Beginning this summer, it will be more affordable for Federal Way gambling establishments to do business.
On June 15, the city council voted unanimously to lower the tax on pull tabs from 5 percent to 3 percent. The move was first considered in May when P.J. Pockets Casino, located at 1320 S. 324th St., closed due to a lagging economy and a hefty gambling tax on card rooms. The council, shortly after the closure, considered lowering both the card room and pull tab taxes.
The council unanimously voted June 1 to lower the card table rates, but at that time, could not agree on the percentage by which to decrease pull tab taxes. City council member Jeanne Burbidge hoped to see a 4 percent tax, while other council members wished to see a 3 percent tax.
The new tax rate was passed Tuesday as part of the city council’s consent agenda. There was no further discussion at the meeting about which rate is expected to best serve the city and business owners. The 3 percent rate applies to games, pull tabs and punchboards. As of Aug. 1, the 17 Federal Way establishments operating pull tabs and the like will begin paying the new rate.
“I think 3 percent is a fair tax,” said Time Out Ale House owner John Foley, who spoke with the city manager and staff about the issue in May.
The city anticipates the rate change will result in a total loss of $110,000 in tax revenues, based on information provided at a Finance, Economic Development and Regional Affairs council sub committee meeting in May. Each 1 percent reduction to the pull-tab tax results in a loss of roughly $55,000 to the city, finance director Tho Kraus said.
The loss will be on top of what the city anticipates due to the recently lowered card table tax. That tax was decreased from 20 percent to 10 percent earlier this month by process of a city council emergency ordinance. The council unanimously voted on the new tax rate, which went into effect June 6.
The city anticipates it will lose approximately $420,000 per year, based on 2009 revenues, from the drop in taxes leveraged from card rooms, Kraus said earlier this month. P.J. Pockets is the only gambling establishment offering a card room. Under the 20 percent tax model, it generates roughly $840,000 of the $1.1 million in gambling taxes collected by the city.
The casino’s management, prior to the tax rate amendment, had announced plans to close the casino. Co-owner Steve Griffiths has since said he will reopen P.J. Pockets and hire back at least 85 employees — the number the casino employed before it closed its doors in May.
