Del. slot casinos start to feel the squeeze - Tuesday 12th of December 2006
For more than a decade, Delawares three slot machine casinos have essentially had a license to print money for state government, racetrack-casino owners and the states horsemen.
But that golden age is coming to an end -- and perhaps a whole lot sooner than worried state officials might want. Already, the threat has state lawmakers thinking it may be time to allow sports betting. Delaware is the only state east of the Mississippi that can offer sports betting under federal law.
"If you look at slots as the business it is, this is the one tool in our toolbox that no one can legally match," said state Rep. William A. Oberle Jr., R-Beechers Lot.
The first nearby competition arrives next month, when Harrahs Entertainment Inc. opens its 2,000-machine casino and racetrack in Chester, Pa., just minutes north of Wilmington. Delaware officials estimate that slots casinos in Pennsylvania could siphon $30 million a year from the states $210 million share of casino profits.
Local casino operators say legalized slots gambling in Maryland would pose an even bigger problem than competition in Pennsylvania.
Thats particularly true for the two downstate slots venues, which rely on Maryland visitors for as much as half of their business.
Maryland slots could siphon $100 million a year from the state treasury. Adding in the loss to Pennsylvania, that would cut Delawares slots revenues by more than half.
The November elections that will send Baltimore Mayor Martin OMalley to the Maryland governors mansion in January also made racetrack slots much more likely there.
"Id say the odds are better than 50-50 that a slots bill will pass in Maryland [in 2007]," said Robert Byrd, a Delaware lobbyist whose clients include Dover Downs.
Maryland government leaders are even less cautious. Senate President Thomas V. "Mike" Miller says the political will is there to push a slots bill through.
"Weve got people going to Delaware and West Virginia and soon Pennsylvania and helping to build schools and fund programs in those states by playing slots," Miller said. "You people in Delaware have been laughing at us and our inability to do this for a decade. ... If this governor wants slots, the votes are there."
And OMalley appears to support the idea, if perhaps not as broadly as Miller and the states struggling racetrack owners and horse breeders.
Rick Abbruzzese, a spokesman for OMalleys transition team, says the governor-elect favors a plan similar to Delawares, where slot machines are restricted to racetracks, with part of the profits underwriting the racing industry.
"Weve got five weeks to work on a budget and put together our legislative agenda," he said. "The governor-elect favors a limited number of slot machines, limited to racetracks, but its too early to say whether that will make it onto the agenda."
The impending competition has Delaware officials thinking hard about what steps to take to protect revenue from gambling, particularly legislators already anticipating tough budget fights against a backdrop of a slowing economy.
They say Gov. Ruth Ann Minners opposition to allowing table games or adding any additional slots sites -- such as in Wilmington or Georgetown -- will doom any such initiatives again this fiscal year.
But other options -- such as sports gambling -- are worth a look, they say.
Delaware is the only state east of the Mississippi excluded from a federal statute outlawing sports betting.
"Its something that Pennsylvania and West Virginia and, eventually, Maryland would all want, but they simply cant have it," said Ed Sutor, chief operating officer at Dover Downs. "We think it would be a tremendous boost to Delaware."
Free drinks give Pa. edge
Slots competition arrives first in Pennsylvania, and it is expected to siphon $10 million from Delawares lottery revenues in this budget year. The full impact hits in the next fiscal year.
Vince Donlevie, the general manager at Harrahs new Chester facility, said he thinks that estimate is high.
"Were right in the heart of the Northeast Corridor and Philadelphia is the fourth- or fifth-largest metropolitan area in the country," he said. "I dont see us hurting each other. I think theres going to be plenty of business for everyone."
The Pennsylvania casinos will have an advantage over Delawares -- the ability to give patrons complimentary alcoholic beverages. Thats a courtesy Delawares unlikely to mimic.
"I think a move like that is contradictory to everything that everyones been trying to do in the interest of public safety," Oberle said. "Im very disappointed in the Pennsylvania Legislature and in Gov. Rendell for doing something like that. Its simply irresponsible from a public safety standpoint."
Donlevie said his company has strict rules on responsible drinking and trains employees to follow those policies.
Some Pennsylvania legislators also have called for the state to allow table games such as poker or blackjack at the new casinos, but Rendell said last week he is not ready to think about that.
With Pennsylvania slots a given, all eyes in Delaware are now focused on Annapolis.
In the last two years, Republican Gov. Robert Ehrlich Jr. tried -- and failed -- to get a slots bill passed. Ultimately, it was blocked by House Speaker Michael Busch, a Democrat and a firm slots opponent.
But experts in and outside Maryland government say the odds are better that OMalley will succeed, mainly because a Democratic governor will be working with a Democratic-controlled General Assembly and the state faces big revenue problems.
But there are conflicting interests.
In the past, developers in Prince Georges County and groups in Baltimore have sought off-track slot locations. Then theres the question of which tracks would get slots -- all or just a few.
In the midst of negotiations in 2005, Busch pushed a "compromise" slots bill featuring a small number of machines and venues deemed unacceptable by Ehrlich and the state Senate.
Byrd said the competing viewpoints could slow progress toward a slots bill.
"There are some very complicated negotiations over who will get slots and how many machines there will be that might stop it, if they cant reach a consensus."
Ralph Hayward, president of the Maryland Standardbred Breeders Association, hopes Miller is right in saying the votes are there.
"We are hoping it happens; we need the help to keep our tracks going," Hayward said.
Del. venues seek upper hand
Delaware has taken steps to protect its venues, including allowing 24-hour gambling and the addition of more and different types of machines, such as multiplayer video poker and blackjack machines.
But Cook says theres no avoiding a hit.
"Obviously, the governor and the General Assembly have seen this coming and have taken some steps to keep our edge," he said. "And those are working. And I think the management at the three casinos are all smart businesspeople. Theyre doing what they can to prepare themselves and theyll survive, but theres no denying well take a hit."
To attract and keep customers, Dover Downs is in the midst of a $52 million expansion of its on-site hotel and is making plans for a 75,000-square-foot expansion of its casino, Sutor said.
The downstate sites are vulnerable, however.
Unlike tracks such as Delaware Park in Stanton and Harrahs in Chester that can draw on a substantial local population base for customers, Dover Downs and Midway Slots in Harrington need to attract people willing to drive more than 15 or 20 minutes to play the slots, Sutor said. Both draw a lot of customers from Maryland.
Oberle and Sutor say its time for Delaware to consider legalized sports betting.
The state has no firm estimates on how much sports betting would generate, but Oberle and Sutor said a state-run sports book would be the kind of attraction that would draw gamblers from other places. If located at the current casinos, it could generate a big boost.
However, the plan has a powerful opponent -- Minner.
Oberle said he hopes to meet with the governor before the General Assembly returns in January to state his case for sports betting. He has legislation ready to go and hopes Minner, who backed off her opposition to 24-hour gambling, will do the same with sports betting.
"Weve tried to do some things to protect our position, but were still a little behind the curve. As nice as our facilities are, people will stay close to home unless theres something compelling that makes them want to go out of their way, he said. "This could be that something."
Sen. Karen Peterson, D-Stanton, isnt as hopeful.
"Obviously, if we want to make sure we keep getting all that money from gambling, we need to do something," she said. "But its been my experience that, once this governor makes up her mind and digs in her heels, shes pretty hard to move."
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