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HOUSE OF REPRESENTATIVES COMMONWEALTH OF PENNSYLVANIA * * * *
BUDGET HEARING
PENNSYLVANIA GAMING CONTROL BOARD * * * *
House Appropriations Committee
Main Capitol Building Majority Caucus Room 140 Harrisburg, Pennsylvania
Monday, March 4, 2013 - 4:00 p.m.
1300 Garrison Drive, York, PA 17404 717.764.7801 877.747.2760 Page 2
1 COMMITTEE MEMBERS PRESENT: 2 Honorable William Adolph, Jr., Majority Chairman Honorable Ryan Aument 3 Honorable Karen Boback Honorable Jim Christiana 4 Honorable Gary Day Honorable Gordon Denlinger 5 Honorable Brian Ellis Honorable Garth Everett 6 Honorable Mauree Gingrich Honorable Glen Grell 7 Honorable Seth Grove Honorable Thomas Killion 8 Honorable David Millard Honorable Mark Mustio 9 Honorable Donna Oberlander Honorable Bernie O ’Neill 10 Honorable Michael Peifer Honorable Scott Petri 11 Honorable Jeffrey Pyle Honorable Curtis Sonney 12 Honorable Joseph Markosek, Minority Chairman Honorable Matthew Bradford 13 Honorable Michelle Brownlee Honorable Michael Carroll 14 Honorable Scott Conklin Honorable Madeleine Dean 15 Honorable Deberah Kula Honorable Timothy Mahoney 16 Honorable Michael O ’Brien Honorable Cherelle Parker 17 Honorable John Sabatina Honorable Steve Santarsiero 18 Honorable Jake Wheatley, Jr. 19 REPUBLICAN NON-COMMITTEE MEMBERS PRESENT 20 Honorable Matthew Baker 21 Honorable Paul Clymer Honorable Becky Corbin 22 Honorable George Dunbar Honorable Harold English 23 Honorable Mark Gillen Honorable Susan Helm 24 Honorable Ryan Mackenzie Honorable Ronald Marsico 25 Page 3
1 REPUBLICAN NON-COMMITTEE MEMBERS PRESENT (CONT’D):
2 Honorable Tina Pickett Honorable Rick Saccone 3 Honorable Will Tallman Honorable Mike Regan 4
5 DEMOCRATIC NON-COMMITTEE MEMBERS PRESENT 6 Honorable Tim Briggs 7 Honorable Vanessa Lowery Brown Honorable Thomas Caltagirone 8 Honorable Dom Costa Honorable Pamela DeLissio 9 Honorable Steve McCarter Honorable Phyllis Mundy 10 Honorable Ed Neilson Honorable James Roebuck 11 Honorable Rosita Youngblood
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13 STAFF MEMBERS PRESENT:
14 David Donley Republican Executive Director 15 Ritchie LaFaver 16 Republican Deputy Executive Director
17 Dan Clark, Esquire Republican Chief Legal Counsel 18 Miriam Fox 19 Democratic Executive Director
20 Beryl Kuhr, Esquire Democratic Chief Legal Counsel 21
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1 INDEX OF TESTIFIERS
2 TESTIFIERS PAGE
3 William Ryan, Jr., Chairman...... 5 PA Gaming Control Board 4
5 Kevin O ’Toole, Executive Director...... 10 PA Gaming Control Board 6
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10 INDEX OF REQUESTED DOCUMENTS OR INFORMATION 11 Page Line Page Line Page Line 12 57 8 - 13
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1 CHAIRMAN ADOLPH: Thank you. I ’d like
2 to call to order the House Appropriations budget
3 hearing on the Pennsylvania Gaming Control
4 Board. With us today is Chairman Bill Ryan, as
5 well as Kevin O ’Toole, the executive director.
6 Gentlemen, thank you for being here today, and
7 the time is yours for some opening remarks.
8 MR. RYAN: Thank you, Mr. Chairman,
9 Chairman Markosek and members of the committee.
10 My remarks are brief. First of all, I ’m here
11 with Kevin O ’Toole, our executive director, and
12 also with us, seated behind us, are
13 Commissioners Keith McCall, Annmarie Kaiser and
14 John McNally.
15 The board is requesting from the
16 General Assembly a budget in the amount of
17 $38.908 million. That is an 810,000-dollar
18 increase. 2.2 percent is how it breaks down.
19 And 36,908 of that is for administration, as the
20 committee knows. Two million of it is for
21 statutorily-mandated local law enforcement
22 grants for the coming fiscal year.
23 I think the board can tell the General
24 Assembly and this committee that we have made
25 great strides in reducing our costs in the past Page 6
1 year. In calendar year 12, we were able to
2 reduce the complement of personnel in the agency
3 from 326 to 302. That was the standing
4 complement. We did that almost completely with
5 attrition; that is, when people left, retired or
6 took other positions, we were able to look at
7 the positions and decide that we didn’t need
8 those positions filled; that we could fill the
9 positions with people inside and consolidate.
10 We did, of course, have to add seven
11 people to our staff when Valley Forge Casino
12 opened in March of 2012, but the annualized
13 savings for the reduction in personnel amount to
14 about $1.1 million; just that alone.
15 In addition, we were able to get
16 better space for our operations in the City of
17 Pittsburgh. That will save us $107,000 a year
18 going forward. We also eliminated 11 vehicles,
19 saving $60,000 a year. We reduced our budget
20 for I.T. consultants by another $60,000 a year,
21 and we reduced the number of BlackBerrys and
22 cell phones by 25 percent, and that enabled us
23 to cut our costs by $24,000.
24 On the other side of the ledger,
25 obviously, we have to add seven more people. We Page 7
1 expect for the opening of Nemacolin Woodlands,
2 which we expect will open about July 10th, 2013.
3 We also have budgeted increases for pensions in
4 the amount of 45 percent; and health care costs,
5 about 11 and a half percent. We also have
6 mandated union pay raises we have to pay for.
7 So the bottom line is an increase of $810,000,
8 or 2.2 percent.
9 The board assures this committee and
10 the General Assembly and the Governor that we
11 will continue to be as efficient as we can. We
12 realize that you can only take this so far. We
13 need people. They're a valuable resource. At
14 some point, we're going to be at that right
15 number, but I think our strides just in the last
16 fiscal year and calendar year have been very,
17 very strong.
18 Mr. Chairman.
19 CHAIRMAN ADOLPH: Thank you. Thank
20 you very much. As is the custom with this
21 committee, we always invite the standing
22 chairman of the House committees. And with us
23 today is the Republican Chair of the Gaming
24 Oversight Committee, Tina Pickett, as well as
25 the Democratic Chair of the Gaming Oversight Page 8
1 Committee, Chairman Rosita Youngblood. We
2 welcome both the chairmen of that committee.
3 My question was mainly regarding some
4 of your cost controls over the years.
5 Obviously, gaming is a big industry now in
6 Pennsylvania, and I was wondering how you were
7 cutting costs as the industry increased. Okay?
8 I appreciate the brief explanation as far as
9 personnel. Any other ways that you were able to
10 decrease costs over the years as the industry
11 continued to grow?
12 MR. RYAN: Well, in the past, I think
13 we've gotten a better -- a better idea of what
14 an appropriate salary is for a particular
15 position, so -
16 Another thing we have done, and this
17 we started to do before I got on the board is,
18 when we hired people doing the same work to
19 replace people who had left, we took advantage
20 of surveys and studies in the past and hired
21 those people or placed those people in positions
22 at lower salaries.
23 That has also, I think, Mr. Chairman,
24 been a real benefit to the board, and it's also
25 made it more fair for all of our employees Page 9
1 across the board. W e ’re getting a salary
2 structure that fits more with the rest of the
3 state and also fits well within our own agency.
4 CHAIRMAN ADOLPH: One of — One of the
5 issues that came up during the Auditor General’s
6 budget hearing was that, they audited the Gaming
7 Board and that he felt that the Gaming Board or
8 the casinos should be paying for this audit and
9 not the taxpayers of Pennsylvania. Any insight
10 to that?
11 MR. RYAN: Well, the only thing I
12 think the board is concerned about, the industry
13 can certainly take care of themselves, although,
14 we all have an interest in keeping the industry
15 healthy and not seeing them as just a cashcow.
16 But, any expense that the General
17 Assembly and the Governor would see as necessary
18 to be taken out of the industry revenue, all we
19 would ask on the board is that it not be done at
20 the expense of the board, the Attorney General,
21 Department of Revenue and the state police. We
22 all have funding needs.
23 As I think I’ve described, we’ve tried
24 to become more efficient and keep our budget
25 low. And a move like this, which we all know Page 10
1 would not be cheap; the numbers I hear bantered
2 about are anywhere from 600,000, 700,000 up to
3 do an audit, that they be carefully placed. And
4 that everyone remember that our budget, which
5 does come a hundred percent from the industry;
6 not from the taxpayers at all, but that budget
7 is appropriated to us each year. And if we have
8 this expense all of a sudden in the middle of a
9 year, we have to give up something else, I would
10 have to assume, in order to meet that expense.
