Delaware Casino Bailout Stinks

Mendte: It could be the worst bailout ever.

 

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Something stinks in Delaware and it’s not just the horseshoe crabs decaying on the beaches of the Delaware Bay.


It is the bailout of the state’s three casinos, which may be the worst deal in the history of bad state government deals.  And that is really saying something considering New Jersey Governor Chris Christie gave Revel casino in Atlantic City $300 million last year, and this year Revel is declaring bankruptcy.

The Delaware deal stinks even more than that one.  Let’s go through the reasons why.

First, the three casinos at Delaware Park in Wilmington, Harrington Raceway, and Dover Downs, got an $8 million bailout last year.  They got it because they promised it was the last bailout they would ever need.  Then they came back the very next year for what State Representative Dennis E. Williams calls, “The second annual, one time only bailout.”

But this time the bailout is not for just one year, but three years.  The Delaware legislature, with the blessing of the Governor, gave the casinos $10 million this year, $11 million next year, and $12 million the year after that.  The casinos have already promised they will be back for additional money next legislative session.

To be fair, the money is more of a “tip” than a bailout, as the state brings in 10 times more money in casino revenue.  But isn’t that revenue the very reason states allow an industry that produces nothing and leaches off the hopes and sometimes desperation of its citizens?  If the casinos keep coming back to take more money from the worthwhile projects and services they are supposed to fund, why have them?

President Obama was in Wilmington this week to announce a new infrastructure initiative.  He used the closed I-495 bridge as a backdrop.  Many of the legislators who posed with the President voted for the casino bailout, which took a lot of gall, since much of the money for the casino bailout is coming out of the state’s capital and infrastructure budget.

The Casinos don’t like the current revenue sharing plan with the state of Delaware.  For instance, the state gets a bigger share of the slot money than the casinos.  That was fine when there was less competition from other states and a more robust economy, but now Delaware casinos are losing money — or at least they claim they are.

“At no time did the casinos open up their books completely so that we could see all their financials,” according to Representative Charles Potter, the chair of Delaware’s Gaming Study Commission.  “I thought that was strange because we have other businesses come in all of the time, somebody might want a $1,000 grant, and we take the time to dot all of the I’s and cross the T’s.  But we didn’t do that with over $30 million to finance this casino deal?  That is absolutely wrong.”

The casinos threatened lawmakers that if they didn’t get a bailout, they would have to lay off workers. Representative Williams proposed an amendment that if a casino still laid-off people after getting state money, they would have to give that money back.  The amendment went nowhere.

So what are the casino companies doing with the bailout money?  They must be using it to just keep their heads above water, right?  No, they are expanding. Delaware Downs opened a football themed restaurant in Georgia that it hopes to turn into a chain. William Rickman, the owner of Delaware Park, bought a casino just over the Delaware border in Maryland. It should be noted that the whole reason Delaware Casinos are losing money and need a bailout is because of competition from other states — like Maryland.

Maybe casinos in Delaware are just bad business. But if that were the case, why do two more casinos want to open up in the state?  “We wanted approval for a casino in downtown Wilmington.  We wanted a new casino in Rehoboth Beach,” State Representative Stephanie Bolden told me. “But they were both blocked.”

Most of the same people who voted for the bailout also stopped competition from coming to the state.  And Rickman was one of those fighting ferociously to keep competition out of Delaware; at the same time he was creating competition just across the border.

If you are trying to make sense of any of this, don’t. It doesn’t make any sense.  If those voting for the bailout were truly concerned about jobs and revenue, they would allow increased competition.

“We could bid out two licenses right now and get almost $50 million,” says Rep. Potter.  “Two new casinos would bring in over $500 million in infrastructure and we’ll get spin-off jobs.”

The state of Delaware has, in essence, created and is promoting a monopoly. “It’s a wonder we haven’t been sued for it,” Potter adds.

Potter, Williams, and Bolden all voted against the bailout, and still it passed the State Senate by a vote of 14-5 and the State House 27-10.  How could a piece of legislation that makes so little sense pass with relative ease?

Many of the legislators serve districts with a casino or have a casino right next door.  Those districts are filled with casino employees who were calling about their jobs.

But many of the legislators who voted for the bailout don’t have that connection. What convinced them?  “I have never seen so many lobbyists in Dover in all my life,” remembers Rep. Williams.  “The last couple of weeks down in Dover, you could not walk the halls without bumping into a casino lobbyist.”

Oh, and did I mention, a handful of the legislators are also on the board of the casinos and did not recuse themselves.

So let me sum this up.  The state is giving bailout money to the state casinos, without investigating their books and without getting a promise of no layoffs.  It is taking that money from other needy projects and at the same time it is barring other casinos that would bring more jobs and money. The bailed-out casinos are using some of that money to do business in other states.  Finally, the casinos have already announced they will be back for more money.

What did I tell you, worst deal ever.  Remember it at election time.

You can watch Larry Mendte's interviews with the Delaware State Representatives about the casino bailout on MeTV Channel 2, Saturday at 7:oo p.m. and again Sunday at 9:00 a.m.

 

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