DOVER -- Gov. Jack Markell’s administration has no plans to endorse cutting gambling taxes this year, despite pleas from casino executives who complain of declining revenues and voracious competition in the region.
Secretary of Finance Tom Cook told executives today he would not commit to making any changes in the gambling taxes. He met with casino executives promoting a request by the Video Lottery Advisory Council to revisit the tax issue. The council wants the administration to consider instituting a tiered tax structure for slot machines and tablegames . Currently, the state keeps 43.5 percent of slots proceeds in Delaware and 29.4 percent of table games proceeds.
Dover Downs Hotel and Casino CEO Ed Sutor, who chairs the council, said the state’s three casinos can’t sustain profitability under the current tax structure.
An explosion of new casino construction over the last six years in neighboring Pennsylvania and Maryland has crippled the Delaware gambling industry, Sutor said.
“We’re in a very dire situation right now,” he said. “We’re losing money and it can’t go on.”
Since the first new regionally competitive casino opened in Chester, Pa., in 2007, Delaware slots revenues have fallen more than 31 percent, according to figures Sutor presented to the gambling council. Total take from slots, by far the largest component of total Delaware gambling revenues, has fallen almost 21 percent in the first three months of 2013 compared to 2012, Sutor reported.
Officials from all three Delaware casinos reported that they’ve cut staff and are using more part-time labor to keep benefits costs down. The companies have also reduced capital expenditures to the bare minimum and renegotiated terms with their lenders when possible.
“We’ve limited capital improvements we normally would have done and our property is starting to show wear,” said Patti Key, CEO of Harrington Raceway and Casino. “We’ve changed marketing plans and so forth, like everyone has, and it’s like banging your head against a wall.”
Cook said the administration has no appetite for lowering casino taxes, particularly since Markell just last week signed into law a package of bills that made permanent several 2009 personal and business tax hikes that were set to expire this year.
Cook also pointed to legislation enacted last year that gives casinos a break on their state licensing fees so long as they spend a certain amount of money each year on capital upgrades.
“We did provide the $7.75 million of relief last year, and we hope that will help,” he said.
That law also legalized online gambling via the websites of Delaware’s three casinos, expected to be up and running by Sept. 30. Cook pointed to that new venture, with which other states have yet to catch up, as an opportunity for a bump in casino profits.
Instead of focusing on tax rates, Cook encouraged the casinos to use their “limited resources” to offer better services than their regional competitors.
“It used to be just us and Atlantic City [N.J.] Now with these new sites all around us it’s about providing the best product,” Cook said. “They’ll drive that extra mile.”
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