WDEL Blog: Allan Loudell

Bailing out Delaware's three casinos: Coddling them?

Facing increased competition and still a tough economic climate, Delaware's three casinos have been pleading for a tax break. The Markell Administration - facing revenue constraints of its own - has resisted.

Then, the Governor came up with something right out of the blue, at about the same time that a fierce thunderstorm tore into New Castle County right out of the blue Monday.

Governor Markell proposes using $8 million derived from an additional $21.3 million in additional personal income tax collections to rescue the three struggling casinos. This injection of state money could offset anticipated hikes in the three casinos' vendor costs.

And already, the guy who usually serves as the spokesman for the three casinos - Ed Sutor - while grateful for the $8 million infusion, says that may not be enough.

Frankly, I fail to see the difference between tax relief for the three casinos and what the Markell Administration proposes. Just seems like a creative way of standing firm on resisting tax cuts, yet infusing the casinos with taxpayers' dollars to avoid threatened lay-offs.

Will it be chasing good money after bad? For years, Delaware lawmakers have seemingly coddled Delaware's three casinos, protecting them from any further competition within Delaware. Lawmakers have shot-down proposals to open up Wilmington or Delaware beach areas to casinos.

Of course, Delaware lawmakers are powerless to block new casinos in neighboring states, and the competition from brand new more elaborate casinos elsewhere may test the loyalties of longtime patrons.

If you have patronized one or more Delaware casinos - or gone elsewhere - what do you think? Are Delaware's three casinos simply past their prime?

I have no frame of reference. I find casinos - and gambling generally - utterly boring, fairly pointless, and akin to flushing money down a toilet. I realize, of course, that casino aficionados get an adrenalin high just before finding out whether they've lost -- or won something. I realize, for some people who don't go overboard, it's pure recreational entertainment.

A final point (which our upstate late-morning talk host, Al Mascitti, keeps making): Are the casinos REALLY on the ropes, or is it just that their profit-margins are leaner? Show the public the books!

Posted at 7:48am on June 18, 2013 by Allan Loudell

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Comments on this post:

Mike from Delaware
Tue, Jun 18, 2013 8:10am
My question would be: If other companies are having problems and getting ready to lay-off people, would the State of Delaware jump in to help? Probably not, so why should the state bail out the three race tracks? As it is, the state has casinos at each race track to help them financially [at least that was what we were told when the proposal for the first casino was announced years ago].

So maybe the answer is for the race-track portion of the casino property to close down as that part is the least profitable and hasn't been so for many years. If that isn't enough, then maybe the casinos will have to cut back on help in the casino part, but close down the race-track side which should cut their expenses considerably.

Maybe Delaware Park could do more like Dover Downs did and offer stuff that would bring non-gamblers to their place, like top-name entertainment [this would be a great not-in-Downtown location for such a venue - free parking, far fewer muggers - heh heh]. Time for those three entrepreneurs to think outside of the box.

That was a long answer to say to Gov. Markell: NO !!! Do not pony up taxpayers' dollars or offer more tax breaks to keep a failing industry such as horse racing going.

Tue, Jun 18, 2013 8:53am
And to think this all comes just days after the governor asked for tax increases from us. e can tell where his priorities are.

Tue, Jun 18, 2013 9:18am
If they can't compete, it's their own incompetence. Dover Downs at least has the races' Delaware Park has the golf course and the minimal horse racing, but what the hell does Harrington offer? Sounds like it's time for the casinos to start scaling back. Or go out of business.

Tue, Jun 18, 2013 9:51am
My what a short memory everybody has! When the slot machine proposal first was adopted in 1994, the entire premise was to supply a new stream of revenue to supplement the purses of Delaware horsemen at the three casinos. It was not meant as a new revenue stream for the state budget. It was not meant to augment the budget of the big three casinos. It was to supplement the horsemen's purses, plain and simple.

1994 was not that long ago. It's a shame we have such short-term memory loss.

Allan Loudell
Tue, Jun 18, 2013 10:18am
Don't forget the Delaware idiosyncrasy.

They're officially video lottery terminals (VLTs), and the State of Delaware owns them!

Tue, Jun 18, 2013 10:25am
Teatime, 19 years ago is not short-term memory loss. Few remember small points from that long ago. And the casinos are there for state revenue. Period. If it helps the horse owners, that is just a nice extra.

Mike from Delaware
Tue, Jun 18, 2013 10:31am
The state didn't make a secret of the fact that the state too was getting its "cut off the top" back then.

The bigger point though is it's time for those businesses to operate like a business. When my company has tough times, it cuts back, usually meaning laying-off people [today referred to as downsizing, rightsizing, etc.]. That is how business works.

I do not go to any casino, and don't have an issue with others going, BUT I definitely do not want mine, or your tax dollars being wasted on such an enterprise. Keeping horse racing going in Delaware apparently is not doable any longer.

The public prefers to gamble in other ways now [Remember when horse racing was the ONLY Legal option other than the illegal bookmaker?]. So as the world changes, develops, etc., etc., then business models must change to stay current.

