One Year Later: Successes And Failures Of Pennsylvania’s Gaming Reform Law

It has been a year since Pennsylvania’s gambling expansion law passed. What has the state accomplished and what comes in year two?

Today is the one-year anniversary of Pennsylvania’s massive gaming reform law which helped the Keystone State join the modern world by becoming the fourth state to legalize online gambling.

Online gambling was the most ballyhooed part of the Keystone State’s comprehensive gaming reform law, but the 900-page bill did a whole lot more than that.

In addition to online gambling, the Pennsylvania gaming law:

  • Legalized sports betting
  • Regulated daily fantasy sports
  • Legalized online lottery sales and monitor lottery games
  • Created a fourth category of casinos, satellite casinos
  • Loosened restrictions on Category 3 “resort” casinos
  • Authorized video gambling terminals (VGTs) at select locations
  • Authorized tablet gaming at select airports
  • Paved the way for the issuance of a Category 2 license in Philadelphia

The success of these reforms can be measured in two ways:

  • Revenue. Some of the reforms have lived up to the initial revenue expectations. Others have exceeded expectations. And still, others have fallen short of expectations.
  • Timeline. Some of the reforms have met their target launch dates, but many have been slower to market than expected.

Here’s a look at the impact of the key components of the gaming reform bill.

Online gambling is behind schedule but already a moneymaker

As noted above, online gambling was the big ticket PA gaming revenue items in the bill. Bringing online poker and casino games to the state has been a slow and frustrating process.

Twelve months after legalizing online gambling, the state is still several months away from launch. That places it well behind the original timeline estimates of 9-12 months.

That said, money is flowing into the state’s coffers from online gambling.

The money isn’t coming from bets and wagers (that will come down the road), it’s coming from the one-time windfall the state receives for each interactive license it sells.

To date, Pennsylvania has collected $100 million in up-front licensing fees, and still has 10 licenses (three slot, three table game, and three poker) in its pocket.

The state is in the process of doling out those licenses to approved gaming entities from outside of Pennsylvania. The price for the a la carte licenses runs $4 million each.

Sports betting was an unexpected bonus

Pennsylvania passed its gaming reform law before the Supreme Court of the United States’ monumental decision that struck down PASPA and paved the way for legal sports betting in the US.

But Pennsylvania lawmakers had the foresight to tuck a provision that preemptively legalizes sports betting into the bill.

Despite an absurdly high tax rate of 36 percent, five Pennsylvania casinos have already coughed up the $10 million for a PA sports betting license.

Because Pennsylvania didn’t anticipate revenue from sports betting, revenues from licenses and later operations will be found money.

Category 4 casinos exceeding all expectations

One of the biggest unknowns in the gaming reform law was the auctioning off of up to 10 Category 4 satellite casino licenses.

Nobody knew how much interest there would be in these licenses or how much money casinos would be willing to pay for a glorified slot parlor.

Pennsylvania is already pretty well blanketed with casinos, but there are some pockets that are underserved, and those areas commanded serious bids.

The minimum bid for the licenses was set at $7.5 million. Pennsylvania estimated about $67.5 million coming from the auctions. Even though only five casino licenses were claimed, the state easily surpassed that number.

The revenue from Category 4 casinos is currently at $127.7 million and counting. Don’t get too excited about that number going up though. There has been no action on the remaining six licenses since April.

January 10 auction

  • Winner: Mountainview Thoroughbred Racing Association, LLC (aka Hollywood Casino)
  • Winning bid: $50,100,000
  • Satellite location: Yoe, PA in York County

January 21 auction

  • Winner: Stadium Casinos LLC (Philly Live! Casino)
  • Winning bid: $40,100,005
  • Satellite location: Derry, PA in Westmoreland County

February 8 auction

  • Winner: Mount Airy Casino
  • Winning bid: $21,888,888.88
  • Satellite location: New Castle, PA in Lawrence County

February 22 auction

  • Winner: Parx Casino
  • Winning bid: $8,111,000
  • Satellite location: South Newton, PA in Cumberland County

April 4 auction

  • Winner: Hollywood Casino at Penn National
  • Winning bid: $7,500,003
  • Satellite location: West Cocalico Township, PA in Lancaster County

DFS is providing a slow revenue trickle

Daily fantasy sports (DFS) has been a hot topic for several years, but by the time the Pennsylvania legislature got around to it the fervor was already dying down. DFS simply wasn’t the revenue generator states were originally led to believe it was.

At the end of the day, legalizing DFS was an easy way to get some money (around a couple million dollars annually) flowing into the state’s coffers.

  • May 2018: $199,755.94
  • June 2018: $152,679.34
  • July 2018: $131,727.75
  • August 2018: $141,543.03
  • September 2018: $320,057.10
  • Total DFS tax revenue earned to date: $945,763.16

Online lottery and monitor gaming already paying dividends

One of the most unheralded parts of the gaming reform law was the legalization of online lottery and monitor gaming.

