The reels of fortune: Pa. gamble paying off

The governor is gloating.

Revenues from Pennsylvania's new slot machines are exceeding state expectations, inspiring Gov. Rendell to predict casinos will easily generate the $1 billion in taxes needed to fund promised property- and wage-tax cuts.

"Cynics and antigaming activists said we'll never get the billion dollars, and the early indications are that we'll get far more than a billion dollars - which is what the governor has been saying for four years now," Rendell spokeswoman Kate Philips said yesterday.

Just-released data show that through Sunday, gamblers had pumped more than $1.3 billion into 5,929 slot machines.

About 90 percent of the money wagered in slot machines is paid back in winnings, and the casinos' 10 percent take has in turn generated about $68 million in tax revenue for the state. The more gambled, the more revenue the state gets, and this month slot revenue easily exceeded state predictions at the three casinos up and running. Eventually, the state will have as many as 14 slots locations, including two in Philadelphia.

Experts caution against reading too much into initial success.

"It's really early in the game to be really analyzing what these numbers mean," said Joseph Weinert, editor of Michael Pollock's Gaming Industry Observer, a trade publication. But he added, "If these are numbers they can sustain over the long haul . . . I think they would be pleased."

PhiladelphiaPark in Bensalem opened in December, and Harrah's Chester opened at the end of January, both serving the all-important Philadelphia-area market. Mohegan Sun at Pocono Downs opened in November. A fourth slots casino, Presque Isle Downs, opens today in Erie.

When calculating gambling revenue, the critical number is the amount a machine "wins" each day - or how much money gamblers lose per machine. The industry calls this "daily win per unit." The state Gaming Control Board estimated that machines at the three open facilities would take in between $180 and $272 each day.

This month, machines at each of the three tracks surpassed the board's predictions. Operating with 2,076 out of the 3,000 machines it eventually expects to run, PhiladelphiaPark exceeded the state prediction by more than 26 percent.

"It's clearly a bigger market than we thought," said Dave Jonas, PhiladelphiaPark's president and chief executive officer.

Most customers have come from Pennsylvania and live within 20 miles, Jonas said. The close-in New Jersey suburbs and King of Prussia area still hold enormous potential for marketing, he added. PhiladelphiaPark has held off on a full marketing campaign because the casino is filled on weekends.

"We haven't even begun to tap the potential," Jonas said.

Harrah's Chester, with 2,744 machines, is surpassing the state's estimates by 15 percent. A Harrah's spokesman said, "Our expectations have been exceeded."

The dollar figures have also exceeded what Department of Revenue officials predicted when justifying Rendell's program for property-tax relief; Philadelphians would get wage-tax relief.

"We're more confident than ever that our initial revenue estimates for gaming are achievable," said Steve Kniley, spokesman for the department.

Kniley said the state projections were turning out to be conservative.

Some tax relief could begin to flow to Pennsylvania residents this year, though the full impact of the predicted $1 billion in tax reductions is not expected before 2008, when at least 11 venues should be running at capacity.

Rendell has also proposed increasing the state sales tax from 6 percent to 7 percent to speed up propery-tax relief. In Philadelphia, the rate would rise from 7 percent to 8 percent.

Up to 61,000 machines were authorized when slots were legalized in 2004.

David Katz, a gaming analyst for CIBC World Markets in New York, said early figures could be affected by how aggressive casinos were at opening, the number of machines in the market, and how many competitors were in the region.

PhiladelphiaPark and Harrah's Chester, for example, will competewith four stand-alone slots parlors - two in Philadelphia, one in Bethlehem, and one at Mount Airy Lodge in the Poconos - by next year. The state says its predictions account for that.

In other markets, the addition of new casinos has only increased the number of gamblers, Katz said. Jonas said the opening of Harrah's Chester on Jan. 22 had hardly affected PhiladelphiaPark's numbers. Gaming Control Board figures back that up.

"We still believe that increasing exposure to gambling often benefits the major markets," Katz said.

Mohegan Sun is more than doubling long-term projections, but still has a small number of machines - 1,100 - that make the slot units extra profitable.