Bids fall, but Pa. mini casino licenses worth $119.5 million so far

How much does a mini-casino cost in Pennsylvania?

Well, the price has been dropping dramatically.

The cost was $50 million in January, when the first license to allow existing casinos to set up satellite shops across the state was snapped up by the company behind Harrisburg's Hollywood Casino for an amount that shocked onlookers.

But the latest winner — Parx Casino parent Greenwood Gaming & Entertainment — last week shelled out only $8.1 million. (They won after a $9.9 million bid was invalidated.)

As the state's grand gaming expansion gets off the ground with applications and auctions, the not-so-stiff competition for mini-casino licenses offers an evolving picture of what is coming. Other parts of the gaming expansion are still in infancy, but the auctions provide a rough idea of where mini-casinos will stand.

So far, three of the four satellites are slated for south central Pennsylvania, making a wide collar under Harrisburg — and around Hollywood Casino, which grabbed the first license to protect its regional turf and has already sued the state with claims that the mini-casinos would draw customers away from that establishment specifically.

The four licenses have brought in $119.5 million, getting the commonwealth more than halfway to its promise that the gaming expansion would yield $200 million this fiscal year. After winning, a bidder has to cut the state a check within two business days.

With six satellite casino licenses remaining, however, the going rate has dropped at each auction: from $50 million to $40 million to $21 million to less than $10 million. And gaming experts have predicted that all 10 licenses may not get picked up in the first round; the gaming control board has more auctions planned if needed.

"As the process goes forward and all of the prime locations are scooped up, the bids should continue to decline, and possibly dry up altogether," writes Online Poker Report analyst Steve Ruddock.

Still, the state should meet or even exceed its goal: online gaming licenses, expected to bring in the dough, lie ahead — plus the launches of video gaming terminals, iLottery, and airport gaming stations.

Six more satellite casino licenses are due to be auctioned before summer. Previous winners aren't allowed to bid again during this round. The mini-casinos can have 300 to 750 slot machines, and proprietors also can petition for a $2.5 million license to operate up to 30 table games in the first year and 40 in the second. Forty percent of municipalities in the state voted to ban satellite casinos within their borders, and casinos are prohibited from settling a mini-me within 25 miles of an existing casino (unless it's their own).

So far, in addition to Penn National's satellite in York County, Stadium Casino, which has yet to open its main casino in Philadelphia, has the rights to locate a satellite within a 15-mile radius of Derry Township in Westmoreland County. And Parx Casino, Bensalem's high-grossing establishment, must plant its casino within the same radius of South Newton Township in Cumberland County.

Each casino company has six months from the bid date to submit a full application to the Gaming Control Board, which will reveal the exact locations for the proposed satellites.

"We do not have a location that we're zeroing in on yet," said Marc Oppenheimer, chief marketing operator with Parx. "The group that's looking at that has a number of options."

He said he was not concerned that a cluster of gambling opportunities in the greater Harrisburg region would make competition too tough.

"It's an opportunity to leverage the skills and capabilities that we've built here at Parx to another similar casino entertainment business in an area that is under-served by casino entertainment," he said. "Because of the [15-mile radius around each satellite casino], the state believes, and I guess we agree, that there will be enough business."

In the west, Mount Airy has slated a satellite to be within a 15-mile zone of the City of New Castle, Lawrence County, just north of the buffer zone surrounding Rivers Casino in Pittsburgh.

That means free space remains in the northern half of the state, all the way up the middle from Maryland to the New York border, and potentially in the northeast near Scranton. The area around State College has yet to be staked out.

Lancaster is the only major area between Philadelphia and Harrisburg not to have some type of casino or mini-casino zone around it; it is the only county in which every municipality opted out of satellite casinos. That leaves only part of southern Chester County as a possible host to a satellite in that region.

At Wednesday's auction, Sands Bethworks Gaming LLC (of Sands Bethlehem Casino) won with a $9.9 million bid, but its placement zone around Hempfield Township in Mercer County overlapped with Mount Airy's mini-casino stake-out on the western edge of the state, invalidating the bid — and handing the license to Parx.

"We're happy to have the license," Oppenheimer said. "Once that step is done, now comes all the process of figuring out where it's going to be and working out a deal for the land and then actually building and opening a satellite casino."