Commission proposal saves casinos $30 million

Proposal that lowers state's cut of revenue moves forward
March 20, 2014
Sen. Brian Pettyjohn, R-Georgetown, was one of seven members of the Lottery and Gaming Study Commission who voted in favor of moving forward a proposal that reduces the state's share of gambling revenues by $30 million over the next two years.

Ten months after being created to study the long-term viability of the casino industry in Delaware, the Lottery and Gaming Study Commission has submitted a proposal to the General Assembly that reduces the state's share of gambling revenues by $30 million over the next two years.

Sen. Brian Pettyjohn, R-Georgetown, sits on the commission and voted favorably for the proposal. He said it’s generally accepted that the casinos need help and used the goose that laid the golden egg analogy to describe the relationship between the casinos and the state.

“We’ve been choking the golden goose and we’re just trying to loosen the grip before it dies,” he said prior to meeting with the Georgetown Chamber of Commerce March 12.

The two-year proposal splits the share of slot machine vendor costs 75 percent between the state and casinos for the next two years. This measure would go into effect July 1 and cost the state nearly $10 million in fiscal year 2015.

Additionally, the proposal would cut the state's share of table game revenue nearly in half - 29.4 percent to 15 percent - by July 1, 2015, and eliminate the annual $3 million table games fee. This would cost the state an additional $10.2 million.

Accounting for $30 million of revenue in the state’s budget over the next two years won't be easy, but Pettyjohn said it can work as long as proper notice is given. He said the proposed $10 million for the upcoming fiscal year has already been figured in.

“It’s something we can stomach this year,” he said.

Alan Levin, Delaware Economic Development Office secretary, also sits on the commission, and was one of two votes against the proposal. He said he thought it was too rich and the state was not in a financial position to handle the revenue loss.

“The state can’t afford this at this time,” he said March 12. “We’re taking revenue that we don’t know we have. I’d much rather see us deal with this year and put money into the facilities using Delawareans.”

During the meeting, Levin offered a different approach that incentivized casino renovations with a $2.5 million credit and reduced the state’s internet gaming tax rate from 43.5 percent to 25 percent. Ultimately, the plan was disregarded, but it would have amounted to approximately $15 million.

Pettyjohn said the casinos had a business plan, and that plan didn’t account for the state taking more and more money. He added that it’s gotten to the point where if things don’t change, at some point, one or more of the casinos were going to go out of business.

“They’re looking for a sense of predictability,” he said.

Levin questioned whether the casinos are doing all they can to present themselves in the best light. There’s a lot of competition, and they can’t expect the state to bail them out, he said.

“Businesses succeed and businesses fail. The ones that can’t make it, can’t make it,” he said. “I have to worry about the state’s financial health before the casino industry’s.”

Pettyjohn said the casinos are still going to be paying their fair share of taxes, but unlike with other businesses the group was looking to decrease the share the state takes from above the line.

One thing both Pettyjohn and Levin agree on is the importance of the casino industry in Delaware.

In addition to the thousands of people they employ, there are other industries that work for and help support the casinos, said Pettyjohn.

“They’re not just a one-trick pony,” he said.

The next step in the process is having the proposal written up as legislation, then introduced and discussed by the General Assembly, which returns from a five-week break Tuesday, March 18.

“This is going to be a long debate,” said Levin. “There's going to be a lot of things that come up over the next couple of months, but we still have to make sure the state is secure.”