11 So, there may be funding in the
12 accounts for that. The only thing I would
13 caution the General Assembly is, don't throw the
14 baby out with the bath water.
15 CHAIRMAN ADOLPH: I understand.
16 Chairman Ryan, can you tell us if the casinos
17 actually get audited by the Auditor General as
18 well? Do you have that information?
19 MR. O'TOOLE: I do not believe,
20 Chairman, that they are audited directly by the
21 Auditor General. The casinos are a private
22 enterprise, so I'm not sure what the scope of
23 the Auditor General's legislative authority is.
24 CHAIRMAN ADOLPH: Okay. All right. I
25 appreciate that. Thank you very much. Page 11
1 MR. O'TOOLE: But, Chairman, just as
2 a -- as an aside, we do have a team of auditors,
3 and we do compliance audits. So, the industry
4 is being watched on a regular basis in order -
5 ensuring that they comply with their
6 requirements.
7 CHAIRMAN ADOLPH: So the Gaming Board
8 retains an auditing firm to audit the casinos?
9 MR. O'TOOLE: No, Chairman. We have
10 on staff, with our Bureau of Gaming Operations,
11 we have five -
12 CHAIRMAN ADOLPH: You have internal
13 staff that does that job?
14 MR. O'TOOLE: -- member audit team.
15 Yes.
16 CHAIRMAN ADOLPH: Okay. Thank you
17 very much. Chairman Markosek.
18 CHAIRMAN MARKOSEK: Thank you,
19 Chairman Adolph. And welcome, gentlemen.
20 Just for the information of the
21 members, we have Representative Ed Neilson,
22 northeast Philadelphia, here. And I'd like to
23 also recognize a former colleague, a good
24 friend, a former chairman of the Gaming
25 Committee, former Representative Dante Santoni, Page 12
1 who is here as well. Welcome. Of course, I
2 would be remiss without saying hello to my old
3 pal, the Speaker -- former Speaker of the House;
4 once the Speaker always the Speaker, Keith
5 McCall, who is here as well.
6 I don’t have any specific question
7 right now. I may come back later with one, but
8 I ’ll let the other -- my time for the other
9 members to ask some questions right now. Thank
10 you.
11 CHAIRMAN ADOLPH: Thank you. Thank
12 you, Chairman Markosek. I’d also like to
13 acknowledge the presence of Representative Sue
14 Helm has joined us. The next question will be
15 asked by Chairman Pickett.
16 REPRESENTATIVE PICKETT: Thank you,
17 Mr. Gentlemen -- Mr. Chairman, sorry. And,
18 gentlemen, thank you for joining us today.
19 It seems like only yesterday that we
20 started the gaming and casinos in Pennsylvania;
21 but, in fact, it’s been a little while. And as
22 the Chairman mentioned, even so, we are still in
23 the process of awarding licenses.
24 I just thought maybe you could do a
25 little history walk for us and a little Page 13
1 projection into the future on the three
2 different categories of licenses that we have.
3 On the Category 1, we have a license
4 in Lawrence County that developed financial
5 problems and wasn't able to proceed, and there's
6 another applicant there for that license. That
7 investor has bid successfully for those rights
8 but has not applied for their slots or table
9 game license as of yet. Can you give us a
10 position for that particular application at this
11 time?
12 MR. RYAN: All we know, Chairman
13 Pickett, is that -- I believe Endeka is the name
14 of the entity that now has the right to the
15 harness racing license in Lawrence County, and
16 they've had a number of extensions to meet some
17 of the requirements of the Harness Racing
18 Commission and have not met them yet, I believe.
19 They have another extension that
20 expires in mid-March. They have not, you are
21 correct, applied to the Gaming Board for a
22 casino license. And, for now, that's where it
23 sits. I couldn't tell you any more than that,
24 and you probably know every bit as much as we
25 do. Page 14
1 REPRESENTATIVE PICKETT: Thank you.
2 If we move to the Category 2 licenses, maybe
3 we're a little further along the road on that
4 one. We'll see what you say. But, Foxwood was
5 revoked, and that was reopened and now we have
6 six applications for that license down in
7 Philadelphia. Can you give us some time frames
8 on those applications and maybe when we might
9 expect to actually see a new casino open down
10 there, and when the 50-million-dollar license
11 fee might come to us and where it would be
12 deposited?
13 MR. RYAN: Well, I think if the board
14 decides to choose one of the six--You're right;
15 there are six applicants--the 50 million would
16 come down the road.
17 First of all, we, as you know, in
18 February, had a hearing down at the Philadelphia
19 Convention Center. All six applicants were
20 given the opportunity to tell the public,
21 demonstrate to the public what their projects
22 were about.
23 The next step, as far as the public is
24 concerned, will be the public input hearings,
25 which will be, again, at the Pennsylvania Page 15
1 Convention Center April 11th and 12th. And
2 people -- representatives of community groups,
3 public officials can register with the board to
4 appear and express their views with respect to
5 any or all of those six projects.
6 And today we announced that the board
7 is also going to have another day, May 8th, in
8 south Philadelphia at Lincoln Financial Center
9 between 9 and 5. That’s open to a change, but
10 it will certainly be from at least 9 to 5 to
11 give people an opportunity, especially people
12 who live down in the south Philadelphia area
13 where three of the six applicants’ projects are
14 located; very close to the stadium complex; give
15 those people who may not have the opportunity to
16 go up to the Pennsylvania Convention Center in
17 April; give them an opportunity to also appear
18 and give their views on all six projects.
19 Following that, we will, of course, be
20 involved in the betting process. We’ll have
21 public hearings involving all of the projects
22 individually, and I think what we on the board
23 hope to do is make a decision by the end of the
24 year. If the board determines that there is a
25 suitable applicant and that one of the six Page 16
1 should be granted the license, I think we can
2 expect one, two or more of the disappointed
3 applicants to, perhaps, appeal. That could drag
4 things out awhile. I would -
5 I don't want to guess about when
6 building could begin, but it could be a while.
7 REPRESENTATIVE PICKETT: That sounds
8 like one to two years.
9 MR. RYAN: I would say that's a good
10 guess.
11 REPRESENTATIVE PICKETT: Okay. Thank
12 you on that. And then if we move to the
13 Category 3 licenses, the resort licenses, we
14 have one in operation right now, Valley Forge.
15 MR. RYAN: Correct.
16 REPRESENTATIVE PICKETT: We have
17 Nemacolin about to open, or sometime in '13;
18 what; midsummer maybe?
19 MR. RYAN: I think they're hoping to
20 open in July right now; Nemacolin Woodlands,
21 yes.
22 REPRESENTATIVE PICKETT: And I think
23 the law says that if the two are opened and in
24 operation, there's a third license available.
25 But I'm curious, does that mean it's Page 17
1 automatically available, or is that the board's
2 discretion?
3 MR. RYAN: That would -- The board
4 would have to decide if that is in the best
5 interest of the public. And I believe it would
6 be available until 2017.
7 REPRESENTATIVE PICKETT: So the market
8 conditions would be a big factor in that,
9 probably?
10 MR. RYAN: The market conditions, I
11 think, would always be a big factor. We're
12 talking couple years down the road. But, a lot
13 of things could happen in a couple of years;
14 you're right.
15 REPRESENTATIVE PICKETT: Thank you.
16 And thank you, Mr. Chairman.
17 CHAIRMAN ADOLPH: Thank you.
18 Representative Santarsiero.
19 REPRESENTATIVE SANTARSIERO: Thank
20 you, Mr. Chairman. I'm up here. You're gonna
21 have to get used to going back and forth
22 throughout the hearing. Sorry about that.
23 Welcome, Chairman Ryan and Director O'Toole.
24 Thank you for coming today.
25 I have a question about the horse race Page 18
1 development fund. As you probably know, the
2 Governor is proposing to transfer more money out
3 of the fund, about $31 million, this coming
4 fiscal year. And I guess that would probably be
5 okay at the end of the day if, in fact, some of
6 the revenue projections were accurate; where we
7 felt we had a fair degree of confidence that
8 they would be accurate.
9 However, w e ’re hearing these things
10 about where revenues are right now, specifically
11 with regard to Category 1 facilities. Can you
12 give us a little bit of a sense of where you
13 think things are and whether you might share a
14 concern in that respect with respect to the
15 fund?
16 MR. RYAN: Well, I guess we have
17 concerns about Category 1, principally because
18 of Presque Isle. As I ’m sure you know, Presque
19 Isle up in Erie is facing competition since last
20 May from the Horseshoe Casino in Cleveland
21 and -- from the time that casino opened until
22 the end of the calendar year. Slot revenues at
23 Presque Isle were down about 15 percent; table
24 game revenues were down about a third.
25 In addition, there are a number -- I Page 19
1 believe, a total of seven racinos authorized by
2 Ohio law. And two of them, from what we read,
3 are scheduled to be one in the Cleveland area;
4 another in the Youngstown area. Both of them
5 would be within a hundred miles of Erie. The
6 people at Presque Isle estimated, before the
7 Horseshoe opened, that 30 to 40 percent of their
8 business came from Ohio, in the Cleveland area.
