Operators seek tax, fee reductions
Delaware’s nine-member Lottery and Gaming Study Commission held its first meeting last week, searching ways to help the state’s three struggling racetrack casino properties.
The panel, made up of state officials headed by Finance Secretary Tom Cook, several state lawmakers and representatives of the casino operators, has until January 31 to formulate recommendations for the Delaware General Assembly on ways to make the casino industry more competitive in the face of increasing out-of-state competition in Maryland and Pennsylvania.
More than anything, the industry representatives on the panel are seeking a break on the revenue tax, which is an effective 60 percent on slots. Lawmakers raised the state share of gaming profit in 2009 in a budget-balancing effort.
Casinos are also asking that the table-game tax be reduced from the current 29.4 percent to 15 percent, and reducing the state’s share of online gaming revenues—currently a match for the brick-and-mortar profit—to a flat 25 percent.
Other recommendations being pondered include changing the revenue split between the state, casinos and the horse-racing industry; reducing vendor fees from gross revenues instead of the current model, under which casinos pay vendors from their share of profits; and restoring the revenue-sharing model for slots, which was abandoned during the 2009 budget-crunching, resulting in the removal of profitable revenue-sharing games such as IGT’s Wheel Of Fortune.
“For many years, the partnership between the lottery, the casinos and the horsemen was very lucrative,” said Delaware Governor Jack Markell in a statement issued as the panel met. “As a state we have come to rely on gaming revenue—about $200 million a year. I would like to see us reduce that reliance on gaming revenue and put the casinos in a position where they can be competitive and good partners.
“I’m looking forward to reviewing their recommendations about what can be improved to make this fair and sustainable for the state and give the casinos the best chance to be competitive.”
According to a report in Delaware’s News Journal, the first meeting of the panel, on January 6, did not produce agreement among commission members on any of the proposals. Several members are reportedly waiting for a report from the accounting firm KPMG on the state of Delaware’s gaming industry before reaching any decisions.
Cook told the newspaper he is pressuring KPMG to finish the report this week, so commission members can study it before the panel’s next meeting on January 21.
There is still much opposition to many of the proposals. Some lawmakers are still pushing to create more casino venues in the state, a prospect current operators say will force at least one current racino to close. Horsemen object to the proposed cut in their vendor fees, which would cost them $2.8 million annually.
Denis McGlynn, chief operating officer for Dover Downs Gaming, told the Delaware State News that the panel should view the proposals as more than simply tax reform, but as a way to help the partnership among state gaming interests survive in an increasingly competitive world.
“All the people that control our destiny at the state level understand that we are still the fourth largest revenue source for the state,” McGlynn said, “but if we can’t stay in business, it puts all those revenues to the state at risk.”
Delaware’s three racinos have seen revenues continue to drop over the past few years, despite the addition of table games, parlay sports wagering and, most recently, intrastate online gaming.