Modified bill on Delaware racetrack casino taxes passes Senate

Posted: April 26, 2018

A bill that would slightly reduce tax rates for Delaware’s racetrack casinos and also increase the share of video lottery terminal revenue that goes to purse accounts passed the Delaware Senate on a 17-3 vote April 26 but could be delayed in the House of Representatives.

The substitute legislation, which resulted from compromise, would cut the tax casinos pay on VLT revenue from 43.5% to 41.5% at Delaware Park and Dover Downs, and from 42.5% to 40.5% at Harrington Raceway. Beginning in fiscal 2020, the tax would drop another two percentage points if the racetrack casinos’ capital expenditures equal or exceed 3% of VLT net proceeds remaining after payments made to the state.

The original version of the bill called for a sliding tax scale (32% to 43.5%) based upon gaming revenue. The rates would have better reflected the language in the 1994 Horse Racing Redevelopment Act, which authorized racetrack gaming in Delaware. The state legislature subsequently increased tax rates.

Under the substitute measure, purses at Delaware Park, which now earn 9% of gross VLT revenue, would get 9.3% in the first year and 9.6% in the second year. Standardbred purses would get 11.05% in the first year and 11.35% in the second year, up from the current 10.25%.

The original bill set the purse share for Delaware Park at 10%, which was the rate in the 1994 law.

In addition, the table game tax would drop from 29.4% of gross revenue to 15.5% at all three facilities. The table games license fee would be “suspended” as of fiscal 2020; the tracks collectively pay $13.25 million a year and would pay $3 million before fiscal 2020.

“This substitute act adjusts the revenue-sharing model in a way that ensures the state continues to benefit from video lottery proceeds, ensures continued employment and horse racing at the state’s three video lottery facilities, and ensures that the video lottery agents will be able to reinvest capital in their facilities, market their facilities, and maintain their high standards of customer service,” a synopsis of the bill states.

Dover Downs, the only publicly traded casino in Delaware, has been actively seeking tax relief for years and reported a net loss of $273,000 for the first quarter of 2018. Company Chief Executive Officer Dennis McGlynn in an earnings release said Dover Downs “demonstrated substantial gaming operational profitability” that was dented by the state’s casino tax formula.

“Legislation has been introduced to implement a more fair and realistic formula, and we hope the Delaware legislature and (Gov. John Carney’s administration) will act favorably on it,” McGlynn said.

According to published reports, House Speaker Pete Schwartzkopf expressed concern over the size of the tax break as well as the way it was put together. He did say the legislation would get a hearing.

(Delaware Park photo by Tom LaMarra)