Major Gambling Interests Focus on Pennsylvania

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

Though table games won’t be allowed, up to 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 are also 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 last.

„You’d be hard-pressed to go to any gambling conference, any boardroom of any company and not find people conversant or knowledgeable about what is going on in Pennsylvania,“ said Joe Weinert, the vice president of the Atlantic City, N.J.-based consulting firm, Spectrum Gaming Group. „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 outside Philadelphia.

And many of the biggest companies came despite the exclusion of table games and a tax rate of 52 percent, more than six times higher than Atlantic City’s or Nevada’s.

„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. „For people that may like to gamble but don’t like to go to Atlantic City, there’s not a lot of product available in the East.“

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

Pennsylvania was among a half-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 has also put on hold the idea of adding table games to slot machines at its four racetracks.

Gov. Ed Rendell was able to get the 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 also have approved the operation of slots at racetracks.

Eleven states have legalized full-fledged commercial casinos. They took in USD 4.7 billion from taxes on gambling revenue in 2004, nearly double the USD 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 in the midst of an approximately USD 3 billion building boom to diversify its gambling industry and expand its casinos, in part to compete with the proliferation of gambling in neighboring Pennsylvania and elsewhere.

Huge spas, upscale dining and shopping, and music acts that draw twentysomethings are already bringing more profits, and should give gamblers an extra reason to drive past slot machines in Pennsylvania and New York and head to Atlantic City, said Jeffrey Vasser, executive director of the Atlantic City Convention & Visitors Authority.

„I think there’s certainly a realization that if we were going to not only maintain our market share, but grow our market share, we need to give people a compelling reason to come to Atlantic City,“ Vasser said.