Pennsylvania Mini-Casino Issue Causes Turmoil, Confusion

As clear winners and losers emerge in the competitive atmosphere created by Pennsylvania’s new law creating satellite mini-casinos, some operators are crying foul. But Mount Airy casino (l.) in the Poconos was aided by an amendment vastly expanding its buffer zone.

Expert: Satellite casinos will cannibalize business

Pennsylvania’s new gaming expansion law contains many unprecedented entries, from online gaming to tablet gaming at airports. No provision of the new law, though, has caused more consternation among local governments and current land-based casino licensee than the provision creating licenses for up to 10 satellite casinos up for bid.

Mini-casinos are satellite casinos of up to 750 slots and 10 table games, to be bid on by current gaming licensees and operated outside of a 25-mile radius of any current casino. Local municipalities have until December 31 to vote to opt out of the mini-casino provision, banning the small casinos in their jurisdictions. Bids will begin January 15.

As the details of the law sunk in, current operators and municipalities with no current casinos aligned their forces to either bid on licenses or, in some cases, planned to sue to block the provision, which will create clear winners and losers, owing mainly to the geography of the state and the locations of current licensees. Clear winners include Mount Airy Resort, which benefits from a last-minute amendment that essentially creates a four-county buffer zone protecting the casino from new competition in the form of satellite casinos.

On the opposite side is Penn National Gaming, which is isolated and depends on a customer base mostly from beyond the 25-mile buffer zone. Penn is threatening to sue to block the provision, saying it puts the operator at an unfair competitive disadvantage.

Some analysts agree with Penn National’s assessment that mini-casinos will, in general, take revenues from existing casino licensees. “These satellite casinos will likely cannibalize business from the current operations, depending on where they are located,” said Colin Mansfield, a gaming analyst with Fitch Ratings, the New York-based credit rating agency, in an interview with the Pittsburgh Tribune-Review.

Mansfield added that most operators are considering mini-casinos “as a defensive play rather than an offensive play,” a means to keep competition away from their territory. That means they will yield little in the way of incremental revenue for the state, Mansfield told the newspaper. “It could just shift the same amount of revenues,” he said.

Meanwhile, local jurisdictions around the state are beginning to make decisions on whether or not they want the mini-casinos in their areas. Spots such as Westmoreland County in Western Pennsylvania are planning to court bids to host the satellite facilities. As noted in the Tribune-Review report, the portion of the county north of New Stanton and east of Jeannette, including Greensburg, Latrobe and Ligonier, falls outside the protected territories of the Rivers, Meadows and Lady Luck casinos, and would all be considered as satellite casino locations.

Meanwhile, jurisdictions such as Bucks County in Eastern Pennsylvania are on the other side. Bucks representatives voted against the bill. State Rep. Craig Staats released a statement last week saying he did not support the bill because he thought expanded gambling would “do more harm than good.”

“It is widely believed that gambling expansion will not bring the level of revenue the new law anticipates, and could actually cost local governments more in enforcement costs should crime increase,” said Staats. “It could also change the nature and character of our communities.”

Former state Rep. Paul Clymer appeared before the Bucks County Commissioners last week to ask for a resolution to ban mini-casinos in the county. “This new gambling bill is a fraud and a disgrace,” Clymer said. “It’s corporate welfare, and the taxpayers are getting ripped off.”

Other jurisdictions coming out in opposition to the mini-casinos include Cheswick, a borough outside of Pittsburgh in Allegheny County; and Muncy, in the north-central region of the state.

According to a report in the Pittsburgh Tribune-Review, the Cheswick Borough Council is scheduled to act on a resolution, perhaps as soon as December 13, to opt out of the mini-casino provision. Cheswick is within the 25-mile buffer zone to Pittsburgh’s Rivers Casino, but under the new law, Rivers can open up a satellite facility in its own zone.

“Cheswick isn’t suited to have a casino,” Councilwoman Chris Schramm told the newspaper. “I don’t want to see us change from a family atmosphere to a different atmosphere.”

In the eastern part of the state, Muncy Borough Council members discussed whether the borough should opt out of allowing satellite casinos. The council will discuss the issue at next month’s meeting.

The Allentown Morning Call is maintaining a list of communities which have completed the two-step process of opting out of the mini-casino provision. Opting out requires a resolution passed after a public meeting, with the resolution sent to the Pennsylvania Gaming Control Board by December 31.

The communities opting out so far, according to the newspaper, are:

• Heath Township in Jefferson County

• Limestone Township in Lycoming County

• Lower Makefield Township in Bucks County

• Strasburg and West Earl townships in Lancaster County

• Washington Township in Lycoming County

• Westfield Township in Tioga County

State College Borough, near Penn State University, passed a resolution last week banning the mini-casinos, and will be added to the opt-out list as soon as the gaming board verifies the resolution. Other municipalities are being added to the list every week.

And then there is Penn National, which is still considering a lawsuit to block the current rules for mini-casinos, spokesman Eric Schippers told the Allentown Morning Call. “We’re the only ones where 25 miles will not protect us,” he said. “We don’t have any of the protection of the overlapping casinos.”

In a white paper prepared last month, Penn National officials drew a straight line on a map from the Chester County border to the northern boundary of the Mohegan Sun Casino’s zone around Susquehanna County. Exclusion zones, including the buffer around the Sands Bethlehem casino, created a continuous vertical protection area 127 miles long, the paper says.

The paper says a similar exclusion zone protects casinos in a 95-mile zone in Western Pennsylvania, and even the Presque Isle Downs & Casino has a natural border of Lake Erie and the New York and Ohio borders. Meanwhile, Penn National prime feeder markets like Reading, Lancaster, York and Gettysburg all are in unprotected areas, opening Penn up to new competition.