FERLO SUBMITS LETTER TO GAMING CONTROL BOARD REQUESTING DENIAL OF MAJESTIC STAR PETITION


Ferlo

HARRISBURG, April 28 - State Sen. Jim Ferlo (D-Pittsburgh) today sent a formal letter to the Pennsylvania Gaming Control Board (PGCB) in opposition to the petition by PITG Gaming, LLC.

Ferlo specified two principal areas of opposition: PITG’s deferral of the construction of the ballroom and outdoor amphitheater, and elimination of the commitment to a $3 million redevelopment fund for the Hill District.

In his letter, Ferlo points out that PITG did not supply any fact-based evidence to defend the request to defer the construction of the ballroom or amphitheater, and only supplied speculative evidence regarding the redevelopment fund.

Ferlo said that these were key elements in the competitive process to gain the sole Category 2 license in Pittsburgh. He added that by granting permission to PITG to withdraw or defer, it would bring into question the suitability of the candidate generally. 

“If you were to build a house without a kitchen you couldn’t likely host as many guests. This situation is no different,” said Ferlo.  “Every element of the originally proposed casino, including the amphitheater and ballroom, had a revenue and job creation value that it added to the facility.  Each element removed represents dollars lost in property tax reductions, local share assessment taxes and redevelopment assistance funds.”

Ferlo has raised concerns in the past about whether Don Barden has the financial ability to complete construction of the Majestic Star Casino. He said his concerns have been heightened over the last two weeks by Barden’s parent company’s Securities and Exchange Commission annual filing, the public revelation that he may default on a bridge loan for construction of his Pittsburgh casino, and last week’s reduction of the Majestic Star’s credit rating by Standard & Poor’s.

Ferlo said all three of these issues point to a company that is over-extended in debt and perhaps in need of equity investors.

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Editor’s Note: A copy of Sen. Ferlo’s letter is attached

April 28, 2008

Via Hand Delivery

The Honorable Mary D. Colins, Chairperson
Pennsylvania Gaming Control Board
5th Floor, Strawberry Square
Harrisburg, Pennsylvania 17101
 

Re:       In re Petition of PITG Gaming, LLC for Approval of Modifications to its Proposed Permanent Facility Pursuant to 58 Pa. Code § 441a.3(6) and Amendment of the Related Statement of Conditions, Pa.G.C.B. Docket No. 1361 (April 17, 2008 / April 23, 2008).

Dear Chairperson Colins: 

            Please accept this letter as formal submission of comments in opposition to the Petition of PITG Gaming, LLC (hereinafter “PITG”) to Amend its Related Statement of Conditions.  Please include this letter as part of the evidentiary record in the above captioned proceeding.  These comments are intended to address two matters (1) PITG’s attempt to delay and alter the scope of the project for which this Board considered and approved PITG for a category 2 slots machine license (PITG filing of April 23, 2008); and, (2) PITG’s request to relieve the company of its financial redevelopment commitment (April 17, 2008).  It is noted that PITG’s amended Petition filed on April 23, 2008 references its prior request to seek Board relief of PITG’s $3 million redevelopment commitment.  However, such request has been deferred – though not withdrawn.  My comments are as follows: 

I.          PITG has failed to aver any facts or circumstances sufficient to justify additional delay or deferment of its promised gaming facility. 

            At the onset, it is worth noting that PITG has filed a Petition with this Board seeking modification of its original development plans and financial commitments without stating any facts, circumstances or actions, beyond the control of PITG, that would justify the proposed modification.  Remarkably, PITG’s Petition is devoid of any support for its claim of relief, instead simply describing a new financing proposal (Exhibit “A”) and a new development plan schedule. (Exhibit “B”).  For this reason alone, PITG’s request should be denied. 

            This Board’s Statement of Conditions, upon which its approval of PITG for a gaming license was expressly contingent, are clear and direct: 

“ . . .to build, within 2 years from the issuance of the Category 2 slot machine license, Phases I, II and II of said gaming facility . . .” (Emphasis added) 

            PITG legally bound itself to these conditions upon its receipt of its license from the Board.  The Board’s imposition of these conditions was not an arbitrary action, but was directly derived from representations made by PITG to the Board in support of its license application.  As this Board noted in its decision to approve PITG for a license, “PITG Gaming has submitted an accelerated construction plan that calls for the completion of the permanent facility by March 2008.”  In fact, PITG specifically stated that its decision to forgo operation of a temporary facility was done in order to “accelerate completion of its permanent facility sooner.”  PITG boldly predicted that it would complete the first phase of its facility as early as March 2008 – last month.  The accelerated development schedule was a material factor upon which this Board’s deicsion to approve PITG for a license was based.  Unfortunately, PITG now attempts to free itself from its promise of an accelerated development schedule. 

            When faced with the reality of executing its original commitment to the Board, PITG seeks the approval of a development schedule that would delay in its completion of its promised facility until the end of 2011 or the beginning of 2012 – a postponement of 3 - 4 years.  Furthermore, PITG now seeks to defer, indefinitely, completion of it promised 100-seat terraced amphitheater and 2,300 person ballroom space. Significantly, PITG’s proposed development schedule includes no firm commitment, but rather simply provides that “these items are intended to be fully developed and built out during year three of operations.” (Emphasis added)

            The inclusion of the amphitheater was an integral part of PITG development proposal to the Board, described as the “flagship” of Don Barden’s properties.  Its inclusion was to be made part of the first phase of development and would be a central feature of an integrated river front development that would provide “unencumbered access to the Ohio River front” including a river front trail and gardens.  Now, under PITG’s proposal, this aspect of the development has been relegated to be an ancillary feature, the earliest in which it is “intended” to be completed is 2012.  

