Friday, January 31, 2014

Before we go bailing out Dennis McGlynn and Delaware casinos . . .

. . . let's take a moment to think about pretending to save jobs while actually (a) socializing the losses of millionaires and (b) throwing good money after bad.

You will note that today's WNJ article bemoaning the drop in Dover Downs net gambling profits from last years' $4.7 million to a mere $13,000 heavily quotes DD CEO Dennis McGlynn talking about how badly his industry needs another State bail-out:

Denis McGlynn, president and CEO of Dover Downs Gaming and Entertainment and Dover Motorsports Inc., said the earnings drop, caused by an increase in competition and disproportionate tax rates, validates long-held concerns by casinos that the state has not kept up with a rapidly changing casinoindustry. 
“I think the numbers validate the story we’ve been telling everyone basically, and most particularly those who do control our destiny,” McGlynn said. 
“It doesn’t take a rocket scientist to figure out what next year is going to look like,” he said. 
The casino reported revenues of $197.2 million as of Dec. 31, down from $225.9 million in 2012. Expenses dropped from $215.6 million in 2012 to $195 million last year, according to the casino’s earnings report. 
The casino is carrying $47 million in debt in the form of a revolving line of credit, down from $58 million in 2012.
Before we start shedding tears for Mr. McGlynn and his noble quest to keep blackjack dealers and security guards in their jobs if only the State of Delaware will come up with another bail-out, let's understand a couple of things:

First, Mr. McGlynn has personally become a millionaire several times over thanks to State largess.  In 2011 his compensation from Dover Downs Casinos was $351,000; from Dover Motorsports was $285,600; and from Campus Crest Communities was $30,000.  While his current earnings (and, one suspects, this list from Forbes was not complete) can't be easily determined, we do know that his compensation from Dover Motorsports jumped up from that $285,600 to $422,550 in 2012.

So while Mr. McGlynn is sounding his warnings about economic collapse, you have to realize that he's personally done incredibly well thanks to the State of Delaware limiting his competition inside our borders, subsidizing his business, and supporting his loans.  He's not so much crying about the loss of a blackjack dealer's $50,000/year job, but about the dangers to his own lifestyle.

There's absolutely nothing wrong with being successful . . . unless your success is continually underwritten by other people's tax money and you perennially walk around Dover holding a tin cup in your hand crying that you need more, more, more . . .

Oh, and Mr. McGlynn does spread the wealth to the politicians in the area whose job it is to keep that corporate welfare rolling in.  Here's just 2012:

[Unfortunately for Dover Downs, backing Lincoln Willis last time around turned out to be a good bet gone bad.  Wonder if he's supporting Trey Paradee this year?]

I can't find (yet) comparable earnings information on other people like Delaware Park LLC CEO Andrew Gentile, but you can make a safe bet that Mr. Gentile isn't personally hurting, either.

The reality is that the Delaware General Assembly bet the farm on casino gambling, and refused to acknowledge signs as far back as 2007 that there was now regional competition, and that you couldn't just sit there and wait for people to travel to Dover and throw their quarters into your slot machines.

So our legislators treated casino income as a more or less fixed part of the State budget and happily spent it all, every year, and counted on it in projections for the future.  Then other States got casinos (including more modern casinos with more bells and whistles) and--BAM!--bloom off rose.

So now legislators and the Governor find themselves scrambling to find ways to throw more money at millionaire casino CEOs ostensibly to "save jobs," but really to avoid losing easy tax revenue that is going to diminish relentlessly over the next several years now matter what they do.

So while they claim to be struggling to find the money to fund Medicaid expansion, hitting State workers with the first raise Jack Markell has ever proposed (a whopping 1%), and plotting to borrow half a billion dollars to build new roads and bridges, our legislators will also be shoveling millions of dollars toward Dover Downs, Delaware Park, and Harrington Raceway.

Time to bite the bullet, ladies and gentlemen, and admit that your entire premise was wrong, and that we have to start over when thinking about long-term fiscal stability.

Yeah, that's going to happen.


Arthur said...

The only long term financial stability in Delaware is being an elected official.

Anonymous said...

Nice one Arthur...

I told Kilroy and he's over there now personally trying out the possibility, but we need to legalize Marijuana on all the Racino Grounds.

That's the marketing edge our casino's need to stay competitive...

Arthur said...

Man, imagine the marketing edge if we legalized prostitution. Whores drugs and gambling all in one place! Think of the income and taxes then.

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Anonymous said...

The reason they are failing is TOO much money taken by the Government of DE and maybe incompetent management at these Racionos.