With less than a month until the Rivers Casino opens in Pittsburgh the slots parlor is facing a $7.5 million payment due this October for its share of the hockey arena debt service. Predictably, casino owner Neil Bluhm is balking at making his first payment so quickly. Instead he insists that his first installment is not due until 2010 at the earliest and possibly not until 2012. Will this be settled amicably or through the courts?
The problem for Mr. Bluhm is that when he took over the slots license from Mr. Barden in 2008, he assumed responsibility for the obligations Mr. Barden had agreed to in order to obtain the license-including providing $7.5 million per year for 30 years to help with bond payments. The Gaming Board issued a press release in August 2008-upon awarding Mr. Bluhm’s group the Barden license-stating that Mr. Bluhm’s group would assume all of the previous license holder’s obligations. One can only interpret the statement as including the $7.5 million bond payments on the original schedule.
In October 2007 the Sports and Exhibition Authority (SEA) issued the arena bonds. The payment schedule called for the casino operator’s first payment to be made in October 2009. That would require the casino to produce $7.5 million by then in order for all the funds to be in place to cover the first bond payment. Thus, since Barden’s company was scheduled to make their first payment in October 2009, it is reasonable to infer that the Bluhm group is now obligated to keep the same schedule. This detail is outlined in the SEA’s financial statement for 2007 and again for 2008.
If the Bluhm casino refuses to make the payment and the court does not order him to produce the funds, the SEA and the state will have to scramble to get the money. Remember that under the complicated and almost surreptitious lease and leaseback arrangement the state has with the SEA, the Commonwealth is required to come up with the money if the casino defaults. However, the replacement dollars have to be appropriated by the General Assembly and, in light of the current budget crisis in Harrisburg; the chances of the Governor being able to convince the legislature to approve the funds seem close to nil. At that point look for typical government chicanery and sleight of hand. The $7.5 million will be miraculously found in some other gaming fund account or little known economic development account.
It is simply wonderful to watch government at work.
