Adjusted policy opens doorfor two additional casinos

POSTED: 05/4/11 1:57 PM

St. Maarten – The government has opened the door for the establishment of at least two additional stand-alone casinos. The amended Casino Policy that was handled by the last executive council in August of last year has now been approved by the Minister of Tourism and Economic Affairs Franklin Meyers. The policy sets the maximum for stand-alone casinos at ten. Currently there are eight stand-alone casinos on the island. There is no limit on hotel-based casinos for hotels with at least 200 rooms.

The policy, though revised in August of last year and approved now, contains dated information. It sets for instance the maximum number of stand-alone casinos at ten, “a maximum expansion of six compared to the current four.”

Actually, there are eight stand-alone casinos at the moment: Atlantis, Beach Plaza, Coliseum, Diamond, Jump Up, Paradise Plaza, Rouge et Noir and Tropicana. Hotel-based casinos are at the Sonesta Maho Beach Resort (Casino Royale), at the Great Bay Beach Resort, Port de Plaisance (Princess Casino) and at the Westin.

Remarkably, the policy relies heavily on a fifteen year old Coopers&Lybrand survey. On October 29, 1996, Coopers&Lybrand submitted its findings to the executive council. Its number one recommendation: “The government should place an immediate moratorium on new casino licenses.”

That recommendation had to do with the situation on the island after Hurricane Luis. With the tourism industry in distress, there was an overcapacity of gaming space.

In the policy that is now released by the government – and that remarkably is dated December 1996 – the casino industry is considered “an integral part of the tourism economy.”

The casinos are not doing too well apparently, because the policy describes the industry’s performance as “mixed.” In spite of this there are several requests pending for the establishment of new casinos. “This fact, along with the growing concern about resident play, requires a well measured response from government,” the introduction to the policy states.

The government is aware of “undesirable side-effects associated with the growth in gaming and gambling,” and refers to abuse by individual players through fraud and addiction, and “the presence of the criminal element in the industry.”

The casino policy focuses on profitability of the casinos, continued and eventually increased tax revenue, a balanced resident participation and avoiding criminality.

The policy states that the government wants to avoid cannibalization of markets, but at the same time it is open to grant more casino licenses.

In 1996 there were nine requests for casino licenses on the table. Among the applicants was the current Minister of Tourism and Economic Affairs Franklin Meyers. His license for a casino in Philipsburg was “conditionally granted pending further review.” Among the other applicants were Rosario Spadaro (denied), Francesco Corallo (for a casino and shopping mall in Philipsburg), Leonidas Friday and Philip van Delden (who was denied a permit for operating slot machines at the airport).

The Coopers&Lybrand study from 1996 already established that, compared to other competitive destinations, the government is not getting its fair share in taxes from the gaming industry.

The policy indicates that this is about to change. “A new system will be developed that meets the needs of the government to derive sufficient revenue needed to aid the socio-economic development of the island, as well as being equitable to the casino operators.”

Currently, according to the Coopers&Lybrand study, casinos pay a fixed license fee per month of $35,000 and a monthly casino controller’s fee of $5,500 per shift. Between September 1994 and August 1995 the government should have collected $5.4 million in fees from the casinos. But Coopers&Lybrand noted that tax compliance stood at 80 percent, and that there was an unpaid balance of a bit more than $1 million that year.

The study examined alternative taxation systems for the casinos. Among the options are a unit-based taxation system whereby casinos pay tax per slot machine and per table game they offer, and a revenue-based system that would require a gross gaming win tax rate of 18 percent to yield tax revenue equal to the current level.

The old casino policy was designed to limit casino-visits by locals, but the system that was put in place to keep a grip on this development failed hopelessly. At the time of the survey there were 31 casino controllers on the government’s payroll, and a couple of years ago their numbers had swelled to 47. But most of the time, the station where a casino controller is supposed to sit, is deserted.

“In recent years it has become evident that neither the legislation nor the casino control function is effectively limiting resident play. The situation begs the question whether government should even attempt to legislate behavior or morals as it relates to gaming and residents,” the policy states.

The concern about criminal activities is real, but the policy does not contain any provisions to act against them. “Pathological gamblers are likely to engage in forgery, theft, embezzlement, drug dealing and property crime to pay off gambling debts. The huge sums involved in legalized gambling tend to attract organized crime,” the policy states.

It then goes on to quote a former Chicago mobster who told a US congressional committee that “the introduction of legalized gambling in Illinois created a brand new market for us.”

Among the rules that are now in place is one that prohibits the establishment of casinos within a radius of fifty meters from buildings that have no permanent activities, such as churches and schools.

The policy limits the number of casinos operated by the same principal to two. The minimum age for entering a casino is 18. “Other entrance requirements will be stipulated by the government in the future, the policy states.

 

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