HOUSE GAMING OVERSIGHT COMMITTEE PHILADELPHIA CITY COUNCIL CHAMBERS CITY HALL PHILADELPHIA, PENNSYLVANIA FEBRUARY 24, 2 011 10:00 a.m. These proceedings were transcribed by James DeCrescenzo, a Fellow of the Academy of Professional Reporters and a Registered Diplomate Reporter. BEFORE REPRESENTATIVES: CURT SCHRODER, MAJORITY CHAIRMAN ROSITA C. YOUNGBLOOD, MINORITY CHAIRMAN JOSEPH T. HACKETT JERRY KNOWLES TODD STEPHENS JOHN A. LAWRENCE TINA M. DAVIS MICHAEL H. O'BRIEN ANGEL CRUZ MIKE VEREB INDEX OF SPEAKERS BY MR. GREENBERGER 14 BY MR. GILLESPIE 38 BY MR. BONI 46 BY MR. MONSON 6 9 BY MS. BERLIN 8 8 BY MR. DiVERGILIS 96 CHAIRMAN SCHRODER: Good morning. I would like to call this hearing of the House Gaming and Oversight Committee to order, filling our agenda today for a hearing only. I must stress this is not a voting meeting and a vote will not be taken at the conclusion of this meeting. But our bill is House Bill 65, which deals with the revoked Foxwoods gaming license. Before we move into comments I would just first like to thank Council President Anna Verna and City Council, all the members, for hosting us today in this very beautiful and historic chamber. So our hat's off to the Philadelphia City Council, and thank you for your hospitality for purposes of today's meeting. Before Representative Chairman Youngblood and I do our remarks, we're going to go around the table up here and behind us and introduce ourselves, for the benefit of everyone. And I will start to my right with Democratic Chair Rosita Youngblood. CHAIRMAN YOUNGBLOOD: Good morning. Welcome all to this wonderful City of Philadelphia. I call it the City of Sisterly Love and Brotherly Affection. REPRESENTATIVE CRUZ: Good morning. everyone. Representative Cruz from here in Philadelphia County, welcome. REPRESENTATIVE VEREB: Representative Mike Verbe, Philadelphia County. REPRESENTATIVE HACKETT: Representative Joe Hackett, Delaware County. REPRESENTATIVE STEPHENS: Representative Todd Stephens, Montgomery County. REPRESENTATIVE DAVIS: Good morning. Representative Tina Davis, Bucks County, originally from Philadelphia. REPRESENTATIVE LAWRENCE: John Lawrence, Chester County. REPRESENTATIVE O'BRIEN: Good morning. Representative Mike O'Brien before across the street. REPRESENTATIVE KNOWLES: Good morning. I'm Representative Jerry Knowles and I represent a portion of Berks and Schuylkill Counties. CHAIRMAN SCHRODER: Thank you. We might have a couple other members stopping in, or other members of the general assembly. We'll be sure to try to introduce them as they arrive. Mike just mentioned that Representative Cruz is the newest member of our committee, I believe, will officially become a member of the committee on Monday we are told. So we welcome Representative Cruz and today we'll treat him as a full-fledged member of the committee with all rights and privileges. So Representative Cruz, welcome to you. REPRESENTATIVE CRUZ: Thank you, Mr. Chairman. CHAIRMAN SCHRODER: I will just say that I know the issue of gaming has many different, divergent points of view. The issue can sometimes get emotional between supporters and detractors of gaming. All I ask is that everyone be respectful to those who are testifying and presenting, let them have their say and allow us to ask the questions that are coming from our side and just respect -- we will expect everyone to respect each other's point of view and act accordingly. The bill on our agenda today. House Bill 65, will provide for the possible relocation and auction of the recently revoked Foxwoods gaming license. Before I discuss the specifics of the bill, I thought it would be useful to review the troubled history of the Foxwoods Casino license and how we arrived at this point. In July 2004 the General Assembly passed legislation allowing slots gambling in the Commonwealth. Act 71 provided for the licensing of 14 slots parlors. including two in the City of Philadelphia. More than two years later, in December of 2 006, a license for the Foxwoods Casino was awarded to a group of Philadelphia investors, which included the Mashantucket Pequot Tribe, who had plans to open a casino on the Delaware River in South Philadelphia. The plan was to open approximately 18 months after the license was awarded. One week before the Street administration left office in January of 2008, it approved the Foxwoods development plan, clearing the way for needed zoning approvals for the project. However, the same month, the new Nutter administration rejected the plan, later describing it as wrong for Philadelphia. Due to opposition of the Mayor and City Council as well as the local community groups, Foxwoods filed a petition to the Pennsylvania Supreme Court to appoint a special master to clear City opposition for the project. In August 2 008 Foxwoods proposed to Governor Rendell and Mayor Nutter that the project be relocated to Center City. In