After Dover Downs Hotel & Casino, Delaware’s only publicly owned racino, reported a loss of 9,000 for the first quarter even though revenues were slightly higher than the same quarter last year, the CEO of its parent company blamed the onerous state taxes for the property’s lack of profitability.
“The gaming revenue share imbalance between the state and casinos in Delaware is the root cause of our lack of profitability,” Dover Downs Gaming & Entertainment CEO Denis McGlynn told investors in last week’s quarterly conference call. “This quarter, Dover Downs gave $22 million to the state, the horsemen and the slot machine vendors, yet we’re stuck with a net loss.”
Dover Downs has led the state’s three racinos in appealing to Delaware lawmakers over the past three years for breaks in taxes and fees to help them recover from the double whammy of the recession and strong new competition in neighboring Pennsylvania and Maryland. The state collects 43 percent of slot revenues and 29.4 percent of table-game revenues, and when combined with a share for horsemen and licensing fees, the effective revenue tax on Dover Downs, Delaware Park and Harrington Raceway is more than 60 percent.
For each of the past two years, the Lottery and Gaming Study Commission, a panel consisting of representatives of the casinos, lawmakers and the state government, has recommended a package of tax breaks and fee reductions to the state legislature that would save the casinos around $46 million a year. The relief would come by eliminating the $3 million annual table-game licensing fee, reducing the table-game tax to 15 percent and providing incentive tax rebates for money spent on capital improvements.
Both years, the state legislature rejected the panel’s recommendations, critics assailing the plan as a “bailout.” In 2014, the state’s lawmakers voted a $9.9 million consolation prize for the industry, transferring unused funds from another state agency to help cover equipment costs. Last year, the casinos got no help, a bill sponsored by state Senator Brian Bushweller to phase in the relief over two years dying in committee.
In January, Bushweller introduced another bill to implement the panel’s recommended relief, this time phasing in the changes over four years. It has yet to be taken up by the Senate Finance Committee, and according to a report in Delaware’s News Journal, Governor Jack Markell will not support the measure in its current form.
“Senate Bill 183 includes a number of ideas that warrant further discussion,” Markell spokesman Jonathan Dworkin told the newspaper. “Given the tightness in next year’s budget and the fiscal impact of this bill, the administration does not endorse SB 183 at this time, but we expect there will be continued conversations on the subject in the coming weeks.”
Bushweller told the News Journal he hopes Dover Downs’ quarterly report jump-starts his bill. “One thing (the earnings report) emphasizes is how important it is for the state to step up to the plate and help ensure that the thousands of jobs the casinos employ in Delaware are still there next year,” he said. “These results and conversations that have taken place in recent weeks suggest to me that this may be the year we get something done for the casino industry.”
