Delaware budget woes sideline debate over casino relief

Matt Bittle
Posted 4/28/15

DOVER — For now, the casino issue has been put to the side while lawmakers try to develop a plan for Delaware’s failing infrastructure.

According to the Department of Transportation, $780 …

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Delaware budget woes sideline debate over casino relief


DOVER — For now, the casino issue has been put to the side while lawmakers try to develop a plan for Delaware’s failing infrastructure.

According to the Department of Transportation, $780 million worth of projects over a six-year period will not be completed if funding sources do not arise.

Due to faltering revenue sources and projections that seem to drop every month, it’s unlikely more money will come from existing sources, officials say.

That means new fees will have to be created or existing ones will have to be raised — at least in the short term to balance the budget.

With that discussion ongoing, a bill that would shift nearly $46 million in tax revenue annually from the state government back to the three casinos waits in limbo.

Senate Bill 30 already was facing some opposition when it was introduced in January. Now, with revenue expectations falling and legislators putting their focus on roads and bridges, the casinos will have to wait.

Casino executives and budget officials weighed in on the current situation when the Video Lottery Advisory Council met Tuesday for the first time since October.

According to those running Dover Downs, Delaware Park and Harrington Raceway, the situation is not good.

Gross gaming revenue totaled $403 million in 2014, a 6.6 percent decline from the year before.

Dover Downs, which is set to officially unveil its results from the first quarter of 2015 on Thursday, has seen shrinking revenues in 33 consecutive quarters, according to the casino’s chief executive officer and president, Ed Sutor. It lost $706,000 in 2014.

Senate Bill 30 would cut the table game tax rate from 29.4 percent to 15 percent and eliminate the $3 million license fee. It also would shift 1 percent of revenue from the state to the horsemen, have the state cover fully the casinos’ share of lottery costs and implement 5 percent marketing and 5 percent capital project credits.

Casino executives have said that only something that drastic would allow them to survive, thanks to stiff competition in neighboring states and the Delaware government’s high tax rate.

“We’re hopeful that something’s done this year because we need it, No. 1,” Mr. Sutor said. “No. 2, it’s been pushed off too many times, kicked down the road. So we’re hoping that this is the year that they give us a long-term solution.

“That’s what the industry needs. We don’t enjoy going back every year, and they certainly don’t enjoy seeing us come back every year.”

He wouldn’t speculate on how likely it is the bill passes, although he believes lawmakers are aware of the casinos’ plight.

Should that bill fail, Dover Downs likely would have to make serious changes.

“Everything’s on the table,” — even bankruptcy, Mr. Sutor said.

As of January, Dover Downs was $39 million in debt, with that money due by Sept. 30. The bank may take over the company, running the operations in a bare-bones fashion if relief does not arrive and that debt goes unpaid.

Lawmakers pushing for aid have made two main arguments: money and jobs. Dover Downs, the only public company of the three casinos in Delaware, contributed about $57 million to the state government and employed 1,400 people in 2014. The state cannot risk those losses, supporters have claimed.

Sen. Brian Bushweller, D-Dover, is the lead sponsor of the bill. Although not a member of the VLAC, he spoke in an interview, expressing a hope the proposal will be heard in committee once the transportation issues are hammered out.

The goal, both he and casino executives say, is to pass some form of relief before the legislature adjourns for six months at the end of June.

“I believe there is an increasingly widespread understanding in the General Assembly of the need to restructure the financial relationship between the state and casinos,” Sen. Bushweller said.

The administration views the casinos as partners and is willing to work to benefit them, Delaware Secretary of Finance Thomas Cook said. However, the infrastructure and budget discussions are in the forefront for now.

Caucus leaders have been discussing several proposals, including raising Division of Motor Vehicles fees, according to Sen. Bushweller.

A gasoline tax increase is also a possibility, he said. Gov. Jack Markell’s push for a 10-cent a gallon hike in the tax last year failed. However, some observers believe there seems to be more support for the tax hike this time around, at least partially due to the fact it’s not an election year.

Revenue predictions for fiscal year 2016 from the Delaware Economic and Financial Advisory Council have dropped $47 million since December, another obstacle standing between the casinos and relief.

Lawmakers hope to have both an infrastructure proposal and a firm handle on the budget when the Joint Finance Committee meets starting May 18 to finalize the nearly $4 billion budget.

In the meantime, Delaware officials are also examining regulations with the intent of streamlining some rules, a process taking place throughout departments.

Some statutory changes could serve to save the casinos some money and increase efficiency, Mr. Cook said.

The General Assembly is in session until June 30.


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