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Panel eyes options for Delaware gambling industry

DOVER, Del. -- A panel examining how to keep Delaware's gambling industry competitive has yet to decide on recommendations for state lawmakers to consider.

The lottery and gaming study commission, which faces a Jan. 31 deadline to submit its report, met Monday to review several options, but members could not agree on any of them.

Several commission members noted that they are still awaiting a report from the accounting firm KPMG on the current status of Delaware's gambling industry.

"I personally need some more discussion about this stuff," said Sen. Brian Bushweller, D-Dover, who has offered several suggestions for commission members to consider.

State finance secretary Tom Cook said he would push KPMG to finish its report this week for distribution to commission members, who will meet again on Jan. 21.

Delaware officials have seen the state's three casinos steadily lose business in recent years to neighboring states despite the addition of table games, sports betting and online gambling. The commission was formed to study how Delaware casinos can respond to significant competition from new casinos in Maryland and Pennsylvania.

Among the options being considered by the commission is reconfiguring how gambling revenue is shared by the casinos, the state, and the horse racing industry.

One suggestion is to restore the revenue-sharing model for slot machines to the percentages that were in place before lawmakers increased the state's share in 2009 to help balance the budget. Under that scenario, the state stands to lose $25 million a year, which did not sit well with House Majority Leader Valerie Longhurst, D-Bear.

"I think the $25 million hit is something we can't afford to do right now," Longhurst said, referring to current budget projections that show a tight fiscal year ahead.

Longhurst also noted that state officials last year extended an $8 million financial bailout for Delaware's three casinos to help cover anticipated increases in slot machine vendor costs.

Another alternative being considered by the panel is paying vendor fees off the top before the state gets its share of slots revenue. Currently, the state takes its 43.5 percent off the top of net gambling proceeds. The horsemen get roughly 10 percent before casino vendor expenses are paid, and the casinos get the remainder. One proposed change would cost the state about $7 million by taking vendor fees off the top, with the state and the casinos getting equal 45 percent shares of the remainder.

Another proposal calls for reducing the state's share of table game revenue from 29.4 percent to 15 percent, an estimated $7.2 million change in favor of the casinos.

Panel members also are looking at the possibility of eliminating the $3 million annual table games license fee for the casinos, and reducing the state share of online gambling revenue to a flat 25 percent. Currently, the state takes 43.5 percent of online slots revenue, and 29.4 percent of online table games revenue.

Cook said a 25 percent share of online gambling for the state would me more in line with the revenue-sharing model in other jurisdictions.

State economic development director Alan Levin suggested that if monetary concessions are made to the casinos, they should invest in new amenities in an effort to attract more customers.

"There's got to be a carrot and stick here in some way," Levin said.