One of the top executives in the Delaware casino industry used an op-ed piece in the News-Journal newspaper last week to urge lawmakers to pass SB 30, a bill in the state Senate that would lower fees and taxes that he says are strangling the industry in the face of increasing competition.
Bill Fasy, president of the Delaware Park racino, noted in the piece that Delaware’s racinos pay some of the highest taxes and fees in the nation, keeping only 41 cents of every dollar after the state’s 43.5 percent revenue tax, plus cuts of 10.75 percent of revenues for the racing industry and 9 percent for vendors are taken out.
That was fine, Fasy wrote, when Delaware’s racinos enjoyed a virtual monopoly, with the closest casinos in Atlantic City and no competition in Pennsylvania or Maryland. The casinos are now suffocating under competition from those two states, Fasy said.
“Today, our casinos are surrounded by more than two dozen competitors located within a fairly short distance, with more on the horizon,” Fasy wrote. “This intense new competition has radically changed the regional casino market. New Jersey learned that the hard way. Despite its relatively low gaming tax rate of 9 percent, Atlantic City recently closed four casinos and is struggling to keep its remaining eight casinos operational.
“While Delaware casinos should be able to hold their own, state gaming-tax policy and the annual license fee levied during the ‘Great Recession’ on the casinos is making it nearly impossible to maintain operations in this new, hyper-competitive market.”
Fasy pointed out that state taxes on Delaware’s racinos have been raised seven times, including the 2009 hike that was intended as a temporary measure to solve a budget crisis, but was never rescinded.
“As a result of falling revenue and high state-gaming taxes and license fees, just when Delaware casinos should be increasing marketing to retain the loyalty of slot and table game customers, they instead must use those dollars to make payroll and pay other operating costs,” Fasy wrote. “Capital budgets for site improvements have been slashed, and new projects that would increase the desirability of Delaware casinos have been shelved because they are not financeable.
SB 30, also known as the Casino Reinvestment Act, would cut the revenue tax on table games—currently an industry-high 29.5 percent—to 15 percent, which is competitive with nearby markets. The annual $3 million table-game licensing fee would be eliminated. It also would provide gaming-tax credits to casinos for marketing and capital investments.
The changes have been recommended twice by the Lottery and Gaming Study Commission, a blue-ribbon panel of state officials and lawmakers that studied ways to prop up the sagging industry. State senators, however, have commented publicly that the Senate bill is not a priority, and it has been shelved in committee because of an immediate budget crunch.
Lawmakers say the state cannot afford the measures. Fasy and other industry executives have suggested amending the bill to implement the changes in phases over time.
“Despite the importance SB 30 to the State’s future, it is currently stalled in the state legislature for reasons that don’t make sense for the state or Delawareans,” Fasy wrote. “Amending the bill as suggested by the casino industry easily resolves most of the arguments against SB 30.
“SB 30 gives the casino industry a fighting chance and provides the long-term solutions the state legislature has sought for years. But, with each day of delay, casino customers are slipping away, perhaps never to bring their tax dollars back to Delaware.
“Now is the time to act for our future and protect our tax revenues. Under the state’s current fiscal circumstances, the Casino Reinvestment Act, SB 30 as recommended with an amendment, is a logical compromise solution for Delaware’s overall financial benefit.”