RELATED: Penn National saves $3M in state and local sales taxes
By JAMISON COCKLIN
Township officials and others are betting that Penn National Gaming’s $125-million racino — expected to be complete next year — could put the suburb on the map and be the catalyst for more economic development.
It’s happened elsewhere with racinos, and right now, it appears as though it’s already starting in Austintown.
Headquartered in Wyomissing, Pa., about 60 miles northwest of Philadelphia, Penn National reported a profit of $212 million on revenue of $2.9 billion last year. The publicly traded company operates 28 gaming facilities in 17 states and in Canada.
But more compelling for Austintown, where the township’s leaders have worked since 2011 to secure a deal with the gaming company and state regulators, is Penn National’s track record of building in out-of-the way spots, where the entertainment offered at its facilities takes root and gives life to more economic development.
“Penn National is always interested in serving as a catalyst for expanded economic development,” said company spokesman Bob Tenenbaum. “It varies from market to market, but what grows up around our facilities is not our decision. Our hope is to be the catalyst and work closely with local officials to market an area. We’re eager to do that in Austintown. It helps the community, and it helps us.”
According to township Trustee Jim Davis, Penn National already has told Austintown it “will help market this township however we want to do it.” It’s too early to tell what those marketing efforts might consist of, Tenenbaum added.
Hollywood Slots at Mahoning Valley Race Course is being built on 194 acres between state Routes 46 and 11, near the Interstate 80 interchange with Interstate 76.
It will be a 100,000-square-foot facility that will include a food court, sports bar, hundreds of indoor and outdoor seats, video lottery terminals (or slot machines as they are better known) and a 1-mile state-of-the-art race track.
Austintown will earn $1 million in 2014 and 2015 to be used for such things as infrastructure improvements and public safety. That money comes as part of legislation drafted by Ohio lawmakers in May 2012 that provides communities hosting a racino with additional money.
Under the legislation, the township’s $2 million will be funded by a portion of the $75 million Penn National is required to pay the state as part of its plans to relocate its thoroughbred racetrack in Grove City, a Columbus suburb, to Austintown.
For every year after 2014 and 2015 that the Austintown racino remains open, the township is expected to take in $500,000. But the funding source for that allocation has not yet been determined, said township Administrator Mike Dockry and Zoning Inspector Darren Crivelli.
That’s because, under the May 2012 legislation, the funding source must be agreed upon by the governor, the state racing commission, tracks and horse owners.
Six of the seven communities that will host a racino in the near future (Columbus is excluded) will receive similar deals under the bill.
Dockry said he learned Friday that at least $1 million has already been deposited by Penn National with the Ohio Office of Budget and Management, which will then distribute the money.
Already, Davis and township Trustee Lisa Oles are marveling at the economic development they say has occurred as a result of the racino’s construction.
Owners at the Holiday Inn Express & Suites on Cerni Place have permits to build a Candlewood Suites nearby. Owners at the Hampton Inn, off I-80, have permits for a Home2 Suites by Hilton. Combined, those projects are worth $12 million, Davis said. The developers are planning to move an influx of oil and gas workers staying at those hotels to the Candlewood and Home2 locations once they are completed. Both new hotels are extended-stay outlets, and the Holiday Inn and Hampton will then be used to accommodate those visiting the racino, Davis said.
The Austintown Plaza on Mahoning Avenue, across from Walmart, has undergone major renovations with a number of businesses interested in that location. Additionally, eight major hotel and restaurant chains have completed renovations worth more than $1 million combined, including Buffalo Wild Wings and Bob Evans. Several new restaurants such as Five Guys Burgers and Jack Perry’s Gastropub also have opened in recent months.
Austintown has a chance to build on the current momentum and capitalize on the edge the slot machines and racetrack will bring to the township. Trustees are considering a host of possibilities that they hope could eventually lead to a new entertainment destination for the Mahoning Valley and beyond.
One revealing clue about how Penn National has continued to build its reputation can be found more than 800 miles northeast in Bangor, Maine — a city in the eastern part of that state with about 32,817 residents — one similar in size and demographics to Austintown.
In 2009, Penn National finished a 116,000-square-foot gaming facility, a four-story parking garage and a seven-story hotel in Bangor at a cost of $138 million. It was the first of its kind in the state, and the company was seeking to do business with the 144,000 people living in the greater Bangor region, while attracting customers from a largely untapped market in eastern Canada.
In that case, Penn National chose a run-down area near a stretch of Interstate 395.
Today, that area is thriving. Since Penn National’s arrival, a nearby harness racing track was renovated. The city of Bangor was able to construct a $65 million, 8,000-seat arena and convention center with the money it took in from the Hollywood Casino Hotel & Raceway there.
What’s more, an independent riverfront concert series, which Penn National sponsors, has cropped up, drawing big-name acts from across the country, and restaurants have opened nearby while a stretch of the city’s downtown has been revitalized.
