Thursday, February 01, 2007

GettysBLOG: How Gettysburg Escaped the Casino

The Pennsylvania Gambling Control Board [PGCB] released their reasoning on how they arrived at their selections for granting licenses to applicants last December, and relevant to the Gettysburg area is why that application failed. The selections for winning bids awarded licenses for two free standing [Class 2] casinos to be built. Gettysburg celebrated over the rejection of the Crossroads investment groups' licensing bid to construct a 3,000 machine slot parlor at the intersection of US Routes 30 and 15, about a mile east of Gettysburg.

Today, the PGCB released their reasoning on how they selected the two Class 2 licensees out of the five that had submitted bid.

We have extracted from the PGCB's report [read the report: go to the PGCB link , and click on the Class 2 Orders and Adjudication Information button.]

...The Crossroads location is primarily rural without nearby population centers. As discussed below in Section C, Crossroads touts its location as desirable because of the populations to the South in the Baltimore/Washington D.C. markets. As addressed in that Section, the Board finds that Crossroads has not demonstrated to the Board’s satisfaction through credible evidence that the Crossroad’s location presents the advantages and benefits asserted by Crossroads...

...McCormick Taylor representative Federico also reviewed the traffic study submitted by Crossroads and testified at the final licensing hearing on December 13,2006 as to the review of site improvements by the applicant and PennDOT. The biggest concern expressed by the McCormick Taylor representative was the impact of the project on the reconstructed interchange of Routes 15 and 30. Federico testified that PennDOT is proposing a “rather innovative design for Pennsylvania for this interchange” and that issues related to the design have not yet been resolved. See Crossroads final licensing hearing transcript at p. 11. Federico’s November 15, 2006 report indicated several remaining traffic issues and stated that other than those issues, it appears that the proposed improvements adequately mitigate the projects impacts...

...With respect to the Crossroads project, Crossroads presented substantial testimony that it will rely in large part on the Baltimore, Maryland and Washington D.C. areas for its patronage and that 60% to 65% of its revenues would originate from outside the Commonwealth. The Gettysburg area itself is primarily a rural area without large population centers nearby to sustain the casino, thus the emphasis on the market to the South. In theory, this strategy is appealing. However, during the licensing hearings, Gettysburg presented testimony that it was “virtually the same drive time away” from the Baltimore/Washington D.C. market as Charlestown slots in West Virginia and that Charlestown had a casino win of $437 million in the fiscal year ending January 30, 2006. While that number is significant, the Board was not presented with any credible evidence to demonstrate how much of that Charlestown business could be expected to leave thatfacility and travel north to Gettysburg.

Further, the Board received testimony concerning the possibility of slot machines being introduced in Maryland and the impact that would have on the Gettysburg property. Gettysburg proponents testified that that they do not believe gaming legislation will be passed in Maryland in the “near future” but that even if it did, “we estimate that the revenue impact on Crossroads will be between 15 and 20 percent leaving Crossroads a substantial cushion above its break-even revenue level.” See Hearing transcript at p. 62. While the Board certainly is comforted by the testimony that Crossroads would have a cushion above its break-even revenue level, since the Board has a strong interest in “protecting its product” by assuring that the chosen casinos stay in business, a twenty percent decline in revenues would place the revenue generation estimates in the $216 million to $231 million range depending on whether the Task Force or Crossroads revenue estimates are utilized. This scenario would place Crossroads at the bottom of the revenue generation models, a position any applicant should desire to avoid in a competitive licensing situation as is present here...

...However, in the comparative setting to which these licenses are subject, the Board finds that the economic benefit of Crossroads and Tropicana, given the smaller economic commitments, likely will not be as significant as the benefits which will occur by virtue of the larger commitments and the spin-off business associated therewith of the Mount Airy, Sands Bethworks and Pocono Manor projects. This again is a factor which the Board weighs in favor of those applicants...

...Opposition was strongest in relation to the proximity of the casino to the historic Gettysburg battlefield areas and the effect the casino would have on the traditionally rural nature of the community. Section 1102(10) of the Act instructs that “the public interest of the citizens of this Commonwealth and the social effect of gaming shall be taken into consideration in any decision or order made.” While the Board duly noted and considered the degree and proportion of public opposition, the Board’s decision was not based solely on this factor.
So, it seems the Crossroads people, who had difficulty maintaining investors [they lost their principle investor, Morgan Stanly, just weeks before the license application closed, and had to scramble to replace them with another outfit with much less financial wallop; even as the PGCB was releasing the names of the licensees who were getting the casinos, individual investors were withdrawing], over estimated their economic market share, and under estimated the impact on the roads around the Casino. And in spite of what the PGCB states in the final paragraph above, public sentiment against the casino far outweighed those who supported the casino locally, and it did have a major impact on the decision.

We had fears that local investor and president of Crossroad investment group David Levan would appeal the board's December decision. When the deadline passed, the releif grew, but it was tempered by the realization that in the time it takes to snap your fingers, the Pennsylvania General Assembly could easily authorize five more Class 2 licenses, and that would open the door to another application for a casino in the Gettysburg area. Of course, the General Assembly would not take such action until at least 2 A.M.

The report posted today on the PGCB website, and partially reproduced above, should put those fears to rest, even in light of the potential for another late night legislative sideshow.

But don't bet on it!


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Robert Dowler said...

Thank God