DOVER, Del. (WBOC/AP)- Administration officials for Gov. Jack Markell are proposing an $8 million temporary financial bailout for Delaware's three casinos.
Administration officials made the proposal Monday to the legislature's capital budget committee as part of their recommendations for spending some $50 million in newly available funds. The new funding includes $21 million in estimated additional tax revenue for the fiscal year starting July 1, and $22 million in premiums from a recent bond sale.
Budget director Ann Visalli said the Department of Finance would develop a formula for distributing the cash to the casinos, which she said are struggling with gaps between revenues and costs.
It's no secret Delaware's casinos are having financial issues. Lots of people agree something has to be done. But some in Dover are using the word "bailout" to describe this idea.
Gov. Markell disagrees with that assessment and is defending the proposal.
"The real issue here is the contract for the machines the casinos use is about up," he said. "Those contracts are being re-bid now. There's likely to be a significant increase in what the vendors charge for those machines."
Markell says this is one-time assistance while state lawmakers take a look at broader issues with the relationship between the state and the industry.
The most notable question is are the casinos over-taxed? Their current rate is 43.5-percent. It rose to that level in 2009.
Sen. Brian Bushweller, D-Dover, says that's too high, considering the economy and added competition in Pennsylvania and Maryland.
"We may not be able to do anything about the competition or the sluggish economy," he said. "What we can do is correct the mistake we made in 2009. That's what the governor is proposing. I think it's a good idea."
But Rep. Dave Wilson, R-Bridgeville, worries about the precedent this would set and called it a bailout.
"My biggest concern is when we start funding casinos out of taxpayers' revenue I'm afraid down the road there will be other entities that will get in trouble and say, 'What can you do for us?' I'm really concerned about changing the structure of how we give people back funding."
Dover Downs tells WBOC it's not prepared to comment on this proposal yet. But the Associated Press quoted CEO Ed Sutor as saying, "Anything is helpful," and, "You don't look a gift horse in the mouth."
In the past few months, Sutor has pushed for the state to reduce the casinos' tax rate.
"We're not in a position right now to do that," Markell said. "But a number of members of the General Assembly have asked for the opportunity to have that conversation. So, this is a temporary measure aimed to not make things worse in the meantime."
This proposal was made to lawmakers on the state's Bond Bill Committee. That committee is meeting this week to finalize its part of the budget.
Some Delaware residents told WBOC they think the $8 million would be a good investment for the state.
"If in the long-run they think they can get that and quite a bit more out of the casinos, then I think it is [a good idea]," Rob McAllister said.
However, others like James Ariette said casinos do not deserve help from the state.
"I don't think they should get a bailout because it's a business that these people decided to start, so take the licks as they come," he said."That money that they're talking about giving to the casinos as bail out that could be used for schools, education, I mean there's a lot of areas that need help more than a casino," Ariette said.
It is unclear if the casinos would have to pay back the money if they receive it.
In addition to casino relief, the administration has made several other recommendations for new capital budget expenditures, including $10 million in additional funds for the port of Wilmington.
WBOC reporter LeAnne Matlach contributed to this story.
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