A principal in the ownership of Rivers Casino, he has dubbed the North Shore gambling palace a "bad investment," claiming it has lost $200 million in equity since it opened in August 2009.
Mr. Schulman, managing principal and co-founder of Walton Street Capital, the casino's majority owner, says the riverfront venue is overbuilt, hasn't met financial projections for slot machine revenue and could lose business to new gambling venues opening in Cleveland and other parts of Ohio next month.
At one point, as revenues fell short of projections, the ownership considered filing for bankruptcy before deciding to invest another $108 million in the project, he said.
"It has been a terrible investment," he told Allegheny County Common Pleas Senior Judge R. Stanton Wettick Jr. last month.
Mr. Schulman testified before Judge Wettick as part of a high-stakes bid by the casino to lower the $199.5 million assessment placed on the property by the county in 2010. It is seeking to have that assessment cut to $59.7 million for the 2009 tax year and to $117 million for 2012.
But Ira Weiss, solicitor for the Pittsburgh School District, which is arguing for a much higher assessment, isn't about to shed any tears over the casino's perceived financial shortcomings. He said he viewed the testimony "through the prism of the tax appeal."
"I think it's all designed to buttress their position that they're losing money and for that reason, their real estate is worth what their appraiser says it is," he said.
The school district and the city have a much higher opinion of the North Shore property than the casino ownership does. They have argued that the assessment should be $250.1 million for 2009 and $278.2 million for 2012.
Judge Wettick has yet to make a ruling.
Mr. Schulman and his group, led by Chicago billionaire Neil Bluhm, acquired the casino from the late Detroit businessman Don Barden after he was unable to obtain permanent financing for the $780 million riverfront complex, which he pledged to make the jewel of his gambling holdings.
As part of the deal to gain control, Walton Street Capital invested a little more than $200 million in fresh equity into the project and put together $558 million in financing to complete it.
It also agreed to honor commitments Mr. Barden had made to contribute $7.5 million a year for 30 years toward construction of the Consol Energy Center and $3 million over three years to both the Hill District and the Northside Leadership Conference -- obligations the casino now argues are a drag on the property's worth.
Mr. Schulman testified that the problems began as soon as the casino opened its doors on Aug. 9, 2009, thanks in part to a recession that cut into discretionary spending.
The casino estimated first-year revenues at $438 million, including food and beverage sales, but they ended up at $241 million. It projected earnings before interest, depreciation, taxes and amortization -- an industry standard -- at $87 million. They actually were $20.2 million.
As a result of the poor performance, the ownership, only four months after the casino opened, was in default of its bank covenants relating to the financing. Mr. Schulman called it a "significant problem," according to the transcript of his testimony.
"We had invested $200 million of equity, and now 18 months later that equity was gone. And we were facing either going into bankruptcy or trying to recapitalize the project in a consensual way with the lenders. We went down both paths simultaneously," he said.
The casino also needed $16.5 million to obtain a license for table games from the state and stay competitive with The Meadows Racetrack & Casino in Washington County. Without some resolution to the fiscal problems, the ownership wasn't sure the casino would be considered financially suitable for a table games license by the Pennsylvania Gaming Control Board.
In June 2010, the ownership decided to invest another $108 million in the project to pay down debt and recapitalize the project, Mr. Schulman said. At the time, the casino said the recapitalization would reduce its senior debt by more than 45 percent and result in "improved financial stability."
During his testimony, Mr. Schulman also complained about the Rivers' $330 million construction cost, calling the complex "extremely extravagant and oversized" compared to the $100 million it cost to build the casino at The Meadows.
He also estimated that Rivers Casino gets about 8 to 10 percent of its revenue from people from the Cleveland area, where a new casino will open next month. "That is all going to go away," he said.
Mr. Schulman was asked by casino attorney Stanley J. Parker if, given the construction cost, he would have proceeded with the project if he had known how it would ultimately perform.
"With 20/20 hindsight, we would never have made this investment," he said.
"Why not?" Mr. Parker asked.
"I think I explained it. It has been a terrible investment. We've lost $200 million," Mr. Schulman said.
The comments came even though the casino, at least statistically, appears to be doing much better than at its start.
Last year, it generated $343.1 million in slots and table games revenue, up 28.2 percent from 2010. That compares to $282.8 million in revenue, or a 7 percent increase, produced by The Meadows. In March, Rivers Casino also finished third in the state with $26.7 million in gross slots revenue, its best month since it opened.
Jon Scolnik, a research analyst for Unite Here, a union that follows the gambling industry and organizes workers, noted that Walton Street had valued its 72.7 percent stake in the casino at $595.9 million as of June 2011 in an investment performance summary.
"They've told investors that Rivers more than tripled in value, and now they tell the judge that they're losing money. Which is true?" he asked.
In response to Mr. Schulman's testimony, the casino issued a statement saying, "The casino's performance is a matter of public record. Rivers Casino is an important community asset, creating 1,800 jobs, support for Consol Energy Center and $175 million annually in taxes for the city of Pittsburgh, Allegheny County and the Commonwealth."