Delaware Racinos Less Taxed After Revenue-Saving Bill Passes State House

Posted on: July 1, 2018, 12:00h. 

Last updated on: June 29, 2018, 04:18h.

Philip Conneller @casinoorgphilc Read More
Expertise: Gaming Business, Regulation, Tribal Gaming.

Tax relief is finally coming to Delaware’s three struggling racinos, a decade after they first began appealing to lawmakers for help.

Delaware casinos get tax relief
CEO of Dover Downs Denis McGlynn believes that the repeated raising of taxes on Delaware casinos has made it impossible for his company to operate like a normal business. The racino posted a $1 million loss last year, despite paying $75 million to the state. (Image: Jason Minto/The News Journal)

On Thursday, the State House passed a bill that all but guarantees that the casinos’ tax burden will be slashed. The bill will shave one percentage point off the 43 percent the casinos currently pay on slots revenues and will halve the current 30 percent levy on table games.

The racinos have been repeatedly squeezed by the state since it legalized slot machines in the 1990s. Taxes have been raised seven times since, to the point where it has become untenable to operate as a profitable business, according to the three operators. Meanwhile, increased competition from casinos in neighboring states has made life even tougher.

The industry employs around 3,000 people.

Expanding Tax Squeeze

Last year, Delaware’s only publicly traded casino, Dover Downs, reported losses of over $1 million, despite having paid $75 million to the state government and the racing association during that period.

We make money, everybody else gets it but us, and we end up with a million-dollar loss,” Dover Downs CEO Denis McGlynn told the legislature earlier this year. “This is just not sustainable.”

This week, McGlynn was back at Legislative Hall in Dover to plead his case to the House. As reported by Delaware Public Media, McGlynn reminded lawmakers that the industry has generated close to $4 billion for the state over the years but its operators were now unable to function as normal companies.

“We are in a partnership with the state, along with the horse racing industry, and I think this legislation shows lawmakers are grasping that we need all three partners to be healthy,” he said. “Our financial situation last year shows that’s not the case.”

The message was clear: act now, or there will be no casino industry for the state to plumb for money in the future.

Sigh of Relief

Lawmakers responded emphatically, approving the bill by 35-4 margain, and an easy passage through the Senate is anticipated.

The bill’s skids have been greased by the healthier state of Delaware’s coffers and the $170 million that carried over from the last fiscal year. The state last raised the tax on slots in 2009 to 43 percent, in an effort to plug a budget deficit at the height of the recession.

Sen. Brian Bushweller (D-Dover), who will retire at the end of the 2018 session, has spent years campaigning for tax relief for the casinos. He told Delaware Public Media the casinos could now “breath a little easier tonight” and expressed optimism for their future.

Delaware casinos will also be helped by the recent legalization of sportsbooks. Earlier this month, the state became the first in the US to offer licensed and regulated single-game sports betting since the repeal of PASPA in March, beating New Jersey to the punch by one week.