To: Susan Paddock

From: Keith Miller, MBA, Wharton

Re: Proposed Mason-Dixon Downs

Date: 1/15/2017

The proposed Mason-Dixon Downs may not be financially viable and may not satisfy the minimum slots requirement for a Category 1 Racino License. The proposed Racino in Lawrence County known as Valley View Downs and then Lawrence Downs failed due to its inability to attract adequate financing estimated at $225 million. This failure was in part due to studies which showed that the proposed Racino could not support the minimum required 1500 slots after Youngstown opened a Racino. §1210 of the enabling legislation HB 2330 states that a "licensed facility ... shall be required to operate and make available to play a minimum of 1,500 machines ... within one year of the issuance ... of a slot machine license"

In 2005 David LeVan proposed the Crossroads casino with 3,000 slots hoping to capitalize on Maryland gamers. The PGCB was skeptical of this claim given the potential for Maryland gaming and denied him a license fearing his projections were too optimistic. In 2008 Maryland approved casino gaming. In 2010 Mr. LeVan proposed a Category 3 Resort Casino at the Eisenhower Hotel with 600 slot machines. 88% of the proposed customers were day trippers with most of these 59% of the total driving less than half an hour. Just as the proposed Mason-Dixon Resort was a locals casino the proposed Mason-Dixon Downs would be a locals casino, and as such it would require far less than the required 1,500 slots.

A review of comparable facilities in Perryville and Rocky Gap, Maryland and Youngstown, Ohio indicate that an Adams County casino would require 484 to 734 slots. If Mason-Dixon Downs performed comparably to Hollywood Grantville which has 2397 slots, it would require 894 slots. Such a scenario is highly unlikely because Grantville faces far less competition than Mason-Dixon would face. Quite simply the proposed 600 slots for the Mason-Dixon Resort appears to be about as good as could be expected from Mason-Dixon Downs and this would not satisfy the minimum requirement of 1500 slots. Furthermore it is doubtful that such a small facility could justify the $50 million cost for a slots license, $15 million for table games license, plus the cost of a track and casino. Such costs added up to over $200 million dollars in the case of the failed Lawrence County Casino project and it struggled to find adequate financing.

Below is a review of

  • Failed Lawrence County Casino
  • Failed Crossroads and Mason-Dixon Resorts Gettysburg Casinos
  • Comparable Local Casinos
  • Hollywood Grantville comparison

Lawrence County Casino History

Valley View Downs claimed May 15, 2008 Public Input Hearing

  • located between Rt 422 and Rt 551 and Baird Rd 12 miles east of Youngstown Ohio 50 miles north of Pittsburgh in Lawrence County
  • 250 acre site
  • 270,000 sqft casino
  • 6,000 parking spaces
  • 1000 Jobs $73 million payroll to operate
  • 5 million gambling visits per year
  • $217 million per year in taxes and fees
  • 2.1 million adults within 50 miles and another 4 million 50-100 miles away
  • 3,000 state of the art slots
  • Fine dining and food court
  • only one mile harness track in PA
  • Obtained $995 million financing from Centaur Gaming and would use $455 million to design and build Valley View Downs.

Recession put project on hold Centaur filed for bankruptcy in 2009

Lawrence Downs claimed May 8, 2014 Public Input Hearing

  • located Baird Road 422 and 551
  • Endeka took over project
  • Western PA Gaming Ventures and Penn National took over the proposal process as operational consultant
  • $210 million investment
  • 110,000 sq foot facility with 1000 slots 36 table games and 8 poker tables
  • 1765 parking spaces
  • dining restaurant entertainment lounge and four vending food court.
  • one mile harness racing track
  • Phase 2 expansion would add 500 slots
  • 600 permanent jobs

Hollywood Casino at Mahoning west of Youngstown opened Sept 2014

  • 2015 Video Lottery Revenue 92.1 million on 939 terminals
  • 2016 Video Lottery Revenue $99.8 million on 982 terminals

January 2015, Western PA Gaming and Penn National withdraw from Lawrence Downs because economic analysis shows that the casino would not meet the statutory minimum of 1500 slots

  • Sought relief from $50 million bond for license.
  • Without bond Lawrence Downs application had to be withdrawn.
  • The cost to build race track and pay the $50 million slot fee and the $15 million table game fee was $225 million.

July 2016 PGCB kills Lawrence Downs project.

Crossroads and Mason-Dixon Resorts Casino Gettysburg Casinos

In 2005 David LeVan proposed a 3000 slot Cat 2 Casino drawing 3,230,000 visits with 67% of it from over an hour away. In rejecting Crossroads application in 2007 the PGCB noted

“With respect to the Crossroads project, Crossroads presented substantial testimony that it will rely in large part on the Baltimore, Maryland and Washington D.C. areas for its patronage and that 60% to 65% of its revenues would originate from outside the Commonwealth. The Gettysburg area itself is primarily a rural area without large population centers nearby to sustain the casino, thus the emphasis on the market to the South. In theory, this strategy is appealing. However, during the licensing hearings, Gettysburg presented testimony that it was “virtually the same drive time away from the Baltimore/Washington D.C. market as Charlestown Slots in West Virginia and that Charlestown had a casino win of $437 million in the fiscal year ending January 30, 2006. While that number is significant, the Board was not presented with any credible evidence to demonstrate how much of that Charlestown business could be expected to leave that facility and travel north to Gettysburg.

