Casino taxes cut, VLT purse share increased in Delaware

By: Tom LaMarra

Posted: July 1, 2018

Legislation signed into law by Delaware Gov. John Carney June 30 provides the state’s three casinos with a few tax cuts and brings the percentage of video lottery terminal revenue that goes to purses closer to the amount received when racetrack gaming was launched in the mid-1990s.

The compromise bill, which stalled for more than a month after the Senate passed a measure that would have reduced casino taxes even more, was approved and signed as the legislature wrapped up its 2018 session.

The 1994 Horseracing Redevelopment Act, which authorized Delaware Park, Dover Downs and Harrington Raceway to operate VLTs, set the purse share for Thoroughbreds at 10% of gross revenue at Delaware Park. The percentage for the two Standardbred tracks was slightly higher.

The bill that passed June 30 increases purses at all three tracks by 0.6%, phased in over two years beginning immediately. At Delaware Park, where horsemen have received 9% of gross VLT revenue, the amount will increase to 9.3% for one year, and then to 9.6% thereafter. The provision was sought by the Delaware Thoroughbred Horsemen’s Association, which maintains a strong relationship with lawmakers.

According to Delaware Lottery statistics, VLTs at Delaware Park generated $12.4 million for purses in 2017. Based on 2017 gross revenue, VLT-generated purses would increase more than $1 million over the next two years.

In the 1994 law, the highest state tax rate on VLT revenue at the three casinos was 30%, but that eventually grew to 43.5% as lawmakers looked for money to fund state budgets. The revised law lowers the tax to a range of 42.5%-41.5%, with an additional two-percentage-point reduction possible beginning July 1, 2019, based on qualified capital expenditures.

The casinos also received a substantial cut in the table games tax rate from 29.4% to 15%. The overall revenue reduction according to a fiscal note will be $11.4 million in fiscal 2019 and $16.8 million in each of fiscal 2020 and 2021.

Horsemen in Delaware also receive a share of revenue from table games and sports betting, which in June went from parlay-only bets on NFL games to full Nevada-style betting. At Delaware Park, purses earn 4.5% of sports betting revenue and, based on the average win in 2017, 9.3%-9.9% of sports betting revenue.

Purses for harness racing under the revised law will increase from the current 10.75% of gross VLT revenue at two tracks to 11.05% and then 11.35%.

(Delaware Park photo by Tom LaMarra)