Legislative Budget and Finance Committee
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Legislative Budget and Finance Committee A JOINT COMMITTEE OF THE PENNSYLVANIA GENERAL ASSEMBLY Offices: Room 400 Finance Building, 613 North Street, Harrisburg Mailing Address: P.O. Box 8737, Harrisburg, PA 17105-8737 Tel: (717) 783-1600 • Fax: (717) 787-5487 • Web: http://lbfc.legis.state.pa.us SENATORS ROBERT B. MENSCH Chairman JAMES R. BREWSTER Vice Chairman DOMINIC PILEGGI CHRISTINE TARTAGLIONE KIM WARD JOHN N. WOZNIAK The Current Condition and Future Viability of REPRESENTATIVES Casino Gaming in Pennsylvania ROBERT W. GODSHALL Secretary PHYLLIS MUNDY Treasurer STEPHEN E. BARRAR JIM CHRISTIANA DWIGHT EVANS JAKE WHEATLEY EXECUTIVE DIRECTOR PHILIP R. DURGIN Conducted Pursuant to SR 2013-273 May 2014 THE CURRENT CONDITION AND FUTURE VIABILITY OF CASINO GAMING IN PENNSYLVANIA MAY 2014 REPORT SUBMITTED TO: Philip Durgin Executive Director The Pennsylvania Legislative Budget and Finance Committee A Joint Committee of the Pennsylvania General Assembly Office Room 400, Finance Building Harrisburg, PA 17105 REPORT SUBMITTED BY: Econsult Solutions 1435 Walnut Street, Suite 300 Philadelphia, PA 19102 Econsult Solutions, Inc.| 1435 Walnut Street, Ste. 300 | Philadelphia, PA 19102 | 215-717-2777 | econsultsolutions.com The Current Condition and Future Viability of Casino Gaming in Pennsylvania | May 2014 1 TABLE OF CONTENTS Table of Contents............................................................................................................................ 1 Executive Summary ........................................................................................................................ 4 1.0 Introduction ......................................................................................................................... 11 2.0 Pennsylvania Gaming Industry Performance ................................................................. 14 2.1 Industry Supply ........................................................................................................... 15 2.1.1 Slot Machine Supply and Revenue ..................................................................... 17 2.1.2 Table Game Supply And Revenue ..................................................................... 19 2.1.3 Revenue Per Position ............................................................................................. 21 2.2 State and Local Gaming Tax Revenues ................................................................. 23 2.3 Economic Impact ...................................................................................................... 27 2.4 Individual Casino Performance and Impacts........................................................ 30 2.4.1 Mohegan Sun at Pocono Downs ........................................................................ 30 2.4.1.1 Economic Impact of Mohegan Sun at Pocono Downs ............................... 32 2.4.2 Parx Casino ............................................................................................................. 34 2.4.2.1 Economic Impact of Parx Casino .................................................................... 36 2.4.3 Harrah’s Philadelphia Casino & Racetrack ....................................................... 38 2.4.3.1 Economic Impact of Harrah’s Philadelphia Casino ...................................... 40 2.4.4 Presque Isle Downs Casino ................................................................................... 42 2.4.4.1 Economic Impact of Presque Isle Downs Casino .......................................... 44 2.4.5 Meadows Racetrack and Casino ....................................................................... 46 2.4.5.1 Economic Impact of Meadows Racetrack and Casino .............................. 48 2.4.6 Mount Airy Casino Resort ..................................................................................... 50 2.4.6.1 Economic Impact of Mount Airy Casino Resort ............................................. 52 2.4.7 Hollywood Casino at Penn National ................................................................... 53 2.4.7.1 Economic Impact of Hollywood Casino at Penn National .......................... 55 2.4.8 Sands Casino Resort Bethlehem .......................................................................... 57 2.4.8.1 Economic Impact of Sands Casino Resort Bethlehem ................................. 59 2.4.9 Rivers Casino .......................................................................................................... 61 2.4.9.1 Economic Impact of Rivers Casino .................................................................. 63 2.4.10 SugarHouse Casino ............................................................................................ 65 2.4.10.1 Economic Impact of SugarHouse Casino ...................................................... 67 2.4.11 Valley Forge Casino Resort ............................................................................... 69 2.4.11.1 Economic Impact of Valley Forge Resort Casino .......................................... 71 2.4.12 Lady Luck Casino at Nemacolin ...................................................................... 73 2.4.12.1 Economic Impact of Lady Luck Casino at Nemacolin ................................ 75 3.0 The Changing Competitive Landscape .......................................................................... 76 3.1 Decomposition of Pennsylvania’s 2013 Gaming Tax Revenue Decline ............ 76 3.2 Regional Competitive Trends ................................................................................... 79 Econsult Solutions | 1435 Walnut Street, Ste. 300 | Philadelphia, PA 19102 | 215.717.2777 | econsultsolutions.com 2 The Current Condition and Future Viability of Casino Gaming in Pennsylvania | May 2014 3.2.1 Snapshot ................................................................................................................. 79 3.2.2 Supply and Revenue Trends, by State ................................................................ 81 3.2.3 Total Regional Revenue ........................................................................................ 86 3.2.4 Supply Forecast and Summary, by State ........................................................... 88 3.2.4.1 Delaware ............................................................................................................. 89 3.2.4.2 Maryland ............................................................................................................. 90 3.2.4.3 New Jersey .......................................................................................................... 91 3.2.4.4 New York .............................................................................................................. 91 3.2.4.5 Ohio ...................................................................................................................... 92 3.2.4.6 West Virginia ........................................................................................................ 92 3.2.4.7 Virginia ................................................................................................................. 93 3.3 Gravity/Other Model of Projected Revenues Given a Few Future Competition Scenarios .............................................................................................................................. 94 3.3.1 Overview ................................................................................................................. 94 3.3.2 Gravity Model Caveats ........................................................................................ 95 3.3.3 Modeling Results .................................................................................................... 97 3.4 Capital Investments ................................................................................................. 101 3.4.1 Reinvestment in Amenities ................................................................................. 101 3.4.2 Casino Investment is Linked to Market Size and tax Rate ............................. 102 3.4.3 Cross State Incentives ......................................................................................... 102 3.5 Financial Sustainability ............................................................................................ 103 3.5.1 Philadelphia Area Casinos ................................................................................. 103 3.5.2 Pittsburgh Area Casinos ...................................................................................... 104 3.5.3 Northeast Pennsylvania Casinos ....................................................................... 104 3.5.4 Central .................................................................................................................. 105 3.5.5 Northwest .............................................................................................................. 105 3.5.6 Overall Impact ..................................................................................................... 105 3.6 Conclusions Regarding Competition .................................................................... 106 4.0 The Regulatory Landscape ............................................................................................. 107 4.1 Regulatory Comparison With Selected States .................................................... 108 4.1.1 Licensing ............................................................................................................... 108 4.1.2 Reporting