“Further, the Board received testimony concerning the possibility of slot machines being introduced in Maryland and the impact that would have on the Gettysburg property. Gettysburg proponents testified that that they do not believe gaming legislation will be passed in Maryland in the “near future” but that even if it did, “we estimate that the revenue impact on Crossroads will be between 15 and 20 percent leaving Crossroads a substantial cushion above its break-even revenue level.” See Hearing transcript at p. 62. While the Board certainly is comforted by the testimony that Crossroads would have a cushion above its break-even revenue level, since the Board has a strong interest in “protecting its product” by assuring that the chosen casinos stay in business, a twenty percent decline in revenues would place the revenue generation estimates in the $216 million to $231 million range depending on whether the Task Force or Crossroads revenue estimates are utilized. This scenario would place Crossroads at the bottom of the revenue generation models, a position any applicant should desire to avoid in a competitive licensing situation as is present here.”[1]

In 2008 Maryland approved casinos, but none would be built for two more years. In 2009, David LeVan proposed a Cat 3 Casino with 12% of guests being existing hotel guests, 59% driving less than 30 minutes, and only 29% driving 30-60 minutes. 88% of the attendance were not resort guests but day trippers. Applying Mason-Dixon's visitation forecast to the surrounding population indicates that Mason-Dixon expected Adams residents to make about 330,000 visits or 43% of the total. No guests came from beyond an hour away. With more significant Casinos in Grantville, and Charles Town and casinos soon to be built in Maryland, there was little prospect for many guests coming from outside Adams County.

Casino Attendance

Crossroads / Mason-Dixon
Existing Hotel Guests / 360,000 / 11% / 93,000 / 12%
Adams / 193,800 / 6%
0-30 Minutes / 449,000 / 59%
30-60 Minutes / 225,000 / 29%
Within 1 hour / 2,170,000 / 67% / 674,000 / 88%
1-2 hours / 700,000 / 22%
3,230,000 / 767,000

The proposed Mason-Dixon casino was to have 600 slots and 50 table games.

Comparable Local Casinos

Facility / 2016 Slots Revenue
$ MM / County Population / $ per Local Pop / Slots / Rev/Slot/day
Rocky Gap Md / 41.3 / 73,000 / $566 / 634 / $178
Perryville Md / 65.6 / 102,000 / $650 / 850 / $211
Mahoning Hollywood / 99.8 / 233,000 / $428 / 982 / $278
Lawrence County / 89,000
Adams County / 101,000
Pennsylvania / $2,388.7 / 26,634 / $246
  • Adams County Population 101,000
  • Maryland Gone, Penn National has Harrisburg Virginia gone to Charlestown/Maryland
  • Anticipated Revenue $43.3 to $65.5 million at $428 to $650 per person
  • Anticipated Required slots at $246 rev/slot/day 484 to 734.

Hollywood Grantville Comparison

2397 slot machines at the Hollywood Casino in Grantville produced $214 million in slots revenue in fiscal 2016. This was down from $250 million in revenue produced on 2,483 slot machines in fiscal 2012. The decline was due to Maryland opening casinos. Dauphin County has a population of 270,000. At this point in time the Grantville casino is a convenient venue for people in Adams, Cumberland, Perry, Lebanon, Lancaster and York counties. Grantville is 97 minutes from the Valley Forge Resort Casino, 76 minutes from the Sands Casino in Bethlehem, 115 minutes from Charles Town Casino, and 99 minutes from the Horse Shoe Casino in Baltimore.

The proposed Mason Dixon Downs has a smaller radius of competitive advantage being 65 minutes from Grantville, 57 minutes from the Charles Town Casino, and 67 minutes from the Horseshoe Casino in Baltimore.

An Adams Casino if it is competitive would cannibalize some of Hollywood Grantville business, and such cannibalization would not be additive to PA's revenues. In any event if a county of 270,000 surrounded by additional potential markets can support only 2397 machines, then a county with 101,000 persons boxed in by other casinos would require less than 897 machines.

2397 x 101,000/270,000 = 897.

This 897 is a very high side estimate, due to the much greater competition that an Adams Casino faces for attendance from more than 30 minutes away. Grantville is currently the most convenient location for people to the east and south driving about 45 minutes, and for longer drives to the north and west. Furthermore as a smaller casino Mason-Dixon Downs would be constrained in its ability to offer amenities to attract patrons.

[1]Pennsylvania Gaming Control Board, “Adjudication of the Pennsylvania Gaming Control Board in the Matters of the Application for Category 2 Slot Machine Licenses in a Revenue or Tourism Enhanced Location.” February 1, 2007, Page 95-96