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Fairness of gaming analysis at issue because of Pa. consultant ties with companies trying to land licenses

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Tuesday, May 13, 2014, 11:06 p.m.
 

The firm behind a study touting the potential financial benefits of building casinos in Philadelphia and Lawrence County consulted for companies vying to land those casino licenses.

The General Assembly's Legislative Budget and Finance Committee, which solicited the $150,000 study, said Econsult Solutions divulged those ties.

“For us, it's damned if you do, damned if you don't,” said Philip Durgin, the committee's executive director. “I didn't consider it a problem.”

Stephen Mullin, Econsult's president, said clients pay a fixed fee, and his firm has no financial interest in the outcomes of casino license applications other than positive marketing associated with successful bids.

“And we've worked for far more unsuccessful applicants than successful applicants,” Mullin said.

A government watchdog group fears a potential problem.

“It's always tough to serve two masters, and there may be questions as to whether the commonwealth got a fair, accurate and unbiased report,” said Barry Kauffman, executive director of Common Cause Pennsylvania.

Another consultant said it initially turned down work with a Pennsylvania casino to pursue the contract to do the state study.

“We live and die on our reputation,” said Steven Rittvo, chairman and CEO of the Las Vegas-based Innovation Group. “Something like that, for me, was a conflict.”

Of the six bidders, Durgin said Innovation Group — the lowest bidder — and Econsult stood out. Lawmakers on the committee supported Econsult because it is Pennsylvania-based, records show.

Instead of punishing firms for ties to Pennsylvania's gambling industry, Durgin said his staff rewarded such experience.

“There is no recommendation one way or the other in regards of who should get a particular license. If we'd been talking about a report on who should get the Lawrence County casino, that would be different.”

Econsult's 203-page report says casino gambling tax revenues grew six consecutive years until declining for the first time in 2013. It placed much of the blame on new casinos in Ohio and Maryland. Adding The Provence casino in Philadelphia and Lawrence Downs Casino and Racing Resort near New Castle could increase tax revenues, the report stated.

“The Pennsylvania gaming market is not currently saturated, as there are unfilled market niches both for Pennsylvania residents and gamers visiting Pennsylvania with a primary purpose other than gaming,” the report stated. “These growth segments, however, are not large enough to lead to significant revenue growth of the kind seen in the seven years.”

The report acknowledges Lawrence Downs would compete with Western Pennsylvania's casinos, but minimizes the impact.

Econsult said it stands by its report.

“We believe our results would have been the same if we were not working for any applicants at the time,” Mullin said.

Pennsylvania has 12 casinos in operation, including four in Western Pennsylvania: Rivers Casino on the North Shore, Meadows Racetrack and Casino in Washington County, Lady Luck Casino Nemacolin in Fayette County and Presque Isle Downs Casino in Erie.

Officials with those casinos declined or did not respond to requests for comment.

When getting passed over for the study, Innovation Group accepted a contract it previously passed on with Rush Street Gaming, which runs Philadelphia's SugarHouse Casino, to help oppose a second casino in the city.

At a January hearing before the state Gaming Control Board, Innovation's Rittvo said the Philadelphia market is saturated.

Had his firm been hired for the study, he said it would have come to the same conclusion for the state. Rittvo's company worked on a 2011 report from state Treasurer Rob McCord that recommended the state's last two casino licenses be redirected to Altoona, Reading or York.

“Our reports don't change on the basis of who our client is,” Rittvo said. “People make billion-dollar decisions on whatever you say.”

Jason Cato is a writer for Trib Total Media. Reach him at 412-320-7936 or jcato@tribweb.com.

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