September of 2 0 08 the Governor and the Mayor announced a move to a new Center City location. On October 14, 2008 the State Supreme Court appointed a special master to handle disputes between the City and Foxwoods. By January 2009 the Mashantucket Pequot Tribe was now facing difficulty due to the economic downturn and mounting debt. Foxwoods selected the vacant Srawbridge's store for the slots parlor in February of 2009. Mayor Nutter announced his support for the project in March of 2009. A part owner of the Strawbridge's building, however, voiced objections. Because of the various delays, in May of 2009 Foxwoods asked the Pennsylvania Gaming Control Board for a six-month extension of its license deadline for having its 1,500 slot machines in operation. In August 2 00 9 the Gaming Control Board ordered Foxwoods to return to its previous site on the Delaware River in South Philadelphia. The board established new deadlines for the project. These deadlines included project specifications and financial documents showing that the Foxwoods investors were able to build and sustain the project. Many of these deadlines set by the board were not met. Foxwoods failed to submit design plans to the Gaming Control Board by December 1, 2 009. On January 7, 2 010 Governor Rendell signed the Table Games Legislation, which includes a provision that Foxwoods could apply for an additional extension to open in 2012. At the time Foxwoods did not apply for any extension. On January 27, 2 010 the Gaming Control Board fined Foxwoods $2,000 a day and threatened license revocation if it did not submit specifics on the casino design and financing. Winn Resorts confirmed it had an agreement to take control of the Foxwoods project on March 1, 2010. On April 8, 2010 Winn pulls out of the Foxwoods deal. In July of 2010 Harrah's Entertainment surfaces as a potential replacement for Winn. Foxwoods presents Harrah's as a new partner to the Gaming Control Board in October of 2010. On November 18, 2 010, the Gaming Control Board gives Foxwoods until December 10, 2 010, to submit evidence of a completed agreement with Harrah's. As part of these agreements Foxwoods and Harrah's submitted documents requesting an extension to open until 2012. And finally, on December 16, 2010, the Gaming Control Board determined that Foxwoods had not met its latest deadline and voted to revoke the Foxwoods license by a six-to-one vote. The current law governing gaming in the Commonwealth is silent on the matter of what happens to a revoked license. And while Foxwoods has appealed its revocation to the Commonwealth Court, the legislature should use this time to carefully evaluate how to proceed. I believe we need to avoid predetermined geographic locations which has, fairly or not, given rise to suspicions of political agreements that dictated site locations. Furthermore, many of us argued over the years that the original licenses should never have been sold for only $50 million. Rather, they should have gone out to bid so that the Commonwealth's taxpayers would receive the highest possible return for the privilege of owning a casino license. Under my legislation. House Bill 65, because the Foxwoods license was revoked prior to the start of operations of the facility, the Gaming Control Board could reissue the license through an auction. Under this bill the license is not tied to Philadelphia, as it is in current law. Although it's important to stress that Philadelphia would still be eligible under this bill for that casino license. House Bill 65 provides that the license may be located anywhere in the Commonwealth, as long as no more than two casinos are located in Philadelphia and no more than one is located in Pittsburgh, which is similar to current law. In addition, upon revocation, which means after all appeals have been completed, the Gaming Board would auction the license to the highest bidder. Specifically, within 30 days of final revocation the board would initiate a public auction for a fee that achieves the highest prospective total revenue for the Commonwealth. The successful applicant must satisfy all the qualifications in the application process as well as all board regulations. Minimum bids would be 66.5 million for a Category One or Two license, and 12.5 million for a Category Three license. And I would just state that those minimum bids reflect the cost of the 50 million slot license and the table games licenses combined together. An applicant must submit information on the location of the facility, details of agreements with the host municipality, ownership structure, projected financial settlements, a business plan for the facility, and a date to which the applicant can commit to opening the facility. After receiving all the sealed applications the board would open all the proposals in a public forum and select the three bidders to participate in the final auction.