Give it Back!

 

In the casino, the cardinal rule is to keep them playing and keep them coming back. The longer they play, the more they lose. In the end, we get it all.       Sam Rothstein (Robert DeNiro), Martin Scorcese’s Casino

The Rivers Casino has a monopoly on legal slot machine and table game gambling in the city of Pittsburgh. Apart from traveling to the Meadows in Washington County, the much longer trip to Erie, or a drive out of state, the Pittsburgh resident bent on spending Friday’s paycheck or throwing away the rent money has nowhere to go except to the temple of vulgarity on the city’s Northside (North Shore, to the sophisticates).

It was Governor Ed Rendell who demonstrated the genius of recovering all of the revenue lost to out-of-state slime balls exploiting addicted gamblers and returning it to Pennsylvania slime balls. Through his diligence, casino gambling arrived in Pennsylvania in 2004. The days of politicians encouraging citizens’ higher sentiments are obviously far in the past. Never mind that casino gambling, like the latest public health problem, opioid abuse, or alcoholism or mental illness are symptoms of an increasingly desperate poor and working class looking for a break and an escape from the myriad disappointments of life in an era of unparallelled inequality.

My own Puritan instincts aside, the monopoly status of the Rivers Casino, like similar government-granted monopolies, awards the owners with a license to plunder. One would expect that those granted such privileges would be suitably humble and appreciative.

But not so.

Back when the Pennsylvania Gaming Board was considering license applications, gambling enterprises were falling over each other, offering juicier and juicier deals to acquire the license to steal. Each contestant promised to fulfill an urban politician’s wish list from buying the Penguins a new arena to sharing large chunks of revenue with the county and city. Backs were bent and, no doubt, some money was offered to fixers and campaign war chests. At one point, then-Mayor Tom Murphy, purposely or accidentally, asserted that the “fix” was in for one applicant, sending the Gaming Board promptly in another direction. Maybe, the “fix” was aborted; maybe, the painfully sober Mayor Murphy was simply discovering a belated sense of humor.

At any rate, the license was granted in 2006 to an applicant who quickly defaulted on a $200 million loan. Rushing in to save the day was Holdings Acquisitions Company, a new partner that now holds a controlling interest in The Rivers Casino.

Part of the original deal was an agreement that the casino owners would pony up 2% of slot machine revenue or $10 million to the city every year, whichever was larger. This would not seem that much of a burden for a business that generates about $275 million a year in slot revenue and nearly $200 million in table game revenue. To give some sense of proportion, casino gross revenue is roughly 90% of the amount of money the City of Pittsburgh collects annually for its entire operating budget.

But the Rivers Casino doesn’t want to abide by the original agreement. They are willing to pay the lower amount, but not the minimum. The casino’s legal advisors cite a glitch in the original legislation that might allow them to escape the agreed terms. Moreover, they are suing to recover $65 million in what they consider back “overpayments.” Like the other entertainment venues that rely heavily upon public largesse to make their private bucks, the casino owners are allergic to giving anything back.

But it should come as no surprise that the owners of the casino aren’t ‘giving’ neighbors. They appealed their local property tax assessment that the county initially estimated at $278 million. They subsequently took their case to court, offering their own estimate of $94 million. The judge bent over backwards and fixed the assessment at $199 million.

Nor did the casino (joining the cheap skate Steelers and Pirates) want to continue subsidizing rides to their doorsteps through the publicly-financed tunnel.

The casino owners are notoriously allergic to paying taxes. In Illinois, a sister casino has maneuvered to avoid over $4 million in property taxes over a 5 year period. Though they paid $117 million for that operation, they argue that it’s only worth $62.9 million. Amazingly, the owners cling desperately to these persistently value-losing enterprises.

Beyond cursory, minimal fact-based news stories, our lap dog media has yet to cover owner Neil Bluhm’s various endeavors, possibly because he is a big-time ‘bundler’ of Democratic Party campaign contributions.

But I have a win-win solution to both the city’s revenue problems and the casino owner’s unwanted burdens: the city should buy back the casino and operate it as a public enterprise. Using the powers of eminent domain, the city could take on all the onerous financial responsibilities currently contested by the casino owners and still accrue net revenues for tax relief, pension funding, infrastructure improvements, etc. And, of course, the current owners could be generously compensated– not at the value they claim for their property ($94 million), not at the value negotiated ($199 million), but at the full value originally assessed ($278 million). In other words, Holdings Acquisitions Company could receive payment nearly three times greater than what they argue their casino is worth!

Of course that will never happen. There is not one elected official in Allegheny County with the spine to suggest, not alone press, such a solution. Every tired,  imaginable excuse would appear: government can’t do anything right, efficiently, or profitably; the law is not clear; the gaming commission will not approve it. But we could be sure that the casino owners would get the message and they would not take their casino and leave as the sports teams always threaten extortionately.

Instead, we get the Mayor’s weak pledge to fight to keep the original deal intact. Sure, like he and his predecessor fought to squeeze revenue from the non-profit free-riders or fought to get the sports teams to live up to their development commitments. Hasn’t happened.

Greg Godels

 

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One thought on “Give it Back!

  1. People who make their riches by taking advantage of addicts and the weak minded are not folks who are to be trusted. The fact that the contract was written loosely enough to allow wiggle room shows they were planning in advance to renege on their play, something they never let their customers do.

    Like

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