Zombie Casino Alert! Part III (or the New Legislative Session Episode)

Filed in National by on January 15, 2012

This morning’s NJ has a great piece of reporting from Chad Livengood and Doug Denison, detailing the current state of Delaware’s casino industry as well as the current positions a number of our politicians have staked out on how to best support this industry.

What is really useful about this piece is that it provides a good look at how competitive the gambling business now is as well as a look at the current state of revenues from gambling here:

Taxes and licensing fees collected from casinos and the state lottery are Delaware’s fourth-largest revenue source.

Slots revenues have fallen every year since the first new competitor — Harrah’s casino in Chester, Pa., — opened in 2007, according to data from the Video Lottery Advisory Council, a state panel made up of casino executives.

Since then, five new casinos have opened in Maryland and southeastern Pennsylvania.

At the end of the third quarter of 2011, slots revenues at Delaware casinos were down more than 13 percent compared with 2010.

Numbers from the Department of Finance show a 3.5 percent decline in lottery receipts through the first five months of the fiscal year.

And nor have table games or sports betting brought in the kind of revenue that were expected.

But this session is bringing a great deal of pressure from the casino owners for the state to do something to help them. That work started long before this session (we talked about it here and here) and the help that they seem to want most is a $10 million give back by the State on the amount of revenue it takes in the form of taxes and licensing fees. And apparently Governor Markell is giving them a good listen:

Markell, who is up for re-election this year, has totally dropped his previous push to add new casinos in New Castle and Sussex counties.

The Democratic governor’s tone has changed as after-tax revenues continue to slide at the state’s three existing casinos amid increasing competition from Maryland and Pennsylvania.

Asked last week whether he would support cutting casino tax rates or licensing fees, Markell deflected a reporter’s question, signaling a proposal is in the works.

Both Senator Patty Blevins and Representative Pete Schwartzkopf both oppose a change in tax or revenue formulas. Senator Blevins in particular understands that these casinos need to operate in the market the way that other businesses do — they need to learn how to compete or get out of the way. $10 million dollars of taxpayer money ($10 million dollars that will no longer be available for vital programs) won’t do ANYTHING to make these venues more competitive (as in bringing in more customers) — they will just make the red ink abit less (as in making owners and shareholders take less of a financial hit). With that in mind, there do seem to be some things the state can do to eliminate some regulatory barriers to competition, such as eliminating the restrictions on some types of comps or letting venues serve alcohol throughout the day.

Eliminating regulatory barriers to compete with the kinds of benefits other casinos offer is a very good start. But Delaware’s current casinos (especially the Dover and Harrington ones) suffer the most from competition from other venues in MD and PA. Why go to Dover when Arundel Mills or Parx is closer? It is important not to dismiss this question — it is about asking these casinos what will keep them alive, what will make them thrive in the face of more competition. It is also an important one for our government leaders too — because what an examination of this question should reveal is that making *these* three casinos more competitive is not the job of the government. It is the ob of the owners of those venues, who have been given alot of protection for this industry. Instead of dropping any push for new venues, I’d tell the casino industry that the state is interested in a thriving casino industry — not in protecting venues that are already on a glide path for downsizing. To that end, tell developers that the state will entertain more venues, in more competitive locales, and let the more competitive venues survive or fail. Without the State providing support to balance sheets that are clearly going to be seeing more red ink in the future.

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"You don't make progress by standing on the sidelines, whimpering and complaining. You make progress by implementing ideas." -Shirley Chisholm

Comments (4)

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  1. Jason330 says:

    Nice post, but I don’t get the math. How does allowing operators to pocket more of a profit help the state’s revenue situation? This is underpants gnome economics.

    1. Increase operators net profit
    2. ??????
    3. Revenues!!

  2. cassandra_m says:

    You are not supposed to get the math — unless you are an owner or shareholder, that is. They’ll be rending their garments about JOBS any minute now and anxiety is a sufficient deterrent to paying attention to the math. It is also a sufficient deterrent to avoiding paying attention to the fact that some of these casinos are going to have a hard time surviving in a market that provides more and more options to players every day.

  3. Truth Teller says:

    The lottery is run by the state so how did these gambling dens end up in the hands of private owners who are always crying poor mouth???

  4. bamboozer says:

    Rackets only work without competition, now theres plenty of competition and more coming every day. Gambling revenue is finite and likely to shrink, the monies just not there. Politicians, in denial like usual, act as if more casinos will boost revenue. They will not and will only divide the pie into smaller pieces. Table Games and Sports betting performed exactly as I expected, no real increase in revenue. Delaware needs to accept that yet another cash cow has been gored and that most of the revenue is not coming back. Hmmm… Reminds me of the tranfer tax.