“Certainly, without the revenue generated from hosting Hollywood Casino, without that, it’s doubtful that [Bangor] would have been able to fund that arena,” said Stephen Bolduc, Bangor’s economic development officer. “One could make the argument that for someone interested in coming to Bangor, [the casino] diversifies the options they have. Penn National knew they weren’t going to draw from the entire state, and they saw a new market here within an hour or so and from those in eastern Canada.”
Unlike Maine, though, Ohio’s gaming market is getting crowded.
In June, gamblers wagered $978 million at the state’s four casinos and two racinos, according to the Ohio Casino Control Commission.
Revenue at all casinos fell, and numbers in Pennsylvania have been relatively flat on a year-to-year basis.
Some are speculating that while the facilities will continue to stoke economic development, revenues are not likely to go much higher.
“It all depends on what kind of product Penn National will offer [in Austintown]. If it can’t stand up to other locations in the region, it won’t be so competitive and it will be more desirable on a local level,” said David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas. “It all depends on the service they offer, customer service, ancillary dining and entertainment, things like that.”
The racino’s long-term success and any corresponding economic development that arises from it in Austintown could either be bolstered or set back if the facility can’t compete on a regional level, Schwartz said.
WHERE IT’S AT
Location is one thing Austintown has that sets it aside from the crowd.
Tenenbaum said Penn National chose to move racinos in Toledo and another near Columbus to prevent the company from “cannibalizing its own business.” It operates two of the state’s four casinos in those cities.
Though revenue went up 6.8 percent from April to June of this year, the company still lost $12.2 million at Toledo and Columbus — a sharp deviation from the $66.7 million in profit for the same quarter last year.
During a conference call to discuss earnings with investors and reporters last week, Peter Carlino, Penn National’s chief executive officer, acknowledged that the company’s Ohio properties have yet to meet its expectations.
As a result of growing competition, the company announced during the call that it would open the Austintown racino with 1,000 slot machines, rather than 1,500 as it originally planned.
But the performance of Penn National’s racinos, and those of its competitors in areas such as Columbus, have company officials optimistic that consumers want additional gaming options.
“We felt certain locations around the state were underserved in terms of gaming,” Tenenbaum said. “Dayton and the Mahoning Valley stood out, and we sought permission to relocate to those areas.”
Even if the state’s gaming market appears crowded at the moment, Austintown trustees are keenly aware of the prime real estate Penn National is building on.
Although Mountaineer Casino Racetrack and Resort is just 60 miles south in West Virginia and Horseshoe Cleveland is about 67 miles northwest, Penn National is meticulous in siting its facilities.
On I-76, I-80, state Routes 46 and 11, more than a half-million vehicles pass through Mahoning County each day, according to the Ohio Department of Transportation.
Regardless of nearby casinos and racetracks, Tenenbaum said Penn National’s target market in Austintown will be within a 50-mile radius.
“Given the location in Austintown and the access to two major interstates, I’m sure to some degree people will be coming from farther away,” he said. “But most regional gaming facilities see the bulk of their business within 50 miles.”
According to the Youngstown/Warren Regional Chamber, 6.8 million people live within 75 miles of the Valley.
The I-80 interchange is believed to be one of the busiest in the country, Davis and others said.
“All those arteries come together right there,” Davis added. “The people [Penn National] markets to — an older generation — those people are here, they can afford to play the slot machines. Austintown is a package deal.”
WHAT'S IN THE CARDS?
Oles said she’s working closely with her colleagues on a big concept — attracting a major indoor water park — like those in Sandusky or Mason, just outside Cincinnati. She said an abundance of land near where the racino is being built, combined with a strong supply of water from the Meander Reservoir makes Austintown an ideal location for such an attraction.
Oles and Davis said the township will soon send a solicitation letter to Cedar Fair Entertainment Co., one of the largest regional amusement operators in the country that owns parks in Sandusky and Mason, hoping to draw interest.
Sarah Boyarko, vice president of economic development at the chamber, said it would be foolish if the trustees didn’t explore all their options. She also said current economic activity will only increase when 1,000 construction workers arrive over the next year to finish the racino. Another 1,000 permanent jobs are forecasted once the facility is open.
The chamber has worked to map the land surrounding the racino site, Boyarko said, for real-estate consultants working with major hotel and restaurant chains interested in building there. She said those talks were “very initial, though.”
Boyarko added that Penn National will help to diversify the region’s economy, something business officials here continue to strive for.
“I think it’s a no-brainer. We’re close to the highways, close to Pittsburgh and Chicago, we are at an ideal location,” Oles said. “They say the three most important things in real estate are location, location, location, and it doesn’t get any better than in Austintown. We’re not really sure what the result is going to be yet, but I think this could become an entertainment destination for sure.”