Pennsylvania Criticizes Its Own Casino Industry For Slot Reductions

On Wednesday, a trio of casinos in Pennsylvania asked the state for the OK to reduce their respective slot totals. The plans were approved.

Wednesday’s Pennsylvania Gaming Control Board hearing was a busy one, with several important regulatory actions unfolding in Harrisburg.

A significant chunk of the more than 2½-hour hearing was on three petitions to modify a gaming floor, with Presque Isle Downs Casino, The Meadows Casino, and Rivers Casino also seeking permission from the state to reduce their respective slot totals as part of enhancements to their properties.

PID was seeking to remove 41 slots, bringing its total to 1,525; The Meadows was looking to remove 485 slots, dropping its total to just over 2,500; and Rivers was asking for the green light to remove 158, dropping its total to just over 2,600. The PGCB approved the plans after each casino gave a presentation explaining the purpose behind removing machines.

A ‘very concerning’ development

The state, which captures more than 50% of slot machine win in the form of taxes, wasn’t too pleased with reduction of slot terminals. PA is essentially a 50-50 partner in the slot machine gambling business, with the money going to offset property taxes that residents pay. A state official said it was “very concerning” that there would be fewer slots, even going as far to call gambling a “means to an end” for the state. Pennsylvania taxes other forms of gambling at lower rates. The average number of operating slot machines during June of this year at the 12 casinos was 24,869, compared to 25,737 in June of last year.

The 12 casinos collectively generated $2.37 billion in slot machine revenue in the most recently completed fiscal year, up a modest 1.1% from the year prior. The record for PA slot revenue was set in FY 2011/12, when they generated $2.47 billion in slot win. Machine revenue has been up and down since.

The three aforementioned properties all saw gains in their respective slot revenues during FY 2018/19.

  • Rivers: $291.1 mm (+6.15%)
  • Meadows: $211.9 mm (+1.16%)
  • PID: $114.8 mm (+0.39%)

PID actually wanted to remove more than 66 machines, but the state didn’t like that plan. Under Pennsylvania law, the casino must have at least 1,500 machines.

Rivers informed the PGCB that fewer slots doesn’t necessarily translate to less slot revenue. Some slots are under-played and old, the casino said. Despite the explanation from the industry, a state official at the hearing wasn’t happy with the recent trend in slot machine removals.

“Just in general, because I’m here for the state treasurer, and obviously revenues are the most important thing, and this isn’t just for the Rivers [Casino]. It is very concerning to me, and very concerning to us, that the solution to a lot of, you know, the casinos want to implement a sportsbook or they want to change … they want to reduce slot machines. And depending on what category [of licensure] you are, in some cases depends on where the money goes, but casinos were put into place in Pennsylvania for property tax relief. They aren’t here because we wanted to add new businesses to Pennsylvania. It [casinos] was a means to an end. It’s just very concerning to me that it seems that the casinos, when they want to change something, their immediate response seems to be to eliminate slot machines. ‘Our slot machines are old … ‘ I don’t know, buy new ones. But at the end of the day, I find it very troubling that it seems to be the solution.”

In response, representatives from Rivers said that for the last few months it’s been in operation with about 2,500 machines, thanks to ongoing construction at the property. “We’ve seen our revenues [continue to] go up … The point is, and to speak for kind of the whole industry, the saying in the industry is that slot machines don’t generate revenue, people do.”

Rivers said it might sound like a little bit of “alchemy” that a reconfigured gaming floor with fewer slots actually generates more revenue for the property, but the evidence is there.

Slots accounted for 73% of statewide casino gambling revenue in calendar year 2018.

Other regulatory actions

Regulators tackled several other items on the agenda, including:

  • Stadium Casino, an offshoot of the Cordish Co. of Maryland, was successful in renewing its five-year license for its upcoming casino in Philadelphia. The long-mothballed property, which is scheduled to open in late 2020, applied for a sports betting certificate last month. Additionally, Stadium Casino received a license for a so-called “mini-casino” outside Pittsburgh. Stadium is also seeking to have retail sports wagering at the western Pennsylvania satelite casino.
  • Regulators also announced that five truck stops in the state will begin VGT gambling next month. These VGT facilities were legalized under the 2017 gaming expansion law that included the legalization of regulating sports wagering, online casino gambling, and iLottery play. Last week, the PGCB launched a self-exclusion program for the VGT truck stop establishments.
  • Evolution New Jersey, a company behind live dealer online games in the Garden State, was approved for a conditional interactive gaming manufacturer license, giving it the ability to do business with PA online casinos. Evolution works with several online casinos in New Jersey, and could do the same in PA.

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