Analysis: Slots casino license race comes down to final spin
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On Wednesday, nearly a year after the competition formally began, one company -- Forest City Enterprises, Isle of Capri Casinos Inc. or PITG Gaming LLC -- will hit the jackpot and win the license for a Pittsburgh slots casino.
The Slots Licenses
It will be a difficult decision for the state Gaming Control Board, one made tougher by Canadian businessman Jim Balsillie's decision to withdraw his bid to buy the Pittsburgh Penguins.
All three bidders have promised to help build a new arena for the Penguins, but only the Isle of Capri's $290 million pledge to finance the construction guarantees that the team will stay in Pittsburgh.
None of the three bids is perfect. On the eve of the award, the competition appears to be a toss-up between the Isle of Capri and PITG, with Forest City's odds a little tougher.
The Pittsburgh license will be one of five awarded statewide for stand-alone slot machine casinos. There will be two winners in Philadelphia and two more in other parts of the state. The gaming board also is expected to finalize the provisional licenses awarded to six racetrack casinos earlier this fall.
Here's how the Post-Gazette handicaps the local race:
PITG Gaming LLC
For most of the last year, Detroit businessman Don Barden hasn't made a lot of noise in his bid to build a casino on the North Shore, just west of the Carnegie Science Center.
But he could be the one doing the celebrating on Wednesday, his birthday.
PITG Gaming LLC headed by Mr. Barden has a good shot at snatching the Pittsburgh casino license from Isle of Capri or Forest City Enterprises.
There are good reasons for awarding the license to Mr. Barden.
For one, the gaming board's own task force and its independent consultant, PricewaterhouseCoopers, have projected that PITG Gaming, with 5,000 machines, would produce the most gambling revenue for Pennsylvania.
For another, Mr. Barden's Majestic Star casino, with its striking steel and glass frame, would greatly improve a section of Ohio River waterfront in desperate need of attention. He also is promising to finish off a North Shore riverfront trail system with a connection from the casino to the West End Bridge.
And while much has been made of Forest City's political ties to Gov. Ed Rendell and others, Mr. Barden has an important political benefactor on his side as well -- H. William DeWeese, D-Waynesburg, the incoming state House speaker.
Mr. DeWeese watched the Steelers win Super Bowl XL from Mr. Barden's private box and has described the casino owner as a "close confidant." Mr. Barden also attended the unveiling of a portrait of Mr. DeWeese several years ago and has supported the Pennsylvania Legislative Black Caucus.
If the casino award is to be decided by politics, why wouldn't Mr. DeWeese want to call the shots when it comes to handing out the license for the biggest slots parlor in the western part of the state? Mr. DeWeese has one appointment to the board, former state Rep. Jeffrey Coy.
Mr. Barden has one other big advantage -- he is the only African American with a majority ownership stake among those competing for stand-alone slots parlors in the state, and legislators clearly made racial diversity a goal in crafting the language that legalized slot machine casinos.
The PITG Gaming proposal does have drawbacks.
Both the city Gaming Task Force and the state gaming control board's traffic consultant have raised concerns about potential traffic congestion and whether Mr. Barden's $11 million to $12 million in proposed road improvements will help or hurt.
City gaming task force members also have bemoaned the "island-like nature" of the site, saying that could make it harder for economic development spin-off even though it is within walking distance of Heinz Field and PNC Park.
The proposal also has brought opposition from the Steelers and Pirates as well as from Del Monte and Equitable Resources, both with headquarters on the North Shore.
Mr. Barden is a much smaller operator than Isle of Capri or Harrah's, Forest City's partner at Station Square, which could work against him with the board. His $350 million proposal to redevelop the lower Hill seems like a copy of the Isle's initiative.
However, his casino has not created the kind of neighborhood opposition that has arisen in the Hill District, and Mr. Barden has won praise from the Northside Leadership Conference for his cooperation.
He has committed $7.5 million a year for 30 years to the Rendell-crafted Plan B formula for funding a new arena, but now the question seems to be whether that will be enough, given Mr. Balsillie's actions Friday.
ODDS: Even. Often seen as an underdog, Mr. Barden has put together a good proposal and quietly has positioned himself to take advantage of weaknesses in the other plans.
Isle of Capri Casinos Inc.
Build a new arena and save a hockey team.
Of all of the issues surrounding a casino in Pittsburgh, that one has dominated the debate since Isle of Capri first announced last December that it would give $290 million toward a new arena to keep the Penguins, its partner in the bid, in the Steel City.
Forget property tax relief, traffic, design, social impact. Overnight, the proposal trumped all other discussion. Hockey fans embraced it, sports talk show hosts championed it, and a host of politicians, Mayor Luke Ravenstahl among them, endorsed it (and yet a lot of people think Forest City has politics on its side).
A new arena became so central to the award of the slots license that it forced Mr. Rendell to craft Plan B, a proposal to fund a new facility in part by asking the casino winner to contribute $7.5 million a year for 30 years toward the construction.
He called it a back-up plan if Isle of Capri didn't win. Given the high interest in the arena, Forest City and PITG Gaming had virtually no choice but to commit to it.
