Keeping taxes low and reviving local projects: What casino tax revenue will mean for Southwest Virginia

Smyth County Administrator Shawn Utt calls the windfall in gaming tax revenue from the first months of operations at the Bristol Casino a “blessing” for his county.

The money – now expected to total more than $700,000 for the first year of operation – might mean that county officials won’t have to raise the real property tax rate as high as expected to help pay to replace an old, outdated public safety radio communication system, he said.

The project is expected to cost $10 million to $15 million, and the casino money can go toward repaying that debt, he said.

That $700,000 is equivalent to about 5 cents on the property tax rate or about 7% of real estate revenues, said Utt, whose county budget for the 2022-23 fiscal year totaled $115 million.

“We were bracing ourselves for a necessary increase of that much, if not more, in order to fund the public safety project, but these funds will help us do both the public safety radio system replacement as well as invest in our schools and the youth of the county,” Utt wrote in answer to questions from Cardinal News. “If you look at the fact that we are only enjoying the revenues from the ‘temporary casino,’ the funding in future years will most certainly increase significantly and we can invest even more in our public safety and education.”

Smyth County is one of 14 localities in far Southwest Virginia that will benefit from tax revenue from the Bristol Casino, which opened in July in a temporary facility but is expected to open as a full-fledged Hard Rock resort and casino next year. 

The two cities and 12 counties will each receive more than $351,000 for the first six months of operations, July to December, according to monthly reports from the Virginia Lottery, which oversees casino gaming in the state.

If gaming continues at the same pace, the counties and cities are on track to receive more than $700,000 each for the casino’s first year.

Between July 8, when Bristol’s casino opened, and Dec. 31, the casino posted $81.97 million in adjusted gross revenues, which is wagers minus winnings. There were $14.75 million in taxes collected.

If gaming continues at the level it has been for the first six months, it would mean nearly $164 million in adjusted gross revenues for the casino’s inaugural year.

That number is more than was forecast in a 2019 study by the Joint Legislative Audit and Review Commission, which was undertaken prior to the state’s approval of casinos. The report states that the proposed Bristol Casino was expected to generate $130 million in total net gaming revenue per year.

The study also predicted the Bristol casino would generate $35 million in annual gaming tax revenues. However, if gaming continues at the same level, it will mean $29.5 million in taxes collected.

Those numbers were forecast for the full casino rather than the temporary casino currently operating. The study was also done before Hard Rock was announced as the operator.

Virginia casino revenue is taxed at 18%, with 6% going to the Regional Improvement Commission, which was set up by the General Assembly to oversee the money that goes to the Southwest Virginia localities. In addition to Smyth County, they include the cities of Bristol and Norton, and the counties of Bland, Buchanan, Dickenson, Grayson, Lee, Russell, Scott, Tazewell, Washington, Wise and Wythe.

Four casinos have been approved in Virginia, but this revenue-sharing model applies only to the one in Bristol. From the start, the casino’s developers, Jim McGlothlin and Clyde Stacy, said they wanted the project to benefit the region as a whole, and the General Assembly agreed.

Like Utt, many people believe that the gaming tax revenue will grow, possibly significantly, when the full, permanent casino opens in 2024 with a gaming floor that’s three times larger, a large hotel, entertainment venue and more shopping and dining choices. And many think the Hard Rock brand will also sweeten the pot.

Plans for the money

That extra money will mean a lot to the local governments across the region, said Washington County Administrator Jason Berry, who chairs the commission.

“It’s a nice windfall for localities,” he said, adding that the commission expects a “very positive outcome.”

The money must be spent on three areas: education, public safety and transportation. It will be paid to the localities once a year and the first payment will go out this year shortly after July 1, which is the start of the fiscal year, Berry said.

His county is discussing using the money for a “recreation component” and to support the school system, said Berry, adding that he doesn’t want to discuss details because nothing has been voted on by the county’s board of supervisors.

Norton City Manager Fred Ramey Jr. said no decisions have been made about use of the funds in his locality, but it’s possible most will go toward “long delayed and much needed general fund capital projects” in public safety and transportation.

Without the funding, those projects would likely have faced additional delays, he said.

“The city has a Capital Improvement Plan that is updated on an annual basis, but, unfortunately, too few of the projects identified in the plan have been able to be funded in recent years due to insufficient revenue,” Ramey said via email.  “Knowing that this funding stream will be received on an annual basis going forward allows our administrative and elected officials to develop 3-5 year spending plans based on the current and anticipated needs in the areas of public safety, transportation and education.”

He added that the Norton community is “appreciative and thankful” for the new money stream.

Utt, the Smyth County administrator, said use of the casino money will be a key discussion topic for the upcoming budget sessions.

“We are anticipating the next year to be a difficult one and the casino funding will come at a good time,” he said.

