Sands and other casinos bring legal actions against Pennsylvania

While lawmakers hope that this new piece of legislation will produce USD 376 M in revenue for Pennsylvania, Sands Casino Resort Bethlehem has brought a lawsuit before a state court and Penn National, in federal court challenging it.

On Tuesday, a third legal action was also brought by the owner of a Harrisburg-area casino, claiming that the gambling expansion law leaves the business uniquely vulnerable to the poaching of its customers by new “mini-casinos.”

The filing by Mountainview Thoroughbred Racing Association, which operates the Hollywood Casino in East Hanover Township, Dauphin County, came a day before the state Gaming Control Board holds its first auction for mini-casino licenses.

Mountainview also filed a petition last week in Commonwealth Court asking the state to tighten regulations outlining where mini-casinos can be located.

Sands’ lawsuit was filed on Dec 28 in state Supreme Court, alleging the law violates the state and federal constitutions by requiring high-performing casinos such as Sands to pay a special tax to subsidize financially struggling casinos. That tax, the lawsuit claims, violates the state constitution’s tax uniformity clause and another section that says all taxes must go to a public good. Sands claims it also violates the due process protections in the U.S. Constitution.

The lawsuit does not name the low-performing casinos that will benefit from the subsidy. But during the bill-making process last year, lawmakers identified the beneficiaries as Mount Airy Casino Resort in the Poconos and Presque Isle Downs in Erie.

The tax money will go into a marketing fund that lawmakers hoped would appease Mount Airy’s owners, who in 2016 successfully sued over a provision in the original law that required casinos to pay host fees to municipalities in and around their facilities. Although the fees, which generated $142 million annually for communities, applied evenly to all casinos, the state Supreme Court found they had a greater impact on smaller, less profitable casinos.

After Mount Airy won, Sands stopped paying the host fee to Bethlehem, Allentown and other Lehigh Valley municipalities that had relied on them to prop up their budgets for more than a decade.

Lawmakers hoped the marketing fund, along with a new host fee arrangement, would resolve the issue and keep money flowing to communities.

Sands made its 2017 host fee payment of USD 9.7 M to Bethlehem on Dec. 29. The city has budgeted USD 9.8 M for 2018.

Mayor Robert Donchez said he is hopeful Sands’ lawsuit would not affect the host fee, which accounts for about 13 percent of his city’s general fund budget.

“It’s critically important to the city,” he said.