Gambling report warns of casino 'cannibalization'

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HARRISBURG -- A proposed Lawrence County racetrack and casino would have an impact, though not a large one, on revenue at Rivers Casino, according to a report on Pennsylvania gaming commissioned by the state Legislature.

The report, by Econsult Solutions of Philadelphia, found Pittsburgh-area casinos face increased competition from Ohio venues and from the proposed Lawrence Downs, about one hour north of Pittsburgh.

The consultants concluded that while much of the potential loss to gaming from Ohio already has occurred, a new casino in Youngstown will erode Pittsburgh-area casino revenue "at the margin" but should not cause financial distress.

The report was issued the day before the state Gaming Control Board's scheduled public hearing regarding the proposed harness racetrack and casino in Lawrence County. That project -- now being called Lawrence Downs Casino and Racing Resort -- has gone through multiple ownership changes and has been on the drawing board for more than a decade.

The proposed casino, and others in Pennsylvania, are vulnerable to market "cannibalization" from Ohio, Maryland and New York, the report found. Ohio is expected to go from no casinos in 2011 to 11 by 2014, according to the study.

That loss of market share would be a reversal of a trend that has been in place since the first Pennsylvania casino opened in 2006; Pennsylvania casinos have been attracting gamblers who had previously spent money in West Virginia, Delaware and especially Atlantic City, N.J.

The report also found Pennsylvania could generate $113 million in annual tax revenues by authorizing online gaming, a finding of interest in the Capitol as legislators enter what promises to be a difficult budget season. The state faces an estimated budget shortfall of $1.3 billion through June 2015, according to a revenue forecast issued last week from the Independent Fiscal Office.

"As we move forward, authorization of online gambling in the state will be explored," Joe Scarnati, Senate president pro tem and a Jefferson County Republican, said in a statement responding to the report.

A spokesman for Republican Gov. Tom Corbett, however, made it sound unlikely such an expansion of gaming could take effect for the next fiscal year.

"Without having fully reviewed the report, and without a legislative interpretation of the report, it would appear very difficult to implement Internet gaming prior to June 30," said spokesman Jay Pagni.

Tax revenue from Pennsylvania's casinos grew between 2006 and 2012 before dropping by 4 percent in 2013, a trend the study said likely is attributable to increased competition from neighboring states, stagnating slots revenues nationwide and a tax structure that decreases the rate for table games after two years.

The report concluded the Pennsylvania gaming market "is not currently saturated," but that the potential for growth is not large enough to produce the kind of revenue gain seen in past years.

Market saturation is on the mind of Peg Wilson, president of the Greater Washington County Food Bank. She's one of the Washington County officials scheduled to speak at today's hearing in Lawrence County.

A new casino in Lawrence County would mean more competition for The Meadows Racetrack and Casino, about 60 miles to the south of New Castle.

"The Meadows has been very good to me and my people," Ms. Wilson said. The casino "came in and hired all these people" who had previously been receiving food bank donations. If the Meadows loses business, the workers in Washington County could suffer, she said.

Several other Washington County political and business officials are scheduled to testify today in opposition to Lawrence Downs. But Washington County has seen much good fortune over the last several years, thanks to the casino as well as the Marcellus Shale drilling and office boon, and most of today's 50 or so speakers believe it's Lawrence County that needs a good break, not Washington.

Besides, said Bob McCracken, head of the Lawrence County Chamber of Commerce, "I don't see us competing with The Meadows or Erie," which is home to Presque Isle Downs and Casino.

The real competition for Lawrence County, he said, will be 20 or so miles to the west, near Youngstown, where Penn National Gaming plans to open its Hollywood Gaming at Mahoning Valley Race Course this autumn. That racetrack won't have full table games and slots like Lawrence Downs would, but even so, the gaming board should act to preserve that market.

It's "better the state get control of this side of the border than let the market share go to [Austintown, Ohio]," said Mr. McCracken.

As of last year, Penn National also is an investor in the Lawrence County project, along with Philadelphia-based Endeka Entertainment, which bought the rights to the long-stalled racetrack project in 2012. Endeka will give an hourlong presentation at the start of today's hearing, scheduled at 10 a.m. at the Mahoning Township community center along Route 224 in Lawrence County.

Republican County Commissioner Dan Vogler said that if Penn National is willing to bet its own money that the two next-door casinos won't cannibalize each other, he, too, thinks the casinos can coexist.

Mr. Vogler, also set to testify today, said he will remind the gaming board of the "economic impact this will have -- not just in the county, but also the region." The casino and racetrack could mean hundreds of temporary construction jobs and hundreds more permanent jobs once the facility opens.

Endeka already possesses a racing license from the state Harness Racing Commission, but it also must secure a casino license from the state gaming board before it could open. Endeka and Penn National applied for that gaming license last summer, telling the state that it hopes to build a $160 million track with 1,250 slot machines and 40 table games.

After today's hearing, the gaming board will schedule a "suitability" hearing to discuss the casino's financing, ownership, projected audience and other viability issues.

Karen Langley:, 1-717-787-2141 or on Twitter @karen_langley. Bill Toland: or 263-2625.

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