Despite strong state backing, slots parlor hits a roadblock as residents take a stand.
Philadelphia -- Pennsport is a working-class neighborhood of about 1,000 people, cut off from the Delaware River to its east by an elevated, concrete slab of Interstate 95 that swoops down through South Philadelphia.
Its streets are lined with 18th- and 19th-century row houses, most modest but comfortable, others rehabilitated into million-dollar homes. Many of the people here seem to know one another. They gather in backyards and garages to celebrate birthdays and holidays. Some families have called this section of the city their home for generations.
But that could change as a group of investors led by the Mashantucket Pequot Tribal Nation prepares to erect, with the state's blessing, a $560 million casino on a long-vacant, weed-choked slice of riverfront just blocks away but on the other side of the interstate.
Younger homeowners with means say they're thinking about leaving Pennsport rather than face the increased traffic, crime and other ills they worry will follow. Others vow to stay and fight the project.
Some don't have much choice but to wait and see what happens.
“Everything we have is sunk into this,” says Catherine Stuski, 76, standing in the doorway of her stone-front Federal Street home. She points out a house across the street. Her husband, George, was born there 80 years ago.
“What are you going to do?” she asks. “Where are you going to go?”
In her front window are St. Patrick's Day decorations and a sign: “No gambling here. Make the right deal.”
The Mashantucket Pequots, owners of Connecticut's Foxwoods Resort Casino, say they are making the right deal. A lot of people agree. Philadelphia Mayor John F. Street and Pennsylvania Gov. Ed Rendell are casino proponents, touting job creation and cash the city and state will raise with a lofty 55 percent tax on slot-machine revenues.
To be sure, not everyone here is opposed to the casinos. Father Gary Pacitti, of South Philadelphia's Annunciation BVM Church, says the Foxwoods project promises to bring much-need jobs and to clean up a riverfront that's become “an absolute disgrace.”
“Our area's become very depressed,” he says, noting that it's harder these days for parishes in the area to keep schools open and provide social services. “One of the key things I began to realize is our people need jobs, bad.”
A recent Foxwoods job fair attracted 460 people to his parish school, Pacitti says, even though it was barely advertised.
As planned, the Mashantuckets would operate the proposed Foxwoods Casino Philadelphia and hold a 30-percent equity stake. Charitable foundations owning 42 percent of the partnership would donate their profits to help disadvantaged children in Philadelphia and the Delaware Valley, a move unprecedented in the industry, says Gary Armentrout, the managing director of Foxwoods Development Co., the tribe's St. Louis-based development arm.
The casino would directly create 950 new jobs when the initial phase opens in late 2008 or early the following year, Armentrout says, and 95 percent of those would come from the Philadelphia job market.
And that's just phase I. If all goes well, the Mashantuckets and their partners plan to spend an additional $426 million — for a total investment of $986 million — to offer a total of 5,000 slots and to add a Riverfront Promenade with nightclubs, dining spots, boutique shopping and a water taxi.
A 500-room hotel, full-service spa and a residential condominium tower are future possibilities, Foxwoods says.
Dennis M. Farrell Jr., a senior analyst at Wachovia Capital Markets, says Foxwoods has a promising location for a destination-style resort, which could benefit from the tribe's alliance with Las Vagas-based gaming company MGM Mirage. He figures the South Philadelphia casino could generate more than $300 million in revenue and $72.2 million in core earnings, or earnings before interest, taxes, depreciation and amortization, within a full year of operation.
For Foxwoods and its bankers, there's no doubt the Philadelphia venture will make money, despite one of the nation's highest gaming-tax rates and the millions of dollars it would pay to accommodate increased traffic and to fund a Special Services District to help Pennsport and surrounding neighborhoods.
But people living along the cobblestone streets of Society Hill and historic Queen Village, like those in Pennsport just to the south, are angry, and the City Council is taking notice.
The 17-member council on Thursday agreed unanimously to put a referendum on the May 15 ballot asking voters to change city zoning regulations to bar Foxwoods and a second Philadelphia gaming project, SugarHouse Casino, from the riverfront sites. The state, however, says the proposed ordinance is illegal and plans to challenge it in court.
In early May, the state Supreme Court will hear arguments from civic groups and others who say the Pennsylvania Gaming Control Board erred in awarding the two Philadelphia slot-machine licenses to Foxwoods and SugarHouse, which was granted a license to build a casino less than three miles north in the city's Fishtown neighborhood.
Foxwoods and its supporters say the maneuvering smacks of election-year posturing by a council dominated by Democrats. Mayor Street and Gov. Rendell, also Democrats, can't run again because of term limits.
