Making the News

Lexington Herald Leader

Originally Published:Monday, March 27, 2006

"You'd be hard pressed to go to any gambling conference, any board room of any company and not find people conversant or knowledgeable about what is going on in Pennsylvania," said Joe Weinert, vice president of Spectrum Gaming Group, a consulting firm in Atlantic City, N.J. "Pennsylvania is it right now."

Pennsylvania plans for jackpot
EXPANDED GAMBLING WILL BRING SLOTS AND LOTS OF REVENUE

By Marc Levy
Lexington Herald Leader

HARRISBURG, Pa. - With an expansion of gambling stalled elsewhere in the country, including Kentucky, major gambling interests have set their sights firmly on Pennsylvania, where hearings will begin soon on competing proposals for slots parlors from Pittsburgh to the Poconos.

Table games won't be allowed, but as many as 61,000 slot machines will be -- enough to draw interest from the biggest names in gambling.

Companies vying to set up shop in Pennsylvania include the world's largest, Harrah's Entertainment Inc., as well as Boyd Gaming Corp., Las Vegas Sands Corp. and Trump Entertainment Resorts Inc. Two Indian tribes that operate hugely successful casinos in Connecticut also are looking to establish a foothold.

Pennsylvania, it turns out, will be the first state this decade to usher in what analysts consider a major expansion of commercial gambling. Michigan, which approved three casinos in 1996, was the most recent.

"You'd be hard pressed to go to any gambling conference, any board room of any company and not find people conversant or knowledgeable about what is going on in Pennsylvania," said Joe Weinert, vice president of Spectrum Gaming Group, a consulting firm in Atlantic City, N.J. "Pennsylvania is it right now."

On April 5, state gambling regulators will begin public hearings on proposals for slots at 14 venues, including racetracks and freestanding locations, which could make Pennsylvania one of the biggest slot-machine states in the country. Slots could be up and running at the racetracks as early as the fall.

"You can see that by the sheer number of bigger companies interested in Pennsylvania that there are not a whole lot of other domestic opportunities right now," said Brian McGill, an analyst at Susquehanna Financial Group near Philadelphia.

Many of the biggest companies came despite the exclusion of table games and a tax rate of 52 percent, more than six times that of Atlantic City or Nevada.

"We think there's tremendous market potential," said Jan Jones, a senior vice president for Las Vegas-based Harrah's Entertainment, which is involved with two separate license applications.

Once all the parlors are up and running, the state has estimated, the industry could generate annual revenue of $3 billion from slots, which account for at least two-thirds of the gambling revenue in Atlantic City and Nevada.

Pennsylvania was among half a dozen states where there was a push for commercial casinos in the last few years. For now, efforts to legalize casinos in Kansas, Kentucky, Nebraska, Ohio, Rhode Island and elsewhere are losing steam. Neighboring West Virginia also has put on hold the idea of adding table games to slot machines at its four racetracks.

Gov. Ed Rendell was able to get Pennsylvania's legislature to approve slot machines in 2004 by promising to use some of the tax receipts from slot revenues to help reduce property taxes.

Analysts say an economic upturn has improved cash flows into state coffers and reduced pressure elsewhere on state governments to unearth new sources of revenue. They also say it is a tricky proposition to get a governor, legislature or majority of voters to go along with new forms of gambling.

Six other states have approved the operation of slots at racetracks. Eleven states have legalized full-fledged commercial casinos. They took in $4.7 billion from taxes on gambling revenue in 2004, nearly double the $2.6 billion collected five years earlier, according to the American Gaming Association.

Indian tribes also operate casinos or bingo parlors in 28 states.

Atlantic City is seeing an approximately $3 billion building boom to diversify its gambling industry and expand its casinos, in part to compete with the proliferation of gambling in Pennsylvania and elsewhere.

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