9 So, it's possible that that will be an impact on
10 Presque Isle that is -- it's considerable.
11 And, of course, when you look at the
12 horse race development fund and how the numbers
13 are put together, the most important number is,
14 what are the gross terminal receipts from the
15 six racetracks. That's the key number. And if
16 that drops, then the money going into the horse
17 race development fund drops.
18 REPRESENTATIVE SANTARSIERO: So,
19 again, I don't want to put words in your mouth,
20 but do you share the concern that, with
21 potential -- with the potential, at least, of
22 revenues falling off in the next fiscal year,
23 and very likely that they're falling now, at
24 least with respect to Presque Isle but, perhaps,
25 with respect to some of the other racetracks as Page 20
1 well, that there may be a problem in proposing
2 to transfer further funds out of the fund -- out
3 of the horse race development fund.
4 MR. RYAN: Well, the board doesn't
5 take a position, sir, with respect to what is
6 done with the funds. Our job is to regulate
7 casinos. What happens to the funds we see as
8 the province of the General Assembly and the
9 Governor.
10 But, just to answer your question
11 about the funds going into the Race Horse
12 Development Fund, any decrease in the gaming or
13 the slot machine revenue is going to have an
14 impact.
15 REPRESENTATIVE SANTARSIERO: Okay.
16 And I appreciate you drawing that distinction.
17 And forgive me, because I wasn't so much asking
18 for your policy perspective. But, obviously, if
19 we are going to make these decisions, we have to
20 be as well-informed as possible in terms of what
21 the facts are and what the appropriate course
22 ought to be at the end of the day. And so, that
23 was the basis for my question to you.
24 MR. RYAN: I understand.
25 REPRESENTATIVE SANTARSIERO: Thank Page 21
1 you. Thank you, Mr. Chairman.
2 CHAIRMAN ADOLPH: Representative
3 O ’Neill.
4 REPRESENTATIVE O ’NEILL: Thank you,
5 Mr. Chairman. Lady and gentlemen, thanks for
6 stopping by today. And, Mr. Speaker, welcome
7 back.
8 I just want to piggyback a little on
9 what Chairman Pickett was talking about. With
10 the new number 2 casino coming into the
11 Philadelphia area--I’m being from the southeast,
12 Bucks County--I was wondering, in looking out in
13 the future dates when maybe all 14 casinos are
14 up and running and you may be able to add a
15 third number 3 casino in the future, are any
16 impact studies being done to look at how the
17 market might be watering down or whether, you
18 know, a new casino here or there might be having
19 an adverse impact on another casino or that sort
20 of thing, because -- I mean, when we actually
21 came up with the gaming legislation, there
22 wasn’t an impact study done prior to that. So,
23 I ’m was wondering if there’s any -
24 MR. RYAN: We are not doing one now,
25 sir, no. Page 22
1 REPRESENTATIVE O'NEILL: Is there any
2 plan to do any such thing?
3 MR. RYAN: Well, it's an interesting
4 question. The board has discussed this on the
5 issue of -- I guess the word is saturation. One
6 of our difficulties is, as I understand it -
7 I've only been on the board since late August of
8 '11. But, there were changes in the statutes in
9 the Gaming Act in 2010 that makes it a little
10 more difficult for the board to retain experts
11 who have real expertise because, once an entity
12 works -- is retained by the board, that entity
13 has -- cannot do work for a casino or appear in
14 front of the board on behalf of a casino for a
15 year to two, depending on what the action is.
16 That is a problem.
17 However, we are discussing how to deal
18 with the issue and -- the impact and saturation
19 issue, I can tell you that. I don't have any
20 more information at this point.
21 REPRESENTATIVE O'NEILL: Maybe that's
22 something that we could be working together on
23 from our end.
24 MR. RYAN: Perhaps it would be a good
25 idea. Page 23
1 REPRESENTATIVE O ’NEILL: Yeah. And
2 just real quick, on the table games, you had
3 mentioned 2010 -- a new law in 2010, which
4 actually brought the table games in. A fee was
5 set, and I believe the 11 existing casinos all
6 got the table games, got that fee.
7 Have any new casinos applied for -
8 that are coming on board applied for table
9 games? And if so, are they being charged under
10 the new fee schedule?
11 MR. RYAN: Well -
12 REPRESENTATIVE O ’NEILL: Or how does
13 that affect, like, for example, the new one
14 coming in Philadelphia?
15 MR. RYAN: It would affect
16 Philadelphia. A casino, a Category 2 in
17 Philadelphia, instead of paying 16 and a half
18 million for the table games certificate, would
19 have to pay 24,750,000.
20 However, I do not believe the change
21 affects the Category 1 that’s presently out
22 there, possibly, in Lawrence County.
23 REPRESENTATIVE O ’NEILL: How about -
24 I know you may have mentioned it. I don’t know
25 how you pronounce it. Nemacolin or however -- Page 24
1 MR. RYAN: Nemacolin. I believe -
2 Kevin, is that the same?
3 MR. O'TOOLE: Nemacolin is 7 and a
4 half million for their table game certificate.
5 MR. RYAN: So that's the same.
6 REPRESENTATIVE O'NEILL: Did they come
7 in after June 2010, or were they grandfathered
8 under the old law?
9 MR. O'TOOLE: Well, I believe that
10 they're grandfathered as a Category 3.
11 REPRESENTATIVE O'NEILL: Category.
12 Okay, great. Thanks for being here. Thank you,
13 Mr. Chairman.
14 CHAIRMAN ADOLPH: Representative
15 O'Brien.
16 REPRESENTATIVE O'BRIEN: Thank you,
17 Mr. Chairman. Welcome everyone.
18 MR. RYAN: Thank you.
19 REPRESENTATIVE O'BRIEN: You know, out
20 in the hall, they said I should be nice with
21 you. I don't understand what these folks meant.
22 MR. RYAN: I don't either.
23 REPRESENTATIVE O'BRIEN: Let's
24 continue with Representative O'Neill's line of
25 questioning. So, last session, perhaps the Page 25
1 session before that, as former member/chairman
2 of the Gaming Oversight Committee,
3 Representative Schroder was walking -- working
4 on what became H.B. 65, which passed the House
5 overwhelmingly, on taking the second
6 Philadelphia license and putting it out to bid
7 statewide. He brought in a number of industry
8 analysts who said the Philadelphia market was
9 saturated; that another casino in Philadelphia
10 would cannibalize SugarHouse and Harrah’s.
11 So you’re kind of telling me that the
12 board did not do a study of their own; is that
13 correct?
14 MR. RYAN: You mean for this
15 particular -
16 REPRESENTATIVE O ’BRIEN: For the
17 Category 2 license in Philadelphia.
18 MR. RYAN: We have not, no.
19 REPRESENTATIVE O ’BRIEN: You have not.
20 MR. RYAN: No.
21 REPRESENTATIVE O ’BRIEN: So you’re
22 telling me that the board is moving along
23 willy-nilly with awarding this license?
24 MR. RYAN: No.
25 REPRESENTATIVE O ’BRIEN: You’re Page 26
1 telling me that the board has no idea what the
2 financial impact will be on the Commonwealth?
3 MR. RYAN: No. I'm not telling you
4 that at all. What I think I'm telling you is,
5 the board thought a lot about this. We on the
6 board believe that we are appointed to put the
7 law first and to consider what the law is. And,
8 clearly, the law right now says there shall be
9 two casinos in the City of Philadelphia.
10 We didn't change the law. But we did
11 feel we have an obligation to do exactly what we
12 did, which was open up the process and ask the
13 public, hey, does anybody out there who is
14 experienced think it's worth applying. We got
15 six applications. I can't go into the details
16 of each because, as we know, we are a
17 quasi-judicial body and we'll make the decision
18 at the appropriate time. But, I think it is
19 fair to say that each one of the six
20 applications is a substantial application.
21 As I understand it--was not on the
22 board--but, back in '05 when there were two
23 Category 2 licenses, there were five applicants.
24 The board saw six applications, each substantial
25 for one. That, I would say, is some indication; Page 27
1 not standing alone.
2 All I can tell you, sir, is that we
3 will do our job. We will take into
4 consideration every issue, including the issue
5 of impact on other casinos. And we will reach,
6 I believe, the right determination.
7 REPRESENTATIVE O'NEILL: So, what is
8 the anticipated net gain by having two casinos
9 in Philadelphia?
10 MR. RYAN: Well, first of all, the
11 General Assembly and the Governor, who passed
12 the legislation and signed it, determined that
13 the City of Philadelphia and that area could
14 sustain two. So that's our starting point.
15 REPRESENTATIVE O'BRIEN: I'll take
16 that answer as, with a lack of study, you don't
17 know.