“I think the debate has been one-sided,” Rendell told gaming-industry executives and analysts gathered this week in Harrisburg. “The debate has been demagogic. I think when things calm down, Philadelphia will be fine.”
Says Foxwoods' Armentrout: “There are certain people out there taking positions publicly that they're taking solely for political reasons because they're running for office. This gives them an issue to campaign on.”
The legal obstacles thrown up recently have set the Foxwoods project back three months, says Armentrout. The casino faces another significant hurdle as it continues to negotiate with the city on a development agreement it needs to break ground, which has been pushed back from April to July.
Armentrout says he expects the license appeals to be resolved by the state Supreme Court in about four months.
And while Foxwoods Development Co. has sunk a lot of equity into the project — about $30 million — it still needs to go to Wall Street for additional financing. Merrill Lynch has committed to arrange or underwrite $460 million for the project, but that can't be finalized until the legal hurdles are cleared.
“I'm confident we'll work through them all,” says Armentrout. “In my mind it's not a question of if, it's a question of when.”
Mary Reinhart is a 63-year-old retired park ranger for the National Parks Service. She lives with six cats in a cozy, yellow-shuttered Civil War-era row house on Manton Street. By foot, it takes five minutes to cover the three or four blocks to the 16-acre Foxwoods site.
To lawyers fighting the casino site, Reinhart's house of 26 years is “ground zero for the onslaught of vehicular and pedestrian traffic generated by Foxwoods.”
“For Sale” signs dot the streets.
Reinhart says about Pennsport: “I've lived in lots of different places, suburbs and all that, but this is the best place because of the sweet neighborhood, the lovely buildings and the big city that's not too big.”
Reinhart is a soft-spoken but firm critic of the casino site. She worries that it will hurt property values in surrounding neighborhoods. Parking is already scarce; traffic on Columbus Boulevard, a busy artery dotted with big box stores running alongside I-95, can be a nightmare.
She fears a slow march of blight and wonders whether eminent domain will be used to take houses and shops and restaurants to accommodate the project, especially a proposed interstate off-ramp.
“I think this is a pretty fragile neighborhood,” she says. “People with hopes and dreams that they'll never see realized, and they think they're going to win big at the casinos.
“It will just drain this neighborhood,” she adds. “And this neighborhood can't afford to be drained.”
Battles over casino sites are growing across the country as the gaming industry expands at a furious pace.
In a recent land-use survey, casinos ranked fifth from the bottom in desirability, just above Wal-Mart stores, power plants, quarries and landfills, according to The Saint Consulting Group, a Hingham, Mass., firm that specializes in zoning fights. Sixty-seven percent of people surveyed said they would oppose a casino in their community, says Chairman Michael Saint, a result that's improved from 80 percent in 2006.
State game regulators said they liked the South Philadelphia location because it's near the city's new professional sports complexes and is “conducive to economic development” without over-burdening local services.
Foxwoods says it has gone to great lengths to study the traffic problems along Columbus Boulevard and has state-approved plans to not only accommodate extra casino traffic but to make traffic flow better than it does today.
The second phase of the project envisions a southbound I-95 off-ramp, technically called a “slip ramp,” to feed casino-goers into the site. Armentrout says “not one square foot of private property” will be taken by eminent domain to make room for the ramp.
“Eminent domain is a red herring that was thrown out by people opposed to our project to instill fear in the neighbors,” he says. “It's as simple as that.”
Pennsylvania lawmakers approved Act 71 in 2004, authorizing up to 61,000 slot machines at 14 racetracks and standalone casinos across the state.
Mohegan Sun at Pocono Downs, owned by Connecticut's Mohegan Pequot Tribe, was the first to offer casino gambling when it opened its slot halls in November.
So far, three other racinos — as the track-based casinos are called — are letting slots players test their luck in Bensalem, Chester and Erie.
John Maxwell, a gaming-industry analyst at Merrill Lynch, is projecting about 27,000 slot machines in the state by the end of next year generating revenues of about $2.7 billion.
Tad Decker, the state's top gaming regulator, says that when all 14 slot parlors are open, gaming is expected to generate $1.5 billion a year in revenue for the commonwealth and local communities.
“It's not too early to declare gaming a tremendous success,” says Rendell. “I think it will be a continued plus that will be things built, institutions preserved, jobs created, tax base broadened — all those things, because we had the courage to go forward in the face of withering criticism.”
Those promises don't console Miriam Evangelou, a stay-at-home mom who has a three-story house on Federal Street. She says she doesn't want to raise her young daughter under the glare of casino lights. She says her family may sell if the casino is built.