Board Refuses Independent Report

Pennsylvania is the state with the dubious distinction of passing flawed gambling legislation at midnight on the Fourth of July, that Beacon Hill seeks to follow.

Not every decision should be based on overstated revenues to the state, but other considerations --

... an independent study would be beneficial because it would allow assumptions to be applied to each applicant, such as the "cannibalization rate" ....

Beacon Hill employed taxpayers' hard-earned dollars to conduct 'benefits reports,' it's time for an Independent Cost Benefit Analysis that considers the other side of that equation.

Analysis of resort gambling pushed

State gambling officials say they don't need an independent expert to scrutinize revenue predictions from firms competing for Pennsylvania's last "resort casino" license, but some industry watchdogs say it could be a mistake to award the license without double-checking the figures.

The Pennsylvania Gaming Control Board doesn't intend to hire an outside firm, as it did before, to determine whether slot machines and table games at four proposed resort parlors could produce the $68 million to $107 million the competitors tout.

"We know from experience that these guys inflate the hell out of what they can accomplish," said Tim Potts, head of Democracy Rising, a good-government nonprofit. "When you're dealing with an issue that affects the public so directly, you need to have good numbers. You need to have an independent voice."

Revenue estimates range from $68 million a year predicted at a casino proposed for 84 Lumber owner Joe Hardy's Nemacolin Woodlands Resort to $107 million a year at the Fernwood Resort Casino in the Poconos. Two others in central Pennsylvania predict $68 million and $83.1 million.

In a letter he sent Wednesday, state Rep. Curt Schroder, R-Chester County, urged the Gaming Control Board to delay awarding the license, known as a Category 3 license, because five of the seven board members' terms expire in January.

The board could vote on the license as soon as Jan. 6.

Schroder, the newly appointed chairman of the House Gaming Oversight Committee, wrote that the public needs "to know that thorough background checks have been conducted and an independent agency has analyzed the finances of each applicant."

Doug Harbach, a spokesman for the board, said revenue is only one factor board members weigh. He said other considerations include business experience, ability to pay licensing fees, traffic impact and community support and opposition.

"I think the fixation on hiring a financial expert to do additional projections for the board is a red herring, when this agency now has hard data on revenue generated by PA casinos in order to evaluate other projections," Harbach wrote in an e-mail.

State law permits two casinos at hotel resorts with up to 600 slot machines and 50 table games. The first resort license went to Valley Forge Resort Casino in April 2009, but an appeal delayed its opening.

Resort licenses cost $5 million. To be eligible, resorts must have at least 275 guest rooms and can't be within 15 miles of an existing casino.

Christopher E. Jones, a gaming industry analyst with Telsey Advisory Group in New York, said an independent report likely would rely on revenue figures the state has from operating casinos.

Even so, he noted that earnings by resort casinos probably would be "more volatile and seasonal" than at stand-alone casinos, making them difficult to predict regardless of who's looking.

Applicants' estimates were more accurate than reports commissioned by the state, Harbach said, adding that "spending money on this type of outside contract no longer makes sense when we have actual gaming revenue figures."

A report prepared by Pricewaterhousecoopers for the control board predicted Rivers Casino would become the highest-grossing casino in the state with 5,000 slot machines.

It estimated first-year revenue could be as high as $428 million. The Rivers took in about $217 million its first year, with about 3,000 slot machines in operation.

Joseph Weinert, senior vice president of Spectrum Gaming Group in New Jersey, said an independent study would be beneficial because it would allow assumptions to be applied to each applicant, such as the "cannibalization rate" or how many players a resort casino would lure away from nearby casinos.

Weinert said the cost of gaming revenue reports can vary widely, from $25,000 to $100,000, depending on the complexity and time needed to complete one.

"In one sense, they're depriving themselves of an apples-to-apples comparison among the applicants," Weinert said.

On Thursday, the Gaming Control Board voted 6-1 to revoke a license for a stand-alone casino awarded in 2006 to Philadelphia Entertainment & Development Partners. The group planned to build Foxwoods Casino in South Philadelphia.

It was the first time the board took back a license. Members did so because of growing questions about financing for the project. Foxwoods partners said they finished negotiating a deal that would allow Harrah's Entertainment to assume the project and raise $275 million needed, but state regulators said the agreement was incomplete.

The board's decision and the likelihood of lawsuits filed by investors in the casino probably mean that Philadelphia will be without a second casino indefinitely.