Lawmakers To Address Delaware's Troubled Casino Industry

A task force is expected to issue recommendations this week to lawmakers on how to overhaul the state's casino industry. Competition from nearby states cost Delaware's three casinos $13 million — a 5.5 percent drop in tax revenue between 2011 and 2012. Some analysts say the industry may be facing layoffs or worse without help.

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Delaware's gambling industry is struggling. Revenues at the state's three casinos have steadily declined in recent years, as competition from neighboring states grows. A state task force is set to make recommendations to lawmakers this week to save the troubled casino industry from layoffs - or worse. NPR's Allison Keyes reports.

(SOUNDBITE OF BACKGROUND CASINO NOISES)

ALLISON KEYES, BYLINE: Earlier this week, Lisa Vespucci was bopping across the floor between rows of flashing, beeping slot machines and a table surrounded with black-jack players. She drove to Dover Downs Hotel and Casino from Maryland.

LISA VESPUCCI: It's about an hour and a half from my house.

KEYES: Vespucci says Dover Downs - which has a race track and NASCAR racing - has more amenities than some of the Maryland casinos she's been to.

VESPUCCI: This one's a lot larger.

KEYES: But she admits she spends a lot more time at the Hollywood Casino in Perryville, Md., just five minutes from her house.

VESPUCCI: Nobody likes to go as much as I do so...

(LAUGHTER)

ED SUTER: We're so small - this state - we really rely on people traveling here.

KEYES: Ed Suter is president and CEO of Dover Downs Hotel and Casino, and says two-thirds of its customers come from out of state. Casinos in Pennsylvania - and particularly Maryland - have knocked Dover Downs' revenue down between 35 and 40 percent over the past few years. Suter points a finger at Maryland Live Casino, which opened in 2012 - 20 minutes from Baltimore.

SUTER: For us, a lot of our customers live in close proximity to that facility. So those customers have to decide, are they going to get in their car and drive a couple hours to come here, or are they going to go 15 to 20 minutes away to Maryland Live? You can't blame them.

KEYES: Suter says that's why he's hoping to see the Lottery and Gaming Study Commission decide to recommend that Delaware reduce the state's tax rate on slot machines. It raised them in 2009 to balance the budget.

SUTER: The tax rate used to be 36 percent of gross revenue and slots; now, it's 43 and a half. Several members of this commission are recommending that it go back.

ALAN LEVIN: We have to look and make sure that they survive; and not only survive but thrive.

KEYES: Alan Levin is director of Maryland's Economic Development Office, and a member of the commission looking at ways to help the casino industry. [POST-BROADCAST CORRECTION: Levin is director of Delaware's Economic Development Office.] Levin says he's heard many scenarios for changing the formula, ranging from changing the revenue-sharing in a way that could cost the state 50 million a year, to something more modest that would mean a $10 million loss for the state. He says any solution should be one that allows both the casinos and the state to make a fair return on their investments.

SUTER: It's an industry that is important enough to the state that we have to address their concerns and their issues.

KEYES: In 2010, Delaware's general fund got 238.6 million in casino revenues. By 2013, it was down to 192 million. And the lottery revenue category, which also includes casino money, is the state's fifth largest revenue source.

Frank Fantini, editor and publisher of Fantini's Gaming Report, says things look pretty bad for Delaware's casinos.

FRANK FANTINI: You can take a look at Dover Downs as an example. It's a stock that once sold at 12-, 13-, $15 a share and now, it's down to the to a 2- to $3 area.

KEYES: Fantini is also CEO of a Dover-based investment research firm. He agrees with other casino business experts that the facilities may need to cut expenses to cope with their losses.

FANTINI: I can see where they would further cut back business operations, if they have to. There's already been some suggestion that table games simply aren't profitable enough; and they might have to cut those back, in some places.

KEYES: Alan Levin, at Delaware's Economic Development Office, says a larger issue to consider down the road is whether the model of a casino and racetrack can survive the competition, or whether smaller venues are the answer.

The Lottery and Gaming Study Commission is expected to offer recommendations to the General Assembly this week. After that, lawmakers and the governor will decide what will be done.

Allison Keyes, NPR News.

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Correction Feb. 4, 2014

In this story, Alan Levin is misidentified as director of Maryland's Economic Development Office. He's actually director of Delaware's Economic Development Office.

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