18 MR. RYAN: Well, remember, the process
19 is just beginning, sir. The process will be
20 long and drawn out. I would expect we're going
21 to get petitions to intervene filed by other
22 casinos. One, two, three, perhaps all four of
23 the casinos in the southeast, they will produce
24 their experts indicating their testimony on this
25 and other issues. And the board will -- we will Page 28
1 make our determination.
2 And, as I said, the board is still
3 considering what we will do as far as seeking
4 expert advice on our own. But, no, w e ’re not
5 gonna just stumble down an alley blind.
6 REPRESENTATIVE O ’BRIEN: Well, it
7 appears you’re doing that right now.
8 MR. RYAN: Well, I would disagree.
9 W e ’re not doing that. But, suffice it to say,
10 w e ’ll do what w e ’re supposed to do. But w e ’re
11 not going to just shut down the process without
12 even starting it.
13 REPRESENTATIVE O ’BRIEN: You know,
14 SugarHouse was awarded before your time, and I
15 was vehemently opposed. Not that I ’m
16 anti-gaming. I argued on a land-use basis.
17 And as you do suitability and as you
18 make your decision, I would advise you, on a
19 land-use basis, a shuttered and fenced-off
20 SugarHouse on the Delaware River is about the
21 worst that could happen. Thank you for your
22 testimony. Thank you, Mr. Chairman.
23 CHAIRMAN ADOLPH: Thank you.
24 Representative Gordon Denlinger.
25 REPRESENTATIVE DENLINGER: Thank you, Page 29
1 Chairman. Gentlemen and lady, welcome.
2 I'd like to shift gears to gross
3 terminal revenue from slot machines, if we can,
4 for a few minutes here.
5 You issued a press release that, for
6 year 2012, slot machine revenue had risen for
7 the 6th consecutive year, and that is accurate.
8 But some of the numbers that I'm seeing are
9 concerning. Looking at this, for the first six
10 months of that year, collections grew by 5.9
11 percent. The second six months -- the second
12 half of the year, revenues declined by
13 five-tenths of a percent. Again, in January of
14 this year, collections declined 1.2 percent; or,
15 for our fiscal year starting on July 1st to
16 presently, we have a decline of six-tenths of a
17 percent.
18 Maybe this goes a bit to the earlier
19 discussions about saturation. What has -- What
20 have these declines sparked within your
21 deliberations and what do you see going on with
22 the situation?
23 MR. RYAN: Well, Representative, let
24 me give you a little more bad news, because the
25 February results are in and were released today, Page 30
1 and slot revenues are down 9.1 percent for the
2 month now.
3 I will add here, and I just found this
4 out not too long ago, that the one thing we have
5 going for us is that, last February there were
6 29 days; only 28. And if you average out over
7 28 days, the decline is down to just below
8 6 percent, as I understand. Still significant,
9 but across the board: Parx down 11.54; Rivers,
10 three five five; Sands, six nine nine; Harrah's,
11 twelve seventeen; Hollywood, twelve sixty-four;
12 The Meadows, thirteen ninety-seven; Mohegan,
13 thirteen eighty-eight; SugarHouse, nine
14 sixty-nine; Mount Airy, 8.8; and Presque Isle,
15 twenty-eight twelve from February 12th.
16 That's not good. I think what it
17 probably indicates is an economy that is,
18 perhaps, weaker than we thought.
19 As we all know, the restoration of the
20 payroll tax in February, now the economists tell
21 us, hit harder than they thought. Gas tax -
22 Gas costs went up considerably in February.
23 We're hoping that that number is an aberration
24 and it's too early to say anything else.
25 But, overall, I think the six months Page 31
1 before that you cite indicate a -- maybe a
2 stabilizing of the market, and the novelty has
3 worn off to a certain extent; not opening any
4 more casinos yearly the way we did in '08, '09,
5 '10, '11. Table games came in '10-11. The only
6 casino opened last year was the Cat 3 in Valley
7 Forge. So, we can't tell you any more than that
8 now.
9 The decline wasn't alarming because, I
10 believe, for calendar year '12, slots were up
11 about 4 percent overall, and Presque Isle has
12 been a weak link. So I don't think the numbers
13 the last six months are that much of a concern,
14 although, when you see a decline after the
15 trajectory we all saw for a couple of years,
16 everybody starts to wonder. But, Presque Isle
17 is a concern.
18 REPRESENTATIVE DENLINGER: Presque
19 Isle's clearly -- that's a dramatic drop; no
20 doubt about it. But it does seem to be
21 system-wide. The numbers that you're sharing
22 there, it's not regionalized. Will that spark
23 some type of a research or analytical project
24 within your agency or something that you would
25 farm out to a third party? Page 32
1 MR. RYAN: Again, that is certainly an
2 issue the board will discuss. Let me put it
3 that way. Although, again, our job is to
4 regulate, and it’s the industry’s job to make
5 the best they can out of a difficult economic
6 situation, out of more competition. But, I
7 think the board certainly will, especially with
8 the Philadelphia Cat 2 right here in front of
9 us, look at that issue; look at all these issues
10 closely.
11 REPRESENTATIVE DENLINGER: Very good.
12 Thank you. Thank you, Chairman.
13 CHAIRMAN ADOLPH: Thank you.
14 Representative Kula.
15 REPRESENTATIVE KULA: Thank you, Mr.
16 Chairman. Over here, sir. Thank you for being
17 here.
18 Representative Mahoney and myself
19 representing Fayette County, and I can tell you
20 w e ’ve sat through probably three, four budget
21 hearings waiting to ask this question and
22 waiting to get the answer you’re going to give
23 us. Nemacolin, Lady Luck Casino will be
24 opening, absolutely, this summer -- spring,
25 correct? Page 33
1 MR. RYAN: Well, we don't open
2 casinos, as you know, Representative.
3 REPRESENTATIVE KULA: I know that.
4 Just tell me it's going to open, really.
5 MR. RYAN: If it makes you feel
6 better, I'll tell you that.
7 REPRESENTATIVE KULA: Thank you.
8 MR. RYAN: In July.
9 REPRESENTATIVE KULA: It makes me feel
10 much better. We have been through so many
11 unexpected lawsuits and delays over these last
12 years. And really and truly, when you look -
13 And I'm sure, if you've ever been to Nemacolin
14 Woodlands, you know that it is the epitome of a
15 resort. And I believe that this is long time
16 coming. We thank you for your patience in all
17 of this, and seeing the benefits that we know
18 will be received, not only to the Commonwealth,
19 but to Fayette County in this decision. Thank
20 you so much.
21 MR. RYAN: Representative, we expect
22 that it will open in July. I think we would be
23 surprised if it doesn't. We could be surprised,
24 but we expect it to open.
25 REPRESENTATIVE KULA: We'll be looking Page 34
1 for you if it doesn't, okay? Thank you.
2 CHAIRMAN ADOLPH: Representative Seth
3 Grove.
4 REPRESENTATIVE GROVE: Thank you,
5 gentlemen. Appreciate your time this afternoon.
6 To follow up my colleague's question
7 from Lancaster; slot revenue. Obviously, a
8 portion of that goes to property tax relief. I
9 get hit all the time about the decreasing amount
10 when you look at individual homesteads, while
11 there's press releases going out that slot
12 revenue is on the increase. Can you just
13 explain why that is occurring; that we
14 traditionally, thus far, have seen an increase
15 in slot revenue year to year, but a decrease in
16 amount ending up towards the actual homeowner.
17 MR. RYAN: Well, I think the -- the -
18 First of all, as you know, it's, I believe, the
19 Budget Office that determines the amount of
20 money; the board does not. But, the amount of
21 money in the last three years going toward what
22 we call property tax relief has been pretty
23 stable. In '11-12 it was seven seven six two,
24 and this year, apparently, seven eight two four
25 and budgeted at seven eight two. They're in Page 35
1 millions, obviously, for ’13-14.
2 And I think the one thing people have
3 to remember is that, at the beginning, about a
4 half a billion dollars of the money that went
5 into the gaming fund came from the licensing
6 fees, and -- at $50 million for each of the
7 Cat 1 ’s and Cat 2 ’s.
8 Then, in addition, of course, you have
9 slot revenue. But, eventually, the slot revenue
10 had to be a hundred percent of the revenue going
11 in, or close to it, because you only get the
12 licensing fees once. And, from the beginning,
13 as I understand it, the figure has been pretty
14 stable.
15 So, I think, overall, given the
16 replacement of licensing fees with slot funds
17 and the now stable amount of slot revenue, table
18 game revenue has made the entire picture look
19 bigger. But, I think what you’re seeing is
20 stabilization. And I think the figures, when
21 you look at them, they make sense. I guess I
22 can’t put it better than that. They do make
23 sense.
24 REPRESENTATIVE GROVE: The Category 1
25 license, in September 2007, the final harness Page 36
1 race track license was issued by the State
2 Harness Racing Commission to investors to
3 develop the Valley View Downs location. It's my
4 understanding that the applicant had filed for a
5 slots license but experienced difficulty in
6 obtaining financing. In December of 2010, a new
7 investor successfully bid for the rights as a
8 developer of the Valley View Downs and Casino
9 project.
