With chips down, casino execs propose same relief plan as 2014

DOVER — A panel of casino executives plans to make the exact same recommendations to the state as last year for reforming the lottery system.

Dover Downs, Delaware’s largest casino, is in financial trouble, thanks to growing competition and state tax rates casino officials describe as too high. The state as a whole has seen declining slot revenue for 34 consecutive quarters.

Unlike Dover Downs, the state’s other two casinos are not public, but they have indicated they too are facing growing difficulties.

At a meeting of the Video Lottery Advisory Council Tuesday, industry executives discussed the current situation and put forth the same suggestions rejected by the General Assembly earlier this year.

The recommendations were presented to the Lottery and Gaming Study Commission last fall. The commission chose by a 5-4 vote to adopt a portion of them and present them to the Legislature in the form of a bill.

That bill would have implemented marketing and capital credits, shared the slot costs fully between the state and the casinos, reduced the table game tax rate, eliminated the table game license fee and shifted some of the revenue from the state to the horsemen. The annual cost to Delaware’s General Fund would have been about $46 million.

In a General Assembly seized by budget challenges and lawmakers struggling to free up a few million dollars, the legislation went nowhere.

Nonetheless, casino executives remain committed to their recommendations. In order of VLAC members’ preference, they are:

•Change the flat tax to a tiered structure, which was originally used when the state added casinos in 1994;

•Pay slot vendors fees entirely before splitting the revenue, as opposed to afterward;

•Remove the table game license fee and cut the tax rate from 29.4 percent to 15 percent, or eliminate the license cost and split operator costs among the state, casinos and horsemen;

•Adopt marketing and capital credits, each consisting of 5 percent of revenue.

Although it was given a one-year extension to Sept. 30, 2016, on its nearly $35 million debt, Dover Downs remains in need of help, executives say. The plans of two Maryland casinos to build luxury hotels aren’t helping, and increases in the city of Dover’s property tax rate and the statewide minimum wage also have lowered the money coming in, Dover Downs President and CEO Ed Sutor said.

Ed Sutor

Ed Sutor

“We’re down to the crumbs, folks,” Mr. Sutor said.

Going forward, there does not seem to be a whole lot to look forward to, either. While Mr. Sutor shied away from referencing bankruptcy when asked if that was an option, he did note “any business has that as the ultimate,” and pressure from the bank and shareholders remains.

The casino remains unable to do large capital improvements, and it had cut 72 positions this year as of July 30.

The VLAC will meet again toward the end of next month and submit its report to finance Secretary Tom Cook on Nov. 5. What ultimately happens to the plan is up to the Legislature. Some lawmakers, both Democrats and Republicans, have stated their support for reforming the revenue-sharing model, but there remains significant opposition.

The upcoming fiscal year also is expected to be tighter than this year, making it on the surface more unlikely lawmakers would approve any sort of plan that takes badly needed money away from the state’s coffers.

Casino executives continue to push for aid as they operate their businesses, keeping a close eye on costs and saving money any way they can.

“We’re going to do everything we do to survive,” Mr. Sutor said.

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