Tuesday, January 24, 2006
Giving Away Money to Slots Operators
What is the value of a slot license in Pennsylvania? The answer to that question should come from a free and open market. After all, when commodities or corporate shares or art works are offered for sale, there is an auction process that determines the value and sales price. However, in Pennsylvania, the market was not allowed to operate for slots licenses. Instead the legislature arbitrarily set the purchase price at $50 million. Evidence to date indicates this price was far too low and the Commonwealth squandered a great opportunity to generate revenues that could have funded tax cuts.
In Pittsburgh there are four candidates for the City’s stand-alone parlor. An auction would have allowed an open competition for the license. Instead these potential owners are trying to curry favor with the Gaming Board by offering elaborate packages designed to benefit the community, with some offering $1 billion in economic development associated with the parlor and another promising a new arena. The three groups that do not get the license will undoubtedly claim foul play in the decision process. An open auction would have made it clear to all who the highest bidder was.
Two of the bidders have estimated that the parlors could earn up to $550 million per year in revenues. Even with taxes of up to 50 percent and payments to the community these casino operators expect to earn a very large profit. Not bad for a $50 million license fee. An auction process could have benefited all citizens of the Commonwealth, not just the lucky few who are granted a slots license. Instead, the winning candidate will have been handed a lot of money that rightly should have been captured for the citizens and taxpayers of Pennsylvania.
What is the value of a slot license in Pennsylvania? The answer to that question should come from a free and open market. After all, when commodities or corporate shares or art works are offered for sale, there is an auction process that determines the value and sales price. However, in Pennsylvania, the market was not allowed to operate for slots licenses. Instead the legislature arbitrarily set the purchase price at $50 million. Evidence to date indicates this price was far too low and the Commonwealth squandered a great opportunity to generate revenues that could have funded tax cuts.
In Pittsburgh there are four candidates for the City’s stand-alone parlor. An auction would have allowed an open competition for the license. Instead these potential owners are trying to curry favor with the Gaming Board by offering elaborate packages designed to benefit the community, with some offering $1 billion in economic development associated with the parlor and another promising a new arena. The three groups that do not get the license will undoubtedly claim foul play in the decision process. An open auction would have made it clear to all who the highest bidder was.
Two of the bidders have estimated that the parlors could earn up to $550 million per year in revenues. Even with taxes of up to 50 percent and payments to the community these casino operators expect to earn a very large profit. Not bad for a $50 million license fee. An auction process could have benefited all citizens of the Commonwealth, not just the lucky few who are granted a slots license. Instead, the winning candidate will have been handed a lot of money that rightly should have been captured for the citizens and taxpayers of Pennsylvania.
