A changed climate for casinos

Last summer, Mayor Nutter was doing everything in his power to block two casinos from being built on the Delaware riverfront.

Today, he is doing everything in his power to get them built - and fast.

The Philadelphia climate, from the political to the economic, has changed dramatically and quickly for the slots parlors.

The first machines could be operating as early as next spring. But gaming will look very different from what was envisioned in 2006, when the state awarded two licenses for the city.

Nutter prevailed in getting at least one of the projects, Foxwoods, to retreat from the waterfront. Its investor group has refocused its sights on two floors of the former Strawbridge's department store at Eighth and Market Streets in Center City.

SugarHouse Casino has not budged from Delaware Avenue. It intends to spend about $300 million to build an interim casino with 1,700 slot machines on 22 acres straddling Fishtown and Northern Liberties.

But even with the mayor's newfound support of the casinos, the city remains deeply divided, agreeing only that nothing less than Philadelphia's future is at stake.

The Foxwoods project, which also would cost about $300 million, has become the keystone of the envisioned redevelopment of the languishing Market Street East business corridor.

Proponents, including trade unions, argue that the projects would bring much-needed jobs to the city. With the current economic slump and drop in city revenue, Nutter has emphasized that the casinos eventually would bring $24 million a year in "host fees," plus 1,000 construction jobs and about 1,000 permanent jobs.

Critics such as the influential Black Clergy of Philadelphia and Vicinity, which represents hundreds of pastors, warn that the proximity of casinos to neighborhoods would foster gambling problems among poorer residents.

Like New Orleans, Philadelphia would have slots parlors sitting cheek by jowl with densely populated neighborhoods.

As City Council, the city Planning Commission, and state regulators take up the matter of Philadelphia's casinos at hearings in the month ahead, the landscape has changed on three fronts:

On 17 occasions, the city and local lawmakers have tried to challenge the two casinos in the Pennsylvania Supreme Court - and 17 times lost.

On top of those defeats, the court appointed "special masters" to mediate disputes for both projects.

"At that point, quite frankly, someone else is making decisions about all the things we care about, which in my opinion is not best for the city," Nutter said in an interview Friday.

City Councilman Frank DiCicco, whose district includes both projects, said Friday that the game was up. Casinos are coming to Philadelphia, he assured, and the conversation must turn to how to make the best of the sites.

"I think people are beginning to realize we're going to have them," DiCicco said. "Some people may not like the locations - but that's always going to be the case."

Since January, Nutter has felt increasing pressure from Harrisburg to toe the line.

In March, House Speaker Keith McCall, a Democrat from Carbon County, threatened to push a bill that would cut Philadelphia out of the gaming revenue that funds city wage-tax relief if the casinos were not built.

At the same time, State Rep. Jim Wansacz, a Lackawanna County Democrat, wanted to punish the city by taking away the $700 million reserved for the Convention Center - a warning he rescinded.

A similar bill by State Sen. Jane Earll, a Republican from Erie, is still in play, and slated for a hearing in a Senate committee tomorrow.

Gov. Rendell set events in motion last summer by asking both SugarHouse and Foxwoods to move off the waterfront. Only Foxwoods acceded, while SugarHouse officials agreed to make minor changes to their design.

"If you ask someone to do something, and they actually do it, then I think you actually have a responsibility to respond," Nutter said, "and not just have a fight for the sake of having a fight."

Others are still fighting.

State Rep. Michael H. O'Brien, a Democrat whose district includes both sites, wants SugarHouse to move. He argues that the project still needs federal approval from the Army Corps of Engineers.

O'Brien is joined by State Sen. Lawrence M. Farnese Jr., a Democrat whose district also includes both. Farnese says that at the very least he wants public hearings and community input on the SugarHouse design.

"The irrefutable fact is that this governor wants these casinos up and operating, and this commonwealth likes the revenues generated from casinos," O'Brien said. "I understand I'm the last man standing."

When the state awarded two licenses in Philadelphia for slots more than two years ago, the outlook for the gaming industry was good.

Today, it couldn't be worse.

The recession is hurting casino revenue nationwide, forcing operators to scrap or delay new construction.

