The Deadwood sports betting initiative that I reported on yesterday actually has two purposes. Along with adding sports betting to the ways one can lose money for fun in Deadwood, the amendment seeks to remove an old and odd cap on how much money the City of Deadwood gets from gambling. Check out the original language proposed by Rapid City attorney Roger Tellinghuisen:
…it shall be lawful for the Legislature to authorize by law, roulette, keno, craps, sports bets, limited card games and slot machines within the city limits of Deadwood. The entire net Municipal proceeds, adjusted annually for inflation, of such roulette, keno, craps, sports bets, card games and slot machines shall be devoted to the Historic Restoration and Preservation of Deadwood [Roger Tellinghuisen, proposed amendment to South Dakota Constitution Article 3 Section 25, as included in LRC letter to Tellinghuisen, 2018.10.22].
The amendment adds “adjusted annually for inflation” to “the entire net Municipal proceeds” remitted to the City of Deadwood each year. At first, that struck me as odd: how can we adjust the proceeds of gambling for inflation? Aren’t the proceeds the proceeds, up if people gamble more, down if blizzards keep people from reaching Deadwood to be separated from their money?
I checked with Tellinghuisen, who directed me to Deadwood Gaming Association exec Mike Rodman, who directed me to SDCL 42-7B-48.1, which since 1995 has defined Deadwood’s net municipal proceeds not as a percentage of the gaming take but as $6.8 million:
Disbursements from the Gaming Commission fund shall be as set forth in § 42-7B-48 until such time as the net municipal proceeds paid to the City of Deadwood equals six million eight hundred thousand dollars for each year, and after payment of commission expenses pursuant to subdivision 42-7B-48(2), and after payment of one hundred thousand dollars to the State Historical Preservation Grant and Loan fund pursuant to subdivision 42-7B-48(4). Thereafter, all remaining funds shall be distributed as follows:
- Seventy percent to the state general fund;
- Ten percent to be distributed to municipalities in Lawrence County, except the City of Deadwood, pro rata according to their population;
- Ten percent to be distributed to school districts, pro rata based upon the previous year’s average daily membership, located in whole or in part, in Lawrence County. For any school district located only partly in Lawrence County, only that portion of the district’s average daily attendance which represents students residing in Lawrence County shall be considered in calculating the proration required by this subdivision; and
- Ten percent to the City of Deadwood for deposit in the historic restoration and preservation fund [SDCL 42-7B-48.1, enacted 1995].
In other words, no matter how much people gamble in Deadwood, no more than $6.8 million goes into the city’s regular budget.
In Fiscal Year 1996, the first year in which this 6.8-million-dollar cap was in effect, Deadwood gambling generated $8.896 million in revenue for the South Dakota Commission on Gaming. The $6.1 million the City of Deadwood received that year ($6.8 million is a cap, not a guarantee; the city still has to percent its way up to that max) was 69% of that revenue. In FY2017, Deadwood gambling generated $15.8 million in public revenue, of which the City of Deadwood’s $6.8 million was 43%.
Under that cap, Deadwood’s relative piece of the action shrinks as gambling and the fees assessed thereupon grow. Add sports betting with that cap in place, Deadwood’s public coffers don’t catch any new nickels.
Thus the inflation adjustment alongside sports betting in the Tellinghuisen amendment. Enact that amendment, and even if nobody places a bet on football or the Tour de France (I can get some action on that, oui, messieurs?), Deadwood can claim more of the chips from the casino tables.
So as crafted, in just eight words, the gambling amendment offers two interesting policy debates. First, we get to decide whether we’re cool with adding sports betting to our public revenue sources and legal entertainment for tourists. Second, we get to debate whether Deadwood is entitled to a greater share of the revenues from the gambling it hosts.
Bonus Media Correction: KEVN reports that Rodman said the attorney general “has 45 days to approve or deny the ballot measure.” KEVN may have misheard something. The Attorney General has 60 days to compose and submit his explanation of the ballot measure, counting from the day that the sponsors hand him their revised text after the Legislative Research Council’s review. If Jackley really does have 45 days left, that indicates 15 have already passed, meaning that if Rodman spoke to the press today, the revised amendment text would have gone to the A.G. on October 31, and the A.G. has until December 29… which is a Saturday… which kicks his deadline to the following Monday, December 31.
But whatever day A.G. Jackley finishes his explanation, he has no legal authority to “accept” or “deny” any ballot measure. Even if he hates a ballot measure, Jackley by himself cannot stop it from going to the petition stage.
Interesting. 🤔 So previously anything above $6.8 went into the general fund I suppose. Now Deadwood wants to keep the entire net? I can’t imagine the grubby fingered grifters in the SDGOP are going to like that.
