Proposed $480M Penn National casino suggests aid to Philly's schools and pension funds

Philadelphia schools and the municipal pension fund would get at least $2 million a year if Penn National Gaming Inc. succeeds in its bid to build a South Philadelphia casino, Steve Snyder, senior vice president of corporate development, told City Council on Thursday.

For the first time, officials of the Wyomissing, Pa., gaming company publicly spelled out its unique casino proposal - one of six under consideration by the state's Gaming Control Board for the city's second gaming license.

Penn National wants to operate a $480 million casino at 700 Packer Ave. and would control one-third of the project. A newly-created nonprofit - Philadelphia Casino Benefit Corp. - would control the other two-thirds and dedicate its share of income to the Philadelphia School District and the pension fund.

Snyder said the company estimated that after the first eight years, the payouts to the city could increase from $2 million a year to between $12 million and $17 million a year.

Over 15 years, Penn National projected, the casino could contribute a total of $115 million to schools and pensions.

The payouts would be less in the first half, since the company would have to deduct for expenses including its management fee, interest costs, and debt payments, Snyder said.

City Controller Alan Butkovitz, who conducted an independent assessment of the proposal, said the project presented an opportunity for the city and was worth consideration.

But he raised questions about the profit projections and said there needed to be safeguards to ensure the maximum profits for city entities.

Butkovitz said the city should negotiate a better deal to keep costs down and profits up.

Under the terms of the project, Penn National would be paid a management fee equal to 2 percent of net revenue and 5 percent of earnings before interest, taxes, depreciation, and amortization. In addition, Penn National would receive a licensing fee equal to 2 percent of net revenue for use of the Hollywood brand.

"The city is in a position to be a little tougher negotiator," Butkovitz testified.

While the contributions to schools and the pension would help, Penn National had to come up with a partner, since it is prohibited by the state's gaming law from owning more than a third of a second casino.

Penn National, which operates 29 casinos, owns the Hollywood Casino at Penn National Racetrack in Grantville. In Philadelphia, the company projects revenue of $259 million the first year and $272 million the second.

"They are doing us a big favor," Butkovitz said, "but we're doing them a big favor, too."

All the applicants for the second casino will present their projects before the Gaming Control Board at 9 a.m. Tuesday at the Convention Center.

Penn National was the only group that was asked to appear before Council, because of the unusual nature of the deal.

U.S. Rep. Bob Brady, the city's Democratic party boss, endorsed the project, along with State Sen. Anthony Hardy Williams, (D., Phila.) and union representatives for teachers and municipal workers.

"God knows our schools could use the help," Brady said.

Paul Boni, an anti-gaming activist with Stop Predatory Gambling, argued that government is already too supportive of gambling.

"The city should not make any government program - no matter how worthy - dependent on the success of a casino," Boni said.