Delaware Doubles Down

by Dave on May 15, 2009

As seen in Coastal Sussex Weekly, April 23, 2009:

With those words in his March 19th budget address, Delaware Governor Jack Markell confirmed what nearly everyone involved knew was imminent: the drastic expansion of gambling in Delaware.

Immediately following that announcement, Rehoboth Beach developers Preston A. Schell and Gene Lankford applied to be one of those three new casino licensees at their planned one-mile racetrack Del Pointe, located on Route 113 just outside Millsboro.

Those two significant events guarantee to dramatically affect the landscape of Sussex County in the very near future. That is, if they can each get past the opposition.

Sports, Slots and Dollar Bills

Like many states in this recession, Delaware faces tough economic times. State budget writers are reportedly staring at $750 million in deficits for the next 18 months. So naturally, the state is looking around for ways to bring in more money. One of the first targets that caught their eye was increased gambling revenue via sports betting, an idea proposed in years past that failed to gain traction under the previous Governor. However, the revenues from slots were undeniable.

Delaware approved slots gambling (defined as ‘video lottery’) in 1994 under the guise of supporting its thoroughbred horse industry. Total lottery revenue skyrocketed, bringing in dollars in excess of $200 million annually. Lottery and slots income became the state’s 4th largest revenue stream, and as a result, the state is strongly protective of the video lottery operations. Twelve states now have racetrack-casino (racino) operations, and according to the American Gaming Association, two of the top 5 racino markets are in Delaware. The AGA estimates that Delaware racinos brought in over $500 million in 2007 and paid $216 million in taxes.

Delaware’s success in the 1990’s with gambling revenue created an attractive option for neighboring states, whose pursuit of racino revenues threaten Delaware’s regional monopoly. Additionally, Atlantic City ramped up marketing to stem the losses of gambling revenue, and its casinos continue to pump in millions to attract more gamblers. Pennsylvania now has operational slots venues, and has discussed legalizing table games. Maryland voters approved slots in 2008, and the state is rushing to get those establishments operational, hoping to use the revenue to shore up its own budget by 2011.

As a result of increased competition, Delaware officials will now consider adding sports betting to the state’s gambling repertoire. Because of a ‘grandfather clause’ due to a prior dalliance with sports betting, Delaware is one of only four states (Nevada, Oregon and Montana are the others) exempt from a 1992 federal law banning sports gambling.
A conversation with virtually any elected official in Delaware results in the same conclusion: Sports betting is coming to Delaware.

“I believe the votes will ultimately be there,” says Republican Rep. Greg Lavelle of Wilmington. “It’s just a matter of working out the details.”

Despite the seeming inevitability of sports wagering in Delaware, not everyone thinks it’s a good idea. The professional sports leagues and the NCAA argue that the concept will not bear enough fruit for the state and will impact the integrity of the games.  The NCAA went as far as to threaten to ban Delaware from any postseason collegiate events.

In addition, there are debates over exactly how much the sports betting portion of the program will generate for the state. Governor Markell’s estimate is that the state will bring in $55 million in the first year should his proposal become law. A 2008 report by then-Gov. Ruth Ann Minner’s administration forecast a first full year (Fiscal Year 2010) General Fund return of between $22.5 million to $30.6 million in a racino-only sports betting scheme, contrasting both a $1 million estimate in a University of Delaware study conducted in conjunction with the National Football League and a Delaware racino industry study that resulted in a $70 million annual estimate.

Sussex County’s Bid

When the original three racinos secured licenses to host slot machines, Sussex County did not have a location that qualified, so the county was left out. That may soon change.

The 370-acre parcel proposed as Del Pointe is expected to bring in as much as $63 million annually to the state coffers, should the project be approved as a new racino. For perspective, the Markell Administration’s proposed 8% pay cut for all Delaware state employees totals $91.7 million annually.

The existing racinos naturally find themselves opposed to any new licensees, and expressed their consternation by busing in employees to recent hearings on Markell’s legislation, where employees told of their concern with potential job cuts should another track be approved in the state. Del Pointe’s Preston Schell is unmoved.

