30-second summary
- Pennsylvania made satellite casinos legal in 2017
- These facilities can have as many as 750 slot machines and 30 tables games
- Ten licenses were up for grabs, with 5 being sold at auction in January
- Penn National paid $50m for the Morgantown license, but the residents are not happy
Pennsylvania introduces satellite casinos
Casino gambling is a popular pursuit in Pennsylvania. However, locals are not happy about the creation of a new satellite casino in the state. Penn National Gaming got approval to create a satellite casino in the town of Morgantown.
This will be known as the Hollywood Casino Morgantown. It is the first-ever satellite casino in Pennsylvania. Estimates are that this new casino will pump in over $94m (£71m) to the local economy. Despite this, the locals are not happy.
In 2017, the state made satellite casinos legal, permitting up to ten such licenses. These facilities can have as many as 750 slot machines and as many as 30 table games. The minimum bid for one of these licenses was $7.5m (£5.7) Penn National, through a subsidiary, paid $50m (£38m) for its license during the auction in January 2019.
The company was not particularly keen on the idea of buying such a license. However, due to the location, Penn National thought it was the best way to protect its interest in the state. It already had a casino in the Harrisburg region and was were contemplating filing a lawsuit saying these new satellite casinos would cause serious financial harm to that facility. Eventually, the company decided to acquire a license instead.
License auction
Only five of the licenses were sold, for a total of $127m (£95.7m). Each license was for a specific region of the state. The region for this license is the Springettsbury Township and York County.
It is up to the license holders to find a suitable location in these regions to create their casino. This selection needs to be made by October 31, 2019. The Pennsylvania Gaming Control Board will have to give its approval to the chosen sites.
Once they get the green light, the building work can commence. It will take Penn National between 12 and 18 months to build their new facility when they get approval.
Penn National picked up another of the licenses during the auction, which covers the region of the Caernarvon Township and Berks County. This license cost just over $7.5m (5.7).
Parx Casino got a license for the Shippensburg Township for $8.1m (£6.1m). This was after Sands Bethlehem originally won the auction with a $9.9m bid (£7.5m). However, their location was too close to that of Mount Airy and was not allowed.
The final licenses went to Stadium Casino for the Westmoreland County and Hempfield Township region. This license cost $40m (£30m).
Penn National Morgantown satellite casino
The Caernarvon Township Board has already given unanimous approval to the Penn National satellite casino. Many local residents attended the meeting and some of them expressed their opposition.
While the board heard these objections, they believe the pros outweigh the cons. About 255 temporary jobs will be created during the construction process and the casino will offer 250 permanent positions when it opens. This means that Caernarvon could get around $1.6m (£1.2m) in additional taxes annually.
The reason that Penn National bid more than $50m for this license was its location. It is only a 20-minute journey from Reading, which has the 5th highest population numbers in the state. It is also not far from Philly Main Line and Lancaster, which are both potentially lucrative markets.
Casinos have performed well
It has been a good few years for the existing casinos in Pennsylvania. The Pennsylvania Gaming Control Board 2018 figures show record high revenues of $3.25bn (£2.45bn), up from $3.23bn (£2.43bn) in 2017.
The main driver of this increase was slot machine revenues, which rose by $32m (£24m) year on year. The state derived $1.38bn (£1.04bn) in tax revenue from slot machines. Slots have been legal in the state since 2006 and they are becoming ever more popular.
With the creation of five new satellite casinos in the coming years, gambling revenues are going to rise to the next level. Pennsylvania has long been in second position in the rankings behind Nevada for the largest gambling revenues in the country. With legal sports betting also on the horizon, the state will likely hold that position for some time.