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Construction Industry Talks, And The Legislature Listens

7 July 2004

Yesterday, the Michigan Senate passed a six percent increase in the wagering tax paid by the Detroit casinos. Under the proposed amended bill, the increase will be reduced to four percent on January 1, 2006 and down to one percent when the Detroit casinos build permanent casinos and hotel complexes. Thus, there is an economic incentive to the Detroit casinos to build the permanent facilities. The proposed legislation was part of an overall attempt by the Senate at a compromise, after the Michigan construction industry and Michigan business leaders expressed grave concerns over the proposed 18 percent increase which had passed the house.

Last week, the Michigan Chamber of Commerce, the Detroit Regional Chamber of Commerce, the Detroit Black Chamber of Commerce, the Construction Association of Michigan, the Plumbers and Pipefitters Association and numerous construction industry trade groups held a press conference in Lansing to speak out in opposition to any form of tax increase on the three Detroit casinos.

Rich Studley, Senior Vice President, Government Relations, of the Michigan Chamber of Commerce, moderated the press conference. He noted that collectively the group was there on behalf of business and labor, Democrats and Republicans to say "no" to any increase in the rate of taxation on the Detroit casinos. He said that the proposed tax increase is an attack on Detroit's three new job providers. Mr. Studley said that one thing the Chamber has learned over the years is that you "cannot tax your way to economic prosperity."

Mike Jackson, of the Michigan Regional Council of Carpenters (representing 23,000 members) said that his members want to build the new casinos. They have been hurting from the economic climate and are opposed to anything that will put at risk the building of the permanent casinos.

Jon Kreger, Director of the Detroit Regional Chamber, noted that the core issue at stake is economic development for Detroit, South Eastern Michigan and the entire state. He noted that the casinos are poised to invest $1.5 billion which will have a far greater multiplier effect on the Michigan economy. He called for any tax increase legislation to be defeated.

Tom Boensch, of the Michigan State Building and Trades Council, said that the proposed increase in taxes on the Detroit casinos "is a move in the wrong direction and discourages development." He said "the livelihoods of the construction trades in Michigan come from businesses willing to invest in economic development." He went on to state: "The Detroit casinos invested over $800 million in construction during 1998-2002, and now are poised to invest an additional $1.5 billion. This is equivalent to two automotive facilities." Mr. Boensch noted that the casinos were paying their fair share. He said that he is very concerned that this will discourage businesses from making the decision to invest in Michigan. "It isn't about killing the Golden Goose, but driving the goose away," he said.

Kevin Cody of Pace Mechanical spoke on behalf of the Plumbing and Mechanical Contractors Association. He noted that in recent years the business climate has been very tough on the construction community. He expressed concern that by changing the economic formula for the investors in the Detroit casinos, the legislature is jeopardizing the permanent casino construction. "A deal is a deal. A contract is a contract," he noted. He voiced grave concern for the legislature unilaterally changing the deal without any input. He noted that this is very troubling to the business community. "Our family and friends are at risk of losing their livelihoods." Mr. Cody noted that there are two ways to destroy a city: (1) bomb it; or (2) increase taxes until it becomes a ghost town.

Kathie Dones-Carson spoke on behalf of the Detroit Black Chamber of Commerce, a group seeking to represent the 18,000 minority-owned business in Detroit. Ms. Dones-Carson previously worked for the Detroit City Council and played an integral role in the negotiation of the Development Agreements with the casinos. She noted the tendency of some to vilify the casino industry. She noted that the Detroit casinos made numerous commitments to the city for economic development. "The came in with their own money and have benefited every citizen in the state through decreased revenue sharing, increased tourism dollars and investment." She urged the legislators not to further raise the taxes.

Mike Lawson of the Construction Association of Michigan said that the "real targets are the people who are going to build and work in the casinos." He noted that in the long run the state will get far more revenue by building up the industry rather than killing it with taxes. "Does anyone really want to put that many people out of work by taxing casinos? That is what is going to happen with a doubt," he said.

Clearly, as a direct result of the construction industry voicing its concerns, the disastrous legislation, which was considered a "done deal" in Lansing a week ago, was modified to seek to ensure that permanent casino and hotel construction will move forward as quickly as the courts will allow. The Detroit casinos should be very grateful for the support of this community, even if they are disappointed that an industry specific tax increase is in the works. Often, critics of casino gaming claim that the dollars spent at a casino don't circulate in the local community. Last week's efforts by the construction industry and by the various chambers of commerce prove that casinos do a lot of local business, and provide millions of dollars of spin-off economic activity by their existence.

The proposed legislation was rejected by the House and will now go to a conference committee to attempt to resolve differences between the two legislative versions. Any form of industry specific tax increase by our legislature is bad for business. Let's hope whatever comes of this proposed legislation, the legislators keep in mind the vast number of jobs at stake not only in the gaming industry itself, but in our overall economy.

David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com
David Waddell
David Waddell is an attorney for Regulatory Management Counselors, P.C. (RMC), which assists businesses in navigating the legislative, regulatory and licensing systems governing Michigan’s commercial and tribal casino industries. He is the co-author of The State of Michigan Gaming Law Legal Resource Book and one of the founders of The Michigan Gaming Newsletter.

David Waddell Websites:

www.michigangaming.com