10 Has the new investor applied for a
11 slots or table games license as of today?
12 MR. RYAN: No.
13 REPRESENTATIVE GROVE: Have you
14 acted -- I guess you haven't acted on the
15 application today, correct?
16 MR. RYAN: On what application, sir?
17 REPRESENTATIVE GROVE: On -- I
18 guess -- No, I'm sorry.
19 Where's that location at, Valley View
20 Downs?
21 MR. RYAN: It's in Lawrence County.
22 REPRESENTATIVE GROVE: Lawrence
23 County. Are you familiar with a report that was
24 put out by the Pennsylvania Treasurer, I believe
25 September 2011, by the Innovation Group? Are Page 37
1 you familiar with that report at all?
2 MR. RYAN: Yes, I think I am.
3 REPRESENTATIVE GROVE: All right. It
4 kind of listed locations in Pennsylvania that
5 would maximize revenue. Are you familiar
6 whether Lawrence County is on that list at all?
7 MR. RYAN: I remember reading the
8 list, but it's been quite a while.
9 REPRESENTATIVE GROVE: Okay. It's
10 roughly about 9th on the list, and there's
11 locations higher up. Do you take that into
12 account when determining application license at
13 all?
14 MR. RYAN: Well, remember, right now
15 they have to have a -
16 REPRESENTATIVE GROVE: An application
17 in front of you.
18 MR. RYAN: Yeah.
19 REPRESENTATIVE GROVE: Yeah.
20 MR. RYAN: All I can tell you, because
21 we are a quasi-judicial body, is, we take
22 everything into consideration that bears on what
23 is in the best interest for the people of the
24 Commonwealth. That is about all I can tell you.
25 I don't want to be specific about this Page 38
1 particular possible license because it could be
2 in front of us, and I don’t want my words to
3 come back to haunt me.
4 REPRESENTATIVE GROVE: Understandable.
5 MR. RYAN: Okay?
6 REPRESENTATIVE GROVE: Being from York
7 County, we obviously border Maryland. Maryland
8 approved casinos last year, year before.
9 MR. RYAN: That’s correct.
10 REPRESENTATIVE GROVE: As far as I’m
11 aware, I don’t think any are operational
12 currently. And just to follow up a request to
13 look at saturation.
14 If you’re not aware, Governor
15 Ehrlich -- former Governor Ehrlich of Maryland
16 is actually pretty popular in York County. We
17 have that many individuals moving up from
18 Maryland, especially in the southern tier. 83
19 is a quick drive down. They are planning a
20 casino in Inner Harbor, which is very attractive
21 to individuals traveling from York County in the
22 southern areas down. So, I would urge a look at
23 saturation, especially with the amount of -
24 expansion of gaming to our border areas. I
25 appreciate it. Thank you. Page 39
1 MR. RYAN: Okay.
2 CHAIRMAN ADOLPH: Representative
3 Carroll.
4 REPRESENTATIVE CARROLL: Thank you,
5 Mr. Chairman. To your left, gentlemen. There
6 we are. Thank you.
7 I'd like to shift gears for a minute,
8 if I could, and talk about the -- Well, let me
9 start by saying this. I think by any measure we
10 could safely calculate that the effect of
11 Pennsylvania gaming has had a significant effect
12 on New Jersey gaming. And the reports that I
13 read related to actions that are being
14 contemplated in New Jersey, whether it's sports
15 gambling or Internet gambling, I think that if
16 we have any kind of foresight at all, we ought
17 to contemplate what steps New Jersey might take
18 next.
19 And based on the information that I've
20 read, it seems to me that Internet gambling
21 seems to be closest to the finish line, and
22 forgive the pun, related to where New Jersey
23 might go next.
24 And so, my question -- my first
25 question is, has the board contemplated the Page 40
1 effect of Internet gambling, should New Jersey
2 open that door?
3 MR. RYAN: We have not,
4 Representative, specifically. That's something
5 that's out of our control. That would be
6 something that I'm sure the General Assembly and
7 the Governor would have to take an interest in.
8 Obviously, we're all aware of what New
9 Jersey is doing; what Delaware is doing in this
10 area. We realize the possible impact of
11 Internet gaming in New Jersey on Pennsylvania.
12 Although, from the literature you read, it
13 appears that many experts don't think that the
14 people who are into Internet gaming are very
15 often the people who want to go to casinos.
16 That seems to be an observation that a lot of
17 experts make. I'm not sure it's a hundred
18 percent valid.
19 But, there's no question that Internet
20 gaming in New Jersey is something that we here
21 in Pennsylvania have to take note of and,
22 perhaps, act accordingly.
23 REPRESENTATIVE CARROLL: It seems to
24 me that, as we cite the decline at Presque Isle
25 and the effect that that has on the revenues Page 41
1 available to Commonwealth, we should be equally
2 concerned with steps that our neighboring
3 jurisdictions might take with respect to
4 Internet gambling or sports betting, and so on
5 and so forth. Because I do think there’s a
6 limited universe of dollars that are invested by
7 the residents of this Commonwealth in gaming.
8 So, to the extent that the board has
9 the capacity to at least analyze the effect -- I
10 understand you can’t and have no control over
11 the decisions made in New Jersey or Delaware;
12 nor do we, by the way. But the fact of the
13 matter is, is that I think that this is an
14 evolving environment with respect to gaming. I
15 don’t think that the current status quo is
16 evidenced by what’s happening in Ohio, and
17 Maryland for that matter. It will have an
18 effect on our gambling revenues.
19 I think that sports betting and
20 Internet gaming is certainly on the horizon,
21 probably sooner than we might even imagine. And
22 I think that we have to all contemplate the
23 effect that that will have on the revenues that
24 are generated that this Commonwealth relies on;
25 that the communities that have casinos rely on, Page 42
1 and that the taxpayers receive in terms of the
2 benefits related to property tax relief have.
3 So, again, nothing -- It’s not really
4 a question there. That was sort of a monologue,
5 really, but it’s something that I think we have
6 to pay close attention to, because I think the
7 environment is changing, and the Internet
8 gambling and the effects that that will have are
9 significant.
10 I just real -- I think it’s a yes or
11 no question. If New Jersey were to go forward
12 with Internet gaming, would Pennsylvania
13 residents be permitted to do Internet gambling?
14 MR. RYAN: Well, as I understand the
15 law and the federal law and the law in New
16 Jersey, they would have to be in the State of
17 New Jersey, because, presently, federal law does
18 permit states to have Internet gambling as long
19 as it’s not sports betting beyond that which the
20 four states that have it now have. But, the
21 bettor and the person taking the bet, the entity
22 taking the bet, have to be in the same state.
23 That is an important factor, and that will have
24 a lot to do with how successful New Jersey can
25 be or any other state. Page 43
1 The way I see the law, there would
2 have to be a federal change in -- a change in
3 the federal statute to allow a person in
4 Pennsylvania to gamble over the Internet in New
5 Jersey.
6 REPRESENTATIVE CARROLL: Absent that
7 federal change, who would enforce a violation of
8 the law related to a Pennsylvania resident who
9 Internet gambles with a casino in New Jersey?
10 What's the enforcement mechanism there for that?
11 MR. RYAN: It would be law enforcement
12 here in Pennsylvania, I would think, and I'm not
13 sure who -- It could be the regulators in New
14 Jersey as well as law enforcement in New Jersey.
15 REPRESENTATIVE CARROLL: Okay. That
16 was a surprising answer. I actually was
17 expecting to hear that the law enforcement
18 entities in Pennsylvania would be the enforcers
19 more than the New Jersey folks. I take your
20 answer at its face.
21 I guess I stop there by simply saying
22 that we really have to pay close attention to
23 this because, again, I go back to my commentary
24 that this environment is quickly changing.
25 Thank you, Mr. Chairman. Page 44
1 CHAIRMAN ADOLPH: Thank you.
2 Representative Scott Petri.
3 REPRESENTATIVE PETRI: Thank you, Mr.
4 Chairman, and thank you, gentlemen, for being
5 here today. I want to start back with the
6 pre -- one of the previous speakers talked about
7 property tax, really. It’s my understanding the
8 Governor's proposing 595 million to be available
9 for property tax relief for Pennsylvanians this
10 year, which is more or less consistent with the
11 last couple years. Is that your understanding?
12 MR. RYAN: I think the total actually
13 comes, Representative, to about seven hundred
14 eighty-two if you include the other items that
15 are, I think, placed under the umbrella of
16 property tax relief.
17 REPRESENTATIVE PETRI: All right. So
18 I do stand corrected. It's five ninety-five,
19 but then there's the enhancements that we did
20 for seniors and the like.
21 MR. RYAN: That's correct.
22 REPRESENTATIVE PETRI: So the total is
23 seven ninety-two.
24 When this idea or concept was
25 originally proposed, the theory was that we were Page 45
1 going to have a billion dollars of funds. Does
2 the board have an opinion as to whether we'll
3 ever reach that level of revenue for the state?
