Would building new casinos feed the state’s coffers, or is it too risky a gambit?
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So What’s the Payoff?
“By restricting licenses, Delaware restricts competition and increases racino revenues and thus tax revenues back to the state,” says Jim Butkiewicz, a professor of economics at the University of Delaware. “What if there were only three restaurants allowed to operate in the state? Would anyone think that represented true competition?”
Fink asks simply whether the state’s proper role is to protect taxpayers or entrenched businesses.
“There is a closed pipe theory regarding gambling,” says Fink. “CRI does not believe Delaware can support more than three casinos. If the state’s proper role is to look after its taxpayers, the question then is, are the current casino locations the best to mitigate the certain revenue losses when Maryland’s additional casinos come on line?”
It’s an illustration of the real estate chestnut: location, location, location.
“Most out-of-state gamblers are coming to Delaware on their way to somewhere else, or because Delaware is closer to home for Maryland residents than, say, New Jersey,” Fink says.
“Why would Marylanders continue coming to Delaware when they’ll soon have four casinos to choose from in their own backyard? Why would anyone drive past a brand new casino to go to an old one? We have to remember that when Delaware’s slots came online, it killed the slot business in New Jersey.”
Fink believes Maryland’s proposed Ocean Downs casino will put an end, for example, to Harrington’s draw of bettors from Washington, D.C. And the recently opened Hollywood Casino in Perryville, Maryland, will significantly and negatively impact Delaware Park.
“If Harrington were located farther south and closer to Route 13, and Delaware Park were, say, near Wilmington’s Riverfront, their chances of mitigating losses due to Maryland’s casino development would improve,” Fink claims.
Yet Butkiewicz doesn’t believe the status quo is sustainable. “With the percentage of revenues paid back to the state and the continuing competitive pressures from Maryland and Pennsylvania, that combination may prove lethal to one or more of the existing racinos here,” he says.
Butkiewicz believes new venues may provide a more competitive environment for Delaware gaming, which is needed for the industry to survive and remain sustainable. That’s the argument Schwartzkopf used to forge legislation to expand gaming sites in the state. “There’s an old saying that a better mousetrap will catch more mice,” Schwartzkopf says.
He points to projections showing that, by merely preserving the status quo with the three current casinos, revenues will stagnate or decline dramatically over the next seven years.
“If Delaware and Maryland-Pennsylvania do nothing to expand gaming in the state, gaming revenues through 2013 remain even with 2009,” Schwartzkopf says. “But if Delaware maintains the status quo while those two states expand their operations, Delaware gaming revenues drop from the current $565 million down to $481 million by 2013.”
The figures come from a recent report by New Orleans-based TMG Consultants that projects significant revenue and job growth as the result of adding two venues. According to the TMG report, the picture brightens only when Delaware adds new operations.
“By 2013, gaming revenues from the added venues will see revenue gains topping $750 million,” Schwartzkopf says. “And by 2017, according to TMG, revenues with those additional sites here will reach revenue returns of $785 million, as compared to just over $500 million without the added casinos.”
Page 4: Does it All Add Up?