Both got off to a strong start following their rollouts earlier this year, and are well on their way of achieving their 2018-2019 revenue targets of around $50 million.

However, the online lottery instant win games have come under fire from the state’s casinos. The casinos are crying foul over the slot-like games, and after the state rebuked their calls to end the games, a group of casinos have filed suit.

Category 3 reforms provide a nice boost

In its quest to raise as much revenue as possible the PA legislature served up a couple of batting practice balls to the state’s Category 3 “resort” casinos.

For a one-time fee, Category 3 casinos could:

  • Eliminate the amenity fee (a door charge for non-hotel-guests to gamble in the casino).
  • Expand their slot and table game offerings.

Valley Forge jumped at the state’s amenity fee offer and has been reaping the rewards ever since. So, not only did the state receive the one-time payment, but Valley Forge’s monthly revenue has ballooned, which means more tax revenue for the state.

Interestingly, the state’s other Category 3 casino, Lady Luck Nemacolin hasn’t followed suit.

Further, neither casino has paid the $2.5 million to increase its number of slots, or the $1 million payment to increase its number of table games.

The jury is still out on VGTs

Like online gambling, VGTs were propped up as one of the cornerstones of the bill. Unlike online gambling, VGTs have been more fizzle than sizzle.

The state has received 11 applications and several have been conditionally approved. However, not a single VGT has been placed in a qualified truck stop.

Flights aren’t the only thing delayed at airports

Another part of the bill that hasn’t amounted to a hill of beans is tablet gaming at select airports.

Airport gaming seems to be on the backburner while the state squares away the bigger ticket items like sports betting, online gaming, VGTs, and satellite casinos.

The Stadium Casino project

Two provisions in the gaming reform put the stalled Stadium Casino project back on track by repealing limits on casino ownership in the state. Originally approved in 2014, the collaboration between Cordish Company and Parx Casino parent company Greenwood Racing.

The gaming reform law also ended a lawsuit by SugarHouse Casino with a provision that imposes heavy fines on casinos with active lawsuits.

With the project back on track, Cordish and Greenwood cut the state a $50 million check for the license.

But the story doesn’t end there. According to recent rumors, the two companies are getting cold feet, and are looking to back out of the project.

Battle Over Hollywood Casino York Results In A PGCB Hearing

After opting out, opting back in, and accusations of bribery, the Hollywood Casino York mini-casino project is getting a Nov. 1 public hearing.

It may not be as simple as putting a York in it, after all. At least as far as the Hollywood Casino York, proposed by Penn National Gaming, is concerned.

Trouble from the start for satellite casino

The proposed York Galleria mini-casino site is already creating ample issues for Springettsbury Township already. As part of the Pennsylvania gambling expansion bill Gov. Tom Wolf signed into existence in 2017, municipalities had the option of opting out from hosting one of 10 proposed satellite casinos.

Plenty did just that, Springettsbury Township included.

In order to opt out, municipalities needed to conduct a public meeting, take a vote, and then send documentation of that vote to the Pennsylvania Gaming Control Board (PGCB). Only a small handful of municipalities actually lobbied for a new casino, meaning more than 1,000 municipalities in Pennsylvania chose to opt out.

Despite Springettsbury’s initial reluctance, the town council voted to overturn the opt-out. Determined residents put up a fight via public forums, but that didn’t stop the $120 million deal with Penn National to open Hollywood Casino York at the York Galleria site.

Springettsbury springs back to contention

Mini-casinos, also known as satellite casinos, are, in essence, limited-size gambling parlors. Penn National expects Hollywood Casino York to initially hold 500 slots and 20 table games. All told, mini-casinos in Pennsylvania are allowed to house up to 750 slots and 40 table games.

But if a fair number of Springettsbury Township residents have their way, the former Sears at the York Galleria mall may not play host to any games or slots or, really, gambling of any kind.

This week, the PGCB set a date for another attempt at gathering public opinion on the proposed Hollywood Casino York.

Residents will have an opportunity to voice their opinion and make any and all concerns heard. It may well be their last chance to speak against, or in favor of, the Hollywood Casino York.

Already, Springettsbury supervisors have taken strides to make Penn National feel more at home, modifying town ordinances to make room for the mini-casino.

Following the initial hearings in July, in which residents cited concerns over potential increases in crime, drops in property value, and the casino’s proximity to schools and a playground, Springettsbury Township supervisors pushed forward, altering ordinances to include regulations for casinos, such as allowing them in the commercial highway zone, which includes the mall.

Why the contention over Hollywood Casino York?

If it seems that the proposed Hollywood York Casino is embroiled in more than its fair share of controversy, you’re right.

Springettsbury’s initial decision to opt out presumably led to the majority of the infighting. It culminated in allegations of a bribe in mid-September.

Previously, Penn National sued Pennsylvania over the very notion of mini-casinos. Penn National was concerned that the expansion of gambling in the state would cause “significant and unique” harm to its property, Hollywood Casino, located in Harrisburg.

