit to its projected earnings because the company is expected to supply gaming systems to the casinos, as well as slot machines.

Caesars, which is in a joint venture with Ohio businessman Dan Gilbert, and Penn National Gaming, which controls casino sites in Columbus and Toledo, oppose the added commercial activity tax.

“Both casino operators have indicated the proposed commercial activity tax rate could cause them to delay and/or scale back existing projects and have also indicated potential legal challenges should the bill pass,” Eilers said.