Sands Casino Resort

Last Week’s Pennsylvania Casino Bid Flub by Sands is Still Warming My Cold Heart

The Pennsylvania gambling expansion bill passed in October 2017 authorized, among other things, the construction of up to ten “mini-casinos” in the Commonwealth which can have 300-750 slot machines and, optionally, as many as 30 table games. The process of determining who gets the licenses for the mini-casinos began in January with live auctions. Last week, Parx Casino (technically Greenwood Gaming and Entertainment, Inc.) won the fourth license after Sands Bethworks Gaming, LLC hilariously showed off impressive incompetence and submitted an invalid bid. Though it happened a week ago, I still bask in in the glow of Sands’ stupidity because anything that might upset Las Vegas Sands CEO Sheldon Adelson makes me happy.

Pennsylvania StampThe “mini-casinos” are classified as Category 4 establishments which means, as you might guess, there are also Categories 1, 2, and 3. The mini-casino licenses, as mentioned, are being made available via a live bidding process, a process which is currently only open to Category 1 and 2 license holders, which are Pennsylvania’s racinos and standalone casinos. The minimum bid for a Category 4 license, which would be for a venue with 300-750 slot machines, is $7.5 million. For another $2.5 million (not included in the bid), an operator can add 30 table games.

When operators place their bids, one ballot contains their dollar amount and another contains the location – literally geographic coordinates – for the proposed casino. It is the second ballot that Sands royally messed up.

Bidders can’t just choose anywhere they want to plop down a mini-casino. First, it can’t be within 25 miles of a Category 1, 2, or 3 casinos. Second, it can’t be in a municipality that has opted-out, that has decided it doesn’t want a casino. And third, it can’t be within 15 miles of another Category 4 location.

That last part is slightly murky, though it still shouldn’t be complicated for a bidder. The coordinates submitted by a bidder establish the center point of an area within which the casino is to be built. The casino must fall within a 15-mile radius of that point. At the same time, that 15-mile radius cannot overlap with another Category 4 licensee’s 15-mile radius.

Where Sands booted it was that the 15-mile radius around the coordinates it submitted overlap with that of Mount Airy’s Category 4 location. Mount Airy won the third auction on February 8th for a location in New Castle, Pennsylvania in Lawrence County. Sands chose Hempfield township in Mercer County, Pennsylvania, which is in western Pennsylvania, very close to Youngstown, Ohio.
Because Sands violated the bidding rules, its bid was thrown out. Only one other operator submitted a bid for the fourth mini-casino license, Parx Casino, so it won. It chose a location in South Newton. Parx’s winning bid was just over the minimum, coming in at $8.111 million. Sands’ bid was $9.885 million.

The bids for the rest of the licenses should be somewhere around the minimum, as the bids have dropped precipitously. Hollywood Casino (Penn National) won the first one, beating out three rivals, with a stunning $50.1 million bid. It chose a location in York, which is 50 miles or so south of Hollywood Casino and 20 miles north of Maryland.

The second license went to Philly Live! Casino (which hasn’t been built yet). It paid $40.1 million for a spot in Derry, Pennsylvania, east of Pittsburgh. Mount Airy, as mentioned got the third license, paying about half of what Philly Live! paid, $21.889 million.

It was estimated that Pennsylvania would rake in $100 million from all ten licenses, which equals the $7.5 million for the base license plus $2.5 million for the table games license times ten. As it stands, after just four license auctions, the total price paid is over $120 million. From here, it will be interesting to see what happens, as the prices have dropped to almost the minimum and there were no other bidders for the fourth license aside from Sands. Sands, of course, could bid again, though its preferred location is obviously gone.

The Pennsylvania Gaming Control Board issued the following brief press release regarding Sands’ snafu:

The Pennsylvania Gaming Control Board’s Executive Director Kevin O’Toole announced this afternoon that the location of the bid submitted today by Sands Bethworks Gaming, LLC for a Category 4 casino location intruded upon the reserved area of a previously secured Category 4 location held by Mount Airy #1, LLC.

Given that the location is non-conforming to Act 42’s requirements, the bid has been therefore invalidated and Executive Director O’Toole will proceed to consider the award for the fourth Category 4 casino auction to the second and only other bidder, Greenwood Gaming and Entertainment, Inc.

Representatives of the Gaming Control Board will reconvene at 10:00 a.m. on Thursday, February 22, 2018 in its Harrisburg Public Hearing Room in Strawberry Square for the purpose of announcing the winning bid amount and opening the location affidavit envelope.

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