Township supervisor Mark Swomley vehemently denied the bribe allegations, which came via an email from a concerned citizen, and attempted to explain away the township’s initial decision to opt out.

As Swomley frames it, the township did not have a working definition of ‘gaming facilities’ in its zoning ordinance. Therefore, it did not have control over where a casino could be placed within the community. Hence the changes to the ordinance and, perhaps, the subsequent about-face regarding a mini-casino in their community.

How to chime in on Hollywood Casino York

Any Springettsbury residents intending to speak at the hearing must register at the board’s website. Follow the QuickLinks section to the “Penn National Casino York Public Input Hearing” link.

People who cannot attend the hearing but would like to place comments into the record can also mail [email protected] or fax comments to 717-265-7416.

The deadline for registration to speak is noon on Oct. 30. Mailed comments must be postmarked no later than Oct. 30 and mailed to:

PA Gaming Control Board
P.O. Box 69060
Harrisburg, PA 17106
Attention: Board Clerk

Big News For Big Beaver, The New Home Of Mount Airy Pittsburgh

The second mini-casino to actually have construction plans is Mount Airy Pittsburgh. The resort-style satellite property will call Big Beaver, PA home.

Big Beaver, PA, it’s time to celebrate.

Earlier today, Mount Airy Casino Resort announced that the cartoonishly-named township will be the site of Mount Airy Pittsburgh, a Category 4 mini-casino.

“For over a decade, Mount Airy Casino Resort in the Poconos has paved the way as one of the nation’s most dynamic, upscale destination casino resorts,” managing trustee and owner Lisa DeNaples said in the release. “Our thoughtful expansion into the Pittsburgh and tri-state area represents a huge milestone in our effort to do what we live and breathe every day: provide award-winning customer service and luxury amenities to more people.”

The news makes Mount Airy the second casino to announce the exact location of their mini casino. Stadium Casino LLC is the other, having announced this past month their plans to put their casino in a Westmoreland County mall.

Mount Airy’s satellite is the anti-mall casino

Whereas Stadium will integrate a casino into an existing mall, Mount Airy is starting with a clean slate. Here’s what we know the property will feature so far, based on Mount Airy’s press release:

  • 750 slots and 30 table games
  • High-limit area and sports bar
  • The Friedmutter Group will design the property
  • Property will create around 700 jobs

Based on the press release, it seems as though Mount Airy hopes to recreate the high-end experience they’ve popularized in the Poconos.

The Friedmutter Group is a world-renowned design firm. Their resume includes The Cosmopolitan in Las Vegas.

According to the press release, the mini-casino is phase one of a two-step project. The second phase will include:

  • A resort-hotel
  • Convention center
  • Fine dining
  • Pool
  • Spa
  • Salon

The following quote from DeNaples summarizes what Mount Airy is hoping to do with their satellite:

“We envision the casino as just the start of building something truly special for the tri-state area. Imagine not just a casino, but a destination that raises industry-wide expectations and standards – serving as a phenomenal gathering space for celebrations and live entertainment and bringing upwards of 700 jobs to regional residents.”

The mini-casino construction should start by the end of this year and finish in late 2019.

Where we’re at with satellite casinos across the state

While Mount Airy and Stadium Casino have found luck with townships who want them, the same can’t be said for Penn National, who holds two mini-casino licenses.

They proposed putting a casino in a mall in York County; residents would have none of it during a public hearing about the possibility of having a casino in their midst.

Parx, the only other satellite licensee, also faced some pushback from residents in two separate townships in Cumberland County.

With Mount Airy and Stadium now on track to break ground on their new casinos, we should see an announcement of similar news from Parx and Penn National during the next month or two.

If You Can’t Beat ‘Em, Join ‘Em: Penn National Drops Suit To Focus On Satellite Casinos

After protecting its turf on multiple fronts, Penn National is dropping its lawsuit challenging the legality of mini-casinos, opting instead to focus on its two mini-casinos.

The lawsuit filed by Penn National against Gov. Tom Wolf and the Pennsylvania Gaming Control Board (PGCB) is no more.

The suit focused on the new Category 4 casino licenses for mini-casinos in Pennsylvania. With two of its own mini-casinos of its own to worry about, however, Penn National pulled the lawsuit. Instead, it is plugging forward on its two satellite properties.

More on the Penn National lawsuit

For months, Penn National fought against the new Category 4 provisions. The company feared cannibalization of existing businesses.

The Cat 4 licenses authorized a 25-mile buffer zone. Penn National used its Hollywood Casino as its prime example. The suit claimed the casino enjoyed a wide geographic reach for potential customers and the buffer zone would affect Hollywood’s business.

Penn National’s case implored the federal courts to block the new Cat 4 provisions because they use “unconstitutional” language. The company alleged that mini-casinos pit Penn National in a worse position than any other casino in the Keystone State.

