UPDATE 9/5: Lawrence County Commissioners' Chairman Dan Vogler says my item on the $50 million in public fiscal relief planned for his county's proposed racetrack-casino project, while accurate, generated an uproar in the Pittsburgh area, where the Tribune-Review newspaper responded by denouncing the idea of tax breaks for casinos.
Vogler wants Pennsylvanians to know the county isn't proposing to forgive the property tax (the only tax, he says, that little Lawrence County has the power to levy) on Penn National, Philadelphia-area insurance broker Manny Stamatakis, and other casino investors.
Instead, county officials want to give up the future share of bets that Pennsylvania casino owners typically pay local governments, float a $50 million bond to help fund the casino project, and repay the bondholders from what would have been that government share. If the county didn't give up collecting that money, which Penn National's top financial officer (below) called a "tax," the casino wouldn't be profitable enough to get built, Vogler says, echoing Penn National officials. "If we are successful, we will be the smallest county in the state to host a casino," Vogler added, and the new casino will rival Jameson Hospital as the formerly industrial county's largest employer.
EARLIER 9/4: Gambling was supposed to help Pennsylvania and its local communities raise revenues without raising taxes. Indeed, Pennsylvania now has the most gambling-dependent state government in the U.S., as I reported last year. But the dozen betting halls already operating in the state, along with casinos on every border and, soon, online gambling in Delaware and New Jersey, has created pressure on communities to start offering casino owners cash to build and hire there, instead of just the other way around.
Penn National Gaming, one of the six companies trying to win a new casino license in Philadelphia, estimates it will collect $50 million in Lawrence County tax breaks for the $225 million gambling facility and racetrack Penn National and its partners are backing in New Castle, Lawrence County, Pa. Read more in the second-quarter 2013 earnings call transcript at Financial Times' SeekingAlpha.com here. Excerpts:
"How do you balance the greenfield opportunity there versus maybe just holding back some [cash] for mergers and acquisitions?" asked Shaun C. Kelley, analyst at Bank of America - Merrill Lynch, noting tough competition in Pennsylvania and neighboring states.
"This is all financing-dependent," said Penn National chairman and CEO Peter M. Carlino. He told Steven T. Snyder, SVP for corporate development to give the details.
Snyder explained: "We've had a tremendous dialogue with the county commissioners in Lawrence County. They are very committed to getting this project done. So much so that they have committed to monetize a significant portion of the local share tax that they are going to receive to make sure this facility gets done. It's the first -- it's really a unique set of circumstances in the gaming development projects that we've worked on to see the equivalent of near a $50 million grant coming from the host community in the form of monetizing its tax stream.
"So, absent that, we'd not be involved in this project," Snyder said. But with the "contribution from the county as it relates to the intangibles, the license and the personal property," he added, "we're very comfortable with our underlying assumptions and we're very comfortable given the proximity with [existing casinos], with, of course, the focus being penetrating further into the Pittsburgh marketplace of this new to-be-constructed facility."