Pennsylvania General Assembly Conference Committee on SB 246
Sen. Stewart Greenleaf, Chairman
North Office Building, Hearing Room #1

Mike Jeannot, Director of Administration
The Meadows Racetrack & Casino

March 13, 2007

Good morning.

On behalf of The Meadows Racetrack & Casino, our Vice President and General Manager Mike Graninger, and our more than 750 employees, I would like to thank the distinguished members of this committee for the opportunity to address our concerns with Senate Bill 246.

My name is Mike Jeannot, and I'm Director of Administration at The Meadows.

We are asking for your help by creating an exemption for casinos in Senate Bill 246.

If this legislation to ban smoking is passed without an exemption for casinos, it would severely hinder our ability to continue our early success and our role as an economic development engine for Western Pennsylvania.

To better understand our position on this legislation, it's important that I give you the appropriate background on what has occurred since we opened our temporary casino.

As the casino serving on the western front for Pennsylvania's fledgling gaming industry, we are subject to a series of unique circumstances that already threaten our early success.

A smoking ban will only make our ability to compete more difficult and threaten the loss of millions of dollars in state tax revenue, not to mention jobs and spin-off benefits to the local economy.

On June 11, 2007, after 11 years of continuous business decline at our racetrack due to slot machine gaming in neighboring West Virginia, The Meadows opened its $52 million temporary casino.

The temporary casino is a small preview of the permanent facility scheduled to open early next year. All told, $450 million is being invested in the property.

The Meadows casino is off to a great start.

However, two additional casinos are scheduled to open ¡V one in downtown Pittsburgh next year and another in Lawrence County in 2010.

Additionally, there are two well-established casinos in West Virginia, both a short drive from The Meadows, which provide significant competition for our operation.

Less than 180 days after we opened our temporary slots-only casino, West Virginia added table games, poker and expanded their hours of operation to 24 hours a day to regain customers that it had lost from Pennsylvania.

Since opening, the table games in West Virginia have been extremely successful. Within two years, there will be five casinos within an hour and fifteen minute drive of downtown Pittsburgh.

The competition is real and significant.

We have performed well above the expectations of the Pennsylvania Gaming Control Board.

Most of this is due to our commitment to invest heavily in marketing. This has been done at great expense.

We have essentially sacrificed our margins in order to increase our revenues for us and our partner, the Commonwealth of Pennsylvania.

Regrettably, we continue to be saddled with new and unforeseen regulations that increase expenses to all casinos.

For example, new audit committee regulations are being implemented that the gaming control board estimates will cost each casino an additional quarter of a million dollars each year.

Simply put, the expenses we pay to stay competitive and the expenses we pay to the state to be regulated have increased since we broke ground.

That's why we are here today to address Senate Bill 246 and ask for an exemption.

If this legislation is passed without an exemption, it will significantly limit our ability to build on our early success and to continue our role as an economic development engine for Western Pennsylvania - the western front for Pennsylvania's nascent gaming industry.

We certainly understand smoking is an important issue for many Pennsylvanians.

At The Meadows, our dining area is completely non-smoking, and we have invested millions of dollars in a state-of-the-art air ventilation and filtration system.

We invite you to visit our facility to see how this works.

But it's logical to ask, "Why would the absence of an exemption hurt The Meadows?" Well, not only does West Virginia have table games, but the casinos there also have the right to set their own policies in regard to smoking.

We are respectfully asking Pennsylvania, our general assembly and governor, to provide us with the same flexibility.

Allow us to assess the marketplace and respond to the demand accordingly.

We have smoking and non-smoking customers. Our job is to take care of everybody, while working to increase our share of the marketplace.

This can only happen if we operate under a free and open market.

Without this free market, we believe The Meadows cannot continue its strong performance.

Our estimates, based on decades of experience in the gaming industry and recent press accounts of what has happened in other states that have passed a state sponsored smoking ban, lead us to believe we can expect a 20-percent drop in revenues if we are forced to ban smoking in our casino.

This means less revenue for us to invest in the local economy, thus fewer jobs will be created.

Also, as you know, we are a partner with the Commonwealth in gaming revenue. A 20-percent drop for us means a 20-percent drop for Pennsylvania and potential property tax relief.

Our numbers indicate we would lose $60 million each year in gross terminal revenue; $34 million in state taxes; $6.2 million in payroll and 168 family-sustaining jobs. Let me be very clear, these are not industry wide losses.

These losses will come directly from The Meadows.

Other states are striving to keep competition fair, while others see the disastrous affects firsthand of when one border state has fewer restrictions than the other.

The Iowa House of Representatives recently excused casinos from smoking ban legislation after market research showed a ban would likely reduce state revenue from gambling taxes by as much as $100 million a year.

A statewide smoking ban in Illinois took effect Jan. 1.

It has already pushed gamers across the state line to Missouri where free market policies reign.

Monthly revenues at the two Illinois-based riverboats in the St. Louis market were down 21.9 percent and 21.1 percent in January, according to The Kansas City Star.

Meanwhile, Missouri casinos were up a collective 7.8 percent despite normally sluggish January market conditions.

Another Illinois casino, Grand Victoria Casino located in Elgin, anticipated a 10 percent drop in revenue. It turns out they were off ¡V revenue plummeted 20 percent in January.

Iowa and Illinois are just two examples of what happens when the gaming industry in one state is at a competitive disadvantage with their neighbor.

We have no doubt that a similar effect would occur at The Meadows.

Frank Fantini of Fantini's Gaming Report stated recently: "If anybody thinks casinos are fibbing when they talk about the damage to business from smoking bans, all they have to do is look at Illinois. Gaming revenues plunged 17.4 percent in January under the state's new smoking ban."

Thank you for your time today, and the opportunity to address your important work.

I would like to close by stating that a smoking exemption for the casino industry will provide an even greater benefit if table games are approved.

I will admit that this is a forward looking thought but it is critical to take into consideration as this committee crafts this important legislation.

Pennsylvania must start a dialogue concerning table games, or we will be right back to where we started in 2003.

If I may, we have done some preliminary estimates on the benefits of adding just 40 table games and have found a great economic benefit for Pennsylvania and our local economy.

700 additional family sustaining jobs in our casino for local Pennsylvania residents, generating $38 million in payroll to local and regional residents, thus doubling the number of jobs and more than double The Meadows' payroll for casino operations;

$37 million annually in additional tax revenue for local and state taxpayers;

$31 million more in investment in the local and regional economy; and

An additional $6 million investment by The Meadows into the permanent facility, bringing the total investment into The Meadows complex to more than $450 million.

It is crucial to keep in mind these numbers only hold true if casinos are exempted from Senate Bill 246.

If provided an exemption, The Meadows will continue to provide the job creation, economic impact and property tax relief intended to be generated by Act 71 for the taxpayers of the Commonwealth.

Thank you. I will be happy to answer your questions.