And to top it all off, Penn National claimed that Mount Airy Casino received special treatment by the PGCB prohibiting new casinos within three counties surrounding Mount Airy.

There’s more to the dropped suit

Despite its initial — and then ongoing — objections to the new licenses, Penn National still jumped on board.

The company dropped $50.1 million for the state’s first Cat 4 license, then purchased a second license for another $7.5 million. So while Penn National fought against mini-casinos, it held ownership of two mini-casinos: one near York, the other between Lancaster and Reading.

In an interview with PennLive, spokesman Eric Schippers said Penn National “made a business decision to withdraw our lawsuits against the Category 4 (casino) law.”

“While we continue to believe in the merits of our arguments, we have chosen to focus entirely on our development efforts for our two new casinos, rather than pursue what is likely to be a lengthy and costly legal battle.

“As previously stated, our goal in pursuing our Cat4 licenses is both defensive, in terms of protecting our existing investment at Hollywood Casino from new competition, and offensive in terms of penetrating more deeply into more populous market areas to our south and east, in order to drive incremental value for our shareholders.”

Boiled down, Schippers said the suit was dropped so that Penn National can move forward with its mini-casinos, even if they were initially purchased as a “defensive” move.

Regulation stipulations could explain Penn’s decision

That said, it appears Penn National were forced to choose between lawsuit or mini-casino. From the PGCB rules:

Notwithstanding any law to the contrary, the board and the commissions shall not consider any application for a license if the applicant or any person affiliated with or directly related to the applicant is a party in any ongoing civil proceeding in which the party is seeking to overturn or otherwise challenge a decision or order of the board or commissions pertaining to the approval, denial or conditioning of a license to conduct thoroughbred or harness horse race meetings respectively with pari-mutuel wagering or to operate slot machines.

PA not out of the woods yet

Yes, Penn National has withdrawn its suit. But Sands Bethlehem continues to press on.

The casino also filed a lawsuit late last year, alleging that the new gambling law is in violation of state and federal constitutional law by requiring high-revenue casinos to pay a special tax. That tax is moved into a marketing fund that benefits smaller casinos.

Sands Bethlehem does not seem to be as willing to pull its suit as Penn National.

PA Might Want To Cut And Run After Five Mini-Casino Licenses

After awarding just a single mini-casino license, interest in the subsequent round of satellite casinos dried up. Is it time to stop trying to make mini-casinos happen?

It now seems the Pennsylvania Gaming Control Board (PGCB) needs to make some important decision.

Last week’s round of mini-casino auctioning went without a bidder, and now it appears that the state may not sell all 10 of these licenses. As a result, the PGCB faces two roads diverged in a wood.

What is a mini-casino?

A scaled-down version of traditional casinos, mini-casinos feature 300 to 750 slot machines. Some may include up to 30 table games.

This subsect of the PA gaming industry became an option after Pennsylvania passed a satellite casino law last October that allowed for 10 new casinos to fall into a new category of the gambling establishment: Category 4. Licenses for these properties would cost $7.5 million. Adding 30 table games would cost an additional $2.5 million.

However, these satellite properties cannot be located within 25 miles of existing Category 1, 2, or 3 properties.

Timeline leading up to latest no-show bids

As the first rounds of auctions neared, over 40 percent of the 2,560 municipalities in Pennsylvania opted not to participate. That included most of Philadelphia and all of Lancaster County. The consensus, particularly in Philadelphia, was a fear of oversaturation of casinos.

In January’s first two auctions, Penn National ($50.1 million) and Stadium Casino ($40.1 million) beat out a combined six other bidders to obtain mini-casinos. Three bidders participated in the Feb. 8 auction, with Mount Airy Casino coming away with the license for just shy of $21.9 million. Parx Casino ($8.1 million) landed a mini-casino during the Feb. 22 auction, followed again by Penn National, which spent $7.5 million as the only bidder April 4. That was a subsequent auction as the state attempted to sell off the remaining licenses.

Interestingly, Penn National has been the most vocal opponent of mini-casino expansion. As the only casino in the central area of Pennsylvania, Penn National was steadfast in its claim that the satellite properties would result in “significant and unique” damage to its Hollywood Casino, according to a 57-page lawsuit against the state that was filed in federal court in January.

Yet while the company is continuing to fight to get the satellite casino law overturned, Penn National figured it would still participate in the auctions as a backstop in case its lawsuit is dismissed. Devil you know, right?

What happens to the auctions now?

The likelihood is high that the auction process stops with five licenses still up for grabs. The PGCB may decide to hold a third and final round of bidding for approved non-casino license holders. Then again, there is strong outside interest to land a mini-casino site.  Note that Category 4 licensees are not eligible to participate in online gambling, so that is not an option for mini-casino license holders.

Now it is time for the PGCB to assess the situation. The next round of auctions, if they took place, would be open to groups outside of existing casino license holders, in which case the PGCB would predetermine eligibility requirements.

