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State Yanks The Foxwoods Casino License In South Philly

The state Gaming Control Board, fed up after four years of delays, today took the unprecedented action of revoking the state license for a South Philly casino. That action came despite pleas from the local investors for more time to open the casino on Columbus Boulevard at Reed Street in a new partnership with Caesars Entertainment Inc.

The state Gaming Control Board, fed up after four years of delays, today took the unprecedented action of revoking the state license for a South Philly casino. That action came despite pleas from the local investors for more time to open the casino on Columbus Boulevard at Reed Street in a new partnership with Caesars Entertainment Inc.

The board seemed to focus on three reasons in questioning the investors today: They submitted incomplete documents on the deal going forward, they changed the way charities would benefit from casino profits and the project as designed today is notably different than the project approved in December 2006.

The move comes as a stunning political blow in Gov. Rendell's last month in office. Rendell is close with the local investors and ran for office pitching casino gambling as a way to raise money for the state. A project in the town where he was mayor for eight years becomes the first to lose its casino license.

The vote was 6-1 with just board member Jim Ginty, appointed by Rendell in July to a second three-year term, pushing to give the casino investors more time.  Ginty said he was worried about the 650 construction job and then 1,200 casino jobs the project would create.  He also had concerns that the city and school district would lose out on local gaming taxes from the project during the delay. And Ginty said the state General Assembly might grow frustrated and pass legislation to move the license out of Philadelphia.

Fred Jacoby, an attorney for the local investors, accused the board of "arbitrarily" revoking the license.  He said the investors will wait to see the board's written opinion before deciding whether to file an appeal.

"I was shocked," Jacoby said after the vote. "I really did not expect to see revocation."

Jacoby said it as an open question as to whether the investors would be refunded the $50 million fee they paid for the casino license.  Doug Sherman, chief counsel for the board, later said state law has no provision for a refund and the board has no authority to issue one.

Bill Downey, an attorney for Caesars, said his client would not be a party to an appeal because it had not been approved as a partner for the local investors.  "I think the board told us we have no role at this point," Downey said.  Caesars already owns the Harrah's casino in Chester, Delaware County.

The "Foxwoods" license rested today on a stack of documents the investors had to file Friday to demonstrate what they wanted to build, how they would pay for it, who would own it and who would manage it. The board last month demanded final versions of those agreements.

Cyrus Pitre, head of the board's Office of Enforcement Counsel, said during the hearing that the investors submitted letters from two banks who said they were confident but not yet committed in funding $200 million in debt for the $275 million first phase of construction. Pitre said the ownership information submitted had some blank spaces and other areas where information was promised later.

On the other $75 million, the investors told the board they had $21 million committed from two local partners and $25 million from Caesars. They hoped to raise the remaining $29 million but could get a $10 million bridge loan from Caesars if they raised at least $19 million more.

Pitre said the documents as drawn up meant the deal might not have closed as late as May 2011.

The board was clearly unhappy with changes made to the original casino project, which originally committed 42 percent of the profits to local charities for children, with an anticipated $300 million over 10 years. The new plan had money going to local charities, but $6 million over seven years would go to the Pequot Museum in Connecticut. The Mashantucket Pequot Tribal Nation, which runs two casinos under the Foxwoods brand in that state, was originally a major partner and planned to manage the casino. The tribe, after stumbling into serious financial trouble, is now little more than a passive investor.

"I guess there's charity and then there's charity," Jacoby said after the board questioned sending charitable funds to Connecticut. "I hadn't realized that today."

Caesars proposed becoming a one-third owner of the project, which it would have managed under its "Horseshoe" casino brand. The board noted the company recently reported that it has nearly $22 billion in debt, though company officials said that would not impact their ability to complete the South Philly project.

The board's staff in March said it would take at least four years from revocation to legal challenges to rebidding the license to approval of a new applicant to opening a new casino project.

A small group of Casino-Free Philadelphia members cheered today's decision as a huge victory but anticipated another casino operator would seek the license.  "We keep fighting," said group spokeswoman Lily Cavanaugh.