Casino relief bill passes Senate but prospects in House less certain

 

DOVER — On the same day Dover Downs announced it lost $273,000 in the first three months of 2018, the Senate passed legislation that would give financial aid to the state’s three casinos.

After passing the Senate 17-3, with one member abstaining, Senate Substitute 1 for Senate Bill 144 now goes to the House. Its chances over there are unknown, with House Speaker Pete Schwartzkopf, D-Rehoboth Beach, speaking out Thursday against both the bill itself and the way it was drafted.

The product of years of calls for help, the measure would slightly lower the tax rate on slots, eliminate the table game license fee and slash the table game tax rate. It is a modified version of a bill introduced in January, with the governor’s office working with the casinos to craft a proposal that is amenable to all parties.

“The simple fact is that the casino industry is very, very important for the local economy here in Kent,” main sponsor Sen. Brian Bushweller, D-Dover, said on the Senate floor. “Yet over the years our practice of increasing the state’s take … has put Dover Downs and the industry in a precarious situation.

“Senate Substitute 1 would reduce the state’s take to give the industry a fighting chance to once again run a healthy business, to maintain its employment levels as well as maintain its contributions to our local economy, not to mention to maintain its substantial contribution,s even after the decline of volume because of the competition from surrounding states, to our state’s General Fund.”

For the state, the measure would result in about $15 million less in revenue next fiscal year and $20 million thereafter, although almost half of that estimated $20 million is contingent on the casinos investing in capital projects.

In addition to lowering the slot tax level from 43.5 to 41.5 percent for Dover Downs and Delaware Park and from 42.5 to 40.5 percent for Harrington Raceway & Casino, the bill would decrease the table game rate from 29.4 to 15.5 percent and suspend the $3 million fee paid for the privilege of holding table games. The fee would effectively be eliminated permanently if the casinos invest a certain amount of money in marketing, wages or benefits.

Under the bill, the horsemen would receive an additional .3 percent in revenue the first year and .3 percent the next year. As a result, the standardbred racing industry’s take would top out at 11.35 percent, while those in thoroughbred racing, which takes place only at Delaware Park, would receive 9.6 percent.

When slots were added in 1994, the revenue-sharing formula was based on how much money the casinos brought in, taxing higher amounts at higher rates, much like income taxes. Over the years, that has changed, and the establishments now give 43.5 or 42.5 percent of gambling income (depending on the casino) to the state.

The original bill would have instituted the tiered structure once more, although that was taken out of the substitute.

Whether the bill passes the House is an open question. Rep. Schwartzkopf said after the vote he is willing to discuss reducing the table game rate and eliminating the license but is fundamentally opposed to the slot provision.

That’s not welcome news to Sen. Bushweller, who has been trying to provide the casinos with relief for about eight years. Lawmakers last offered assistance in 2014, when they passed a bill shifting some of the slot vendor fees to the state.

The measure’s passage comes with Sen. Bushweller set to retire this year, and colleagues praised him for pushing the issue over the years.

Sen. Bushweller has repeatedly cited the casinos’ impact on central Delaware’s economy as an argument for ensuring the establishments stay in business. In total, the three casinos employ about 4,500 people, and the horseracing industry supports another 2,200 jobs, according to Sen. Bushweller.

About 2,000 of those 4,500 casino workers are full-time, Mr. Geiseberger said.

After the vote, Dover Downs President and CEO Denis McGlynn applauded lawmakers.

“We didn’t get everything that I think we really need for the long run but I think we have enough to hold us for the foreseeable near future,” he said. “No telling what’s going to happen. We have more competition on the way, but as was described in there — I think fairly accurately — while the competition really has created the situation, the biggest driver of the situation we’re in now is the state’s share.”

Secretary of Finance Rick Geisenberger testified on the floor the measure “recognizes that we are partners with the casino and the horseracing industry and it’s important that there be fair treatment.”

Just three senators — two Republicans and one Democrat — voted against the bill. Minority Leader Gary Simpson, R-Milford, went not voting because of a potential conflict of interest.

Sen. Robert Marshall, D-Wilmington, was the main opponent Thursday, citing a desire to let the free market sort the situation out. Instead of directing revenue away from the state’s coffers to help the casinos, the General Assembly should do more for small businesses, he said.

“I’m just a little bit uncomfortable bailing out a profit-making, publicly traded corporation,” he said.

But he was in the minority, with lawmakers expressing a desire to “guarantee the sustainability of a fundamental economic driver,” as Sen. Bryan Townsend, D-Newark, put it.

The House may be a different story than the Senate, however.

“I’m still trying to make sense of what they’re talking about here,” Rep. Schwartzkopf told reporters a few hours after the vote. “But it’s going to cost our state $20 million, when we have a problem that might be a million dollars. I don’t understand that.”

Rep. Schwartzkopf was also unhappy with how the substitute was drafted, saying it was done without any input from the House and he was not aware the bill was filed until he read about it in the paper Thursday morning.

“I feel pretty out of it on this one, I’m telling you,” he said. “For being an equal part in this thing, we have been left out. … Not just the bill but the discussion that would help craft the bill.”

He pledged to give it a fair committee hearing but noted he will hold the measure until after May’s financial projections, currently set to be released May 21.

Failure would be a crushing blow to the casinos and their supporters.

“I think anybody who’s read our numbers for 2017 knows that this can’t go on much longer, so you can draw your own conclusions from that. I’m not one to make threats, I’m just presenting facts and the facts are we lost $1 million where our other two partners made $75 million,” Mr. McGlynn told reporters post-vote, referring to the $75 million paid to the state and horsemen last year. “We have to fix that, so that’s what’s at stake.”

Staff writer Matt Bittle can be reached at 741-8250 or mbittle@newszap.com. Follow @MatthewCBittle on Twitter.

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