PA Slots Far Off?

- Racetrack slots and standalone casinos in Pennsylvania have already, before they've even been licensed, caused fear and loathing in surrounding states, joyous anticipation by horsemen, casino companies, and job-seekers alike, construction that is already underway to add racino facilities and the resulting cancellation of the state's biggest thoroughbred race (not to mention Harrah's Chester, a brand new harness track due to open in September). But now, they may be further away than ever as the state's Gaming Control Board faces a crucial deadline. The situation is so serious that Tad Decker, the board chairman, was quoted as saying "I'm not sure we're even going to have gaming.....I want to be honest with you." [Thoroughbred Times]

The board has until July 5 to finalize all of the rules and regulations covering slots, but there is a contentious sticking point that shows no sign of being resolved. The slots law passed by the state legislature two years ago mandates that suppliers of slot machines may not sell directly into the state, but must do so via Pennsylvania-based suppliers. Columnist Eric Heyl of the Pittsburgh Tribune-Review has no doubt as to why this extra layer was added.

The supplier applicants are politically wired individuals. They will function as needless middlemen, purchasing slot machines from manufacturers, then turning around and selling them to the casinos at what undoubtedly will be a large and unearned profit.

The dispute amongst the commissioners centers on whether the suppliers will be able to sell anywhere throughout the state, or if each will be limited to one of two regions. The board is said to be deeply divided on the issue.

Commissioner Jeffrey Coy insists on two regions, saying that will allow the largest number of suppliers to operate and create the most jobs. Commissioner Ken McCabe favors just one region. Other commissioners could go either way. [Pittsburgh Post-Gazette]

The slots law that created all of this gave the commission two years from July 5, 2004 to come up with the rules, so if they don't see eye to eye by then, authority reverts to another government agency, and Decker fears that this could put the slots ball right back into play.

The commission could hold hearings for months, taking testimony from slots foes and proponents and further delaying approval of supplier license regulations, Mr. Decker said.

He said the commission review process could take "at least a year and maybe longer."

"I think [delay of] a year would be an optimistic timetable [for issuing supplier licenses]. There will be opponents of gaming who will have a shot to delay this'' once the commission gets involved. [Pittsburgh Post-Gazette]

On the other hand, the commissioners could agree to agree and the first machines could conceivable roll out early this fall. But a considerable delay would have wide implications, and not just only in Pennsylvania, and not solely in the U.S. For neighboring states with either no slots or with prohibitions against table games which, some feel, will help them compete, it will buy more time before the onslaught begins.

Canada-based Magna Entertainment has a huge stake in the outcome as well. The $225 million sale of the Meadows harness track is contingent upon slots licenses being issued, and the debt-laden company needs the cash badly, as one of its own executives freely admitted.

"A year delay would be devastating," said Michael Jeannot, vice president of operations......Magna, which has reported a working capital deficiency, plans to use funds from the sale to repay two large loans. [Thoroughbred Times]

In addition, you may recall the footnote to the company's latest financial report last month which, according to a now-archived article in the Toronto Globe and Mail, cautioned that Magna’s ability to continue as a going concern is in "substantial doubt" amid high debt, poor cash flow and delays in a key asset sale. Well, this is that key asset sale, and a delay in the licensing process in Pennsylvania could certainly cast an even bigger shadow on the company's already murky chances of succeeding in the competition for the New York franchise.

- Prospects of licensing delays haven't stopped the developers of the proposed Bedford Downs harness track/casino in Pennsylvania's Lawrence County from celebrating a court decision that ordered the state's Harness Racing Commission to reconsider its rejection of their application to build the track. The commission was concerned about an alleged connection between the developer's deceased grandfather and the mob, but the court treated its reasoning with disdain.

"The deceased grandfather is not an officer, director or stockholder of Bedford," the court wrote. "Thus, there is no statutory basis for considering whether his previous business dealings with reputed organized crime figures are consistent or inconsistent with the best interests of racing." [Beaver County Times]