The end of this legislative session finds Delaware taxpayers footing an $8M bill to help the local casinos pay the increased costs of their equipment providers who are apparently paid with a percentage of the casino’s profits. Casinos now pay those vendors 6% of the profits for equipment and machines and expect to pay 10% after these contracts are re-upped. In addition, Epilogue language provided for a new Lottery and Gaming Study Commission
to study the viability of the First State’s gambling industry, including the taxes the racinos pay the state to operate.
Think about that for a minute. We are “studying” the taxes the racinos pay, we are sending them $8M to cover their increased costs, we didn’t get a no layoffs promise in return for that money. This after we spent money on a study commissioned by the DE Sports and Video Lottery Commission to take a look at the competitive field if we added two more casinos, and then promptly rejected the conclusions of that study — which recommended adding two new venues. The Governor and the GA knew then (2010) that the casinos were facing serious challenges. And we knew that they were dead wrong then, and now that all of these new venues in PA and MD have come on line (and come online like gangbusters), the threat is suddenly here.
As the DE Sports and Video Lottery Commission signaled back in 2010, they won’t be concerned with the long-term viability and competitiveness of this industry — but they will be invested in making sure that the current crop of owners get paid. So as you look at this going forward, we are specifically looking at your government protecting the interests of a very few people. I’m amused to recall that in the aftermath of the Kinder Morgan leaving the state that the Governor accused the people who opposed this deal as not knowing much about business. Because a business that didn’t have the chance at taxpayer monies making their balance sheets whole, would have been investing in where they could be competitive and cutting the strings on those venues that had no long term viability.
Instead of working on better competition, the Governor and the GA are working out a path to decrease the taxes they earn from these operations. Notice that it is a given that the vendors whose take goes from 6% to 10% won’t be giving back anything. Layoffs from casinos are not off of the table. The state taking less money — and still not being able to give their own workers a raise — is the only solution that seems to be on the table.
These casinos have a much bigger problem than state taxes. They’re customer base has been eroded due to other venues in PA and MD, and I can’t figure out what they’ve done to try to cultivate a different customer base (much less energize their old customer base), but I can tell that they’ve spent alot of time persuading the Governor and the GA that they are Too Big to Fail. Maybe everyone is trying to stay in a holding pattern until Internet Gambling comes on line. Is online gambling a savior? I don’t know. But if they are waiting for that, they should condition any cut in taxes with an expectation that taxes go right back up when this comes online.
Zombie Casino Alert
Zombie Casino Alert, Part II
Zombie Casino Alert, Part III