Plan B takes some of the steam out of the Isle of Capri pledge, even more so after new Penguins owner Jim Balsillie's 11th hour decision to withdraw his bid as owner throws a whole new level of uncertainty into that equation.
In that regard, the Isle of Capri proposal has one important advantage -- it guarantees that the team stays in Pittsburgh for the next 20 years. Plan B does not. Mr. Ravenstahl and Allegheny County Chief Executive Dan Onorato would have to reach a deal on a long-term lease with a new owner under Plan B.
Working to the Isle of Capri's disadvantage is that the National Hockey League clearly has a preference to keep the team in Pittsburgh. Two unsuccessful bidders for the team -- Andrew Murstein and Jim Renacci -- have vowed to keep the Penguins here and may re-emerge as bidders.
The Isle proposal has another key component -- a $350 million plan to reconnect the lower Hill to Downtown with housing, offices, and shops, all to be developed by Nationwide Realty Investors, the same company that did the trendy Arena District in Columbus.
But the Achilles heel of the Isle's proposal could be its location abutting the lower Hill. While much has been made of the expected synergy between an arena and casino built side by side, gaming board members may think long and hard about locating a slots parlor so close to a residential neighborhood that has struggled for years to right itself.
The opposition to the casino, which has become more vocal in recent weeks and culminated in a rally yesterday, could be difficult to ignore.
And given the board's interest in the Penguins' fate under Plan B, it may see that proposal, even with Mr. Balsillie's decision, as a way to save the hockey club while sparing a neighborhood.
ODDS: Even, and somewhat improved given the latest developments. Could this proposal and the savvy PR campaign that accompanied it be derailed by Plan B and neighborhood opposition to a casino?
Forest City Enterprises
For more than a year, this proposal has been defined by one sentence spoken by former Pittsburgh Mayor Tom Murphy.
When Mr. Murphy declared, "It is no secret ... that supposedly, the fix is in." With that statement, made during a Press Club of Western Pennsylvania panel discussion, he implied that Forest City would get the Pittsburgh casino, not on merit, but on its well-oiled political connections, which include Mr. Rendell.
Before the state ban on campaign contributions by gambling interests, Forest City had given nearly $150,000 to Mr. Rendell and $20,000 to Mr. Onorato. It also counts among its investors in the proposed Station Square casino William Lieberman and Charles Zappala, two well-known political insiders and fundraisers.
The "fix is in" became a mantra for thousands of Penguins fans and sports radio talk show hosts who embraced the Isle of Capri proposal and its pledge to give $290 million for a new arena.
Never mind that there are good reasons to award Forest City the license that have nothing to do with politics.
After all, Forest City is the country's largest developer. And its partner, Harrah's Entertainment, is a powerhouse in the gambling industry, making for a formidable one-two punch. Harrah's would manage the Station Square casino.
Station Square already is one of the region's top entertainment destinations, drawing an estimated 2.5 million visitors a year. It makes sense to add a casino to a mix that includes a dancing fountain, Hard Rock Cafe, the Funny Bone comedy club, restaurants and nightclubs, and the Gateway Clipper fleet. Heck, it's almost Vegas right now.
The site also is far more removed from residential neighborhoods than Isle of Capri at the edge of the Hill and perhaps even PITG Gaming on the North Shore.
Despite the upside, Station Square has one especially big obstacle to overcome: traffic.
Even with a number of improvements planned by Forest City, the gaming board's own traffic consultant has questioned whether anything can be done to ease potential congestion in the vicinity of Carson Street and the Smithfield Street Bridge. The city gaming task force also has registered a host of reservations regarding traffic, the latest being the location of a proposed riverfront parking garage.
It's an important issue that could give the gaming board pause -- people who have trouble getting into or out of a casino might not come back, affecting revenues to the state.
Traffic is the biggest strike against Forest City, but not the only one.
The board also might have reservations about giving Harrah's a management role in Pittsburgh when it already is a 50 percent owner of the Chester Downs racetrack/casino near Philadelphia.
If Forest City gets the license, Harrah's would have a major say in the two largest markets in Pennsylvania. That could be a concern, given that some legislators believe the law was crafted to avoid gambling company monopolies.
There's also the issue of revenue. For months, Forest City has been predicting the casino could generate $617.7 million a year in gambling proceeds. That's far higher than what the board's own task force and consultant, PricewaterhouseCoopers, has estimated for the Pittsburgh market and the Station Square casino. They don't even have Station Square producing the most yearly revenue of the three bidders. Does the board want to gamble on such an important point?
Forest City has committed to providing $7.5 million a year for 30 years under the Rendell-crafted Plan B formula for funding an arena and has promised a $25 million endowment for the Pittsburgh History & Landmarks Foundation, plus $1 million a year for community investment, if it wins the license.
ODDS: 2-1. If you can't get there, you're not going. Forest City has the biggest name in the gambling industry and political cachet to boot, but will traffic concerns end up trumping it all?
First Published December 17, 2006 12:00 am