Budget shortfall threatens tax breaks
Two weeks ago, a special panel of Delaware lawmakers and government officials delivered a report to the state General Assembly recommending more than $30 million over the next two years in breaks on revenue taxes and licensing fees for Delaware’s three struggling racinos.
Now, reaction from some members of the General Assembly are throwing the plan into doubt.
The Delaware Lottery and Gaming Study Commission, a nine-member panel chaired by state Finance Secretary Tom Cook and including a bipartisan group of lawmakers and government officials, recommended a drop in the table game tax from 29.4 percent to 15 percent, elimination of the $3 million annual table game licensing fee, and a state takeover of 75 percent of vendor fees associated with buying and servicing slot machines as remedies that would save the casinos more than $30 million over two years.
The racinos—Delaware Park, Dover Downs and Harrington Raceway—had wanted more to ease the losses they have suffered as a result of new competition in Maryland, and to a lesser extent, Pennsylvania. They had asked the panel to recommend a drop in the slot revenue tax, which was raised from 36 percent to 43.5 percent in 2009.
But in an example of timing that perhaps couldn’t be worse for the state’s gaming industry, the panel that sets the state’s official financial projections last week lowered Delaware’s overall revenue expectations for the current year by nearly $108 million.
The Delaware Economic and Financial Advisory Council, whose projections are used to formulate state budgets, predicted a decline for this year not only in gaming revenue, but in corporate income taxes, which the panel says could drop by $70 million. The council projects a budget deficit of $40 million for the current fiscal year.
With the new predicted crunch to the state’s budget, few lawmakers are in the mood to give the casinos a break.
“We could not afford it before the estimate of a $40 million shortfall. We definitely can’t afford it now,” said Rep. Dennis E. Williams in an interview with Delaware’s NPR News station. “It’s not good public policy in the first place to be bailing out failing businesses.”
Williams went on to say the casinos have not presented any reports saying how the savings would be applied to their businesses. “We’re not seeing any detail to show that this money is actually going to save jobs or create jobs,” he said. “Is this just going to go to (shareholder) dividends? Is this just going to go to executive compensation and bonuses for the managers?”
Casino representatives say they need the tax and fee breaks and more to stem losses from outside competition and to recruit new staff.
Williams and others are not convinced. “I’m sure most of the constituents in most of the state will be saying, ‘No bailout.’ We heard that last year after the budget passed. People were upset then and I’m sure they’re going to continue to be upset,” he said.
The House Gaming Committee got a full report from the gaming panel last week, but no bill has yet been drafted based on any of the recommendations.
