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Thursday, September 14, 2006

Magna and the Meadows

- Here's a story out of the Beaver County Times that could conceivably have large implications for Magna. The completion of the company's sale of their Meadows harness track in Pennsylvania is still pending the issuance of a license for slots, and you may recall the ominous footnote to their last financial report in which they questioned their own viablility as an ongoing concern should it not be completed. They've already had to accept a reduction in the sale price due to the high tax rates.

Now comes the report that the Meadows' casino plan received the third degree from the state's Gaming Control Board during this week's license hearings; the board and the track apparently have grossly different projections on the revenue the slots facility could garner.

The gaming board's staff analysis shows $100 million a year in revenues at a temporary facility, while company estimations [sic] based on independent market reviews were $215 million.

Bill Paulos, co-owner of Cannery Casino Resort, the new buyer of the Meadows, said the project could not stay afloat off such gaming staff projections, considering what would amount to a 60 percent tax bite from state and local governments.

"If they're right, you should not put a casino at the Meadows," Paulos said. "It doesn't pencil. We wouldn't do it."
The board also expressed concern over the owners' financing plan, which would have to produce, in addition to the costs of building a permanent facility, the $200 million to complete the purchase from Magna. ..Gaming board members said state statute requires that slots licenses be awarded only to projects that are "likely" to be successful and wondered if the Meadows fits that bill. And they disputed a study paid for by the track that predicted that 35 percent of the region's 2.1 million adults would visit the Meadows to play slots.

35%!? Jeez, I would hope not! In any event, I imagine this is all causing a little more heartburn for Frank Stronach.

- And while the licensing process continues in Pennsylvania, surrounding states continue to beef up their own gambling in response. Existing racinos in Delaware are undergoing expansions. A state law enacted earlier this year allows casinos to add 1,500 machines in 500-machine increments. Dover Downs has already added 200 more machines, and plans are in the works for 74,000 additional square feet of space, and 550 to 650 new machines.

Harrington Park has commenced construction of a $35 million project that will almost double the size of the casino at the state fairgrounds. []

The Northeast is fast becoming one giant slots parlor, and there has to be a limit to this somewhere, doesn't there? It's not going to be a pretty picture for racing if and when it all comes crashing down.