The Pennsylvania Gaming Control Board held an auction September 4 to accept bids on five remaining licenses for Category 4 satellite casinos, also known as mini-casinos.
There were no takers. It was the second consecutive Category 4 auction that failed to draw a single bid.
Pennsylvania’s 2017 gaming expansion law authorized up to 10 Category 4 casinos as a way to gain revenue from areas of the state where there are no current casinos. The mini-casinos are limited to 750 slot machines and 30 table games, with an additional 10 tables by petition after opening. Under the law, the casinos must be at least 25 miles from any other casino.
The original Gaming Expansion Act of 2017 called for auctions for the licenses, first limited to current casino licensees. It provided that unclaimed licenses could later be bid out to other qualified entities, including operators outside the state with no current Pennsylvania casinos. The law provided for a minimum bid of $7.5 million, payable as a license fee upon approval.
Penn National Gaming, owner of Hollywood Casino at Penn National Race Course outside Harrisburg, lobbied hard against the Category 4 provision, and after it passed, filed a federal lawsuit seeking to block the provision. Penn asserted in the lawsuit that its Hollywood Casino was “uniquely vulnerable” to cannibalization of its revenues by the new mini-casinos, since, because of its relatively isolated location, most of its customers came from outside the 25-mile exclusion zone.
The lawsuit was filed on the eve of the first Category 4 casino auction held by the board January 9, 2018. Penn decided to hedge its bets, bidding on the license in a defensive move to protect its market. The operator submitted a $50.1 million bid, winning the first license for a mini-casino in York County.
It ended up being the largest bid submitted. The second license went to Stadium Casino, then a partnership between Parx Casino owner Greenwood Gaming and Baltimore-based Cordish Companies, for a bid of $40.1 million. Mount Airy Casino Resort won the third for $21.2 million, and Greenwood Gaming won the fourth for $8.1 million.
Penn National was the only bidder for the fifth Category 4 casino, winning the license for a bid of $3 over the $7.5 million minimum. The subsequent auction drew no bidders, which, under the original law, technically opened up the bidding to “other qualified entities” outside of current Pennsylvania licensees.
However, earlier this year, the Pennsylvania legislature passed Act 20, which provided for the board to conduct up to five additional auctions restricted to current Pennsylvania casino license holders, and extended the exclusion zone to 40 miles from a current casino.
That law also provided that no further auctions be held if an auction failed to generate a bid.
“The original language from 2017 did include permitting any ‘other qualified entity’ in additional auctions,” said gaming board spokesman Doug Harbach in an email to GGB News, “but when language was passed this year to have us conduct more auctions, the law specifically stated ‘eligible bidders shall only be slot machine licensees.’”
Harbach said the September 4 no-bid means the Category 4 process ends with the current five mini-casino licensees. “The legislature could pass something to reinitiate the process in the same or altered form., but I cannot answer for what they may or may not do,” he said.
The state raised $127 million in fees for the state from the five Category 4 licenses. Construction has begun on only one, in the former Bon-Ton department store in Westmoreland Mall outside of Pittsburgh. To be called Live! Casino Pittsburgh, it is under the $40 million license won by Stadium Casino, now owned solely by Cordish.
Construction on the second satellite casino is expected to begin soon in the space of another former department store, the former Sears anchor store at the York Galleria mall—the license for which Penn shelled out $50 million.
The other three are still in the process of planning, public hearings and local approvals. They are Mount Airy’s planned casino in Western Pennsylvania’s Beaver County, Greenwood Gaming’s planned facility in Cumberland County in the west-central part of the state, and Penn’s second license, for Berks County in eastern Pennsylvania.
Following the failed auction, officials commented that the market for new casinos in Pennsylvania is officially tapped out, due to market saturation not only within the state but in the entire Northeast.