The Victor Talking Machine Company [today's RCA Victor] no longer makes Victrola's, because besides a handful of folks like me who like history, and old music, etc., no one even knows what a Victrola is, but more to the point, there is no demand for such a device. RCA didn't ask the government to give the company a tax-break so it could continue to make its antiquated product that no one uses, as better devices replaced the Victrola many years ago in the early part of the 20th Century. (The Victor Talking Machine Company didn't go into business until 1901, but the phonograph with the horn [acustistic] recording & playback was developed in the 19th century. Sony Music owns today's RCA Victor.) Same with horse racing in Delaware; it is what it is. So in one sense, all the legalized gambling options are part of what killed-off the horse racing industry. In the business world, that's called competition.

Tue, Jun 18, 2013 11:25am
This gets the hutzpuh award.

The casinos intentionally shot themselves in the foot and now want Delaware taxpayers to pay for it.

They aggressively lobbied neighboring states to allow gambling - as was their right. They should have spent that time/money protecting their regional monopoly - as was the far smarter move. Now every border state permits gambling - in part due to the efforts of Delaware's casino operators. Is it any wonder that gambling revenues in Delaware are down?

Now those casino operators are complaining about lower revenues and a tax burden that is out-of-whack with the present economics of Delaware's gambling industry. Really!!! They put themselves into this position - a position that was easily foreseeable. Bottom line: They took a gamble and completely failed to appreciate what a loss would look like. Talk about irony.

No bailout. There are simply too many critical, essential, human needs in this state for Delaware taxpayers to bail out this crowd. Get the money from your stockholder and/or investors, or can the officers/directors, but don't ask for a taxpayer bailout. This is capitalism - begging for taxpayers' dollars is not the answer, never was, and never will be.

Finally, absolutely shocked that the Governor would support this. I thought he was way too smart as a businessman, and way too astute as a politician, to kowtow to the threats and begging of an industry that's perceived by many as morally repugnant. This quickie will come back to bite him in a bad place at a bad time.

Allan Loudell
Tue, Jun 18, 2013 1:04pm

A great analysis.

I would only suggest, however, that the operators of Delaware's three casinos/racinos are not equally guilty in having lobbied neighboring states to allow gambling, and cannibalize Delaware's three establishments.

The Rickman family (Delaware Park), by far, was most responsible; the owners of Harrington, the least.

Allan Loudell

Tue, Jun 18, 2013 1:22pm

Wrong you are JimH. The casinos were created ONLY to supplement the horsemen's purposes. At least that was the premise of the original bill allowing slot machines. It is a major point and is like a breach of contract to go against the original premise of the legislation.

Tue, Jun 18, 2013 1:30pm
One little note I want to add. Gambling has long been illegal in our state. But at Super Bowl time and March Madness, most bars would have pools and other contests where money was exchanged, of course. This has gone on for years. This year, all of that changed. The state made it quite clear that it would not turn a blind eye to these activities. The establishment would be fined and lose its license if it allowed any form of gambling on the games. Now that the state is in the gambling business for sporting events, the state will allow no competition. The state-sanctioned casinos are not willing to change their business models, but the casinos have police to wipe out their competitors. Delaware has learned lessons from the Mafia.

Mike from Delaware
Tue, Jun 18, 2013 3:35pm
JimH: Interesting point.

So maybe when we next see our "Don Corleone" Governor he'll be wearing a pin-striped suit, fedora, and packing some heat. I believe he already rides around in a black limo. I wonder if he'll take on those "family businesses" in PA that have taken from his "family businesses here in Delaware. This could be a real "turf war" - heh heh.

Tue, Jun 18, 2013 4:29pm
Mr. Loudell:

It may well be true that some gambling operators acted more aggressively lobbying other states. The fact remains, however, that none of them took steps to preserve a very unique and profitable state-sanctioned monopoly. Every neighboring state that has opened its borders to gambling did so in the face of strong opposition. That opposition was a lost opportunity.

The current problems, however, reflect an undeniable management failure. The out-of-state casinos didn't just fall from the sky one sunny day. Every Joe Sixpack knew they were coming and knew what it meant to Delaware. Yet, what did the Delaware operators do in anticipation of the changing landscape? As best I can tell - little to nothing. It's been business as usual - even in Monty Python movies, even the Three Stooges, even an irate mother-in-law, at some point, yields to reality if only for contrast. Not here.

Now stumbling along a well-beaten path of their own mismanagement, these operators resort to base threats. Instead of exercising real business acumen to solve a problem set, they look to the lowest hanging fruit - the taxpayer dollar. They walk the halls in Dover warning of doom and gloom. Nothing about this story line justifies a lifeline, especially one thrown by non-stockholders.

The solution now is to re-construct the business model to recognize the loss of roaming, out-of-state money bags and, most importantly, acknowledging and understanding that interstate gambling operators will play states off against each other for the operators' gain - not against them doing this, but public policy that fails to acknowledge this ends up wrongfully bowing to artificial pressure.

I say we feed kids. Fix schools. Fix roads. Invest in opportunity, not failure. Eight million dollars goes a long way.

Tue, Jun 18, 2013 6:28pm
Once again, those of us who opposed legalized gambling from the get-go have been vindicated. At some point, the consequences of homosexual marriage and "gender-neutral" bathrooms will also come home to roost.

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