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A Poker Face While Budgeting

The Tiverton Town Council’s discussion about a possible $2.2 million shortfall in casino revenue revealed a lot about how some council members view taxes and the role of government.  To them protecting the town’s budget is the primary consideration, in that taxes should be set so as to safeguard the government from financial worries.

Another way to look at local government is that the residents should come first — that we should be the ones safeguarded.  If a downturn comes, the role of government is to fit itself into what we can afford.

The problem is this.  Under Rhode Island General Law 42-61.2-7(g)(2), the state guarantees Tiverton at least $3 million in gambling revenue from the Twin River casino.  The way the statute is written, we didn’t get the minimum payment the very first year, because the casino opened a few months into the fiscal year and was therefore not open “all of such state fiscal year.”  The law repeats “all of such state fiscal year” for every year after that, stressing that “if in any state fiscal year either video-lottery games or table games are no longer offered at a facility in the town of Tiverton… then the state shall not be obligated” to pay the minimum.

Before our state faced the unusual threat of a pandemic, that language seemed intended to ensure that, just like the first partial year, the town would not get the minimum payment for a partial year of gambling if the casino were ever shut down for good — if games “are no longer offered at the facility in the town of Tiverton.  Now, town officials are worried that the state will insist a couple months of COVID-19 closure means the games were not “offered” for the whole year and, they say, we’ve built the minimum payment into our budget.

A good case could made that both of these arguments are wrong.

Interpreting “all of such state fiscal year” to include even temporary closures would mean that any year the state experienced a snow day or hurricane shutdown, or even if the casino lost power for a while or had some other operational problem, the state could renege on its promise.  Nobody told Tiverton voters they were taking that much of a gamble when they approved the casino.  If that had been the intent, the law would have given some level of detail, whether to specify the number of days or the reason for the temporary closure, or even just to make it clear that such things were included.

These are the types of arguments that our town solicitor, Michael Marcello, should be making.  When it comes to granting the council president unprecedented power to change state law in Tiverton, he’s right there making the legal arguments his employers want.  This should be no different.  Of course, Town Council President Patricia Hilton may have made Marcello’s job more difficult when she signed her own executive orders unnecessarily repeating what the governor had already done, thus shutting down the casino under town law, too.

But again, this is an argument that the solicitor should be figuring out how to address.

The truly revealing statements, however, have to do with the idea that the town shouldn’t use casino revenue to cover its regular operations.  Unless the argument is that the town should only use the money for things it doesn’t actually need, this is government voodoo talk.  If we actually need the things we’re buying, then it doesn’t matter whether the gambling revenue goes toward capital or toward operations.  It all flows together, and we can stop capital payments just as easily if they’re paid out of a casino account or the general fund.

At the end of the day whether the additional revenue from the casino goes toward necessary capital or operations, it just offsets taxes.  What the big government folks like Hilton and John Edwards (the Fifth) are saying is that, because we didn’t tax ourselves more in the past, we might have to start taxing ourselves the same amount now.

My argument has always been that the town should leave money in the pockets of taxpayers until it is needed.  The government can take your money or take your property away whenever it has to come up with cash, so it doesn’t need to squirrel the funds away in its own accounts.

Of course, the Town Council is also hoping taxpayers won’t notice something huge that they’re slyly leaving out of the conversation.  As of last June, the town was sitting on $4.5 million (and that’s not even counting the extra $1.4 million on the schools’ books). This is money the town collected from taxpayers but did not spend, and it’s about $3 million more than the charter requires in minimum reserves.

If the problem is that we’re going to have a one-time shortfall in casino revenue, the money is right there.  If the purpose of reserves is not to cover one-time emergencies, what are they for?

That’s a question Hilton, Edwards, and the rest should answer.  If they think this money should be held for something more important than a pandemic and double-digit unemployment among the taxpayers, they must explain what it is. Otherwise, what they are really saying is that the priority is always to get more money for the government at the expense of the people.  Tax people more so the town government can sit on a big pile of money… that it won’t even use in an emergency.

This isn’t how government should operate.  Town government should be serving us, not the other way around.

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Justin Katz

Justin Katz is a writer and researcher focusing on Rhode Island policy and politics. For more about Justin, see our About page. justin@justinkatz.com (401) 835-7156.

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