The Delaware Senate is scheduled to discuss HB 333 today, the Delaware Gaming Competitiveness Act of 2012, described as the “next logical step” for Delaware as it struggles to maintain revenues while neighboring competition has siphoned off gaming dollars. The bill passed through committee last week after getting House approval earlier this month.


HB 333 authorizes the Delaware Lottery to offer its traditional lottery games for sale via the Internet, and the racetrack casinos would be allowed to offer online versions of their games. As currently amended, players would have to visit lottery retailers to purchase prepaid cards or vouchers in order to play online; this provision helps protect existing retailers. The bill also allows for keno and the expansion of sports betting (currently limited to pro football parlay games) to non-racetrack locations such as bars and clubs.

As one of the first states with racetrack video lottery terminals (beginning in late 1995), Delaware jumped out of the gate early, but had a target on its back from the beginning. Fortunately for Delaware, it took Maryland and Pennsylvania a while to follow suit, and revenues finally peaked in 2006 before the Pennsylvania casinos were up and running.

Since then, VLT revenue has declined every year, and a 2009 response legalized table games and limited sports betting at the tracks, which allowed overall gaming growth in 2010. However, the declines resumed in 2011. Overall, gaming revenues fell by 15.2 percent from 2006 to 2011; revenues from VLTs dropped by more than 27 percent. Certainly the recession played a part in recent years, but competition was the driving force.

Fortunately for the state, the 2009 legislation also increased the taxes on VLT revenues, so the state’s own revenue from gaming hasn’t dropped off nearly as much over the longer term. In 2011, the state share of all gaming was $230.2 million (before expenses of the Delaware Lottery and the Division of Gaming Enforcement), down just one percent from 2006. However, the one-year decline in state revenue from 2010 to 2011 was 6.2 percent, which no doubt is a major reason the legislature is considering the current bill.

The following chart summarizes gaming revenues over the past ten years at each of the three racetracks in the state. Not surprisingly, Delaware Park has suffered the largest declines due to competition from two new casinos within 30 miles – Harrah’s Chester, which opened in January 2007, is the closest Pennsylvania casino, and Hollywood Casino Perryville is Maryland’s closest competitor; it opened in September 2010. Harrington Raceway had its worst year in 2011 with the opening of its closest out-of-state competitor, the Casino at Ocean Downs in Maryland, about 55 miles to its south, and will lose more ground with the opening of Maryland Live! earlier this month and of course the future Baltimore casino. Dover Downs, in the middle of the state, has been the most insulated from competition, although it too has seen overall gaming revenue decline from 2006 to 2011.

 

 

 Net gaming revenues (millions)            Statewide totals (millions)
 Delaware ParkDover DownsHarringtonGaming revenueState revenue
      
2002$268.2$186.9$110.8$565.9$201.0
2003233.9167.4100.7502.0175.7
2004261.6185.9105.9553.3196.3
2005272.0194.5112.9579.4206.3
2006306.7218.6126.5651.7232.5
2007272.6216.9122.9612.4216.6
2008253.3213.6122.1588.9210.6
      
2009:     
  VLTs235.0207.7121.5564.2277.6
  Sports2.10.60.53.21.6
Total237.1208.4121.9567.4229.1
      
2010:     
  VLTs216.8199.5116.5532.8231.8
  Tables19.410.68.538.511.3
  Sports3.10.90.64.62.3
Total239.4211.0125.6576.0245.4
      
2011:     
  VLTs185.7186.7101.6474.0206.2
  Tables37.223.013.673.921.7
  Sports3.00.80.64.52.2
Total226.0210.5115.9552.4230.2
      
Percent change
2006-2011,
all gaming
-26.3%-3.7%-8.4%-15.2%-1.0%


Notes on the data: These calendar year figures are based on monthly reports as posted on the Delaware Lottery’s website, which themselves are based on weekly periods, so they are not exact calendar years. The sports betting numbers are for a full football season despite a slight overlap between calendar years. For example, the 2011 sports betting figures are for the season from August 2011 through January 2012. Rows/columns may not add to totals due to rounding. Also note that a smoking ban took effect in late 2002, which was directly linked to the 2003 drop in revenues.