That ongoing Isle of Capri Casinos Comeback Tour comes to Nemacolin Woodlands Resort, which won Pennsylvania‘s final “resort casino” license earlier today. Situated in the greater Pittsburgh area, the rural getaway is owned by lumber tycoon (and “george” political donor) Joe Hardy. The vote wasn’t even close, as Hardy and Isle were handily granted the right to 600 slot machines and possibly 50 table games, too. Fernwood Resort up in the casino-saturated Poconos, and backed by Penn National Gaming, got one vote. Limited liquidity at Isle, while an issue, wasn’t an insuperable obstacle for Nemacolin’s bid.
Totally shut out were laughinstock applicant (see bottom of story) RV World in Mechanicsburg and the controversy-plagued Mason-Dixon Resort & Casino, outside Gettysburg. The latter’s location made a lot of sense from the standpoint of its proximity to Maryland, where the casino industry has had great difficulty getting its act together — partly due to unceasing machinations by Penn National — leaving a wide-open market for south Pennsylvania to tap.
Wells Fargo gaming analyst Carlo Santarelli has run the numbers on Lady Luck Nemacolin and likes what he sees. It’s a hella good deal for Isle, which pays a fee to Hardy, plus a percentage of any casino revenue above $30 million. Isle’s $50 million construction cost also buys the company 10 years at the helm in Nemacolin and 100% of the cash flow, with the exceptions noted above. By Santarelli’s estimate, Isle is looking at a 21% ROI. Execs at Isle are celebrating today (and Tweeting about it) — as well they ought. Congratulations!
Change partners and litigate. Across the state, the jinxed Foxwoods Philadelphia project has a new, mystery partner and is back in court. The argument before the Commonwealth Court is that losing a casino license is “an excessively draconian sanction” for not being able to get one’s ass in gear, despite having had five years to do so. The Ed Snider-led cast of changing characters would like another 17 months to try and get the job done. They’re counting on the peremptory speed with which their concession was pulled to work in their favor. Or, as their attorney says, the Snider group “understood, shared, and still shares the board’s apparent frustration that its casino project could not be completed quickly, as both the board and [Foxwoods Philly] had hoped and envisioned. But frustrated expectations do not justify erroneous, arbitrary, and capricious decisions.”
Speaking of Penn National, frustrations in Maryland mean good news for its Charles Town racino and its Hollywood Casino at Penn National Race Course, in Grantsville, Penn. Both are posting better-than-expected revenues for early 2011, leading J.P. Morgan analysts to raise their share-price targets and cash-flow estimates. Penn’s two newest properties, its Perryville slot parlor, near Baltimore, and freshly acquired M Resort have seriously underperformed (through no fault of Penn’s in the case of the Vegas property), so the numbers coming out of the West Virginia and Pennsylvania racinos must be strong indeed. Morgan, however, attaches an over-optimistic timeline of 2012 for the opening of Penn’s Ohio casinos.
The company’s wrangles with local officials have cast some doubt about that and now Buckeye State Gov. John Kasich (R, left) could thwart a 2012 opening outright, spending time — and mucho diñero on consultants, and making financial demands that probably push casino completion well into 2013. We might even be talking 2014, depending on how long the $400/hour consultants take to chew their cud … and if the state’s financial insatiability forces Penn and Caesars Entertainment to downgrade and redesign would-be destination properties to grind joints just to break even. It’s quite something to listen to Kasich’s irate, ill-founded and undignified whining (click on audio link) on this subject. As tantrums go, it’s a doozy. All that’s missing is the flinging of the gubernatorial baby rattle through the bars of a crib.
At least Kasich’s backed off from job-killing demands that would have required a 2012 re-vote of the terms and tax rate under which casinos operate in his fair kingdom. He’s merely using “a little leverage,” he says, to extort wrest “help” additional revenues, in the form of extra fees plus a liberal interpretation of the Commercial Activity Tax (i.e., taxing all wagers as revenue), as well throwing the prospect of racinos and Indian gaming onto the table. His message? ‘Nice little duopoly you got there. Hate to see something bad happen to it.”
Eh, I can’t help but cheer on other states with their 30-40% casino tax rates, simply because the more that median goes up, the more ridiculously low Nevada’s 8% looks and the state will no longer feel like it has to be that low to be competitive.
I think it’s a bit of an industry mistruth that the size/quality of the resort is somehow comparative with the tax rate. It’s comparative with demand. The amount of demand for gambling at Sands in Pennsylvania is so low that the returns wouldn’t justify a Palazzo-sized property even at 2%.
Sands Bethlehem is a chicken/egg proposition to me. Sheldon Adelson predicted 17% ROI on a $724 million casino w/o a hotel or table games. When he got an unexpected bonus, in the form of tables, the place still had trouble operating at a profit. But if he’d spend 50%-60% as much, surely his ROI would be better, no? But he’s contractually committed to building what will inevitably be a $1 billion-plus resort, ensuring that an operating profit will always be just out of reach.
Nevada’s low casino tax is justifiable when one considers how few obstacles exist to building and operating a casino here … not to mention the sheer number of them in the state. If the gaming tax were to inch past New Jersey’s — where casinos are subject to strict geographical restrictions, the Lege would have an interesting time rationalizing it, especially since your average Nevada lawmaker can barely construct a coherent sentence, let alone conduct a train of thought.
It’s always interesting when the political party that is the champion
of business and low taxes and, supposedly, private sector job creation, manages to contradict itself so completely.
Between the city of Columbus and Kasich, Penn National actually manages to look reasonable.
Contrary to The Guv’s apparent belief, most of us understood what we voted for and just wish they’d get on with it.
Wouldn’t blame anyone for chucking the whole thing, but that seems to be what Kasich wants.
Along with this new gambling license in Pennsylvania Isle of Capri also captured the last gambling license in Missouri with their Cape Girardeau proposal back in November. I saw renderings of that casino entertainment complex and it looked pretty cool.
Kasich is setting up an interesting election. His insane anti-union legislation will likely make it to the ballot, as Ohio has a system where if enough voters sign petitions they can overturn laws. Just imagine being a Republican/right winger down ballot from that emotion. This will destroy any “mandate” he ever had, and make him actually answer to the people. The fool wants firefighters, cops, teachers, and now casino gamblers to pay for his absurd tax cuts for the rich and corporations. Not to even mention his nutty attempts to privatize everything including the States liquor monopoly. It’s only a matter of time before this idealogue gets his.
Mike, make that “absurd tax cuts for … corporations that are not stinky-poo casinos.” 🙂
A double-standard appears to be at work in the governor’s office. Notice how (in the audio clip) he basically describes Penn and Rock Ventures as alien entities with a parasitic — or at least opportunistic — relationship to Ohio. That’s chorus and verse from the standard anti-gambling hymnal … hence my suspicion that moral high dudgeon has gotten the upper hand over fiscal logic.