Gaming tax revenue expected to decline due to gaming in Nebraska

When Nebraska voters passed a referendum in November 2020 to allow casino wagering in the Cornhusker State, it was widely understood that this action would have a negative impact on western Iowa casinos and the state’s gaming tax revenues. Just what that impact will be is becoming clearer.

 In December, 2021 the Iowa Racing and Gaming Commission received reports from two different consultant groups examining the socioeconomic impact of gambling on Iowa and a market analysis of the state’s existing casinos. Both studies found that there would be significant impact on the four casinos in communities that border Nebraska. 

 The bigger impact would be felt in Council Bluffs, where three casinos currently operate. The Ameristar, Harrah’s, and Horseshoe casinos could expect to see a 35-45 percent reduction in revenue and tax payments to the state according to the two casinos. The patronage at these casinos includes a large percentage of Nebraskans, with one estimate being that 80 percent of customers coming from the west side of the Missouri River. Current plans in Nebraska call for casinos to be built on the west side of Omaha and in Lincoln.

 The Hard Rock casino in Sioux City would also be impacted by the construction of a casino in South Sioux City, Nebraska. The two studies project that the Hard Rock could lose anywhere between 18 and 42 percent of their revenue when that casino is operational.

 Why is this such a concern for Iowa and the state’s Rebuild Iowa Infrastructure Fund? The three Council Bluffs casinos generate a disproportional amount of the gaming tax collected. In Fiscal Year 2021, the state collected $314.5 million in gaming tax. The three Council Bluffs casinos paid $83.1 million, which mean those casinos generate 26.4 percent of the state’s gaming tax revenue.   The Hard Rock casino in Sioux City paid almost $17 million in gaming tax in FY 2021. 

 Iowa’s casinos have experienced an increase in wagering since Governor Reynolds reopened the casinos in the late spring of 2020. That growth has produced a one-time bubble pf approximately $60 million in RIIF funding, as gaming tax collections in FY 2021 and FY 2022 have been higher than projected by the state’s Revenue Estimating Conference. But that growth has leveled off and gaming tax collections starting to work its way back down to pre-pandemic levels. 

 Last year, the Legislature decided to phase out the collection of gaming tax on promotional play incentives at casinos. This will reduce gaming tax by $25 million when fully implemented in Fiscal Year 2027. The arrival of casinos in Nebraska will further that decline in gaming tax revenue. Using the average amount of gaming tax deposited into the RIIF in FY 2018 thru 2020, the annual amount was $161.1 million. If the impact of the Nebraska casinos is at the lower end of the socioeconomic studies’ projections, the amount of gaming tax going to RIIF could decline to $101.8 million in FY 2027.

 When the Nebraska casinos actually come on line is still unclear, but when it does they will have a big impact on Iowa’s gaming tax revenue and the amount of money that can be spent on infrastructure projects.