HELENA - Buffeted by the recession and later the indoor smoking ban in taverns and casinos, video gambling revenues in Montana dropped 2 percent in fiscal 2009 over the previous year and then plunged by 16 percent in fiscal 2010, the state Gambling Control Division reported.

The revenue fall from fiscal 2008 to 2009 marked the first decline in the 20-year history of the tax, the division said in its biennial report. The Gambling Control Division is part of the state Justice Department.

Video gambling machine tax collections for fiscal 2008 totaled $63.4 million. Tax collections from electronic poker and keno machines in fiscal 2009 dropped 2 percent from the previous year's total to $62.1 million.

Then in fiscal 2010, revenues dropped again, this time to $52.4 million, or 16 percent from the previous year, as the state's Indoor Clean Air Act took effect Oct. 1, 2009, for bars and casinos, four years after it applied to other businesses.

The state imposes a 15 percent tax on what's defined as the gross income from video gambling machines. It is applied to the income of the poker and keno machines, which is the amount of money played in the machine, minus the payouts in winnings. So if $100 is wagered on a video gambling machine and players won $30 dollars, the gross income for that day would be $70.

Neil Peterson, executive director of the Gaming Industry Association of Montana, which represents casinos, attributed the initial 2 percent drop to the start of the economic downturn.

Then came the smoking ban and the further reduction, he said.

He said the wood products, restaurants and a number of other businesses in Montana are suffering from the economic downturn.

"Essentially, we're back to 2004 revenue, so we've lost five years of growth in the gaming industry," Peterson said. "Unfortunately, we're saddled with 2011 costs."

Rick Ask, administrator of the state Gambling Control Division, said video gambling tax collection results from the latest quarter, October through December 2010, aren't due until Jan. 15. Tax receipts from the previous quarter were down from the previous three-month period.

"It kind of goes on in cycles," Ask said of the video gambling business. "You have one good week, and one bad. Next week, that's the worst week I've ever had."

He said the video gambling machine industry "had a perfect storm or confluence of problems that created this in the beginning of October 2009, with the smoking ban right in the middle of a recession, and we also had a lot of bad weather when people stay home."

Ask said he will be looking to see if some of the industry's old growth patterns recur when the economy improves.

Mark Staples, an attorney for the Montana Tavern Association, could not be reached for comment.

Here are the annual video gambling revenues by the most populous counties for the year ending June 30, 2010, in alphabetical order:

  • Cascade, $5.6 million.
  • Flathead, $4.6 million.
  • Gallatin, $2.9 million.
  • Lewis and Clark, $3.8 million.
  • Missoula, $5.3 million.
  • Silver Bow, $3.2 million.
  • Yellowstone, $10.2 million.

As for cities, Billings topped the list with video gambling tax revenues of $8.9 million for the same period, followed by Great Falls with $4.8 million, Missoula with $4.4 million, Helena with $2.97 million, Kalispell with $2.2 million and Bozeman with $1.7 million.

Missoulian State Bureau reporter Charles S. Johnson can be reached at (406) 447-4066 or at chuck.johnson@lee.net.

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