Buying out Pennsylvania casinos is becoming a hot ticket. It affords outside companies the opportunity to get in on the ground floor as the world of gaming is due to expand.

Still, purchasing these Category 4 licenses will not provide owners to offer such experiences. The logic goes that casinos with higher-category licenses could provide sports betting, et al., but a mini-casino on its own would not have that kind of freedom. To boot, a Cat 4 casino would not have access to any of the available interactive gaming licenses.

Basically, if an outside group invested in a mini-casino, that would be all it was investing in.

The other option for the PGCB is to shut down the auctions altogether. Half of the 10 mini-casino licenses are still available, and the last auction went without a bidder. Expectations have already been met. Large bids from the first few rounds generated over $120 million. Consider that, had all 10 licenses sold for the base cost of $7.5 million, the result would be $75 million in revenue.

The ideal locations for mini-casinos, allowing for buffer zones from existing casinos, have already been taken. And over 1,000 municipalities in the state have opted out of hosting a mini-casino. Available options are slim for the PGCB. Perhaps it is time for it to take the money and run.

The Four Types Of Land-Based PA Casino Licenses Explained

There are four different types of casinos in Pennsylvania. Each category can have a limited number of slots and table games in addition to other amenities all based on type.

Pennsylvania first launched legal casino gambling in 2006 when the first legal slot machines opened up at racetrack and casino properties across the state.

Since then, 12 legal gambling operations opened their doors, and a 13th is currently under construction in Philadelphia.

The original authorization for slot operations came from Pennsylvania’s Racehorse Development and Gaming Act, which was signed into law on July 5, 2004. In fact, the act created the Pennsylvania Gaming Control Board (PGCB) to oversee casino gambling in the state. Plus, it also created three categories of casino licenses governing gambling operations.

Category 1 licenses are for the state’s existing racetracks.

Category 2 licenses for stand-alone casino operations.

Category 3 licenses are for resort casinos.

In 2010, lawmakers amended the Act to allow for the operation of table games inside all three types of licensed facilities.

Plus, in 2017, the state passed a comprehensive gambling expansion package. It authorized the issue of online gambling licenses. Plus, this new set of laws created a fourth casino license category for satellite, or mini-casinos, across the state.

Here’s a look at the now four types of land-based PA casino licenses and exactly what each authorizes:

Category 1 – Racinos

Category 1 casino licenses were designed to help bolster the state’s struggling horse racing industry. The state’s existing racetracks were invited to apply for these Category 1 licenses and turn their horse racing facilities into a combination racetrack/casino known widely as a racino. The state planned to award no more than seven Category 1 licenses.

Each license permits the racetrack facility to host as many as 250 table games and 5,000 slot machines.

Six racetracks applied for Category 1 licenses and were approved. The list of currently operating Category 1 licensed Racinos in the state includes:

In order to apply for the license, existing racetracks were required to host live racing for at least two years prior. In order to keep it, live racing must occur at the property at least 100 days every year.

If a new racetrack property wants to apply for a Category 1 license, it must host live racing for a minimum of 150 days by its second year.

Category 2 – Stand-alone casinos

Category 2 licenses are for classic casino operations. There are currently five Category 2 licenses in the state. These are the four that are open:

The state granted a Category 2 license to Stadium Casino LLC. This entity is a partnership between Cordish Cos. and Parx Casino and racing owners Greenwood Gaming & Entertainment Inc. They are currently building a casino complex in South Philadelphia’s sports stadium district. The complex should open in 2020.

Category 2 license holders can operate the same 250 table games and 5,000 slot machines the state’s Category 1 license holders can. They can also offer major resort amenities, including restaurants, spas, and entertainment.

However, Category 2 licensees are not permitted to operate hotels directly connected to the casinos. Although, hotels may be built elsewhere on the property.

Category 2 licensees must build casinos in major cities or tourist areas. Additionally, they must be outside of a 30-mile radius of any Category 1 Racino.

Category 3 – Resort casinos

Category 3 licenses are for resort casino properties. The law authorizes the state to issue three of these licenses. So far, there are only two Category 3 casinos. These are:

Gaming options are restricted to 600 slot machines and 50 tables. However, these are the only gaming facilities that can have attached hotels.

Initially, casino players had to either be hotel guests or pay a fee to use the property’s amenities. However, as a part of the state’s 2017 gambling expansion, Category 3 licensees could pay a $1 million fee to remove the amenity fee provision.

Category 3 licensees can now also pay another $1 million to add an additional 15 table games and $2.5 million to add up to 250 slot machines.

Category 4 – Satellite Casinos

The comprehensive gambling expansion laws passed by PA legislators in October 2017 authorized the issue of up to 10 Category 4 satellite casino licenses

These mini-casinos can operate anywhere from 300 to 750 slot machines and up to 30 table games. Properties can add 10 more table games after the first year of year of operation.

