In Challenging Casino Development Environment, 2 Projects Underway in Pennsylvania

With hospitality development being hampered across the nation by the credit crunch and staggering economy, Pennsylvania is looking to buck the trend, with a pair of casino projects on the horizon.Pennsylvania’s Gaming Control Board has approved the first of two resort casino licenses, awarding one to the Valley Forge Convention Center, located west of Philadelphia. The 500-slot, $42 million casino will be located within one of the two hotels in the complex, and could be open in nine months. The Bushkill Group, which applied for a resort casino license for a property in the Poconos, was granted 90 additional days to provide further details on its application. The board opened up the application to other bidders, according to a report by the Pittsburgh Post-Gazette. Pennsylvania’s 2004 law legalizing casino gambling provides for seven racetrack/casinos, five stand-alone casinos and two resort casinos, and the state has seen some more action on this front recently. Foxwoods Casino Philadelphia announced on Wednesday that it applied to state regulators to build a casino in a former Strawbridge & Clothier site in the city. And in late March, the $550 million SugarHouse, which could have as many as 5,000 slot machines, received a foundation permit from the City of Philadelphia. Many states look to “sin taxes” in times of economic distress to help fill holes in their operating budgets, but the credit crunch, high gambling taxes and competition from Indian casinos have dampened casino development, according to a recent report on the industry from analysts Robert LaFleur and Robert Shore of Susquehanna Financial Group. LaFleur and Shore note in their report that Pennsylvania issued licenses for five stand-alone casinos in late 2006, yet only one property is now open. The states “racinos”, that is, casinos located at racetracks, are the lone bright spots and are performing well, the analysts wrote. LeFleur and Shore noted in the report that Maryland, as of March 30, had received six bids for five potential slot sites. Penn National Gaming requested authorization for a 500-slot facility, but that is 2,000 less than the law allows. The analysts say a lack of financing, and a 67 percent tax rate, makes Maryland unattractive for casino operators to work in. Legislators must do a better job of finding a low enough tax rate that will encourage casino development, but that is also high enough to bring sufficient revenues to states, the analysts wrote. “Typically, they err in favor of a higher tax rate, which actually ends up retarding development and revenue production. We do not see a new wave of casino development on the horizon.”