Ever faithful Gambling Supporter, Scott Van Voorhis does an admirable job explaining the whining of Delaware Racinos that agreed to steep terms to gain table games, made bad business decisions and now need a bailout.
Delaware’s Racinos Lobby For Table Tax Relief
Scott Van Voorhis
Delaware’s racinos are now faced with having to launch a protracted lobbying campaign in a bid to win relief from crushingly high state fees on table games that they contend have turned a reliable profit maker into a money loser.
The state’s three racinos will now have to take their case to the state Legislature after it reconvenes early next year, with Gov. Jack Markell having rebuffed pleas to cut millions in hefty annual table game license fees.
Delaware’s three racinos, Dover Downs, Delaware Park and Harrington Raceway contend they are beset with a tax burden on table games that verges on the toxic - a $13.5m annual licensing fee on top of a nearly 30 percent tax rate, one of the highest on tables in the US.
As a result, barely six months after launching table games with much fanfare, Delaware’s racinos say they are now facing serious financial trouble.
Yet help could be long in coming, with Delaware racinos now caught in a quarrel with the Markell Administration after an unusually blunt rejection of their pleas by the governor.
“The politicians are saying ‘let’s go after the gambling tax, it’s a sin tax’,” said Frank Catania, president of New Jersey-based Catania Consulting Group.
“(But) you can’t keep a business open that is losing money,” Catania warned.
Dover Downs and Harrington say they are now losing money on a new offering that was supposed to bolster their bottom lines and put more money in state coffers as gambling competition mounts in neighboring Pennsylvania and Maryland.
The third, Delaware Park, has indicated its bottom line has also been dramatically squeezed.
Compounding matters, rising competition has already taken its toll on slot revenues, the mainstay of Delaware racinos. Slot revenue at Dover Downs has plunged by 18 percent since the recent opening of a competing slot complex in Maryland.
But the Markell Administration’s response has offered little encouragement to Delaware racinos as their losses mount, instead triggering an exchange of political fire between the two sides.
A spokesman for Markell, Brian Selander, told The News Journal that the racinos “knew there was competition coming from nearby states and they knew they would need to live with this agreement,” when they launched table games.
Meanwhile, with an array of social service programs facing devastating cuts, slashing millions in table fees is out of the question, the governor’s office maintains.
Selander could not be reached for comment by GamblingCompliance.
But Ed Sutor, chief executive of Dover Downs, challenged the remarks coming out of the Delaware governor’s office.
When racino executives and state officials were laying the regulatory groundwork for the launch of table games back in early 2009, there was a clear understanding that license fees were to be dropped based on certain market conditions occurring.
One of those was the entry of Pennsylvania into the table game market, which has since occurred. The discussions were recorded and captured in minutes of those meetings, Sutor contends.
“All through those meetings I was warning them that this was too high, this is too high, we are going to lose money,” Sutor said.
Meanwhile, the refusal to budge on the table games fees comes even as the Markell Administration insists that a $4m annual license levied on each racino for the right to offer sports betting also be kept in place, despite profitability issues with that new offering as well, Sutor noted.
A legal challenge by the National Football League severely limited Delaware’s once promising launch into sports betting, savaging revenue expectations.
“We are getting no mercy from this administration,” Sutor said.
Without support from the governor, Delaware racinos face the more difficult task of having to work around Markell and go directly to the Legislature.
With Delaware and other states now convulsed in 11th hour campaigning for the upcoming mid-term Congressional elections, there is little chance of getting anyone’s attention until January, when state lawmakers return to Wilmington for a new session, Sutor said.
But Delaware racinos will have a somewhat complicated case to make, explaining why table games have become a money loser when they appear to have bolstered casinos and racinos in other states.
Table games have helped keep Pennsylvania’s relatively new gambling industry growing since their launch last summer, and have also helped bolster bottom lines at West Virginia’s racinos.
Other states, including Maryland, New York, Maine and Rhode Island are considering or have considered adding table games in recent months.
Dover Downs’ Sutor contends the struggle table games are having in Delaware boils down to a dismal combination of extremely high state taxes and fees with a poor economy and rising competition.
The $13.5m annual license fee, combined with a 29.4 percent tax, chews up half the revenue table games generated at Dover Downs. Labor costs account for another 40 percent, with the racino having hired 400 new employees to staff its new array of games.
That leaves 10 percent to cover all other expenses, from complementary drinks, playing cards and dice to electricity and other utilities.
By comparison, Pennsylvania charged a one-time licensing fee of $15 million and an annual tax rate of 14 percent. Atlantic City has a straight gambling tax rate of 8.5 percent.
“It doesn’t come close to being a profitable situation,” Sutor said of Delaware’s table game taxes and fees.
Looking ahead, Sutor stopped short of threatening layoffs if the Legislature or Markell Administration won’t play ball and cut or suspend the $13.5m annual table game license fee.
But backed into a corner, Delaware racinos will have to look at their options.
One route would be to continue to take losses but also try to drive more business, a difficult task given the fierce competition for gambling dollars with Pennsylvania and now Maryland as well.
Another might be a hiring freeze that would let the payroll of table game workers drop through natural attrition as employees leave.
