No dice: Latest mini-casino license fails to attract bidders

Future auctions will allow more to bid

After four rounds of bidding that have netted nearly $120 million for state coffers, gaming regulators ran out of luck this week in their fifth attempt to auction off a mini-casino license.

The Pennsylvania Gaming Control Board today received no bids for the latest mini-casino license, also known as a Category 4 license, following a steep drop in winning bid prices over the first four auctions this year.

The first of the 10 available licenses went for $50.1 million while the last license fetched $8.1 million. 

Despite the lack of bids Friday, the sale process for the remaining six licenses will move forward, albeit in an alternative format.

Under rules approved by the state, the initial round of license auctions was open to the 10 large casino operators in the state, or so-called Category 1 and Category 2 slot machine license holders.

If no bids are received in one of the initial rounds, the law requires the board to shift to a new round that is open to more bidders. That will happen now with the next auction slated for March 21.

Under the alternative format being used, Category 3 resort casinos, of which there are two in Pennsylvania, can now bid on mini-casino licenses.

Category 1 and Category 2 casino operators can continue to bid, as well, and companies that won the first four auctions also can bid again. Heading into Friday’s auction, the winning companies, including Penn National Gaming, winner of the first auction, were not allowed to bid.

Penn National spokesman Eric Schippers said the company already is “evaluating” whether it will bid again when the auctions resume in two weeks. The Berks County-based owner of Hollywood Casino at Penn National Race Course in East Hanover Township, is looking to use its first mini-casino license to build a facility in York County.

With 10 big casino operators, the odds of all 10 mini-casino licenses getting auctioned off in the initial rounds were not high, state officials acknowledged.

Richard McGarvey, a spokesman for the board, said his agency had no expectations about how far the process would go before the alternative auction format would kick in. But he knew it was likely to occur given the number of eligible bidders and auction alternatives laid out by the state law.

“The legislature was thinking ahead,” he said.

The state budget also assumed that only $100 million would come from the licensing of the 10 new mini-casinos. The first four winning companies spent nearly $120 million.

The minimum bid price is $7.5 million. An additional $2.5 million fee must be paid for permission to add table games.

If the six remaining licenses only sell for the minimum bid with table games added, the state revenue figure will jump to at least $180 million, if not higher.

On top of the license, the casino operators also have to buy properties to build facilities. And construction isn’t cheap.

Hollywood Casino, which opened in 2008, cost more than $300 million to build.

It’s unclear how much a smaller casino might cost, as the price will depend on number of slot machines and table games. It will still be a significant investment.

Licenses for the smaller casinos are being auctioned off under a state expansion of casino-style gambling, which was approved last year. The new gambling parlors can house 300 to 750 slot machines and up to 40 table games.

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