The Kent City Council voted 4-2 on Tuesday night to reduce the city’s gambling tax rate on the Great American Casino from 11 percent to 7 percent on gross revenues.

Casino officials asked the city to reduce the tax in an effort to help reduce their losses of more than $1 million over the last two years at the Panther Lake facility. Great American is the only casino in Kent.

Councilmembers approved the reduction in part because city officials said the lost city tax revenue would be covered by the state Department of Revenue as part of the annual annexation sales tax rebate Kent receives to help cover the costs of annexing 24,000 Panther Lake residents in 2010.

“I’m very excited,” said Shannon Younker, Great American Casino general manager, during a phone interview Wednesday. “I would have been there (at the council meeting) but I heard it was going to be tabled. I missed my victory.”

Younker had requested a cut to 4 percent, to match the city of Auburn rate.

“I didn’t get 4 percent but I’m very happy they met us halfway at 7 percent,” said Younker about the tax cut that starts in July. “It really helps in relief of a tax that we have on top of other taxes.”

The casino paid a gambling tax of $338,000 in 2012 and $342,000 in 2011, John Hodgson, city chief administrative officer, told the council. The 4 percent reduction will cut the tax by about $120,000 per year. The new rate is effective until Dec. 31, 2016.

“They’re trying to remain competitive in a very competitive market between the surrounding cities and (Native American) nations,” said Councilman Les Thomas, who asked for the proposal to be placed on the agenda after Council President Dennis Higgins removed the item from a vote in April because of a lack of four votes needed for adoption. “We found out (from city staff) that we do receive the money but that amount is taken away in (annexation) mitigation fees so it’s like a wash whether it’s 1 percent or 7 percent.”

Kent receives about $3.7 million per year from the state in sales tax credits for annexing the Panther Lake area as part of a 10-year state program. The city certifies an amount each year of the difference between expenses in the annexation area and anticipated revenues from property taxes, sales taxes and other sources, including the gambling tax.

City officials projected $11.7 million in annexation area service costs for July 1, 2013 to June 30, 2014 and about $8 million in revenue to come up with the $3.7 million amount.

“We collect the money, it’s ours,” Hodgson said. “But because the area doesn’t generate enough money to cover the costs of operating, the state for 10 years gives us a certain amount of mitigation money. We’re going to get mitigated for the next seven years.”

Hodgson added that the state does have a cap on how much money the state gives to the city through the annexation program.

“I don’t know with the $120,000 (per year) we will reach that or not,” Hodgson said. “There is a cap on how much we get mitigated.”

Hodgson said the city already submitted mitigation requests to the state for the 2013-14 budget, so the city will see reduced gambling revenue (of about $120,000) for the final six months of this year and first six months of 2014 that the state won’t cover.

Thomas, Higgins, Jamie Perry and Dana Ralph voted for the gambling tax cut. Elizabeth Albertson and Bill Boyce were against the cut. Councilwoman Deborah Ranniger had an excused absence from the meeting.

“This tax reduction has no affect whatsoever on our bottom line,” Perry said. “All of the money we collect essentially gets taken out of what we collect from the state in annexation money. By us lowering this tax rate, there will be a zero dollar impact to our actual budget. For that reason, I support this.”

Albertson said she was against the tax cut because “I don’t think it’s fair to just single out one business for a tax break and a house-banked card room is not a city necessity like a denture clinic for low-income seniors that if we didn’t fund it bad things would happen in Kent.”

Boyce said he didn’t want to take any revenue off the table and he struggled with reasons why the city should help this one business in tough economic times while other businesses also struggle. He also voiced concerns about losing the $120,000 before the state mitigation money kicks in.

Higgins said it was important to help protect the 100 jobs at the casino, jobs that would be lost if the casino had to close or moved out of town.

The council wondered whether the casino pays the city’s new business and occupation (B&O) tax, and city staff thought it didn’t pay because of a gambling tax exemption. But Younker said the casino does pay a B&O tax. She also knew about the state mitigation money.

“The city will ask for that money from the state, so it will get the money anyway,” Younker said.

State officials said the city can change tax rates and still get the annexation sales tax funds.

Mike Gowrylow, spokesman for the state Department of Revenue, said the state “accepts the threshold figures that the city supplies and calculates the sales tax credit based on it. The RCW (Revised Code of Washington) does not prohibit the city from changing its tax rates on gambling or other activities, so that is a variable that can affect threshold calculations.”

Gowrylow said it is up to the city to follow the RCW governing the program. He added the annexation program speaks to “general revenue” but the law doesn’t define general revenue, and gambling tax revenue could be interpreted as falling under general revenue.