York County’s chance at a mini-casino could get sunk — by the winning bidder

(York) — Here’s one thing that could stop a mini-casino from coming to York County:

The company that paid $50.1 million for the right to build one in this area also says that the law that made new casinos legal is unconstitutional.

That company, Penn National Gaming, filed a lawsuit, asking the courts to stop Pennsylvania from awarding licenses for mini-casinos — ones that can operate between 300 and 750 slot machines and eventually up to 40 table games.

Confusing?

It is a classic case of a business hedging its bets. 

A spokesman for Penn National said that even as the company pursues the litigation against the state, it’s going to be working very aggressively to build a casino in York County.

Why Penn National says there should be no mini-casinos

In October, Pennsylvania lawmakers approved a major gambling expansion in the state that would allow 10 mini-casinos to be built. That’s in addition to the state’s existing 12 casinos.

Earlier this month, Penn National filed a lawsuit in federal court against the Pennsylvania Gaming Control Board and Gov. Tom Wolf over the law, known as Act 42. The business argued that:

• The law was unlikely to cause people to spend more money on gambling. Instead, they would just spend money at different places. That’s often referred to as as cannibalization.
• Penn National would be uniquely harmed and its casino in Dauphin County would be the only one in the state likely to face significant cannibalization.

Also, Penn National thinks it’s misleading to call these casinos “mini.” They could be pretty big, and it’s possible they will have more slot machines than some existing Pennsylvania casinos.

Why is Penn National unique?

The map of Pennsylvania casinos makes the situation clear.

There is one casino in northwest Pennsylvania. There are three in southwestern Pennsylvania.

Seven more are on the eastern side of the state, covering the greater Philadelphia, Lehigh Valley and Scranton/Wilkes-Barre regions.

But there’s only one casino in the midstate: Hollywood Casino at Penn National Race Course in Dauphin County. That is operated by Penn National.

When lawmakers passed Act 42, they created a 25-mile buffer zone for existing casinos. But Penn National attorneys said that because most of Hollywood Casino’s customers already travel more than 25 miles, that buffer doesn’t do it much good.

The buffer zone would have to be at least 50 miles to offer any real protection, said Alan Woinski, president of Gaming USA Corp., which publishes newsletters on the gaming industry.

Penn National attorneys argued that there was “no rational basis for this arbitrary and inequitable treatment.” They said the law violated Penn National’s “constitutional rights” to equal protection and due process, as well as a state constitutional ban on special legislation that favors a private party.

Plus, the law bans new casinos from Wayne, Pike and Carbon counties on the eastern side of the state. That type of special treatment helps ensure virtually none of the 10 new casinos will be located in roughly the eastern third of Pennsylvania, attorneys said.

So Hollywood Casino in Dauphin County is uniquely vulnerable, attorneys argued.

What is Hollywood Casino?

The race track opened there in 1972, and the casino was added in 2008.

It hosts more than 2,300 slot and video poker machines and several dozen table games. 

Penn National has invested $350 million into the casino, attorneys said. And from the time it opened through Nov. 30, it had paid more than $969 million in taxes to the state and more than $142 million in local share assessment payments to East Hanover Township and Dauphin County.

It also pays property taxes, and the township and county were due to collect a combined $4.9 million in property taxes in 2017, the lawsuit said.

The casino employed more than 1,000 people as of the end of June.

What did Penn National ask for?

In the lawsuit, the company asked the court to rule that the law is unconstitutional as applied to Penn National, because it fails to provide it with an adequate protective zone. And they said the state shouldn’t be able to enforce sections of the law related to the mini-casino licenses.

So why did Penn National bid $50.1 million for the right to build a casino here?

The company couldn’t afford to sit back and let a competitor come in while it works through the lawsuit, said Eric Schippers, senior vice president of public affairs for Penn National. So that’s why it bid for a mini-casino license in the York area.

Woinski, with Gaming USA Corp., said the bid was partially a defensive move by Penn National to prevent someone else from coming into the market.

But at the same time, Woinski said, the York area is a good spot.

The county is on the Maryland border, and it is has the eighth-largest population in the state.

Penn National already operates an off-track wagering site in York County, and its Dauphin County location attracts a significant number of people from the area, Schippers said. So it knows the area well. And the business hopes to attract more customers from Maryland.

What’s at stake for Penn National?

If the law remains as is, the casino expects to lose about $34 million each year because of cannibalization, attorneys said in the lawsuit.

What happens if Penn National doesn’t build a mini-casino in York County?

The first auction for a mini-casino license took place on Jan. 10, and Penn National won that auction by offering $50.1 million for the right to build a casino within 15 miles of Yoe, a small York County borough. The business made the payment on Jan. 12.

The law says that Penn National has six months to submit its detailed application to the state, with the possibility of a two-month extension.

If the law remains as is, Penn National either has to submit those detailed plans to build a casino in the York area, or it loses the $50.1 million it already paid.

If that happened, the state would hold another auction for the right to build a mini-casino. It’s possible that auction could end with someone winning the right to build one somewhere else in Pennsylvania.

That’s according to Doug Harbach, a spokesman for the Pennsylvania Gaming Control Board. He said a company can’t win the right to build a casino in an area and then let it remain undeveloped.

But despite the lawsuit, Penn National isn’t planning to leave the area undeveloped.

It’s going down to parallel paths: The lawsuit is on path one. The mini-casino in York County is on path two.

Over the next several weeks, Penn National plans to meet with people in interested communities as it looks for the best location in the York area, Schippers said.

This story comes to us through a partnership between WITF and The York Daily Record.