Comparing projected and actual revenue from PA gaming expansion

Is Pennsylvania Gaming Revenue Hitting The Mark Amid Expansion?

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Pennsylvania has spent the better part of three years ironing out the details of its massive gaming reform.

The state used sweeping legislation to plug a nine-figure hole in its budget, authorizing everything from online gambling to daily fantasy sports to new satellite casinos. Lawmakers made no bones about it. The expansion was designed to raise revenue.

During a reform debate in October, the House Committee on Appropriations produced a fiscal note including anticipated revenue.

The total projection was nearly $250 million for FY2017-2018, including $238.5 million from applications and licensing fees. Another $10 million would go to the Lottery Fund. The projected total was later revised down to $214 million for the fiscal year ending June 30.

How accurate were the state’s estimates?

The committee wasn’t too far off in terms of its total projection. Where the expected revenue actually came from, however, is a different story.

Online gaming revenue pushed back

A big chunk of the projected revenue was supposed to come from online gambling licenses. But because the first applications were submitted in July, those fees will be used to fund the FY2018-2019 budget instead.

Category 4 auctions over-perform

On the other hand, the Category 4 mini-casino auctions were a rousing success, even though only five of the 10 licenses were claimed.

The committee expected all 10 mini-casinos to be auctioned off for $7.5 million apiece. Each mini-casino was also expected to pay the additional $2.5 million to operate 30 table games. Those licenses would generate a grand total of $100 million, a projection that was later was trimmed to $67.5 million.

Either way, the five Category 4 casino auctions outperformed both estimates.

  1. Hollywood Casino: Owner Penn National Gaming bid an astounding $50,100,000 for first rights to build a mini-casino in York County.
  2. Stadium Casino: The forthcoming property in Philadelphia won the second auction with a bid of $40,100,005 for a mini-casino in Westmoreland County.
  3. Mount Airy: The property in the Poconos won the third auction, bidding $21,888,888.88 for a mini-casino in Lawrence County.
  4. Parx Casino: In the fourth auction, Parx placed the winning bid of $8,111,000 for a mini-casino in Cumberland County.
  5. Hollywood again: The fifth action brought another win for PNG, a bid of $7,500,003 for a mini-casino in Lancaster County.

The state collected $127.7 million when all was said and done. Each casino is likely to pay the additional $2.5 million to operate table games at some point, too.

A (sort of) unexpected windfall

Pennsylvania would have missed its FY2017-2018 projections if not for two provisions buried within the 900-page gaming reform law. The new law repealed one from 2014 that had imposed limits on casino ownership. At the same time, it also imposed heavy fines on casinos with active lawsuits.

These new provisions put the Philadelphia Live! casino project, originally approved in 2014, back on track. The venture is a collaboration between Cordish Company and Greenwood Racing.

Since the latter also owns Parx near Philly, competing SugarHouse Casino had previously filed suit. That lawsuit was dropped following the passage of the gaming reform law, and the Live! casino project cut the state a $50 million check for its slot license.

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FY2018-2019 already off to a good start

With the online gaming license fees pushed back a year, the state is already well ahead of schedule for FY2018-2019.

In mid-July, nine casinos paid $10 million apiece for online gambling licenses. At least two of the four remaining casinos are expected to purchase a-la-carte licenses over the next month, resulting in another $16 million to $32 million.

There is also the likelihood that as many as 13 sports betting licenses will be doled out. Those licenses come at a cost of $10 million apiece, too.

The big questions in 2018-2019 are:

  • When will the Category 4 casinos open their doors?
  • When will online gambling and sports betting go live?

Pennsylvania estimated Category 4 casinos would bring in $82.5 million for FY2018-2019. So far, though, not a single shovel full of dirt has been moved. It’s unlikely any of the mini-casinos will be ready to go until sometime in 2019.

Fortunately, the licensing fees from online gaming and sports betting will more than make up for the delayed openings of the Category 4 casinos.

- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.
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