“I thought it proved the lack of support the casino industry truly has among the general public,” says Schell.  “While at the hearing, we overheard one casino employee assuring another that they were ‘still on the clock.’  I don’t blame the employees for being there.  If they truly felt their jobs were at risk, they should be there. “

“I find it disheartening and sickening to see the existing racino industry threatening to fire their employees if they were to make slightly less money as a result of (the legislation) when almost every other business owner in DE is struggling and is, instead, asking him or herself what he/she can do to hold onto their employees even while losing money,” Schell adds.  “Think about it – here they are making millions in a protected market, one of the only ones in our state, and they are threatening to fire their employees if they make slightly fewer millions.”

A trip to the Dover Downs web site in part supports Schell’s argument about the racinos’ health. A portion of the web site is dedicated to the racino’s expansion, stating “Dover Downs Hotel & Casino is always growing.”

The fate of Del Pointe is undecided, but the project’s backers made it even harder to refuse when they recently pledged $20 million in advance contributions to the state coffers to go towards closing this year’s budget deficit.

“We are interested in doing our fair share or, arguably, more than our fair share to help alleviate some of the sacrifices that other groups are being asked to make in the near term, particularly our State employees.  This $20 million was not in the Governor’s budget and is found money that can be used to off-set the salary decreases being asked of our state employees.”

Opposition to expanded gambling comes from other circles as well. Much of western Sussex County prides itself on traditional, conservative values and many stand opposed to additional gambling on moral grounds.

One who holds that view is Georgetown resident Eric Bodenwieser, a consistent and vocal opponent of additional gambling. Among his concerns is the presentation of Del Pointe to families.

“The way I look at it, it’s like the family goes to this area, and the kids are in the theme park while the adults are in the gambling casino. We’re training these kids that when they’re old enough, you’re going to be able to come into the adult theme park,” says Bodenweiser, who recently started an online petition opposing sports betting. “It’s a continuous slide down the slippery slope of morality, with a continuing focus on me and my pleasures, instead of foucsing on what really matters in life. It’s all about me, me, me.”

Delaware Going All In?

The final piece of the puzzle is a call for a legal opinion and study concerning the addition of table games to the existing licensees in Delaware. That would make Delaware the second state in the nation, after Nevada, to allow full casinos with sports wagering. Expanding gambling to that level would create access to hundreds of millions of dollars in annual revenues to the state, but could bring with it societal costs that many claim lie hidden in all of the rosy scenarios.

Nationally-recognized problem-gambling advocate Gerry Fulcher of Wilmington knows the costs, and has seen them first hand. Fulcher cites three previous eras of expanded gambling: the 1600’s, the 1800’s and the 1900’s.

“It’s the only governmental policy where we legalized and then went back to prohibition,” says Fulcher. “The results were so bad each of those times that the country retracted and criminalized it again.”

Fulcher cites the extreme increase in criminal activity surrounding gambling venues.

“Atlantic City went from 50th in crime to number 1 since the casinos (arrived). I have right on my desk here documentation from the US Attorney’s office, the Attorney General’s office and the Public Defender’s office indicating $422,098,000 stolen by compulsive gamblers (in Delaware) from their employers, customers and co-workers in the last 8 years. The bottom line is trouble.”

Fulcher also cites a nationwide five-year study, first revealed by John Warren Kindt in a statement before a hearing of the U.S. House of Representatives Committe on Small Business on September 21, 1994, that produced the following fact. “For every dollar you think you make,” says Fulcher, “the state will lose $3 with the ancillary costs.”

Good idea or bad, profit center or long-term moral and financial catastrophe, the plans are in place and the future of the state of Delaware and Sussex County will continue to involve gambling of some kind. The revenues are too attractive to a state known for its low taxes that is now staring at a 25% budget deficit. But in an industry with big dollars, big players and big risks, no one knows exactly how it will all shake out as Delaware doubles down.

{ 1 comment }

George Wilkie December 16, 2009 at 12:53 pm

I want the Del Pointe Casino to start, we need it in our state and it will bring jobs, VOTE FOR IT YES!!

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