Harrah’s projects $347M tax bill

By Andrew Conte
TRIBUNE-REVIEW
Wednesday, February 15, 2006

The backers of Harrah’s Station Square Casino say their plan would generate $117 million more a year in state and local taxes than either of their competitors for Pittsburgh’s slots license.

That’s great, politicians countered Tuesday, but the company still needs to come up with money for a new arena, too.

A Station Square casino would generate more than $347 million a year for Pittsburgh, Allegheny County and the state — compared to an estimated $230 million from its nearest competitor, said Cleveland-based Forest City Enterprises in a letter to Mayor Bob O’Connor and county Chief Executive Dan Onorato.

Forest City Executive Vice President Brian Ratner wrote in his letter Friday that a multipurpose arena would be an “important asset” for the city, and he offered to work with the city, county and state on a “financing strategy for the arena.”

Both of the other competitors for Pittsburgh’s stand-alone slots license disputed Forest City’s claims.

Isle of Capri, the Biloxi, Miss., company partnered with the Penguins, said the letter understated what the company plans to invest in a Lower Hill District casino. It plans to spend more than $400 million on the casino, not including the $50 million license fee, said David Morehouse, the Penguins’ senior consultant. It also would give the team $290 million for an arena.

“I would question the accuracy” of Forest City’s projections, Morehouse said.

Forest City based its projections on Isle of Capri’s spending $250 million for the casino. Forest City plans to spend $462 million on its proposed casino.

Forest City also expects each of its 3,000 slot machines would bring in nearly twice as much as those of competitors. In the second year, it expects to generate $617.7 million — $200 million more than projections by either competitor. There is a 54-percent tax on gambling revenues.

“I take issue with their very aggressive projections,” said Detroit businessman Don Barden, who wants to put a Majestic Star Casino on the North Shore. “There’s no way they can generate that kind of money. It’s not realistic. It doesn’t mean anything.”

Forest City defended its numbers, saying that Station Square already is an entertainment destination and that it intends to invest more money in the casino. Its partner, Las Vegas-based Harrah’s Entertainment, has a “premier name” and a database of more than 40 million customers, Ratner said.

The Harrah’s brand and its rewards program for players could give it an advantage over other gambling companies, said Denis Rudd, a professor of tourism and hospitality at Robert Morris University in Moon.

“People recognize Harrah’s as one of the players in the industry,” Rudd said. “They have that extra money that a lot of other places don’t have.”

Whichever company wins the license for Pittsburgh’s slots parlor, it should take money out of its profits to help build an arena, O’Connor said.

“You have to take time to validate the numbers, the projections and also the economic development part,” O’Connor said. “We’re doing our due diligence in waiting to see the place and the potential benefits for the people of Pittsburgh.”

Onorato met Monday with Barden to discuss his casino plan. Barden said he would respond in “several weeks” with a specific amount his casino would contribute toward an arena.

Onorato also has met with Forest City officials, said his spokesman, Kevin Evanto.

“The endgame here is to get a new arena for this region,” Evanto said. “(Onorato) wants to see the successful applicant fund an arena out of their revenues. The numbers that we’re talking about here — the revenue that will accrue to the gaming licensee — are pretty big.”

Onorato is expected to endorse one of the casino proposals after the state Gaming Control Board has vetted them. The county also continues to work on an alternate financing plan that would build an arena without gambling money, Evanto said.

About a dozen state lawmakers who are backing the Isle of Capri proposal met in Harrisburg yesterday to discuss ways of supporting the plan, said State Rep. Frank LaGrotta, D-Ellwood City.

By projecting to raise more tax money than its competitors, however, Forest City says its proposal proves the Penguins arena would not be free to taxpayers. The public cost of clearing land for the arena would be at least $50 million, it says. And Isle of Capri’s proposal would bring in less tax money.

“It is disingenuous to say the arena is free,” Ratner wrote in his letter.

Andrew Conte can be reached at aconte@tribweb.com or (412) 765-2312.

This article appeared in the Pittsburgh Tribune Review © Pittsburgh Tribune Review