January 26, 2006 in City

County may ante up again for Aces Casino

By The Spokesman-Review
 
File/ photo

Jerry Heggestad said his Aces Casino is turning a profit now that Spokane County has lowered its gambling tax.
(Full-size photo)

Six months after slashing taxes on gambling establishments, Spokane County commissioners might offer even more help.

A $7,000 penalty accrued by Aces Casino when it failed to pay taxes on last year’s third-quarter gaming receipts would be waived under a proposal that commissioners will consider at a meeting Tuesday. The casino blames its tardiness on cash flow problems it suffered while still paying the older, higher tax rate.”I’d hate to see them disappear if there’s something we can do to keep them,” said Commissioner Mark Richard, who requested board consideration on the penalty. “I think we’d send a very clear message that it will be a one-time occurrence.”

Aces moved just north of Spokane city limits to Francis Avenue and Division Street in July and requested that county leaders reduce its 15 percent tax on card rooms. The business previously was in Spokane Valley, which has a 10 percent tax on card rooms.

In August, Aces’ move paid off. Commissioners reduced the tax to 2 percent, effective in October.

Still, Aces racked up more than $40,000 in taxes under the old rate from July to September.

“We are very pleased with the new tax rate and believe that it will make us a successful business, but unfortunately, the third-quarter tax payment puts us in a severe cash flow bind,” Jerry Heggestad, Aces co-owner and vice president, wrote in a letter to commissioners.

Having to pay the 15 percent tax is penalty enough, Heggestad said in an interview.

Aces completed paying the original tax bill last month but is left with a $7,071 penalty and $589 in interest.

“I expect to pay interest,” Heggestad said. “I don’t expect free money.”

The county isn’t flush with cash, either.

County officials projected last month they would have to dip into reserves by about $5 million to pay bills this year. Commissioner Todd Mielke said Wednesday that might not be necessary, because the budget projections were conservative.

Mielke said he might consider forgiving the Aces penalty, as long as the casino has been timely with previous tax payments.

“What I’m looking for is, is this a business that has been in good standing with regard to paying their taxes and paying them on time and have just had one blip?” Mielke said.

County Treasurer Linda Wolverton noted that commissioners have the authority to waive fines for late property taxes, too, but rarely do so. Wolverton, an elected Democrat, said forgiving the Aces penalty would be unfair.

After all, Wolverton said, Aces isn’t the only establishment that has to pay the county’s gambling tax. It applies to taverns that sell pull tabs, for instance.

“What about the other ones that paid on time at the higher rate?” she said. “Why should they have had to pay on time?”

Commissioner Phil Harris said he has concerns about waiving any of the fine.

“There would have to be some real extenuating circumstance,” Harris said.

In his letter to commissioners, Heggestad said that Aces lost $158,000 during the period when it was taxed 15 percent. In October and November, after the lower tax was implemented, Aces hired four additional employees and made a profit of $58,000, he wrote.

Bob Wrigley, Spokane County’s chief deputy treasurer, said this is the first time a casino has been this late in paying the card-room tax to the county during his nine years working for the office. Officials said it’s also the first time in their recollection that a card room has appealed to the commission to waive a penalty.

When they lowered the tax in August, commissioners said they wanted to help card rooms compete with tribal casinos. And they hoped to lure businesses from cities like Spokane, which recently decided to lower its card-room tax from 20 percent to 10 percent.

Richard said the commission is considering the waiver because Aces is dealing with more than the normal trials of doing business.

“These guys are in a unique position in that they are kind of competing with another government,” Richard said, referring to the tribal casinos. “If another business came to me and said we’re in an uneven playing field, I’d try to help them out too.”


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