When Pittsburgh’s casino license passed from Don Barden to Neil Bluhm, the latter agreed, as a condition to the transfer, to honor all obligations associated with that license-which includes an annual $7.5 million payment for the new hockey arena. The original agreement called for the first payment to be made October 2009. Mr. Bluhm first balked at making this payment earlier in the summer and while negotiations with the Sports and Exhibition Authority continue, this deadline looms closer. If his casino doesn’t honor this obligation, state taxpayers will be on the hook.
Through an arrangement of leases and subleases, the Commonwealth of Pennsylvania-i.e. the taxpayer-is responsible for paying the debt for building the new Penguins’ palace if the casino is unable. But here’s the catch: the money has to be appropriated by the Legislature. This is an interesting situation considering the State doesn’t have a full budget and is lamenting falling revenues. It’s highly unlikely the Legislature will approve the gubernatorial request to cover the casino’s first payment.
The main reason for the casino’s objection is that they just opened in August and hasn’t had time to earn the money to make the payment. Since its initial opening the casino has earned gross terminal revenues of $20.1 million-well below their projections-of which 55 percent must be paid in taxes. That leaves roughly $9 million to pay expenses such as personnel, maintenance and operations, and debt service.
But the payment is coming due and the taxpayers should not be saddled with his problem. The Rivers Casino could more easily find the money by perhaps borrowing against future revenues. When he took over the slots license Mr. Bluhm promised to be a good citizen. Stepping up and making the payment would be a great first step in keeping that promise.