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State Senator Larry Farnese’s Testimony to the Pennsylvania Gaming Board April 11, 2013
On April 11, 2013
Dear Chairman Ryan and Board Members:
I am pleased to have the opportunity to provide this input in connection with the selection process for Philadelphia’s second Category 2 gaming license.
Although we are only partway through the licensing process, the Board has done an excellent job of making it more open and accessible to the general public. I thank the Board for acting on my suggestions – such as scheduling an additional hearing in South Philadelphia – and I’m confident that the Board will give serious consideration to all the testimony it receives in these hearings.
The process is important for more than just the sake of openness. I believe a more accessible process will help the Board gather the information it needs to choose the best project for the City, neighborhoods and State.
As you may know, all six applicants have proposed projects within my legislative district. The Board will have a hard decision to make choosing among these applicants. Each of them brings a unique team and a unique vision to the table. And I am glad they want to invest here.
At this stage of the process it would be difficult, if not unfair, to choose a particular favorite.
I can, however, offer my suggestions about the questions you should focus on, and the meaning of the many selection factors in the Gaming Act.
My testimony today covers three broad areas:
- Overall economic impact.
- Community impact on host neighborhoods.
- Suitability of the applicants.
(1) The overall economic impact of the project.
Each of these facilities would have a profound economic impact in my district, as well as the entire City and the Commonwealth. If the only mandate you had was to generate gaming revenue from wagers, the Board’s decision would be relatively easy: build the biggest box you could, put in as many slots and tables as you could, and open the doors for business.
However, the objectives for gaming go far beyond direct revenue. There are many goals listed in the Act, found specifically in section 1102 of the Act. In addition to revenue and tax relief, these include:
- Employment opportunities and the creation of skilled jobs;
- Economic development opportunities;
- Furthering development of the tourism market; and
- Broad economic opportunities to the citizens of this Commonwealth.
Philadelphia’s history and its many public assets create the potential for this new casino to be a truly unique feature in the City’s landscape, and a standout among the highly successful casinos around the state. I believe the Board should give preference to the project that best leverages Philadelphia’s public and cultural assets to create a multi-faceted facility.
What does that mean? Well, it’s the casino itself, and its context in which you place it.
First is the casino itself. Will the project have features in addition to gaming that support employment, economic development, and tourism? That means things like new hotel rooms, restaurants, spas, retail outlets, and entertainment venues. Not only will these features generate revenue, they will create much needed jobs.
Every applicant has proposed a project with a variety of economic drivers. I suggest that the Board look closely at each element of a project – not as an afterthought, but as a quantifiable and integral part of the economic impact.
Second is the context – where is the casino going and what is happening around it? Will the project transform vacant property, or reinvigorate land with a better use than it currently has? Will it support so-called “spinoff” development around the casino? Will it be attractive to tourists and conventioneers, bringing in new money from outside Pennsylvania? If so, how much?
I know the City’s Commerce Department will be taking a detailed look at the economic impact of each of these facilities. I hope the Board gives those opinions serious consideration.
A related issue to creating a unique facility is the issue of phasing. If something works well and there’s an opportunity to make it bigger, we should all get behind that. I don’t believe, however, that we should support a project which only fulfills its promise at some undetermined point in the future – or never. Looking at the failed starts in the past, there might be a temptation to pick a project that is seemingly lower risk on its face, but in the long run fails to create that unique facility possible in this licensing opportunity. I hope the Board carefully considers this, and makes sure that promises are kept as a condition of a license.
Finally on the issue of economic impact, there has been much public discussion about an applicant which pledges to donate money to the City through a nonprofit. I applaud those officials who have promoted this discussion, because it served an important purpose: it highlights the fact that gaming is a much-needed source of revenue for the City.
However, we already give local share money directly to the School District and the City’s general fund. Since it opened in September 2010, SugarHouse has generated over $21 million for the City and schools through local share assessment alone. Over the last year, just 220 of SugarHouse’s 1,600 slot machines generated $1 million of that local share.
What that means is that the extra money promised through a non-profit might easily be equaled or exceeded by another applicant’s facility with only a few more slots or tables – all under existing law.
I share the concern about the future finances of our City and school system. I believe those financial goals, and others, can best be served by looking at the overall economic impact from each of these six proposals – from every angle, not just the structure of the deal.
(2) The community impact.
In addition to economic impact, the Board should also consider the impact on the host neighborhoods.
In fact, section 1329 of the Gaming Act specifically mentions community support or opposition in the licensing process. While that section refers to the relocation of an existing license, community support is equally important as you consider this initial decision.
The three things I’m hearing most from my constituents this time around are concerns about crime, congestion, and community benefits.
We are fortunate that our first casino, SugarHouse, has been a financial success and a good neighbor. Local police officials will tell you that overall crime has actually decreased around SugarHouse, despite some isolated incidents. Crime has been controlled by using cameras, lighting, increased vigilance, and a small but focused unit of police.
The Board should ensure that applicants in this process create and carry out a comprehensive security plan to make sure that patrons and neighbors remain safe.
More so than crime, the most concern I’m hearing about is congestion, or the effect of additional casino traffic. I would point out to the board that traffic studies are also specifically mentioned in section 1329 of the Act.
A casino that is easily accessible and works well with the neighborhood will be a financially profitable one. The Board should require that applicants’ traffic studies are up-to-date and reflect realistic traffic patterns. It should also consider the impact of new traffic on existing, nearby activity. I’m sure that the testimony presented by the City and by the many neighborhood groups will speak to this point in more detail.
A third concern is community benefits. The School District and City receive direct revenue from casinos. The host neighborhoods also deserve a dedicated share of casino benefits. Along those lines, the issues raised most by constituents are local hiring and neighborhood funding.
I encourage applicants to hire from the surrounding neighborhoods for both temporary construction jobs and permanent employment. SugarHouse successfully made a commitment to local hiring. Our next casino should be no different.
When SugarHouse held its first job fair three years ago, nearly 15,000 people showed up for less than 1,000 openings. People want to work, and there’s no better place to look for employees than in your own backyard.
In addition to hiring, neighborhood funding has also been of concern. Local funding can take on many forms, whether it’s renovating a neighborhood park, cleaning nearby streets, or supporting the many vital programs that take place in the community. At SugarHouse, the Penn Treaty Special Services District was created to fill that role through a Community Benefits Agreement. Philadelphia also has other specially-funded districts that have been in operation for years, such as the University City District and the Sports Complex Special Services District. All of these can serve as models for the future.
I know that the six applicants here began the process of reaching out to neighbors and community groups months ago. I’m glad I can assist with those discussions. I encourage them to develop a structure of community benefits that is tailored to local needs, conducts regular elections from the community, and has oversight, but not control, by public officials. Most importantly, community benefits should be responsive first and foremost to the citizens and residents who live in casino neighborhoods.
(3) Suitability of the applicants.
This final issue is suitability of the applicants, a phase in the process we are only just beginning. The Act uses phrases like “financial fitness” and “operational viability.” In short, it means that the Board needs to look closely at who will fund, build, and operate the casinos.
As I said earlier, each of these applicants brings a unique team to the table, many of whom have national or international experience. Beyond the mere financials, I hope the Board also takes into consideration the track record of applicants who have a history of developing Philadelphia projects. An applicant that understands this market and how to operate here will be a successful one.
As the Board moves through this suitability phase, much of the vetting will be confidential or complex. I urge the board to continue its trend of openness and err on the side of public access as this phase of the process continues.
I expect to have additional comment before the close of the record, as we learn more about these projects. Again, I thank the Board for the opportunity to testify today.
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