Doubling down: Casinos again await tax relief legislation, but the outcome is uncertain

DOVER — As lawmakers enter the final week of the 149th General Assembly, one of the biggest questions still remaining concerns Delaware’s casinos.

Senate Substitute 1 for Senate Bill 144 would slash the tax rate on table games, suspend the table game license fee and lower the tax rate on slots.

It’s been hailed by supporters as a necessary piece of legislation that would keep Delaware’s three casinos in business, avoiding the loss of thousands of jobs and more than $100 million in annual revenue.

But, while the bill passed by a large margin in the Senate in April, its chances in the General Assembly’s other chamber are less certain, owing in large part to opposition from the speaker of the House.

The measure would take $15 million from Delaware in the first year and $20 million annually thereafter, which some feel is just too large a hit to the state’s coffers.

Lawmakers welcomed the state champion Cape Henlopen High School field hockey, girls lacrosse and boys baseball teams to Legislative Hall Wednesday. Twitter photo/House Republican caucus

After the bill was approved by the Senate, Speaker Pete Schwartzkopf, D-Rehoboth Beach, unloaded on it, describing the measure as fiscally irresponsible.

“Our job is to provide services and to put a budget together and not guarantee people a certain amount of profit,” he said at the time. “So, what we’ve done right now is taking $20 million out of our budget when it could have been $5 million, or it could have been $6 million and the rest of that money could have stayed in our budget. The casinos have given us a lot of money over the years, but they’ve also made a lot of money over the years.”

He also believes the recent expansion of sports betting will prove to be a major boon for the casinos, something Dover Downs officials have disputed.

Rep. Schwartzkopf has introduced an amendment that would keep part of the bill, effectively halving the fiscal impact by eliminating the $3 million table game license fee split between Dover Downs, Delaware Park, and Harrington Raceway and Casino and lowering the 29.4 percent table game rate to 15.5 percent. Not included are the provisions related to slots.

“The bottom line is this: Right now, they don’t have anything,” Rep. Schwartzkopf said Thursday. “They want the $15 million, they have nothing, I’m offering them $10 million and a passing bill, and I’m also offering that if they don’t make the additional $5 million with the sports betting, then I’ll come back and rework a deal with them. I don’t know that I can do much more than that.”

But for at least one casino, the amendment is simply not an acceptable compromise.

House Speaker Pete Schwartzkopf, a Rehoboth Beach Democrat, met with students from Santa Fe, Texas, to discuss gun control Wednesday. Some of the students are survivors of mass shootings. Twitter photo/House Democratic caucus

Dover Downs, the only public casino among the state’s three establishments, paid out $75 million to the state and the horseracing industry last year but lost $1 million itself, which supporters see as indisputable proof taxes are simply too high.

“It doesn’t take a rocket scientist to figure out that the situation needs to be changed,” Dover Downs President and CEO Denis McGlynn said Friday, noting the casino eliminated 96 positions in 2015.

He’s shot down arguments sports betting will bring in a windfall, pointing out that going from parlay betting, which Delaware has offered since 2009, to single-game betting means the odds will shift to give gamblers a big advantage when considered collectively. The hold — what the casinos make on bets — is around 30 percent for parlays, while it is less than 5 percent for wagers on individual games.

“I don’t know what basis in fact the speaker might have for concluding what he’s concluded about sports betting,” Mr. McGlynn said. “Anybody who does even rudimentary research into that would come to understand what our industry understands about sports betting, and that is it’s a very, very small part of a casino’s business.”

Unfortunately for him, Rep. Schwartzkopf is confident his amendment has the votes to pass the House.

Mr. McGlynn and Rep. Schwartzkopf have not spoken about the proposed change, although the speaker said he talked to officials at Delaware Park and, as of Thursday, was waiting to hear back as to whether his amendment is palatable.

By voting for the amendment, lawmakers would be freeing up funds for other needs.

“The vote members of the House are going to have to take is a decision,” Rep. Schwartzkopf said. “Do you want to vote and tell the public you’re taking $20 million of money that could go to programs that we have like (a bill that would increase the rates paid to service providers for individuals with disabilities) or maybe the Correction Department, where they could maybe look at their pension a little bit, make it a little bit better so that we could attract more candidates for the job to keep them from working themselves to death, freezing them on double shifts?

“Probation and parole, they’re underpaid in comparison to other law enforcement agencies. So, they have to make a decision.

“Do they vote for $20 million and not have more money for these agencies and these causes or do you vote for $10 million and have more money to put in other areas? So, when you’re facing your constituents and you’re talking to your constituents and they say ‘Well, why did you pick 20 over 10?’ they’re going to have to explain that.”

While Rep. Schwartzkopf said he is willing to renegotiate a deal if the casinos fail to make $5 million combined in sports betting in the fiscal year starting July 1, Mr. McGlynn believes Dover Downs has been waiting too long for relief as it is.

Although he shied away from discussions about bankruptcy, he believes it’s clear change is needed.

Gov. John Carney, whose administration worked with supporters to craft Senate Substitute 1 for Senate Bill 144, sees the state, casinos and horsemen as partners and “looks forward to evaluating the various proposals the legislature considers,” a spokeswoman said in an email.

Other issues

Also pending this week are measures relating to firearms, legal marijuana and budget reform.

While bills banning bump stocks and allowing authorities to take guns from individuals believed to be mentally ill or dangerous have passed, proposals that would prohibit the sale of “assault-style” weapons, criminalize magazines that hold more than 17 rounds and raise the age to buy a rifle are sitting at various stages of the legislative process.

All three are controversial and have generated a very large outcry from opponents. Despite the General Assembly being controlled by the Democratic Party, the bills are not expected to pass.

Legislation that would legalize cannabis will likely be voted on in the House Wednesday. The main sponsor last week said she is “90 percent” sure it will pass and move on to the Senate.

The General Assembly may also vote on legislation that would impose new restrictions on the state’s budgeting process. Designed to prevent unsustainable budget growth, a constitutional amendment would reform the existing Budget Reserve Account into one that is filled with extra revenue in boom years and tapped in bust years.

It’s supported by the governor, Republicans and some Democrats, but opposition from other Democrats means passage may not happen this year.

The House will vote on the budget Tuesday after the Senate approved it last week. The General Assembly also may pass the capital improvement bill ahead of June 30, the last regularly scheduled day.

The Joint Finance Committee will meet Tuesday to consider funding for nonprofits through the grant-in-aid measure.

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