Seems to me that this ballot measure runs afoul of Mickelson Jr.’s “one topic” rule. Unless that only applies to amendments. Either way people will soon realize how dumb that rule is in practice.
That cap has a history. Governor Janklow needed revenue for his state aid to schools/property tax relief scam he was running. He was looking in every nook and cranny for revenue. I’m not sure about how the deal was negotiated, but this was the deal that Lawrence County and gambling interests made with Janklow. Deadwood had, of course, wheedled a monopoly on gaming for itself for the sole purpose of historic preservation. Under the original amendment no other jurisdiction can allow the sorts of games Deadwood has. So, the $6.8 million cap was based on historic preservation needs, as set out by Deadwood. Lawrence county schools got cut in on the deal because of whining about impacts to the school district from gaming growth. The rest of the state was going to gain some advantage, as well, with some of that money going to other jurisdictions that would not have access to gambling for historic preservation.
I realize that times change, but adjusting Deadwood’s share for inflation automatically takes a bite out of all the other areas that money flows to. So, Cory, Aberdeen schools will take a hit, as will every other district in the state, if this passes.
Looks like hitching our state-funding-wagon to unreliable and shrinking sin taxes maybe isn’t the best policy? Who knew? Oh, wait, economists and researchers knew that? Fake news!
AND, Deadwood still gets 10 percent of the state money in addition to their municipal money for historic preservation. So, I don’t know why they are whining.
It might be nice to have a readout of what Deadwood spent their largesse on. In the vacant lots of my memory, which is covered in weeds now, I recall that much of it was supposed to go for upgraded water and sewer lines, but I recall also that they used some for questionable purposes through the years. Maybe Deadwood needs to tighten its belt a little bit, rather than trying to sneak a bump up in taxpayer subsidies through a sports betting measure. I agree: this is two separate subjects.
Deadwood sports betting would face some challenging markets and I wonder how much of it has been researched.
Currently, it seems that that Las Vegas has online sports betting and that there are plenty of well established sports betting markets off-shore that are lucrative.
How would Deadwood even attempt to cash-in on established sports betting, especially online sports betting.
Right, Debbo: 70% to general fund, 10% to the other towns in Lawrence County, 10% to the school districts in the area, and 10% to the historic restoration and preservation fund. The amendment as written wouldn’t give Deadwood the entire net, just increase that $6.8M cap each year by the inflation rate.
Thing is, on a statewide level, we’re not talking about that much money. Check that total figure for FY2017 again: $15.8 million. We’re anticipating over three times that much just from the new Amazon/Wayfair tax (which we’re supposed to give back under the Partridge Amendment). The state general fund share of that money in FY2017 was less than 1% of the general fund. The amount the proposed inflation indexing would take from the general fund would be a small fraction of the money Mickelson wanted to raise through IM 25’s tobacco tax.
That index doesn’t even seem like that big of an increase in Deadwood’s take. 3% inflation would increase the cap a mere $200K—a big deal, sure, in any one municipality’s budget, but still not enough to cover the $569K Deadwood needed in supplemental appropriations earlier this year to its $16.3M budget.
$200K, out of $16.3M? That’s 1.2% of Deadwood’s starting budget for FY2018.
At the moment, from the numbers available, I’m willing to contend that Deadwood interests aren’t pushing a massive money grab.
The State of So Dak has an unconstitutional law capping
The gambling income to Deadwood
At 6.8 million dollars.
When the people allowed gambling
In Deadwood it was a Constitional change that said ALL proceeds were to
go to Deadwood for Historic Preservation. PERIOD ! It’s not to be used by the State cap or no cap for ANY purpose but to be used by Deadwood for historic purposes.
If a suit were brought against the
State of So Dak Deadwood would be entitled to money above the cap plus
Interest in said money.
The legislature can not change the Constition by legislation.
Roger, maybe the Deadwood folks are more interested in indexing the cap than in sports betting itself.
Mr. Kolbe is, most entertainingly, wrong.
Note how the monies continue to flow, sir. And please also note how the fancy historic district does a lot of fine things for the old people like me, and the really old dead people too. Mr. Kolbe is wrong.
You’re probably right, Cory. Why would Deadwood be more interested in indexing the cap as opposed to sports betting itself. What am I missing?
I can only speculate, Roger. Maybe each is equally important though not massively beneficial. Maybe they recognize what you’re saying about the stiff competition from Vegas and online and, rather than seeking a big windfall, are just looking to diversify their offerings a bit more. And maybe indexing the cap isn’t big money, but seeing inflation diminish their capped take each year bugs them, and this amendment provides them a chance to fix that small problem. And hey, leave that cap in place, and eventually it’ll feel like big money, leaving Deadwood to make up larger chunks of its local budget.