SugarHouse and Foxwoods have changed their plans by arranging new sources of funding and scaling back their designs to be up and running sooner.

SugarHouse is building a toned-down, one-story "interim" facility instead of a flashier, two-story building. The developers also are adding acres of surface parking, an element not in the original plan from 2006.

In two years, a 10-story parking garage will go up, said Leigh Whitaker, a SugarHouse representative.

SugarHouse needs to borrow $140 million to build its interim casino. Robert Sheldon, the casino's president, said he did not think that would be a problem even in today's tight credit market. He said lenders should be comfortable with the fact that investors already had put up $160 million of their own money so far.

SugarHouse investors include Chicago gaming billionaire Neil Bluhm, Philadelphia developer Daniel Keating III, local lawyer Richard A. Sprague, former state Supreme Court Justice William Lamb, auto magnate Robert Potamkin, and business-services entrepreneur Jerry Johnson.

Foxwoods announced in September that it would move off the waterfront after persistent delays and opposition from neighbors.

The partners first looked at the Gallery before switching to the Strawbridge's site. In the new location, the ground floor would be reserved for restaurants, with 3,000 slots split between the second and third levels.

Behind the scenes, Foxwoods has had to change its ownership and management structure. According to sources, the Mashantucket Pequot tribe would play less of a role.

Under a plan approved by regulators in 2006, the tribe, which owns the Foxwoods mega-casino in Connecticut, was supposed to operate the slots parlor and entertainment venues. Now the casino would be Foxwoods in name only, with local investors hiring their own management team, sources said.

In addition, the tribe's ownership of the casino would shrink from 30 percent to about 15 percent, they said. That's because local investors - including Comcast-Spectacor chairman Ed Snider and a family charity run by the daughter of local entrepreneur Lewis Katz - would contribute more to the $300 million cost.

Originally, Foxwoods was going to borrow most of the money. The local partners now would cover that expense, Foxwoods officials told the Pennsylvania Gaming Control Board at a hearing last week. They also reiterated to regulators that 42 percent of the casino's profits would go to charitable causes, as originally envisioned in 2006.

With the mayor's about-face, the volume in the public debate over casinos has been turned up, not down.

Many are taking a stand with him, saying the city is desperate for the jobs and revenue. Others feel betrayed and are alarmed by the mayor's willingness to push both projects along.

Helen Gym, a director of Asian Americans United and an anticasino organizer, said Nutter and DiCicco "once articulated a strong stand that gambling was not viable economics and slots parlors didn't belong near homes and neighborhoods because of their pernicious influence."

John J. Dougherty, business manager of Local 98 of the International Brotherhood of Electrical Workers, was against Foxwoods when the casino was going to be built next to his Pennsport neighborhood. He said Friday that his concerns about how Foxwoods would deal with traffic and sewer issues had not been adequately addressed.

Now that the project has moved to Center City, he has come out loudly in favor of both casinos.

Dougherty said he had told Nutter recently: "You're talking about having me pay for my trash. You're not shoveling my snow. We're losing some of the fire companies and libraries in our neighborhood. You have no money for the parade I march in. You're not going to put water in your pools this summer."

At a time of such cutbacks, Dougherty said, the city cannot justify its opposition to the casinos.

The Foxwoods casino also is seen as a potential catalyst for reviving Market Street East.

Nick DeBenedictis, chairman of the Philadelphia Convention and Visitors Bureau, wrote in a letter to state gaming regulators that the city needed tax revenue, the hospitality industry needed another entertainment venue, and Market Street needed a new project to spur development.

"Philadelphia needs - must have - quick action," he wrote.

That's just the sort of "fast-track machinations" that worry Nick Taliaferro, a minister and former executive director of the Philadelphia Human Relations Commission.

Taliaferro got involved in the anticasino movement after Foxwoods decided to move to Center City.

"My opposition is to placing a casino in the heart of the city," he said.

He pointed to DiCicco's request to Council last week that it not deliberate Foxwoods' plan for Strawbridge's before sending it to the Planning Commission.

Taliaferro called that "an egregious misuse of the system."

"There's a sudden gearing up to get casinos built," he said. "To place a casino in the heart of a community is counterproductive to our . . . higher ambitions for these communities."