Experts: Betting on Pennsylvania gaming expansion risky |
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Rich Cholodofsky
Casino patrons play some of the 600 slot machines at the Lady Luck Casino Nemacolin, situated about 70 miles south of Pittsburgh.

While Westmoreland County officials hope to cash in as Pennsylvania adds up to 10 mini casinos, some industry observers doubt the plan to expand gambling will generate the tax revenue state lawmakers are betting on to balance the budget.

“These satellite casinos will likely cannibalize business from the current operations, depending on where they are located,” said Colin Mansfield, a gaming analyst with Fitch Ratings, the New York-based credit rating agency.

Gov. Tom Wolf last month signed into law a gambling expansion bill that allows new casinos that can house between 300 and 750 slot machines and, eventually, up to 40 table games. State officials believe the new facilities — along with internet gambling, fantasy sports betting and allowing video gaming terminals at truck stops — could bring in $200 million or more in the first year through license fees and taxes to help cover a projected $2.2 billion budget shortfall.

Pennsylvania’s 12 existing casinos — including Rivers Casino in Pittsburgh, The Meadows Racetrack and Casino in Washington County and Lady Luck Casino Nemacolin in Fayette County — in 2016 topped $3 billion in gambling revenue for the sixth consecutive year, which ranked second only to Nevada.

Under the new law, outside casinos cannot open a satellite facility within 25 miles of an existing casino. Existing casinos could bid to build a satellite facility within their exclusionary zone.

That dynamic could lead to interesting strategy discussions by the state’s casino operators, according to Mansfield.

“Most operators are now thinking about these mini casinos as a defensive play rather than an offensive play,” he said.

Casino operators could view the satellite licenses as a means to keep competition away from their primary locations and extend their exclusive territory, Mansfield said. But that could yield little in terms of new tax revenue, he said.

“It could just shift the same amount of revenues,” Mansfield said.

Westmoreland County receives no taxes from the region’s existing casinos. Officials are exploring ways to strengthen the county’s economic outlook and attract new business and residents.

“There is no reason Westmoreland County shouldn’t benefit from what is a legal activity,” Commissioner Ted Kopas said.

The swath of the county north of New Stanton and east of Jeannette — including Greensburg, Latrobe and Ligonier — falls outside the protected territories of the Rivers, Meadows and Lady Luck and could be considered by any casino operator as a satellite location.

The first satellite casino license will be auctioned off by Jan. 15, said Doug Harbach, spokesman for the Pennsylvania Gaming Control Board. Details on the auction process are still being developed.

“We won’t have specifics until the first half of December,” Harbach said.

The initial plan is for an open bidding process, with the market determining how much each license will cost. Winning bidders will have six months to submit detailed plans and an exact location for their satellite casino, which the gaming board would have to approve, Harbach said.

The initial licenses will allow slot machines, with table games to be added later, he said.

Alan Silver, a professor of casino management at Ohio University, said it is unclear how the smaller casinos will affect the state’s gaming industry. Saturation could be a concern in the long run, he said.

“I don’t think they’ll have any problems getting rid of the new licenses,” Silver said. “Pennsylvania has done well with its casinos but now risk being spread too thin.”

Rich Cholodofsky is a Tribune-Review staff writer. Reach him at 724-830-6293 or [email protected].

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