Satellite casino sites cannot be within 25 miles of one of the state’s existing Category 1, 2, or 3 casino license holders. However, its these license holders that got the first chance to procure the licenses and build the casinos.

PGCB is now in round two of auctions for Category 4 licenses. The first round began in January 2018, resulting in four accepted bids:

  • Mountainview Thoroughbred Racing Association, LLC, operators of Hollywood Casino at Penn National Race Course, bid $50,100,000 to build in the Borough of Yoe in York County.
  • Stadium Casino, LLC, the group in the middle of construction on a second Philadelphia casino, bid $40,100,005 to build in Derry Township in Westmoreland County.
  • Mount Airy #1, LLC, operator of the Mount Airy Casino Resort, bid $21,188,888.88 to build in the City of New Castle in Lawrence County.
  • Greenwood Gaming and Entertainment Inc., which operates Parx Casino, bid $8,111,000 to build in South Newton Township in Cumberland County.

Satellite Casino Bachelor: Suitors Line Up To Win Stadium’s Rose

With a lucrative satellite casino up for grabs, communities across Westmoreland County are wooing Stadium Casino LLC to partner on the project.

The suitors are lining up.

In January, Stadium Casino LLC won the second of 10 satellite casino licenses the Pennsylvania Gaming Control Board (PGCB) auctioned off as part of the state’s gambling expansion package passed in Oct. 2017.

The group is about to start the demo at the property upon which it will build Philly Live! casino. It also designated a 15-mile circle within Westmoreland County as the site of its satellite casino. Now, according to several news outlets, towns are lining up to woo the county’s first satellite casino.

The communities in the running for the casino are, according to Trib Live:

  • Derry
  • Greensburg
  • Hempfield
  • Unity
  • Salem

Towns hoping for satellite benefits

A satellite casino is smaller than existing brick-and-mortar casinos. There is a limit of 750 slots and 40 table games. Nonetheless, it still represents a tremendous revenue opportunity for the townships that end up with them.

A satellite casino means increased traffic, which means more revenue for:

  • Gas stations
  • Restaurants
  • Shopping areas
  • Hotels and motels

Local leaders are aware of the economic benefits of a satellite casino and, as one township supervisor commented, “they all want it.”

Hempfield is of particular interest because the town commercial development has “declined by about 40 percent over the last three years.”

Local residents were quick to point out via Facebook comments that a new casino also has its distinct disadvantages.

One alleged resident of Hempfield was worried that a new casino would pull people away from local bingo games that raise money for community services.

Another commenter whose hometown was listed as Greensburg scoffed at his city officials’ claims that the town lacks the infrastructure.

One trip down Route 136 will prove that the infrastructure isn’t quite where it needs to be, implying that the road’s poor condition belies officials’ claims.

Strategy is the name of the satellite game

Satellite casino locations are almost as important as the satellite themselves. Casinos jockey for locations that allow satellites (some counties opted out) and are close to big populations.

Place a satellite between a casino and its commuters and you’re bound to earn the business of gamblers who don’t want to drive farther away to their favorite casino floor.

Stadium Casino LLC’s selection of Westmoreland County is an advantageous one. It captures westbound traffic heading into Pittsburgh, the second-largest city in the state.

Meanwhile, Mount Airy, winner of the state’s third satellite auction, selected Lawrence County. The location is north of Pittsburgh and captures the wager-hungry living in the surprisingly populated Youngstown, OH area. The city’s urban area is home to more than 500,000 people.

Pittsburgh’s lone casino, Rivers, will most likely lose customers from the Youngstown area as well as from the less-populated counties to the east of the city.

Little about the PGCB’s satellite license auctions has been predictable. Still, it may be a foregone conclusion that Rivers will win one of the remaining six licenses in order to shore up the customer base.

The PGCB satellite auctions continue until all 10 licenses have a buyer or there are no bidders. Should any licenses remain, the board will open up the auction to Valley Forge and Lady Luck. These Category 2 properties are not allowed to bid during the initial round of auctions, per the rules of the state’s gambling expansion bill.

Mount Airy Beats Out Sands, Parx For Third Mini Casino

With a $21 million bid, Mount Airy secured the third mini casino license in Pennsylvania, which it will use to build a satellite property near Youngstown, OH.

The state of Pennsylvania is $112 million richer, thanks to its third satellite casino auction. Mount Airy won the bigging for a license with a $21 million bid. The casino plans to build their satellite in Lawrence County.

According to the Morning Call, Lawrence County leaders sent out letters to the state’s existing casino trying to convince them of the county’s readiness to welcome a satellite to their area.

County commissioner chairman Dan Vogler said he and his colleagues were waiting on the results of the lottery to find out who won and where the winner would build their property.

“We watched it here this morning, and we were very pleased with how it transpired,” Vogler said.

Mount Airy became the third casino in three auctions to win a license. Penn National scored the first one with a $51 million bid, while Stadium Gaming LLC snagged the second one for $41 million.

