The decision by the Pennsylvania Gaming Control Board to award Philadelphia’s second casino license to the Live! Casino & Hotel may put Harrah’s Philadelphia casino in Delaware County out of business, and slash tax revenues for its beleaguered host city, Chester.
At $425 million, Live! Casino was the least expensive gambling option proposed to the Board the cheapest proposal. It was also the only proposal that didn’t require a zoning change, meaning neighborhood associations opposed to the casino can’t block the issuance of construction permits. Most importantly, Live! Casino was the lone applicant that wasn’t also a loan applicant.
Live! enters an arena where competing casinos are mired in debt. Caesar’s Entertainment — Harrah’s parent company — has $22.8 billion in debt. Its losses for the 2014 third quarter topped $908 million, driven by a 26 percent increase in interest payments, bringing the year-to-date shortfall to over $1.76 billion.
Caesar’s is trying to restructure its debt, but could soon be forced into bankruptcy by its creditors.
In Chester, Harrah’s casino’s revenues per slot machine and table game are both below the state average. Operating profits for the first half of 2014 were down 32 percent.
Fitch Ratings says Harrah’s will lose another 10 percent of its revenues when rival SugarHouse opens a $164 million expansion in Fishtown next year. If Live! opens, Harrah’s will lose an additional 15 to 30 percent in revenues, according to estimates cited in a 174-page report by the Gaming Control Board. Harrah’s revenue will drop between $55 million and $87 million.
The big loser may be Chester, where 26 percent of the city’s 2012 budget was financed by revenues taxes and fees from Harrah’s.
Harrah’s is the “most significant economic development project since Chester’s peak manufacturing days,” according to a city report.
While the adjudication examined Live! Casino’s impact on SugarHouse at length, Harrah’s was barely mentioned because Harrah’s management failed to intervene in the licensing hearings in time. SugarHouse tried late in the process to add Harrah’s as a co-intervener, but the gaming board said no because of “untimeliness and because Harrah’s interests were already adequately represented by SugarHouse.”
Even if Caesar’s goes belly up, Harrah’s could continue operating under a different owner if it’s profitable enough. But a new casino in South Philly will stack the deck against it. And if Harrah’s goes bust, Chester is looking at a bad hand, courtesy of the PGCB.
Note: The print version of this article misidentified Harrah’s Philadelphia Dover County as where Chester sits. It is in Delaware County.