4 MR. RYAN: I guess our opinion would
5 be exactly like yours. If the revenues go up
6 enough to justify that, a billion dollars, I
7 guess, was a round number that made sense. When
8 you look at seven eighty-two, it's less than
9 that. But, in fairness to those who made that
10 projection, there are still three, maybe four
11 casinos not open. So, it's possible, I guess.
12 REPRESENTATIVE PETRI: Yeah. Of
13 course, at the time I remember hearing the pitch
14 about how much property tax relief everybody
15 would get. And I remember the figure was about
16 9 billion in education costs. And 1 million
17 divided by 9 never added up in my brain to 40,
18 to 50 percent in property tax relief. I think
19 my calculator says that's about 11 percent.
20 So, even at that number, I don't think
21 we're ever gonna get to the point, unless you
22 know of something I don't know, where we're
23 gonna deliver a 50 percent or even a one-third
24 property tax relief.
25 MR. RYAN: No, I don't. Page 46
1 REPRESENTATIVE PETRI: Okay. With
2 regard to the horse development fund and the
3 slots terminal, I just received a copy of the
4 same report you got for February. And if you
5 discount the Valley Forge location, which wasn't
6 on the line the previous month, it looks like
7 the drop was even more than 9.2 percent. In
8 other words, had Valley Forge not come on board,
9 the losses would have been even more
10 significant.
11 MR. RYAN: Yeah. Again, remembering
12 what I didn't realize is, as important as it is,
13 one less day does make, statistically, a
14 considerable difference.
15 REPRESENTATIVE PETRI: I understand;
16 because the revenues are so high. And I know
17 that we shouldn't be totally alarmed just from
18 one month, but I think many members have
19 expressed concern about what's going on in
20 Maryland, New Jersey and what has taken place in
21 Ohio.
22 With all of that in mind, what is the
23 board's anticipation of what's going to happen
24 with this horse development fund?
25 MR. RYAN: With the -- Page 47
1 REPRESENTATIVE PETRI: With the
2 Pennsylvania Race Horse Development Fund and the
3 monies that are going to actually be available
4 this year, what's your inclination as to the end
5 result?
6 MR. RYAN: I don't know if there's an
7 end result. But, clearly, with Presque Isle
8 into some trouble, and if the revenue shortfall
9 compared to last February is carried forward
10 into ensuing months, that will be a problem.
11 There's no question. Again, we don't run the
12 industry. As we all know, we regulate it.
13 REPRESENTATIVE PETRI: I understand.
14 MR. RYAN: But I'm sure that each of
15 the casino operators is concerned about those
16 numbers and will do what they can to turn things
17 around. But, certainly, the number there at
18 each of the casinos, at least for slots in
19 February, is a concern.
20 REPRESENTATIVE PETRI: Yeah. Well,
21 when -- you know, speaking personally, coming
22 from Bucks County, and we already had -- when we
23 did casinos we already had a racetrack in our
24 community. And so, part of the pitch, at least
25 for Bucks County folks like myself, was that we Page 48
1 were gonna save the horse racing industry. One
2 of the concerns I have is, we continue to chip
3 away at those purses.
4 And I can say firsthand, just using
5 one example, I ’ve not even ever talked to the
6 owners; I don’t know the owners, but there’s a
7 Fashion Farm 1, 2 and now 3. We probably have,
8 I ’m guessing, conservatively, 200 preserved
9 acres as a result of one operation. I can’t
10 even imagine how many millions of dollars
11 they’ve put into those operations, and obviously
12 very successful. So, at what point does the
13 board get concerned about the level of purses
14 being such that it’s gonna impact our horse
15 racing industry and, namely, our homegrown
16 horses?
17 MR. RYAN: Again, the board regulates
18 the casinos. We really don’t have too much to
19 do with the fund. We ’re concerned because we
20 want to see a thriving industry.
21 But, I would just remind everybody--
22 I ’m sure you know--that, still, when you look at
23 it, purses in the last year were about 250
24 percent greater than they were in ’06. The
25 number of live races was up about 45 percent. Page 49
1 The live handle was up about 35 to 40 percent.
2 So, there has been real progress made.
3 I think there is a -- The industry is
4 stabilized somewhat with the revenue they have
5 been able to get from gaming. The revenue has
6 not been insignificant and has helped and has
7 given the racing industry some breathing room.
8 I think you also know the big problem
9 going forward is the same problem racing's had
10 in the past, and that is declining interest of
11 people that go to races. That's the big
12 problem.
13 REPRESENTATIVE PETRI: I want to drill
14 down just a little further, and we're gonna have
15 to be a little quick in our -- my questions and
16 your answers. Otherwise, we're gonna get the
17 hook from the Chairman. But, I want to drill
18 down a little bit here.
19 With respect to some of the expense
20 that's being incurred for the Animal Health and
21 Diagnostic Commission, the Pennsylvania Vet Lab,
22 and like, as I understand, some of that is the
23 testing of the horses that we have always
24 required as a part of fair racing?
25 MR. RYAN: Sir, I'd have to defer to Page 50
1 the agriculture department. I have no idea. We
2 don't have anything to do with that.
3 REPRESENTATIVE PETRI: Okay.
4 MR. RYAN: I really don't.
5 REPRESENTATIVE PETRI: So you don't
6 really know the cost. That's a better question
7 for tomorrow?
8 MR. RYAN: I think so, yes.
9 REPRESENTATIVE PETRI: Okay. Do you
10 know -- Last question. Do you know, before we
11 had casinos, how that testing was paid for?
12 MR. RYAN: I do not.
13 REPRESENTATIVE PETRI: So again,
14 another question for Ag.
15 MR. RYAN: I think so.
16 REPRESENTATIVE PETRI: Okay. Thank
17 you. Thank you, Mr. Chairman.
18 CHAIRMAN ADOLPH: Thank you.
19 Representative Parker.
20 REPRESENTATIVE PARKER: Thank you, Mr.
21 Chair. And good almost-evening, gentlemen.
22 Great to see you and thank you for being here.
23 Let me start by noting that, when I
24 first arrived in this body in '05, obviously,
25 the gaming legislation, it had already passed. Page 51
1 But I want to share with you something that I’ve
2 shared with my constituents often in Mount Airy,
3 Chestnut Hill, Roxborough and Andorra in
4 Philadelphia; and that is, whether or not you
5 were for gaming in Pennsylvania and, in this
6 case particularly, residents of Philadelphia, I
7 am extremely pleased that $1.45 billion and
8 16,200 jobs are not going to New Jersey and/or
9 Delaware, Maryland and/or New York.
10 So I just want to note that for the
11 record and sort of outline the importance of a
12 job that you’ve been challenged to do and the
13 value that it brings to the Commonwealth.
14 With that in mind, I have to say this
15 for the record, because one of my questions is
16 about diversity. It’s great seeing all of you
17 gentlemen here, but the testosterone definitely
18 needed some much -- needed balance, and I ’m glad
19 to see Annmarie Kaiser here, because it would
20 make me nervous just seeing each of you. So,
21 you definitely have a great added-value partner
22 up there.
23 On the issue of diversity regarding
24 the Category 2 license in Philadelphia, one of
25 the issues that we hear a lot about is the issue Page 52
1 of diversity. Philadelphia, 1.5 million people;
2 one of the most diverse cities in the nation;
3 part of what makes us so great. The issue of
4 diversity, people often wonder whether or not
5 the board is taking that into consideration when
6 you are going through your review process. And
7 when we talk about diversity, we’re not just
8 referring to, you know, we’ve hired X number of
9 janitors who work in the new casino; but
10 diversity as it relates to partnership.
11 Can you tell us about how that would
12 add value or how it sort of forms in your
13 ratings of these organizations that have made
14 proposals to you?
15 MR. RYAN: Representative, clearly the
16 statute requires and the board has to enforce
17 the law that the casinos make every effort to
18 open up their employment and also their
19 contracting to people of all races and also to
20 women. We have an Office of Diversity, and that
21 Office of Diversity has been active, since the
22 beginning, making sure that casinos do what
23 they’re supposed to do in this area. And
24 casinos have to file and applicants have to file
25 a diversity plan. Once the casino opens, that Page 53
1 casino has to file quarterly reports indicating
2 what it has done to ensure that it does give
3 people, both sexes, all races, equal
4 opportunity. And the board issues a report
5 every year.
6 I can tell you, our board is proud of
7 the effort that the Office of Diversity does.
8 We are on top of the issue. We discuss the
9 matter frequently with the director of our
10 Office of Diversity. She's an experienced
11 person. She goes out to the casinos. She knows
12 what's going on. And I think that shows when
13 you look at the statistics with the casinos; 57
14 percent of the employees are males, 42 percent
15 females, and about 30 percent are minorities.
16 That's across the state. And I think that -
17 You can rest assured that the board
18 will make sure that all the applicants for this
19 second Category 2 honor their obligations to
20 give everybody a chance; an equal chance.
