Delaware: The state's Addiction to Gambling Revenues in a Saturated Market
Commission begins examination of casino gambling in Delaware
By James Dawson
July 23, 2013
State lawmakers are searching for solutions to help Delaware’s ailing casino industry through a new commission.
Legislators created the Lottery and Gaming Study Commission after awarding the state’s three racinos $8 million in emergency funds earlier this year.
In its first meeting, the Commission touched on issues including falling casino revenues in recent years and the state’s move to increase its share of those revenues during the economic recession.
Since fiscal year 2007, casino revenue from slots dropped from a record-high share of $300 million to $192 million in FY 2012.
Meanwhile, the state increased its share of gambling revenue by 7.5 percent in 2009 to help deal with an $800 million budget shortfall. But Sen. Brian Bushweller (D-Dover/Central Kent) points out those rates haven’t decreased like other emergency tax hikes enacted at the same time.
“The fact is that almost every one of them, we mitigated the negative effects of what we had done in 2009 in subsequent years,” said Bushweller.
“But we did not go back and address the increase of the net gaming revenue – the state share – up to 43.5 percent.”The committee also spend considerable time focusing on future agendas. Rep. Charles Potter (D-Wilmington North), who chairs the House Gaming Committee, wanted to discuss licensing more casinos in the state.
[When revenues decline: The SOLUTION? EXPAND!]
“I believe in an open market,” said Potter. “It’s like, are we going to stop Wawas from opening up in the State of Delaware or anybody else who wants to do business? And if somebody came in and said, ‘Well, I’ll bid a license out at $50 million and at zero cost to the state,’ we’re going to turn our head to that?”
Other commission members shot him down, saying it’s outside the scope of their mission. A bill creating two new casino licenses is stuck in Potter’s committee.
The commission begins its work as the state finalizes slot machine vendor rates for the next few years. Currently, casinos give six percent of their net proceeds to pay for the latest gaming machines.
State officials extended that contract an extra five years past its original terms. The latest figures will be unveiled August 1.
The effect of competition from neighboring states and state budget projections also remain factors in any discussion of changing the current structure of gambling in the First State.
Since Delaware’s last new casino opened in 1996, 13 casinos have popped up in Maryland, Pennsylvania and New York, with three more planning to debut in 2014 and 2016.
At the same time, a steep budget shortfall is predicted for fiscal year 2015. The latest estimates show the state having to fill a $140 million hole, while revenue has just slowly trickled in over the past few months.
There’s also the horse racing industry to consider – since it has been tied to Delaware’s casinos since the beginning. Revenue shares for the standard and thoroughbred horsemen dropped one percent in 2009 and remain at ten percent today.
The number of thoroughbred races dropped by 19 after their lobbying group made the request to state lawmakers, also citing competition from eastern U.S racetracks.
One of the arguments used to promote Predatory Gambling is to 'Save Horse Racing!' This is another example of the failure of that argument.
Finance Secretary Tom Cook chairs the commission and says, “It is a three-legged stool. It is the state, the casinos and the horsemen and it’s very important that the three of us can work together to make sure that we can keep this a viable revenue source in the state.”