Making the News

Philadelphia Daily News

Originally Published:Tuesday, March 10, 2009
http://www.philly.com/dailynews/local/20090310_is_economy_sinking_philly_s_casinos__rendell_impatient_over_lack_of_progress.html

Is economy sinking Philly's casinos? Rendell impatient over lack of progress

By Chris Brennan
Philadelphia Daily News

 

GAMING corporations, unlike many of their customers, tend to know when to cut their losses.

So, with the national economy in free fall, many of those companies are delaying new casino projects, slowing them down or calling them off completely.

In that climate of economic uncertainty, investor groups backing two casinos proposed for Philadelphia and approved by the state more than two years ago have yet to start building.

Gov. Rendell, for one, is losing patience.

And the sick economy raises a question with potential long-term impact for the city: Can those groups still afford to build their projects?

For now, the only people who can answer those questions - the investors and the state Gaming Control Board - won't.

Investors for SugarHouse, approved for the Delaware riverfront in Fishtown, and Foxwoods, approved for the riverfront in South Philly but considering two locations on East Market Street in Center City, filed audited annual financial statements last week with the Gaming Control Board.

The board refused a request from the Daily News for copies of those statements, calling the information "proprietary."

SugarHouse and Foxwoods also refused to provide copies.

SugarHouse and Foxwoods declined to comment when asked if they still could afford to build their projects or if there was a financial point at which investors would give up on their licenses.

Harrisburg is losing patience. Rendell yesterday said that he was "disappointed" that the city's two casinos are not open.

Rendell added that he would have to "weigh very heavily" any legislation proposed to strip Philadelphia of gaming-tax benefits.

Philadelphia has received $86.6 million so far in wage-tax relief from taxes on casinos around the state, according to the Gaming Control Board. In the rest of the state, gaming taxes are used for property-tax reductions. Cities with casinos also receive taxes to help cope with expenses for maintaining the areas around them.

Mayor Nutter, who spoke with Rendell yesterday about casinos, said that the city "is not an obstacle or barrier" to casino development.

Nutter said that he met with SugarHouse a month ago to talk about a potential temporary casino that could be erected by the end of this year. And Nutter noted that the city quickly passed zoning legislation late last year to help Foxwoods with a move from South Philly to an existing structure on East Market Street - either in The Gallery or the former Strawbridge & Clothier department store.

SugarHouse would need approval from the Gaming Control Board for a temporary casino. Foxwoods must ask the board to move its license. Neither casino has made those requests.

SugarHouse and Foxwoods each say they have spent $100 million or more on development costs. SugarHouse says its costs now run about $1 million a month. Foxwoods declined to say how much its expenses cost a month.

"We are committed to this project and confident in our ability to move forward," Foxwoods spokeswoman Maureen Garrity said in a brief statement in response to several questions.

Philadelphia's five-year financial plan includes anticipated taxes from two city casinos.

Terry Gillen, Nutter's chief adviser on casino issues, said that the city is tracking potential delays from the national credit crunch on all big-ticket development projects, not just casinos.

"We're certainly paying attention to that and asking those same questions," she said, when asked if a lack of financing could imperil the projects. "I don't know what the answer is yet."

Joseph Weinert, a senior vice president of Spectrum Gaming Group, in New Jersey, said that casino investors must consider whether they can afford to build and when customers might return to gambling after the national economy recovers.

"I can't imagine anybody is real excited about building a casino these days," Weinert said.

SugarHouse and Foxwoods have been tangled for two years in legal actions as some city residents and officials have tried to block or move the projects.

Philadelphia faces two more obstacles - real and potential competition from nearby sources.

"Philadelphia already has two very successful racetrack casinos north and south of the city," said Weinert, referring to Philadelphia Park, in Bensalem, and Harrah's, in Chester.

The Gaming Control Board last week announced that gross revenue at six casinos across the state grew by 14 percent in February, compared with February 2008. A seventh casino, opened last month, was not included in those calculations.

Harrah's Chester saw revenue decline by 1.89 percent last month, compared with February 2008. Philadelphia Park in Bensalem saw revenue climb by 6.45 percent in the same period.

Rendell last month proposed legalizing video-poker machines in bars, a practice that now flourishes illegally across the state. Taxes on the machines would help college students pay for tuition, Rendell suggests.

Weinert notes that West Virginia "sucked the growth" out of its casinos after it legalized barroom video-poker machines.

Gaming decisions in recent months by companies within driving distance of Philadelphia don't offer much hope.

In October, MGM Mirage said that it would "reassess timing" for a new Atlantic City casino due to the economy and the state of the credit markets.

In November, Pinnacle Entertainment Inc. - which had rejected applying for a Philadelphia casino license - put on "indefinite hold" plans to build a casino on the Atlantic City Boardwalk. The company cited credit-market conditions and new competition from other states, including Pennsylvania.

In January, Revel Entertainment Group delayed interior construction work for a new Atlantic City casino, slowing progress due to "challenges experienced in the current economic environment."

Last month, the Pennsylvania Gaming Control Board approved a plan by the Sands Casino Resort Bethlehem to delay building a hotel, retail shops and a "multipurpose" facility until after the company gets its casino open. Sands asked for the delay for its previously approved plans, citing the economy and increasing costs.

Also last month, Penn National Gaming, which operates a casino and racetrack in Grantville, Dauphin County, dropped plans to build a casino in Atlantic City.

 

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