Council reviews gaming proposal that could bring millions to city schools and municipal pension fund
PHILADELPHIA – February 7, 2013 – City Council’s Committee of the Whole, today heard testimony on Resolution 121009, sponsored by Councilman Kenyatta Johnson and Counciman James Kenney, about the feasibility of an arrangement in which casino revenues could be funneled to city schools and the municipal pension fund through a nonprofit organization.
The witness list included: Congressman Robert Brady, State Sen. Anthony Hardy Williams, City Controller Alan Butkovitz, Alan Greenberger, the city’s Deputy Mayor for Economic Development and Director of Commerce and representatives from the police, fire, teachers’ and municipal workers’ unions.
Also testifying were representatives from Penn National Gaming Inc., one of six applicants for the city’s second casino license and the only one in the pool that has proposed to give two-thirds of its revenue to the city to help support the cash-strapped school district and underfunded municipal pension fund.
During the hearing, Steve Snyder, Senior Vice President of Corporate Development for Penn National Gaming, laid out the company’s proposal to invest $480 million in a proposed casino located at 7th Street and Packer Avenue in South Philadelphia. He outlined a scenario in which the city would receive two-thirds of the casino’s revenue after the first several years of operation. Prior to that, the city would receive a minimum of $2 million a year in addition to standard fees and taxes levied on casinos.
While declining to comment on a specific proposal, Deputy Mayor Greenberger said the city could accept charitable donations from a casino. Meanwhile, committee members and City Controller Butkovitz sought details on how the arrangement would work and whether the revenue would be guaranteed.
The Pennsylvania Gaming Control Board will ultimately award the license to one of the six applicants. However, if chosen, Penn National Gaming would only be allowed to own one-third of a casino – the maximum allowed by law because it already runs another casino in the state. Its application calls for a non-profit organization controlled by Penn National to hold two-thirds of the equity in the casino. The nonprofit would make annual distributions to the school district and the municipal pension fund.
The by-laws for the nonprofit organization permit up to seven members on the board. It has one member already. However, it was unclear how the remaining members would be chosen.
“Our pension fund maintains a dangerously low funding level, forcing us to spend 18 % of our budget annually to avoid insolvency,” Congressman Brady testified. “Our schools face annual budget shortfalls of over $200 million, over $1 billion over the next five years, forcing us to lay off teachers and close schools.”
“Today this City Council has a choice,” he added. “You can stand on the sidelines as a group of private developers and casino operators compete for Philadelphia’s last casino license…Or you can get in the game.”
State Sen. Williams said during testimony that he simply wanted to examine the various streams of revenue that the future casino license could provide to Philadelphia.
“It’s critical that any economic opportunity we explore for the city be directly beneficial to its residents,” he said. “That is, from construction and engineering to food vendors and daily staffing. Will local businesses play an integral role in the construction of the facility? Will the employees be from the local community?”
Councilman Johnson and colleague James Kenney called for hearings on the proposed revenue-sharing arrangement back in December, citing its potential as a revenue source for the city.
“As I have said, the gap between what we have and what it costs to fund our schools and municipal pension fund widens every year, leaving us with deficits” Johnson said “We cannot continue to balance the budget by hiking property taxes year after year. We have to start thinking outside the box when it comes to generating more revenue for the city.”
Added Kenney: “I don’t know if this is going to work out or not, but I think it should be vetted.”