Estimate of Proposition DD revenues in fiscal 2020-21 = $1.5 – $1.7 million #COWaterPlan

Colorado Water Plan website screen shot November 1, 2013

From The Colorado Sun (Jesse Paul):

When Colorado voters OK’d Proposition DD last month, they were told sports betting would deliver millions in tax revenue toward solving the state’s water problems.

But a new analysis from the Polis administration shows that likely won’t happen in the first full year of wagering.

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. That amount isn’t enough to reach the threshold under which funds would be transferred to water projects.

The projection is wildly different from what state lawmakers anticipated when they put the measure on the November ballot. In fact, it’s about the same amount the Colorado General Assembly’s fiscal analysts projected would be generated in the first two months of sports betting.

The annual revenue expectation also is far less than the $16 million in tax revenue that legislative analysts forecast would be collected each year for the first five years of sports betting in Colorado. The state is authorized to collect up to $29 million in sports betting tax revenue annually under the Taxpayer’s Bill of Rights…

The Division of Gaming’s estimates were presented Thursday to the Joint Budget Committee as it prepared to draft the $30 billion-plus spending plan for the coming fiscal year. And members of the panel expressed concern…

It’s likely that enough tax revenue will be generated in future years to go toward the water plan, but how much water managers can expect appears lower overall given the latest projections by the gaming division. Proponents of sports betting are bullish that tax revenue figures will rise once the industry matures in Colorado, though they admit initial estimates were likely too high.

A spokeswoman for the Department of Revenue, which oversees the Division of Gaming, noted “that all of these numbers are still projections.” She added that the department has been consistently conservative in its assumptions about sports betting revenue when speaking with lawmakers and legislative analysts…

One reason revenue projections are lower: The gaming division doesn’t believe the state’s casinos, which will operate sports betting, will be willing to pay the $125,000 per license — which would have to be renewed every two years — to offer wagering as originally projected. Instead, gaming officials think that the most they could reasonably charge for a license fee would be $40,000 and possibly much less, according to a memo presented to the JBC on Thursday.

Because the cost to implement sports betting is expected to exceed the tax revenue generated in the first months, it could actually end up costing taxpayers money.

If that deficit were to happen, the Joint Budget Committee would likely ask the Department of Revenue to dig into its pockets to cover the difference. The funds could, however, ultimately have to come out of the legislature’s discretionary fund, which goes toward paying for things like transportation and education…

The division’s revenue estimates came after the agency gathered 75 people representing gambling companies and operators from around the world to help create its rules around sports betting. The agency also visited other states where sports betting has been legalized, like New Jersey, to better understand how to implement the wagering in Colorado and what to expect.

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