Mount Airy beat out two other casinos

Per the Pennsylvania Gaming Control Board’s rules, the auctions take place at 10 a.m. Bidders provide the auction board with two envelopes — one contains the casino’s bid and one contains the coordinates of where the casino plans on building their satellite.

After the auction was over, the board released the results: Sands and Parx’s bids lagged behind Mount Airy’s offer.

Satellite site just a few miles from 500,000 people

What makes the satellite casino auctions so fascinating isn’t just the bidding; it’s the strategy.

For example, Penn National won the first satellite license. Its mini-casino will pop up in Yoe County, which gives it access to Maryland residents driving up the interstate to gamble in Pennsylvania. However, there aren’t any major cities near the Maryland-Pennsylvania border.

Stadium Gaming LLC, the group who will soon break ground on Philadelphia’s second casino, won the second satellite license auction. Their site is just outside Pittsburgh, a move that will capture coming from the east of the metropolis and will, it seems, cut into Rivers’ revenue.

Mount Airy’s Lawrence County location may be the most ingenious of all of them because their site will be a 30-minute drive from Youngstown, OH, a city whose urban and surrounding area is home to more than 500,000 people.

The city does have a racino — Hollywood Gaming at Mahoning Valley Racetrack — but the property has no slot machines or table games, two things the satellite property will offer.

A look into the future of the remaining seven satellite licenses

There are two factors that stand at the forefront of the discussion about Pennsylvania’s remaining seven satellite licenses.

First, there’s a good chance prices may decline as each new license comes up for auction. The first license went for around $50 million, the second for $41 and third for $21 million. The minimum bid is $7.5 million. The downward trend points to the next license selling for less than $20 million, but it’s no guarantee.

Second, strategy may dictate who bids and when. For example, Stadium Gaming’s plans to build just a few miles east of Pittsburgh may push Rivers to make a move for a satellite and capture some of the revenue they’ll inevitably lose from the Stadium property.

SugarHouse, the original Philadelphia casino, may also feel pressure from Stadium Gaming’s satellite. While the satellite won’t cut into SugarHouse’s revenue, the money Stadium earns from that second location could be leveraged to strengthen their soon-to-be-constructed Philadelphia location through better marketing, expanded entertainment venues, and other avenues of growth.

Pittsburgh Think-Tank Asks If PA Gambling Expansion Has Gone Too Far

A Pittsburgh-area conservative think-tank is beginning to wonder if Pennsylvania’s gambling expansion will help fill state coffers, or if ongoing trends means oversaturaition is on the horizon.

A Pittsburgh-area conservative think-tank is beginning to wonder if Pennsylvania’s gambling expansion will help fill state coffers, or if ongoing trends will ensure just the status quo is maintained.

The Allegheny Institute for Public Policy released a new policy briefing last week. It was penned by the institute’s president, Jake Haulk, and Senior Research Associate Frank Gamrat.

In the briefing, Haulk and Gamrat outline how 2017 gaming revenues were up only slightly over 2016 numbers. Plus, the increase actually led to a decrease in state tax collected.

The increase in overall gaming revenues was led by an increase in table game revenues. This offset a small decline in slot machine revenues. However, it all led to a drop in state tax receipts from casino gaming.

Pennsylvania Gaming Control Board figures show table game revenues in the state rose 4.4 percent over 2016, from $853.2 million to $890.6 million. They also show a one percent drop in slot machine revenues, from $2.36 billion in 2016 to $2.33 billion last year, a decrease of almost $24 million.

Revenues up, taxes down

Table game revenues are taxed at a 16 percent rate in PA Slots at 54 percent. As a result, the increase in overall gaming revenue still meant a decrease for the state’s end.

In fact, the $24 million drop in slot machine revenues meant the state collected $13 million less in taxes. Of course, the rise in table game revenues brought the state $6 million more in taxes than it had collected in 2016. However, it still left state tax receipts from casino gaming $7 million short of 2016 figures.

Haulk and Gamrat say the numbers can be deceiving:

“At first glance, the ongoing increase in table game revenues gives the impression that the gaming industry in Pennsylvania is doing very well. But if the year-to-year growth trend continues its declining path, it will not bode well for the state’s reliance on those games to produce increasing tax revenue.”

Table games up, slots down

Plus, Haulk and Gamrat say the situation is getting worse every year.

The pair point out that the number of slot machines operating in PA is down 2.2 percent since 2012. Additionally, gross revenue per machine has fallen from a high of $7,753 in 2012 to $7,497 last year. That’s $256 per machine, representing a 3.3-percent dip.

In the meantime, the number of table games available is climbing. In 2013, the average monthly number of table games hit 1,058. Last year it was 1,243. Plus, the revenue per table has stayed relatively flat. It went from $59,610 in 2015 to $59,737 in 2017.

In October 2017, the state legislature passed new gaming laws. This included several expansion initiatives, including internet gambling and the authorization of up to 10 satellite casinos.

