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

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.