On tour of Pa. casinos, lawmakers gather ideas for sharpening competitive edge

State Rep. John Payne has been chairman of Pennsylvania’s House Gaming Oversight Committee for just a couple of months, but he’s taking an active approach.

On Wednesday, Payne and the committee stopped in Philadelphia to talk with the heads of two area casinos on how the state can keep its gambling market competitive – the first stop on a tour, of sorts, of the state’s 12 brick-and-mortal facilities.

 

In the morning, the group heard testimony from Jan Jones Blackhurst, executive vice president for Caesars Entertainment, and Ron Baumann, general manager of Harrah’s Philadelphia in Delaware County. In the afternoon, the committee headed east to SugarHouse Casino, the only casino in the city.

“I’m very concerned that what happened in Atlantic City – thanks to Pennsylvania being very good in our gaming business – I doubt they’re going to sit there and just let it go,” Payne told the committee at the afternoon hearing.

“They want to get that money back, and I think our job as state representatives is to make sure we stay competitive, and we don’t have four casinos close here,” he added.

Payne might have more than just Atlantic City to worry about; every state that touches Pennsylvania has legalized at least some form of gambling.

SugarHouse general manager Wendy Hamilton didn’t waste any time. During her testimony, she said it was imperative that there be no more licenses issued in the Philadelphia area.

The state awarded a license in November to Live! Hotel and Casino in the city’s stadium area.

“The casino industry here has been a big success by any measure,” Hamilton told the committee. “In order to ensure that success, please take a pause, consider the intense competition in every direction. One needs only to look to Atlantic City to see the horror that can happen in an oversaturated market.”

Internet gambling, video gaming

Hamilton would, however, like Pennsylvania to legalize Internet gaming, as New Jersey did late in 2013.

“Although some initially speculated that regulated Internet gaming would cannibalize brick-and-mortar casinos, data from operators in the New Jersey market over the past 16 months has shown Internet gaming has been complementary by providing a new revenue source,” said Hamilton, though she acknowledged the new venture has caught on slower than expected in the Garden State.

Five casinos in New Jersey offer online gaming since regulation began in November 2013. Gross revenue through February was $135.9 million, a fraction of the $2 billion the state’s casinos bring in. From that amount, the state has collected $20.4 million – 15 percent – in taxes, according to the state’s Department of Gaming Enforcement online data. When asked about concerns over minors gambling online, a department spokeswoman called the integrity of the operations “very successful so far.”

Though Hamilton said Internet gaming might bring in more customers, she thought the opposite of video gaming terminals set up in bars and restaurants.

“You’ve got big businesses here that have a lot invested, a lot of employees, and have created a great experience,” said Hamilton. “When you start to put a couple slot machines in every bar across the state, you’re creating a different experience and, I think, exposing the state to a lot of risk.”

Hamilton pointed to Illinois, who authorized VGT gambling in 2009, as an example. It wasn’t until 2012 that video gaming actually went live, and Hamilton said that casino revenue for the state has stagnated since.

She’s partly right. In 2012, Illinois collected $476.2 million in taxes from 10 casino establishments, and $3.69 million in taxes – 30 percent — from video gaming, a total of almost $480 million in revenue for the state, according to Illinois Gaming Board statistics.

In 2014, Illinois collected only $414.8 million from casinos. However, tax revenue from video gaming jumped to $164.9 million, and brought total tax revenue up to $580 million last year.

“It’s not to say there wouldn’t be any additional revenue, but it’s a very, very difficult thing to regulate,” said Hamilton after the testimony.

Pa. casinos generate $1 billion in taxes

Overall, the latest data from the Pennsylvania Gaming Control Board shows the state’s gambling market isn’t terrible. Total revenue in February increased 3.7 percent over this time last year. Though in 2014, total casino revenue dropped 1.4 percent from 2013, its second consecutive year of decline. Casino tax revenue still brings in more than $1 billion each year for the commonwealth.

“I want to give our control board a picture frame if you will, here are a whole bunch of options inside that frame,” said Payne as the testimony hearing drew to a close. “Whether that’s changing the games, changing the staffing, Internet, fantasy sports, a 24-hour marathon bingo night, I mean, I’ve heard all kinds of things so far.”