Delaware casinos betting on tax relief bill

The state's leading advocate for cutting the taxes paid by Delaware's three casinos is making one last push to reach a deal before he leaves office in November.

"I'm not going to predict success," said state Sen. Brian Busheweller, D-Dover. "But I am more optimistic than ever before that we can do something."

After two failed tries since 2015, Bushweller's odds of success might be improving.

His latest tax relief proposal – which he estimates would cost the state $20 million a year – has the backing of key leaders in the Senate Democratic caucus.

Senate Finance Committee Chair Harris McDowell, D-Wilmington, also has promised to release the bill to the full Senate – a hurdle that prior attempts failed to clear.

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But first, McDowell wants to give Gov. John Carney a crack at negotiating a new deal with the casinos.

"The issue of revenue sharing between the State and the casino operators within our state is such a complex and precarious topic that I appeal you to deploy the expertise that is housed in the executive branch," McDowell wrote in a letter to the governor. "If the negotiations are unsuccessful in producing an alternative I will release this bill from committee, on March 14th."

Despite the deadline, Carney's office has yet to schedule talks with the state's casino operators. He also did not include any room to provide them with a tax cut in his proposed $4.25 billion spending plan for the coming fiscal year – a budget proposal that anticipates $170 million in added revenue.

Carney spokesman Jonathan Starkey on Monday declined to say whether any negotiations will be scheduled. Instead, he released a statement the governor's office issues whenever the topic of casino tax relief comes up.

"Delaware's three racinos are major employers -- and help generate significant revenues for the state," the release said. "Delaware also continues to face long-term budget and revenue challenges. The governor will keep all these factors in mind when considering policies affecting our state's casinos."

Bushweller and the casinos – which collectively employ more than 3,000 people – have long argued that Delaware's current tax structure is threatening their ability to stay afloat, particularly given increased competition in surrounding states.

Delaware has collected about 43 percent of statewide slot machine revenue since 2009, up from 36 percent the year before and nearly double what the casinos were required to fork over in the mid-1990s. The state also collects nearly 30 percent of all gross revenue generated by the casinos' table games and another $3 million a year in table game licensing fees.

"The casinos pay all the same taxes as any other business, including income tax, payroll tax and gross receipts tax," said Bushweller, who is not seeking a fourth term. "But in addition to that, they have to give money to the state and the horse racing industry."

Delaware's two privately owned casinos – Delaware Park Racetrack and Slots in Stanton and the Harrington Raceway and Casino – did not respond to requests for comment.

But the publicly traded Dover Downs Hotel & Casino says the impact on its operations is clear.

The company lost more than $1 million in 2017 – its second annual net loss in four years. But that deficit came only after the casino finished paying $75 million to the state and the Delaware Standardbred Owners Association.

"To me, that says everything there is to say about the fairness of the state's current tax structure," Dover Downs CEO Denis McGlynn said. "When the state raised our taxes in 2009, we told them that we were going to struggle to survive. And that's what you're seeing now."

Bushweller's bill would re-establish a tiered-tax rate on slots revenue that ranges 32 to 43.5 percent, cut the gross table game tax rate to 15 percent and completely eliminate the annual table game licensing fee. The proposal also would lift a ban that prevents Delaware casinos from operating on Christmas and Easter.

Some of those proposals are unpopular with other legislators. House Speaker Pete Schwartzkopf, D- Rehoboth Beach, said he's willing to consider a cut to the table game tax imposed in 2009 but not much else.

"When we put the tax on table games, we just reached up into the air and picked out a number because we didn't know what to charge," he said. "We always made a commitment that we would return to that if it came out to be too high and we've never done that."

Bushweller said his bill is simply a starting point for debate.

"I'm optimistic that by March 14 there will either be some kind of understanding that could become the basis for a new bill or there will be substantial progress in that regard to make it worth everyone's wile to continue those talks," he said.

If the governor's office is unwilling to take the lead, Bushweller said he will call on his colleagues in the General Assembly to find a compromise of their own.

"The Kent County delegation to the General Assembly, by and large, has always been supportive of these major economic development initiatives in other parts of the state," he said citing recent tax cuts for DuPont Co. and The Chemours Co. "What we're hoping for now is to get people in other parts of the state to now support us in our time of need."

In the meantime, McGlynn said there are no immediate plans to eliminate jobs at Dover Downs.

The company cut nearly 50 jobs and stopped offering table games during early weekday mornings in the months after suffering its first-ever, year-end loss in 2014 of $706,000. Dover Downs eked out a meager $13,000 in profit in 2013.

McGlynn, however, said he is anticipating a difficult start to the year if Dover Downs cannot get the breathing room it needs to upgrade to its aging hotel or advertise its casino in out-of-state markets.

By contrast, Maryland Live in Hanover, Maryland, is slated to complete a $200 million expansion this spring that will include a 17-story hotel and a 1,500-seat concert venue.

"The industry outside of Delaware is getting bigger and better," he said. "But we're stuck trying to fix our peeling wallpaper, tattered carpets and broken sidewalks."

Contact reporter Scott Goss at (302) 324-2281, sgoss@delawareonline.com or on Twitter @ScottGossDel.