21 REPRESENTATIVE PARKER: Well, thank
22 you for your response. Again, it's extremely
23 important to several members of this body, I
24 know when we've discussed the issue of
25 diversity, that we not only talk about diversity Page 54
1 from the perspective of employment, but that we
2 talk about diversity as it relates to ownership.
3 And when the board is evaluating and making its
4 decision in accordance with law, that you really
5 make sure that diversity plays a role in that.
6 So I appreciate your response.
7 In addition to that, I want to share
8 with you that I was actually extremely pleased
9 regarding the public information process
10 associated with how you are sort of going about
11 ensuring that public input is received regarding
12 the license in Philadelphia. So, February 12th,
13 I know you had the public information meeting at
14 the -- in Philadelphia at, I believe, the
15 convention center.
16 I know on April the 11th and the 12th,
17 and I believe you'll schedule some more hearings
18 if necessary; elected officials, community
19 organizations and citizens have the opportunity
20 to voice their concerns about what they believe
21 for or against and indifferent.
22 The important thing is, is to have an
23 opportunity to have the board via writing and/or
24 testimony to hear the perspectives of those who
25 live in Philadelphia and will be directly Page 55
1 impacted.
2 So, putting these hearings -- making
3 them accessible via your webcast; making the
4 applicant's presentation available on the
5 website, so if I don't have a computer at home
6 and have access to the Internet, I can schedule
7 a time to go to the public library to view it if
8 I know it's gonna have a direct impact on my
9 neighborhood.
10 So I ask you right now and let you -
11 you're on a very good track as it relates to
12 transparency and making sure that you engage as
13 many Philadelphians as possible. Just don't
14 change. Just stay where you are now to make
15 sure you continue it.
16 We in the Philadelphia delegation, as
17 chair of the Philadelphia delegation, several
18 members have said that they have an interest in
19 doing eBlast to their constituents; letting them
20 know that this hearing is taking place; if
21 anybody wants to voice their concerns, that they
22 are available. We'll do what we can do on our
23 end to engage people, but we ask that you not
24 stop moving in the transparent and fully public-
25 engaging direction. Page 56
1 MR. RYAN: I can assure you,
2 Representative, we won't stop, because it's just
3 best for everybody. It's best for us. It's
4 easier for us to know what's going on than not
5 to. And the only way you can know what's going
6 on is to let people tell you what's going on.
7 It just makes sense.
8 REPRESENTATIVE PARKER: Thank you for
9 your testimony. And we know that you don't make
10 the appointments to the board, but we're gonna
11 write some letters, because I want to see some
12 more Kaisers and Cherelle Parkers become a part
13 of that board. So thank you.
14 CHAIRMAN ADOLPH: Have you sent in an
15 application already, Representative?
16 REPRESENTATIVE PARKER: You won't let
17 me go, Mr. Chairman.
18 CHAIRMAN ADOLPH: Thank you.
19 Representative Sonney.
20 REPRESENTATIVE SONNEY: Thank you, Mr.
21 Chairman. Good afternoon.
22 MR. RYAN: Afternoon.
23 REPRESENTATIVE SONNEY: I sort of have
24 to talk to you about enforcement for a few
25 minutes. Tell me how many actions, enforcement Page 57
1 actions were taken against the industry as a
2 whole last year; what kind of fines, revenues
3 that those actions brought in.
4 MR. RYAN: We have the numbers. I
5 think the fines totaled -
6 MR. O'TOOLE: About 500,000.
7 MR. RYAN: — about $515,000, I
8 believe. The numbers I don't have in front of
9 me. I can certainly get them to you, sir,
10 quickly. But I think the amount in fines was
11 about 515, $520,000.
12 REPRESENTATIVE SONNEY: And then that
13 revenue goes to the General Fund, if I remember
14 correctly?
15 MR. RYAN: It does.
16 REPRESENTATIVE SONNEY: And do you
17 know how many actions were taken to generate
18 that revenue?
19 MR. O'TOOLE: I don't have that.
20 MR. RYAN: We can get that for you.
21 We don't have -
22 REPRESENTATIVE SONNEY: If you could
23 provide that -
24 MR. RYAN: Sure. No problem.
25 REPRESENTATIVE SONNEY: -- to the Page 58
1 Chairman, that would be great.
2 MR. RYAN: Yep. Fine.
3 REPRESENTATIVE SONNEY: Do you have
4 any idea how we compared to other states with
5 gaming when it comes to actions taken against
6 the casinos? In other words, are our casinos
7 trying to get away with more or less, or are the
8 enforcement actions pretty similar to what other
9 states go through?
10 MR. O ’TOOLE: They’re pretty similar,
11 but, certainly, we have a zero tolerance level
12 on underaged gaming. So there are quite a few
13 enforcement actions because we -- we insist upon
14 the casinos. And they take it very seriously,
15 but there still are occasional violations in -
16 Our enforcement bureau files a consent agreement
17 every time there’s a violation of underage, and
18 that increases our overall number of cases.
19 REPRESENTATIVE SONNEY: And is that
20 the number 1 issue?
21 MR. O ’TOOLE: Up to date —
22 REPRESENTATIVE SONNEY: Underage
23 drinking?
24 MR. O ’TOOLE: Yes. Not underage
25 drinking, but underage gambling. Page 59
1 REPRESENTATIVE SONNEY: Underage
2 gambling.
3 MR. O'TOOLE: And that situation would
4 be exacerbated if the underaged person was
5 served alcohol.
6 REPRESENTATIVE SONNEY: Thank you.
7 Thank you, Mr. Chairman.
8 CHAIRMAN ADOLPH: Thank you,
9 Representative. Chairman Markosek.
10 CHAIRMAN MARKOSEK: Thank you,
11 Chairman. I do have a question now that I
12 thought about it. First of all, happy birthday
13 to Mr. O'Toole. I saw it on one of the online
14 information services today.
15 MR. O'TOOLE: Thank you, Chairman.
16 CHAIRMAN MARKOSEK: I have a question;
17 just kind of following, piggy-backing with
18 Representative Grove and, I believe,
19 Representative Petri earlier in talking about
20 the property tax relief fund and the amount of
21 money that is -- has been spent there.
22 And I'm just using the estimated
23 '13-14 numbers here, where it looks like we're
24 planning to spend about 782 million this year on
25 property -- various forms of property tax Page 60
1 relief, which is about $200 per property owner
2 in the Commonwealth; which, as an aside--I'm
3 sure you've heard this before-- a lot of folks
4 say to me, when are we going to get any property
5 tax relief from -- for anything?
6 Of course, they're getting it, because
7 it goes to the school district and they don't
8 see it. But that's a whole another issue. So,
9 maybe, for the folks watching, you are getting
10 some property tax relief from all of this.
11 But my question, beyond that is, after
12 we've spent that 782 million, we still -- And I
13 know, statutorily, I believe, you have to have a
14 balance and you have to have a reserve. But
15 according to the numbers that I have, the
16 2013-14 reserve is $647 million or so. And your
17 statutory reserve is, correct me if I'm wrong,
18 150 million, which, if I'm reading these numbers
19 correctly, there's about 500 million additional
20 dollars that could be spent on property tax
21 relief, which would put us way over that
22 billion-dollar number that one of the other
23 members had questioned you about.
24 What is the reason for keeping such a
25 huge balance, way beyond even the minimal Page 61
1 balance that you’re required to do?
2 MR. RYAN: Mr. Chairman, I think the
3 only answer I can give you, and Kevin, who’s
4 been around longer than I, can correct me if I ’m
5 wrong. But, this is another area where this is
6 the Office of the Budget; perhaps the Department
7 of Revenue; perhaps the Governor, General
8 Assembly. This is not something we have
9 anything to do with because what we do is
10 regulate the casinos, and it’s up to the other
11 agencies to follow the statute and to disburse
12 the funds.
13 So, I think I would -- I don’t -- I
14 think I would refer you to the Office of the
15 Budget for, perhaps, a clearer, more concise
16 answer to your question. And it’s a good
17 question.
18 CHAIRMAN MARKOSEK: Well, let me just
19 maybe ask something in a different way; a
20 slightly different way. The number that I have,
21 $647,086, is that a correct or an accurate
22 number for the estimated -
23 MR. RYAN: That’s -- That’s the figure
24 we have coming from the Governor.
25 CHAIRMAN MARKOSEK: Okay. Page 62
1 MR. RYAN: Or the Administration's
2 Office of Budget.
3 CHAIRMAN MARKOSEK: Okay. Well, we
4 will ask that question, and I appreciate your
5 answer, and I understand that you can only -
6 you're limited in the scope of your duties. But
7 I think it's good for everybody to know that we
8 do have an enormous balance there, at least it
9 seems to me. And when we're talking about
10 property tax relief, that some are -- certainly
11 a lot of that over and above the statutory
12 reserve that I understand you have to keep
13 should be used for that purpose. And it just
14 seems to me like we are sitting on -- especially
15 in these times when everybody's talking about
16 how tight the budget is, and we're sitting on a
17 huge, huge number in your reserve fund. So -
18 MR. RYAN: And it's possible, sir,
19 that it is a snapshot and that money is
20 committed or will be soon committed out of that
21 fund. I'm just suggesting a possible reason why
22 it's that large, but I think the Office of the
23 Budget would be the place to go to get an
24 answer.
