Black Pearl request for lower card game tax in Spokane Valley at a standstill

A request from Black Pearl Casino and Poker Room to reduce Spokane Valley’s gambling tax rate for card games appears to be at a standstill with city officials.

Spokane Valley reduced its gambling tax rate for card rooms from 10 percent to 6 percent in 2015 to help businesses such as Black Pearl remain competitive with card rooms in Spokane, which pay a 2 percent tax.

Last November, the Spokane Valley City Council heard public testimony from attorney Eric Sachtjen of Paine Hamblen, who stated his client, Ian Riley, owner of Black Pearl, is at an unfair disadvantage compared with similar card rooms in Spokane.

“My client is estimated to pay about $280,000 in gaming tax to the city of Spokane Valley. … The tax, at 6 percent, is three times what the city of Spokane charges,” Sachtjen said at the meeting. “If my client were to pick up and move a few miles west, they’d save two-thirds of that tax and move jobs from the city of Spokane Valley to the city of Spokane.”

Spokane lowered its gambling tax rate for card games from 8 percent to 2 percent in 2016, to protect jobs primarily, as other jurisdictions including unincorporated Spokane County had lower rates, said Marlene Feist, spokeswoman for the city of Spokane, in an email last year.

Sachtjen requested the Spokane Valley City Council consider reducing the gambling tax further on card games to match Spokane’s rate, which prompted a discussion about the subject at a Jan. 15 council meeting.

City staff presented a comparison chart to the City Council outlining Spokane Valley’s lack of utility taxes for electricity, natural gas, cable television, water, solid waste and sewer.

City staff indicated that while the city of Spokane has a 6 percent tax on electricity, natural gas, telephone, cable television and a 20 percent tax for water, solid waste and sewer, Spokane Valley only charges a 6 percent telephone tax.

Additionally, the cost for a business license in Spokane Valley is $13, compared with $117 in Spokane.

Spokane Valley Mayor Rod Higgins said the argument put forth by Black Pearl was that gambling taxes for card rooms were significantly above Spokane’s, and although card room gambling taxes are higher in Spokane Valley, pull tab taxes are 10 percent in Spokane – a lucrative source of revenue.

“Then you get to the part of utilities, there were zeros in our column,” Higgins said, referencing the chart comparing utility tax rates of the two cities. “There’s a high of 20 percent on at least three items in their column. So, (Riley) may be at a disadvantage in (card room taxes), but I’m a little skeptical about the rest of it.”

The city of Spokane Valley expects to collect $280,000 in gambling tax revenue from card games in 2019 and indicated every 1 percent reduction in the tax rate would represent a $28,000 deficit in the general fund.

Washington state card rooms in 2017 generated more than $256 million in revenue and paid more than $24 million in local taxes, according to the Washington State Gambling Commission.

But, the state’s card room industry has experienced a steep decline since 2001, primarily because of minimum-wage increases, competition from larger casinos and low barriers to entry allowing new establishments to “spring up” periodically and cut into already thin profit margins, according to a 2016 market study by Spectrum Gaming Group.

Riley told The Spokesman-Review last year he wants to keep Black Pearl in Spokane Valley, but would consider options.

“From a business point of view, you need to consider all options,” he said last year. “We are responsible for 105 people’s incomes and livelihoods, so if we were on a level playing field, it would be great.”

Riley and Sachtjen weren’t immediately available for additional comment Tuesday afternoon.

The city’s future council agenda doesn’t indicate plans for further gambling tax discussions.