Utt added that county leaders also hope to use some money to provide additional support to the county school system. For many years, the board of supervisors funded the schools at 115% of the required minimum, but that number dropped to about 100% during the “budget crisis in the 2007-2010 time frame.”

“The School Board is working on options to help get back up to that 115% level,” he said.

“We will likely use some of the casino funding to help close that gap,” which would mean about an additional $1.4 million, Utt said.

Wythe County Administrator Stephen Bear said his county will likely use the casino revenue in the area of public safety, specifically emergency medical services.

Across the region and in other parts of the state, he said it’s challenging for local nonprofit rescue squads to meet the staffing and financial requirements to provide adequate services, particularly given the increasing demand from an aging population.

“In our upcoming budget, we will be reviewing options for using these funds to help address the shortfall in revenue recovered from billable calls compared with the total cost of providing required emergency medical services coverage,” he said.

The money will provide a revenue source other than local real estate and personal property taxes to fund services. Being able to use it to address public safety issues means that other local tax funds can go toward other areas such as education and community services, said Bear, whose current budget totals about $141 million.

Both Bristol City Manager Randy Eads and Wise County Administrator Michael Hatfield said use of the money will be discussed during the upcoming budget process for fiscal year 2024.

Allie Evangelista, president of the Bristol Casino, said she can’t emphasize enough how important the “regional revenue share” is to casino officials.

“It is a great point of pride for our team that Bristol is the only casino in Virginia with this model,” she said. “During the legislative process with the General Assembly, Mr. McGlothlin and Mr. Stacy made the regional revenue share a top priority. I am glad that revenue from the project will have a broad and substantial regional impact and benefit all 14 localities within the VDOT Bristol Transportation District. This additional revenue will assist our local governments [to] serve their residents by funding infrastructure, public safety and other critical needs.”

Coming up next for the Bristol Casino

In the six months since its opening, the temporary casino has drawn 661,796 visitors from all 50 states and Canada, according to Evangelista. The winners among those patrons have pocketed more than $45.33 million in winnings.

So far, the casino’s best month was December, when it posted $14.87 million in adjusted gross revenues. The month with the lowest adjusted gross revenues, $11.71 million, was July, which was only a partial month since the casino didn’t open until July 8. The second lowest month was November, when the adjusted gross revenues hit $12.65 million.

Evangelista said she is also proud the casino is involved in the community. Since it opened, more than $286,000 has gone to local charities, she said.

Evangelista also likes to point out that there were more than 25,000 applications for the casino’s 600 filled jobs. An additional 600 casino employees are expected to be added when the full casino opens.

In December, a groundbreaking was held for the permanent $500 million Hard Rock Hotel and Casino Bristol project, which is expected to open in summer 2024.

In addition to a larger gaming floor and more games, there will be additional restaurants, a 300-room hotel that can be expanded to 650 rooms, a spa, a pool, retail options and convention space. It will also include Hard Rock Live, a 2,000-seat indoor music venue that can be converted into a 20,000-seat outdoor venue for major touring acts.

Of the three other casino projects in Virginia, the Rivers Casino Portsmouth opened in late January. A temporary casino is expected to open in Danville later this year with its permanent casino expected to launch in 2024, and the Headwaters Resort & Casino in Norfolk is expected to open a temporary facility later this year and open its full casino in 2024.

Setting priorities, funding projects

The Regional Improvement Commission’s mission is to set priorities, divide the revenue evenly and make annual payments. Each of the 14 localities sharing the revenue appointed a member to serve on the commission. Each member serves a two-year term.

Since its first meeting last May, the commission has met five more times. Because it is a new entity, its members have had to organize and get it up and running. A set of bylaws has been approved.

A bookkeeper who will handle some administrative duties has been hired, as has an audit firm. An attorney will soon be on board.

A bank account has been set up with First Sentinel. As of Jan. 26, the commission had more than $4 million cash in hand, Berry said.

The commission was given no money for operations, but it is getting an interest rate equal to the Federal Reserve, minus a half percent from First Sentinel Bank. Berry said he believes the commission can pay its expenses off the interest on the money alone. That way, 100% of the gaming tax revenue can go to the counties and cities, he said.

Its next priority will be to create a form that localities will use to describe how they plan to spend the money for review by the commission.

“Not that we’re going to tell them how to spend the money, because we collectively as a commission believe that the elected officials of these localities need to decide how they will spend their money. As long as it’s in those three categories, public safety, education and transportation, we’ll put our review and rubber stamp approval on it,” Berry said.

Localities will likely be asked to submit a final report on how the money was spent so there’s “complete transparency,” at the beginning and end of the process, he said.

The commission’s next meeting will be at 1 p.m. April 20 at the Russell County Government Center in Lebanon.