25 CHAIRMAN MARKOSEK: I understand. But Page 63
1 it was almost 600 million last year, so it
2 was -- and the year before was five hundred and
3 fifty-seven. So, it's been pretty big for a
4 while; not just this -- Apparently up until now
5 they've just let it grow.
6 So, anyway, I mean, thank you for your
7 answers and I'll move on now. Thank you, Mr.
8 Chairman.
9 CHAIRMAN ADOLPH: Thank you, Chairman.
10 Before we all start getting phone calls from
11 constituents, how come we're not getting that
12 $600 million, a simple explanation -- And I want
13 to thank my executive director for this
14 information. Those balances that you see in the
15 back of the budget book are as of June 30th.
16 And the school districts receive their payments
17 in August and September. So -- And October. So
18 that cash fund quickly goes down.
19 And we had the same situation happen
20 before in another one of those funds, you know,
21 that, if you pick a month, sometimes you're
22 picking the highest month, but you have that -
23 you have liabilities due in the next quarter.
24 So that's what happens with that. So I hope
25 that clears you up, Mr. Chairman. Page 64
1 CHAIRMAN MARKOSEK: Well, we've had
2 these -- we've had these big surpluses here for
3 the last three years. They're on my sheet here
4 perhaps even further back than that. So, it
5 seems to me that -- And I understand the 150
6 million that we have to keep. I understand
7 that.
8 But I think any reasonable person
9 would look and say, okay, if you have to keep
10 150 million and you're sitting on 650 million,
11 that is a pretty -- Sure, you want to keep a
12 balance, but that is -
13 CHAIRMAN ADOLPH: Yeah.
14 CHAIRMAN MARKOSEK: — probably way
15 more than what we need.
16 CHAIRMAN ADOLPH: Okay.
17 CHAIRMAN MARKOSEK: Thank you.
18 CHAIRMAN ADOLPH: Thank you.
19 Representative Sabatina.
20 REPRESENTATIVE SABATINA: Thank you,
21 Mr. Chairman. Thank you, gentlemen, for your
22 testimony today.
23 My question's not so much a financial
24 one as it is a -- I guess a mechanical one.
25 What powers does the board have to guard against Page 65
1 potential bait and switches? And what I mean by
2 that is, when a casino presenter comes in and
3 presents this grand facility, and their contract
4 is awarded and their facility is less than what
5 they presented to you, what powers does the
6 board have to right the situation?
7 MR. RYAN: Well, we can force -- Now,
8 that’s a -- This is a hypothetical. I’m sure -
9 And this is my first venture with the awarding
10 of a license. But the board can insist that
11 the -- whatever was promised by the applicant,
12 the applicant can deliver and can take steps to,
13 perhaps, suspend a license and penalize the
14 applicant; revoke the license.
15 The board has a lot of discretion in
16 this area as long as due process is met to
17 protect the interest of the public. And the
18 board, I think, is given a lot of discretion by
19 the statute to suspend and to revoke. And,
20 certainly, those powers would be at play, if I
21 understand your hypothetical correctly.
22 REPRESENTATIVE SABATINA: Thank you,
23 gentlemen. I appreciate your testimony.
24 CHAIRMAN ADOLPH: Thank you.
25 Representative Bradford. Page 66
1 REPRESENTATIVE BRADFORD: Thank you,
2 Chairman Adolph.
3 I just wanted to follow up on
4 something that was kind of mentioned more in the
5 context of online gaming, which was kind of the
6 crowding-out effect, or the competition, and
7 what that’s having from other states. And one
8 of the things that came up quite a bit during
9 the discussion of outsourcing the lottery was
10 Keno.
11 What is your thoughts, or do you have
12 any analysis? Have you guys done any studies to
13 what the impact of an expansion of gaming like
14 that would have on the traditional casinos?
15 MR. RYAN: We have not done any study
16 at this point, Representative. The contract
17 signing by the revenue department was something
18 that the board doesn’t have any authority over,
19 and we have not taken any action with respect to
20 what is happening and what the Department of
21 Revenue is trying to do, which, I guess, for
22 lack of a better phrase, is privatizing the
23 lottery.
24 We have asked our Office of Chief
25 Counsel to review the material, at least the Page 67
1 material that's available. But, at this point I
2 can't give you any information specifically that
3 will help you, I don't think, because, again,
4 this is not an area where the board has any
5 direct responsibility or authority.
6 REPRESENTATIVE BRADFORD: I understand
7 that that at one point was the Administration's
8 position. I guess, subsequently, the Attorney
9 General has ruled that it is a gaming function.
10 Have you guys been in contact with either the
11 British firm or the Governor's office regarding
12 what -- prior to the decision to outsource or
13 subsequent to the Attorney General's ruling on
14 the role that your board must take in order to
15 pursue expanded gaming?
16 MR. RYAN: No, we have not. At this
17 point -- First of all, I should say, we were not
18 contacted or consulted by the Department of
19 Revenue before the contract was signed, and
20 haven't been part of any negotiations with
21 Camelot.
22 At this point, all I can tell you is,
23 we are looking at the matter. And to the extent
24 that we have anything worthwhile to provide, we
25 will provide it to the Senate and we will also Page 68
1 provide it to this committee. Beyond that, it's
2 really impossible for me to say, because we
3 don't have much in the way of information except
4 what we read in the paper.
5 REPRESENTATIVE BRADFORD: You had also
6 mentioned that your general counsel was looking
7 at the information that's out there. Have they
8 reached a conclusion in terms of the gaming
9 function as to what the purview and
10 responsibility of the Gaming Board is in this?
11 MR. RYAN: I don't want to jump too
12 far ahead at this point. I would just stand on
13 what I said, which is, we are looking at it more
14 closely now. We know, all of us as board
15 members, what our authority is under the
16 statute. We regulate casinos. Whether
17 tangentially there are issues here the board
18 should be concerned about, we'll wait to hear
19 from our Office of Chief Counsel. It may be
20 there are; it may be that there are not. At
21 this point, I can't really tell you.
22 REPRESENTATIVE BRADFORD: Okay. So
23 your chief counsel hasn't come to a decision as
24 to what is within your responsibility?
25 MR. RYAN: That's correct. Page 69
1 REPRESENTATIVE BRADFORD: Okay. So
2 you don't -- At this point, you don't agree or
3 disagree with the Attorney General or the
4 Governor; you have no position on that?
5 MR. RYAN: That would be an accurate
6 statement.
7 REPRESENTATIVE BRADFORD: Okay. Thank
8 you, Chairman.
9 CHAIRMAN ADOLPH: Thank you. Chairman
10 Youngblood.
11 REPRESENTATIVE YOUNGBLOOD: I would
12 like to thank the board for coming before us
13 today; Chairman Ryan, Executive Director
14 O'Toole, and members of the board. One thing
15 I'm proud to say is that Pennsylvania is being
16 held up as a role model for other states and
17 countries on how we have set up our gaming
18 industry, and they've done an excellent job as
19 far as regulating the gaming industry.
20 We hear from people all the time
21 telling us, even with diversity, and the staff
22 has accomplished a lot. I think, with the
23 committee itself, and I will talk to Chairwoman
24 Pickett that we're gonna have to give more
25 information out out to members so that they will Page 70
1 understand what is your role; what needs to be
2 done and currently what is being done.
3 I'd like to, once again, to thank you
4 for coming. And the City of Philadelphia is not
5 oversaturated. We've talked to both Parx and
6 Harrah's. They have no problem with
7 Philadelphia receiving a second license; plus,
8 in addition to that, there have been studies
9 that indicate the City of Philadelphia is not
10 oversaturated. Thank you.
11 CHAIRMAN ADOLPH: Thank you, Chairman.
12 I'd like to thank Chairman Ryan and Mr. O'Toole
13 for being here. It was nice to see the other
14 members of the board here as well. And I will
15 assure you that we will take your budget request
16 very serious, and we certainly appreciate the
17 job that you are doing. Thank you.
18 (At 5:20 p.m., the budget hearing
19 concluded).
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1 C E R T I F I C A T E
2
3 I, Karen J. Meister, Reporter, Notary
4 Public, duly commissioned and qualified in and
5 for the County of York, Commonwealth of
6 Pennsylvania, hereby certify that the foregoing
7 is a true and accurate transcript, to the best
8 of my ability, of my stenotype notes taken by me
9 and subsequently reduced to computer printout
10 under my supervision, and that this copy is a
11 correct record of the same.
12 This certification does not apply to
13 any reproduction of the same by any means unless
14 under my direct control and/or supervision.
15 Dated this 25th day of March, 2013.
16
17
18 Karen J. Meister - Reporter Notary Public 19 My commission expires 10/19/15 20
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