Lack Of Interest Thwarts Latest Pennsylvania Casino Auction

Sep 4, 2019

Lack of interest has thwarted Pennsylvania's latest casino expansion attempt.

The Pennsylvania Gaming Control Board received no bidders Wednesday in a casino license auction ordered by lawmakers as part of an aggressive gambling expansion launched in 2017 by a cash-hungry state government.

It was Pennsylvania's second failed effort to auction a sixth mini-casino license, after the first five auctions raised $127 million last year. Auctions were limited to the owners of Pennsylvania's 12 larger casinos and a 13th that is under construction in Philadelphia, and many of them never even bid in the auctions.

Minimum bids were set at $7.5 million, and the state tax rate on casino revenue is among the nation's highest.

Meanwhile, exclusion zones around 18 existing and proposed casino sites had rendered Pennsylvania's largest metropolitan areas off-limits. That left bidders with a choice of rural northern Pennsylvania and a handful of smaller cities, including Altoona, Williamsport and State College.

Joe Weinert, the executive vice president of Spectrum Gaming Group, an Atlantic City, New Jersey-based consultancy, said he's sure casino owners gave the locations a close look, and decided that revenue potential, license fees and taxes would not produce the gross operating profit return of at least 20 percent that many are looking for.

"You have to look at the constraints posed by the regulating jurisdictions, you have to look at what can be built in what area, what's the tax rate, what's the licensing fee and you have to put all those ingredients into a big pot of stew and see whether it'll turn into a palatable product," Weinert said.

The gambling landscape is also increasingly competitive, with 1,000 casinos of some type in 43 states that ensure that no gambler has a very long drive to reach a slot machine or a blackjack table, Weinert said.

"Existing gaming companies or would-be gaming companies are growing increasingly leery or skeptical of expansion opportunities," Weinert said.

Pennsylvania is already the nation's No. 2 state for commercial casino revenue, behind Nevada, at $3.2 billion last year, according to American Gaming Association figures. It is No. 1 in tax revenue from casino gambling at nearly $1.5 billion.

The gaming board had stopped the auctions in April last year after it received no bids in the first auction for a sixth license. But lawmakers ordered the gaming board to restart the auctions under a provision slipped into a budget-related bill signed by Gov. Tom Wolf in June.

House Gaming Oversight Committee Chairman Jim Marshall, R-Beaver, said at the time that he had not heard directly from Pennsylvania's casino owners that they had an appetite for more licenses. Rather, he had said, lawmakers wanted to see what kind of appetite was out there for a casino in untapped parts of central and northern Pennsylvania.

The budget provision said the auctions would end, once and for all, if there were no bidders for a license.

The 2017 law authorized 10 mini-casino licenses that allow the holder to operate up to 750 slot machines and up to 40 table games. The first mini-casino, Hollywood Casino Morgantown operated by Penn National Gaming, is expected to open next year close to the Pennsylvania Turnpike, near the city of Reading.

The 2017 law also authorized online casino gambling and sports betting through the state's casinos.