            PITG’s Petition does not simply seek the Board’s approval of additional delay, but also seeks modification of an important tool to mitigate traffic congestion – reducing the number of parking places from 4,100 to 3,842.  Though a 250 space reduction may not seem significant, PITG’s commitment to ample parking was a significant factor in the Board’s desire to mitigate traffic and parking related problems in the vicinity of Pittsburgh’s sports stadiums.  PITG is now attempting to back out of this promise as well.

            The delays encountered by PITG were both foreseeable and manageable.  Appeals from licencing decisions and vocal community concerns are to be expected with any large scale development project.  A responsible developer should have anticipated these challenges when seeking a $50 million gaming license.  However, in order to demonstrate additional value to the Commonwealth resulting from an accelerated development schedule, PITG promised to this Board that it would be able to “maximize revenues to the Commonwealth as soon as March 2008.”  Furthermore, PITG made the bold promise in 2007 that if granted a license, it would complete all 3 phases of its development plan by March 2009 – less than a year from now.Unfortunately, when faced with the reality of actually having to deliver on its promise, a promise that was central in winning approval of the Pittsburgh slots license, PITG now attempts to renegotiate its commitments.   This is unacceptable – PITG should not be permitted to change the fundamental conditions upon which its license approval was received.  PITG has shown no exigent circumstances that would other otherwise justify deferring its development commitment for an additional 3 to 4 years.            

 

II.         PITG has failed to aver facts or circumstances sufficient to justify elimination of its $3 million redevelopment assistance commitment. 

            This Board’s Statement of Conditions, upon which PITG’s receipt of a gaming license was premised, directs the company to provide “$1,000,000 per year for 3 consecutive years for the redevelopment of the Hill Section in the City of Pittsburgh commencing within one year of opening the gaming facility.”  This condition was derived by PITG’s representation to the Board that it would lead a redevelopment effort in the City’s Hill District as part of its license application.  In support of its commitment, PITG noted to the Board its affiliated history of charitable and community donations since 2004.

            PITG now seeks approval from this Board to relieved of this commitment. The sole reason stated by PITG in support of its request is the fact of its “contemplation” that PITG would be granted the development rights in the Hill District.  Id. Things have not transpired as “contemplated” by PITG.  The company has been unable to obtain an agreement with the City and County Sport & Exhibition Authority for the development rights to the Hill district.  The rights were instead granted to the Pittsburgh Penguins.  As a result, PITG now attempts to use its failure to obtain these development rights as justification for being relieved of its $3 million pledge.  PITG’s request is contrary to the public interest. 

            An expressed condition of licensure was the requirement that PITG provide financial support for the redevelopment of the Hill District.  Period. The underlying record, Board’s decision and the Statement of Conditions are devoid of any explicit requirement that PITG be granted such development rights as a precondition in order for it to be financially obligated to provide $3 million.  While PITG may have “contemplated” receiving the development rights – its financial commitment was not explicitly conditioned upon receipt of such rights, and therefore, as a matter of state law, cannot be a basis for elimination of this regulatory requirement.  PITG should not be rewarded and receive a financial windfall as a result of its own failure to successfully negotiate with the City and County Authority for the development right.  Simply stated, PITG made a $3 million commitment, the only expressed condition was its receipt of a gaming license.  As a consequence, this Board should enforce PITG’s promise in an effort to protect the financial support for the redevelopment of the Hill District. 

III.        Conclusion 

            I supported the enactment of the Pennsylvania Race Horse Development and Gaming Act.  I did so recognizing that legalized gaming could become an important economic development tool to support job growth, urban revitalization, tax relief, and business growth.  This Board is charged with protecting the public, strictly overseeing gaming operations and safeguarding the integrity of this new industry.  Basic among these responsibilities is the assurance that licensees adhere and satisfy conditions of licensure.  While it is recognized that satisfying conditions made in an effort to win a gaming license may prove to be difficult, and at times expensive, Board enforcement of these commitments is necessary in order to preserve public confidence in the ability of the Commonwealth to strictly oversee gaming operations. 

            This Board’s previous reluctance to relieve licensees from prior commitments has been noted.  This matter is no different.  PITG’s petition fails to aver any facts, circumstances or reasons that provide good cause as to why PITG should be permitted to rewrite its development and financing commitments made both to this Board and the citizens of Southwestern Pennsylvania. 

            For the foregoing reasons, I respectfully request this Board deny PITG’s request for approval of its modified project development plan to the extend it seeks any additional delay of its development plans, including the terraced amphitheater and a 4,100 space parking facility.  The Board is further requested to deny PITG’s request that its $3 million financial commitment for the Hill District redevelopment initiative be eliminated. 

Sincerely,

 

JIM FERLO
Pennsylvania State Senator
38th District 

cc:        All members of the Pennsylvania Gaming Control Board