Zombie Casinos, Replicating
Delaware State News reports today that there is a plan percolating in the GA to *add* three more casinos to the mix as a way to address the state’s declining revenues from the current three. Read that again — 3 casinos that are suffering from a declining market share will have 3 more casinos in state to steal their market share PLUS lose their share of out-of-state players.
One current version would have the state sell three more casino licenses with a minimum bid of $10 million per, doubling the number of casinos in the state.
Though still being formulated with no specific timetable, the idea serves as a sharp contrast to the one put forth in a Senate bill that would, critics claim, simply bail out the existing establishments.
Darrell Baker, who runs a law office in Delaware, is working with legislators to draft the plan. He also represents clients hoping to start a casino and so has a vested interest in opening up the market.
Mr. Baker has spoken at several meetings of the Lottery and Gaming Study Commission, criticizing officials for letting the existing casinos act as a monopoly.
In an interview, he rejected claims the decline of Dover Downs, Delaware Park and Harrington is due largely to market saturation.“They have sucked the money out of those properties for so long, and they overleveraged them and now they have the unmitigated gall to come and ask for a bailout,” he said of ownership. “Why doesn’t every other business in the state do that? They want a monopoly and a tax break.”
Mr. Baker declined to name his clients or any of the lawmakers behind the plan, but Rep. Charles Potter, D-Wilmington, has been perhaps the loudest proponent in the General Assembly of opening up the market.
Do you know what you need to about this plan now? Seriously, if there was a market still untapped for gambling in Delaware, Baker’s clients should be able to produce market research to demonstrate that. My guess, though, is that the market research would show you that the clients would just shift (after an initial novelty bump), accelerating the problems for the current crop of casinos and adding three more that won’t be able to hold on for very long. But they’ll have the GA bailing them out because that is what the GA does. Several years ago a study group did recommend more casinos (at the beach and in the Wilmington area), but that was before Maryland and PA expanded their offerings so successfully. Those expansions ate into the client base for Delaware’s casinos — because why go to Dover when Maryland Live, Horseshoe Casino in Balto, and the Philly area casinos are so much closer to where those clients live? The window to genuinely compete here is pretty much closed unless there is a developer that is going to build something worth traveling for. And who sees that happening?
I wish these folks were working as hard on expanding the port and its client base as it is on expanding a dying business in this state.
Tags: casinos, Delaware casino expansion, Featured
The “dying industry” had sales of more than $635 million in Delaware in 2013, the last year I could find.
People keep confusing “less profitable than previously” with “dying.” It is not dying, it’s just not growing anymore. The shrinkage is not in the total wagered, it’s in the growing number of outlets vying for the stable number of gambling dollars.
As for your notion that we would bail out six casinos instead of three, I’m missing something — isn’t this being floated as an alternative to bailouts?
The existing casinos get what they want because their oligarchy has brought them considerable political power. Adding casinos would more likely dilute, not concentrate, that power.
Clearly there is not untapped market, so we are talking about shifting players around. While I agree with Geezer it would be harder for the 6 casinos to cry for bailouts, I don’t think they would ever stop crying for bailouts.
wouldn’t we be looking at doubling the number of casino-funded lobbyists? And tell Revel that this isn’t a dying industry.
Can we pull a Christie and get New Jersey taxpayers to underwrite this expansion?
The only way that you can characterize this as a non-dying industry here is to demonstrate is that there is untapped marketshare that can support this kind of expansion. Otherwise, you are still talking about an industry that still might be raking in impressive amounts of money now (while still asking for bailouts), but certainly is threatening the profitability of at least a couple of its owners — mainly because the marketshare they had is now staying closer to home.
Asking for bailouts is built into the business plan for these casinos. If three more are opened, they will raid customers from existing casinos. Meaning that for the short term, the existing casinos will certainly be looking for taxpayer “partnership” to ease their shareholders’ pocketbooks.
I think everyone knows you double down on a 3 Jason
Just to be clear, I don’t support the casinos. But the “bailouts” we’re talking about are actually tax-rate rollbacks, meaning the government takes less of that pot of cash, not that money actually goes from taxpayers to the government.
So casinos would have to fight for market share — so what? Supermarkets fight for market share, as do retail operations of every type. Why should casinos be different?
I’m not arguing that casinos should not fight for marketshare.
I am arguing that their marketshare is clearly shrinking, and they missed their best opportunity to get ahead of that. Given how dependent these casinos were on customers from MD and PA in particular, they *still* have a tough row to convince folks to come to Dover and Harrington. They are agitating for their bailouts precisely because their marketshare is shrinking, and there is little chance at this point that they’ll ever increase that, even with new casinos in the state.
Though Dover Downs has done the most whining, the real weak link in the three-casino set-up is Harrington. It was well-located when Maryland had no slots, but it’s a millstone around the state’s neck now. Lawmakers’ pathetic fealty to the State Fair (many of them hold stock in it) makes it sacrosanct, but almost anywhere else in the state would be a better location for a third casino.
Under a competitive system with added casinos, it wouldn’t last a year.
Let’s not forget the three properties have consistently contributed more than $200 million annually to the state, I would hardly consider that “dying.” The casinos need help because they retain just 38% of revenues. How would you like to have your business taxed at a 62% effective rate?
The suggestion of adding more casinos is laughable as the article rightly suggests.
Rocketman – that is the tax rate only on the revenue from gaming. All the rest of the revenue (hotel, restaurants, banquet halls, etc.) are taxed like every other business. And the casino’s knew what their take was going to be when they got in this business.
liberalgeek: You are incorrect. The tax rate has been raised SEVEN times since inception. They knew what their INITIAL rate was.
The racetracks were failing businesses that were granted, for nothing, licenses that made them billions. If the state shut them down tomorrow — and it could, you know, just as easily as it legalized them — they would still be far ahead on balance.
Granted, the state’s take will have to be dialed back in an age of competition. But there is no reason — none — for the state to protect the existing operations vs. any others. They are no different from any other retail business operation: The state should not restrict competition without clear benefit from doing so.
This bill won’t pass, but the crass appeal is obvious: Making new players pay for a license to get in the game is free, up-front money. Sleazy behavior if it goes through, but then gambling is a sleazy business, isn’t it?
Racetracks have learned the lessons of the banking industry. Socialize the losses and privatize the profits. If more casinos meant that ALL casinos would lose their protected profits, I’d be for it. I doubt it means that. Instead, this expansion is no doubt is about getting more millionaires under the state’s umbrella of protection.
Build more casinos? Great! But require them to have live music ’cause same old, same old gambling peaked years ago and something’s got to get people in the door. As a musician I’ve worked in a half a dozen casinos in three states and watched them all take an ever downward spiral, and it’s not going to end. Just like their closing casinos in A.C. at some point we’ll be closing them here, the GA or not.
More Casinos would be a joke and a burden on the taxpayer. Why fund a business that is failing & beyond it’s time. DE missed the boat on casinos. is this all this Administration is betting on? (No pun intended). Let private industry build businesses, not the Government, it only fails or costs us too much!
Moron alert! Moron alert!
Any new casinos would be private businesses, Einstein. And, as noted extensively above, casinos remain profitable for people who know what they’re doing.
Geezer: apparently it’s not working because they needed a BAILOUT. I wont lower myself to call names.