“Another alternative is to scale back,” Sutor said. “We just hired these folks. We don’t want to be like a yo-yo and say you are hired and now you are not. Maybe let attrition take place and let this thing take its natural course.”
Delaware’s Racinos Lobby For Table Tax Relief
Scott Van Voorhis
Delaware’s racinos are now faced with having to launch a protracted lobbying campaign in a bid to win relief from crushingly high state fees on table games that they contend have turned a reliable profit maker into a money loser.
The state’s three racinos will now have to take their case to the state Legislature after it reconvenes early next year, with Gov. Jack Markell having rebuffed pleas to cut millions in hefty annual table game license fees.
Delaware’s three racinos, Dover Downs, Delaware Park and Harrington Raceway contend they are beset with a tax burden on table games that verges on the toxic - a $13.5m annual licensing fee on top of a nearly 30 percent tax rate, one of the highest on tables in the US.
As a result, barely six months after launching table games with much fanfare, Delaware’s racinos say they are now facing serious financial trouble.
Yet help could be long in coming, with Delaware racinos now caught in a quarrel with the Markell Administration after an unusually blunt rejection of their pleas by the governor.
“The politicians are saying ‘let’s go after the gambling tax, it’s a sin tax’,” said Frank Catania, president of New Jersey-based Catania Consulting Group.
“(But) you can’t keep a business open that is losing money,” Catania warned.
Dover Downs and Harrington say they are now losing money on a new offering that was supposed to bolster their bottom lines and put more money in state coffers as gambling competition mounts in neighboring Pennsylvania and Maryland.
The third, Delaware Park, has indicated its bottom line has also been dramatically squeezed.
Compounding matters, rising competition has already taken its toll on slot revenues, the mainstay of Delaware racinos. Slot revenue at Dover Downs has plunged by 18 percent since the recent opening of a competing slot complex in Maryland.
But the Markell Administration’s response has offered little encouragement to Delaware racinos as their losses mount, instead triggering an exchange of political fire between the two sides.
A spokesman for Markell, Brian Selander, told The News Journal that the racinos “knew there was competition coming from nearby states and they knew they would need to live with this agreement,” when they launched table games.
Meanwhile, with an array of social service programs facing devastating cuts, slashing millions in table fees is out of the question, the governor’s office maintains.
Selander could not be reached for comment by GamblingCompliance.
But Ed Sutor, chief executive of Dover Downs, challenged the remarks coming out of the Delaware governor’s office.
When racino executives and state officials were laying the regulatory groundwork for the launch of table games back in early 2009, there was a clear understanding that license fees were to be dropped based on certain market conditions occurring.
One of those was the entry of Pennsylvania into the table game market, which has since occurred. The discussions were recorded and captured in minutes of those meetings, Sutor contends.
“All through those meetings I was warning them that this was too high, this is too high, we are going to lose money,” Sutor said.
Meanwhile, the refusal to budge on the table games fees comes even as the Markell Administration insists that a $4m annual license levied on each racino for the right to offer sports betting also be kept in place, despite profitability issues with that new offering as well, Sutor noted.
A legal challenge by the National Football League severely limited Delaware’s once promising launch into sports betting, savaging revenue expectations.
“We are getting no mercy from this administration,” Sutor said.
Without support from the governor, Delaware racinos face the more difficult task of having to work around Markell and go directly to the Legislature.
With Delaware and other states now convulsed in 11th hour campaigning for the upcoming mid-term Congressional elections, there is little chance of getting anyone’s attention until January, when state lawmakers return to Wilmington for a new session, Sutor said.
But Delaware racinos will have a somewhat complicated case to make, explaining why table games have become a money loser when they appear to have bolstered casinos and racinos in other states.
Table games have helped keep Pennsylvania’s relatively new gambling industry growing since their launch last summer, and have also helped bolster bottom lines at West Virginia’s racinos.
Other states, including Maryland, New York, Maine and Rhode Island are considering or have considered adding table games in recent months.
Dover Downs’ Sutor contends the struggle table games are having in Delaware boils down to a dismal combination of extremely high state taxes and fees with a poor economy and rising competition.
The $13.5m annual license fee, combined with a 29.4 percent tax, chews up half the revenue table games generated at Dover Downs. Labor costs account for another 40 percent, with the racino having hired 400 new employees to staff its new array of games.
That leaves 10 percent to cover all other expenses, from complementary drinks, playing cards and dice to electricity and other utilities.
By comparison, Pennsylvania charged a one-time licensing fee of $15 million and an annual tax rate of 14 percent. Atlantic City has a straight gambling tax rate of 8.5 percent.
“It doesn’t come close to being a profitable situation,” Sutor said of Delaware’s table game taxes and fees.
Looking ahead, Sutor stopped short of threatening layoffs if the Legislature or Markell Administration won’t play ball and cut or suspend the $13.5m annual table game license fee.
But backed into a corner, Delaware racinos will have to look at their options.
One route would be to continue to take losses but also try to drive more business, a difficult task given the fierce competition for gambling dollars with Pennsylvania and now Maryland as well.
Another might be a hiring freeze that would let the payroll of table game workers drop through natural attrition as employees leave.
“Another alternative is to scale back,” Sutor said. “We just hired these folks. We don’t want to be like a yo-yo and say you are hired and now you are not. Maybe let attrition take place and let this thing take its natural course.”
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