What Are Video Gaming Terminals (VGTs)?
According to the Pennsylvania Gaming Control Board (PGCB), video gambling terminals (VGTs) are very similar to the slot machines you might find at any one of 12 Pennsylvania casinos. Every VGT play has a randomly generated outcome from the previous play, the same way it does at a slot machine.
They are not up and running in Pennsylvania yet. But when they are, VGTs will accept only cash, no credit or debit cards. By law, the maximum bet allowed on a VGT will be $5. The maximum payout will be $1,000.
The law also ensures the minimum theoretical payout percentage for VGTs is 85 percent. Of course, that is the same return to player rate slot machines are mandated to provide in Pennsylvania casinos. Essentially, it means that over the long haul, VGTs in PA should pay out 85 cents of every dollar put into them.
Illegal VGTs in PA
Researchers estimate there are as many as 40,000 illegal VGTs operating at various bars, restaurants, and social clubs across Pennsylvania today.
In an effort to stop this illegal activity and start collecting taxes, the state considered several options before striking a compromise. Both the House and the Senate passed a comprehensive gambling expansion package. It includes the authorization of VGTs at certain truck stops. Gov. Tom Wolf signed the bill into law soon after.
The state’s Gaming Control Board has since defined regulations for VGTs at PA truck stops.
Legal and regulated VGTs in PA
The board opened the application process on May 7. Up to five VGTs will be allowed in truck stops that meet certain criteria.
The truck stops must:
- Be equipped with diesel islands
- Sell, on average, 50,000 gallons of diesel or biodiesel fuel every month for the previous 12, or be projected to sell an average of 50,000 gallons for the next 12 months
- Have at least 20 parking spaces dedicated for commercial motor vehicles;
- Maintain a convenience store
- Be a PA Lottery Sales Agent
- Be situated on a lot no smaller than three acres that is not owned by Pennsylvania Turnpike.
Pennsylvania counties that currently play host to one of the state’s 12 casinos could also opt out of having VGTs at truck stops inside their borders. They all took advantage of that option.
Currently, there are 62 pending applications for VGTs in the state. Expect truck stops to debut them during the first half of 2019.
Once the VGTs are up and running, the state will charge operators a 52 percent tax on all revenues. Some 42 percent of the gross revenue generated by VGTs will go into a newly established Video Gaming Fund. The state will ultimately deposit this money in its General Fund.
Another 10 percent of the gross revenue generated by VGTs at truck stops in PA will be used for grants to various counties in the Commonwealth and administered through the Commonwealth Finance Agency.
VGTs in liquor-licensed establishments
Various bar, restaurant, and small business associations continue to push for the state to authorize the operation of VGTs in liquor-licensed establishments.
Most claim authorizing VGTs at a limited number of truck stops would comparatively inflict little impact on illegal VGTs. With only an estimated 120 truck stop sites actually qualified to install VGTs, just 600 legal VGTs will ultimately run. Of course, that leads to a tax hit, critics say.
They estimate as many as 8,000 of Pennsylvania’s 12,000 liquor license holders would have applied to install VGTs. However, the state’s $3 billion annual casino industry lobbied hard to prevent that. The industry feared VGTs would eat away at its existing business.
VGTs bring tax revenue increase in Illinois
In nearby Illinois, VGTs were authorized at any establishment licensed to serve alcohol in 2012. The industry has grown from 61 VGTs in September 2012 to almost 27,000 last summer.
In 2017, for the first time ever, Illinois VGTs generated more tax revenue than the state’s 10 riverboat casinos. However, tax revenue also increased overall.
The Illinois Commission on Government Forecasting and Accountability says Illinois VGTs paid $296 million in taxes last year. That’s compared to $270 million paid by casinos over the same period.
The year before authorized VGTs, Illinois’ riverboat casinos paid $340 million in taxes. Revenue numbers in the Illinois casino industry have certainly declined. However, the revenues haven’t simply shifted over to VGTs as some have suggested.
The state is receiving less money in taxes from riverboat casinos. But the increases from VGTs have more than offset that decline. In 2017, Illinois actually took in the most tax revenue from gambling in a decade.
Taxes collected from all gambling in Illinois, including riverboat casinos, VGTs, the Illinois Lottery, and horse racing, amounted to $1.31 billion in 2017. That was up almost eight percent from 2016. Plus, it marked the most taxes the state has pulled in from gambling since 2007.
Those figures make clear VGTs do more than just eat away at existing casino gambling revenues. They can help increase overall gambling revenues across the board as well.