Casinos get healthy share of tax breaks

Marc Levy

Thursday, Sept. 22, 2005 | 9:35 a.m.

HARRISBURG, Pa. -- Some multibillion-dollar companies that have proposed building slots parlors in Pennsylvania would qualify for millions of dollars in tax breaks, surprising even some legislators who voted to expand legalized gambling.

Harrah's Chester Casino and Racetrack is being built in one of 193 Keystone Opportunity Zones scattered around the state in depressed parts of municipalities that are willing to forgo tax revenue to attract businesses.

Harrah's Chester, which is half-owned by the biggest gambling company in the world, Harrah's Entertainment Inc., is already getting tax breaks on purchases of building materials and furnishings for its $350 million site under construction on Chester's struggling riverfront.

The gambling hall's owners also will benefit from tax exemptions on purchases, property and income into 2013, when the tax breaks expire.

The site is practically guaranteed to get a slots parlor because last year's legislation that authorized up to 61,000 slot machines at 14 sites set aside a license for each of the state's four licensed harness-racing tracks.

Other hopefuls who plan to apply for one of two slots licenses reserved for Philadelphia could qualify for Keystone Opportunity Zone tax breaks.

One senior lawmaker, Sen. Robert J. Mellow, said slots parlors should not receive the tax breaks because they are lucrative businesses that are granted virtual monopolies when they are licensed.

"KOZs were started to attract marginal businesses to give them a chance," said Mellow, the Senate's Democratic leader from Lackawanna County. Bestowing the tax breaks on slots parlors "goes against everything a KOZ stands for."

Mellow said he would encourage the Pennsylvania Gaming Control Board, which licenses and regulates slots parlors, to examine critically any applicant that accepts the tax breaks.

Board members expect to begin awarding licenses next year.

Sen. Robert M. Tomlinson, the Bucks County Republican who helped write the slots law, pointed out that the slots owners will pay a $50 million license fee and lose more than half of the slots revenues to taxes. Part of those taxes guarantees 2 percent of the slots revenues, or a minimum of $10 million, to Chester.

But he also noted that competition could force a gambling company to relinquish any tax breaks. For example, the board could decide that an applicant that pays higher taxes is a better candidate, Tomlinson said.

"They still have to be competitive and they still have to present the best plan to the commission, and the commission is going to be sensitive to what's best for the community," Tomlinson said.

Jan Jones, Harrah's senior vice president for communications and government relations, said she saw no reason why a casino should be treated differently than any other business when it comes to tax breaks.

And Kevin Feeley, a spokesman for Las Vegas-based Ameristar Casinos Inc., said the company had not decided whether it will pursue the tax breaks at its Philadelphia riverfront property, part of which is in a Keystone Opportunity Zone.

David Sciocchetti, the executive director of the Chester Economic Development Authority, said the city approved tax breaks at the abandoned shipbuilding site that Chester Harrah's will occupy without any idea what kind of business would sprout.

"The purpose of the KOZ was to do exactly what happened," Sciocchetti said. "Find a reuse for a vacant industrial property."