Each can operate from 300 to 750 machines and up to 40 table games. Two licenses have already been won through the bidding process, including one from Hollywood Casino owner and operator Penn National Gaming.

Should all 10 satellite casinos open, it could add another 7,500 slots and 400 table games to the state’s total.

Will gambling expansion help?

However, Haulk and Gamrat wonder if the increased number of games will actually boost tax revenues from gaming, considering recent trends.

“The question is whether or not the increase will be substantial or merely incremental and whether any upturn can be sustained. Clearly, the question of “saturation” needs to be answered. Can Pennsylvania’s population and economy support in a profitable manner 22 casinos, gaming in airports, truck-stops and on the internet?”

Haulk and Gamrat conclude saying that economic reliance on gaming can be very risky. Particularly with all the competition surrounding the state.

They say the majority of casino gaming revenue is money Pennsylvanians would otherwise be spending on other recreational pursuits, luxuries or even necessities.

Plus, while casinos create jobs, they claim they cannot replace manufacturing and gas industry jobs in terms of total boost for the local economy.

Finally, Haulk and Gamrat suggest gambling expansion is a poor economic stimulus substitute for creating a friendlier business climate that attracts manufacturing firms or encourages companies already operating in the state to expand.

Philly Casino Wins Bid To Build Pittsburgh-Area Satellite Casino

The group behind a second Philadelphia casino set to open in 2020 has won a $40 million bid to build a satellite casino in the Pittsburgh Metropolitan Statistical Area.

The group behind a second Philadelphia casino set to open in 2020 is now making plans to build not one, but two new casino properties. Stadium Casino, LLC‘s $40 million bid to build a satellite casino in Westmoreland County in the Pittsburgh Metropolitan Statistical Area was the highest of four received by the Pennsylvania Gaming Control Board this week.

The bid was a part of the second in a series of satellite casino project auctions. As a result, it won the auction. Stadium now has two business days to pay the $40,100,005 it bid. Additionally, it has another six months to submit an application for a Category 4 satellite casino slot machine license.

Category 4 slot machine licenses permit the operation of between 300 and 750 slot machines. License holders can also apply for permission to operate up to 30 table games for an additional fee of $2.5 million. Additionally, after the first year of operation, ten more table games can be added.

Penn National Gaming vs. Pennsylvania

In the state’s first auction held on Jan. 10, a subsidiary of Penn National Gaming that operates Hollywood Casino at Penn National Race Course was the high bidder. It’s $50 million bid is for a satellite casino in York County. York County is just south of the capital city of Harrisburg and north of the Mason-Dixon line.

However, Penn National Gaming is also suing the state to have the buffer zones around existing casinos where satellite casinos cannot be built changed to better protect its Hollywood Casino.

Stadium Casino, LLC is a joint venture between the Cordish Companies and Greenwood Gaming & Entertainment.

Greenwood currently operates Parx Casino just outside Philadelphia. Additionally, Cordish Companies’ US casino projects include two Seminole Hard Rock Hotel & Casinos in Hollywood and Tampa, Florida and the Maryland Live! Hotel & Casino in Hanover, Maryland.

Philadelphia’s second casino

The joint venture already holds a Category 2 license for a major casino project in Philadelphia. Plans were to open in the first quarter of 2018. However, a legal battle and question regarding casino ownership laws in the state forced delays.

Questions arose regarding whether Greenwood principal Watche “Bob” Manoukian’s ownership interest in Parx and the new Philadelphia casino project represented a breach of casino ownership laws in the state.

However, the state eventually gave Manoukian the thumbs up. Additionally, Philadelphia’s only other casino, SugarHouse Casino, dropped an appeal of the project’s gaming license after the new gambling law changed ownership standards.

Ultimately, the company received the gaming license granted to it by the state and a building permit.

Construction on the $600 million casino and entertainment complex will begin sometime this year. It will go up at the former Packer Avenue Holiday Inn property located in South Philadelphia’s sports stadium district.

The complex will include a 200-plus room hotel, five restaurants, nightclubs, and a parking garage. Its casino will feature 2,000 slot machines and 125 table games. It will open in 2020.

Opening beside the city’s sports stadiums should make it a true destination for fans of gambling and sports. Owners claim it will be the first comprehensive gaming, resort, entertainment, and sports destination in the US.

The Pittsburgh-area gaming market

Satduims’s satellite casino will obviously be much smaller in scale and scope. However, it does represent a move into the Pittsburgh-area gaming market.

Pittsburgh is Pennsylvania’s second-largest city. SugarHouse Casino owners Rush Street Gaming already have a stronghold on the intersection of sports and gambling there.

In fact, its Rivers Casino Pittsburgh is in the city’s North Shore neighborhood, just a short walk from Heinz Field. The 68,400-seat Heinz Field stadium is home to the Pittsburgh Steelers National Football League franchise.

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