Colorado Sports Betting Will Leave Water Budget Thirsty In First Year

Posted on: December 23, 2019, 09:27h. 

Last updated on: December 23, 2019, 04:22h.

Todd Shriber @etfgodfather Read More

Expertise: Financial, Gaming Business, Mergers and Acquisitions.

In November, Colorado voters approved Proposition DD, a ballot initiative to legalize sports wagering to direct revenue to the state’s water projects.

New estimates indicate that the first year of sports wagering there will leave the water budget dry, indicating it could take awhile for the plan to be a significant contributor to the state’s water needs.

The Division of Gaming expects sports betting, which starts in Colorado in May, to generate between $1.5 million and $1.7 million in tax revenue in the 2020-21 fiscal year, which begins on July 1,” reports The Colorado Sun. “That amount isn’t enough to reach the threshold under which funds would be transferred to water projects.”

That estimate is attributed to an analysis by Gov. Jared Polis’s office. Last year, Polis, a Democrat, signed a bill allowing Prop DD to be included on the November 2019 ballot. Sports betting will, of course, be taxed in Colorado, and since it amounts to a new levy, it had to be approved by voters there, as the state constitution mandates all new taxes must be signed-off on by residents.

Far Shy Of Estimates

Heading into the Nov. 5 election, Prop DD was expected to easily pass. But the result turned into a nail-biter, and approval wasn’t made official until Nov. 6, as more than 49 percent of Centennial State voters rejected the plan.

The Polis Administration forecast of just $1.5 million to $1.7 million in sports betting tax revenue in the first year falls well short of lawmakers’ prior projections, which estimated the state could generate $20 million or more annually from the endeavor.

Even if $20 million (or more) is eventually reached, the state would still need to find other avenues for plugging a $100 million annual shortfall in its water budget.

That was one of the primary criticisms of Prop DD: that it wouldn’t come close to being a cure-all for Colorado water needs, and that politicians there could direct sports betting proceeds away from water to other projects.

Other Alterations

Operators of Colorado gaming properties, including Native American tribes and commercial companies such as Century Casinos, Full House Resorts, and Monarch Casino, have displayed enthusiasm for sports betting licenses. But Colorado politicians believe the originally proposed $125,000 per license fee with renewal every two years needs to be lowered.

Instead, gaming officials think that the most they could reasonably charge for a license fee would be $40,000, and possibly much less,” reports The Sun.

In addition, the Colorado Division of Gaming could require up to $10,000 for background checks, a $2,000 charge for a master license, and $1,200 for what the department calls “spots betting operator” and “internet sports betting operator” permits.

Under Prop DD, gaming companies will pay a 10 percent tax on net sports betting revenue. The net figure is derived after operators pay out to winners and account for federal levies.

When sports betting goes live in the Centennial State in May, gamblers there will be able to wager on college and professional contests, the Olympics, and even esports.