In Chester, Harrah's losing its tax break

Posted: December 26, 2013

Since opening nearly seven years ago, Harrah's Philadelphia Casino in Chester has had a financial leg up on other gambling halls in the state.

Harrah's was built in a Keystone Opportunity Zone, which means it hasn't had to pay most state and local taxes. The goal of the tax-relief program is to spur development in blighted areas.

But those lucrative benefits end Dec. 31.

So how much additional money will Harrah's - it already turns over more than $10 million of its annual winnings to Chester City under state law - start kicking in to help the city and the financially beleaguered Chester-Upland School District?

That remains a mystery.

Delaware County's Board of Assessment has tentatively valued the casino at $218 million, but Chester uses its own figures to calculate city real estate and school taxes.

As of last week, the city hasn't provided that number to the school district's chief financial officer, who needs to send out an interim tax bill for the first six months of 2014.

The county's assessment, which would result in a county property tax of $1.22 million, is not final.

John Vanzelst, assessment manager for Delaware County, said $218 million is an interim assessment because Harrah's has 40 days to appeal.

"I won't know until March if we can actually bill on the $218 million," Vanzelst said.

Vanzelst was scheduled to meet this week with Harrah's staff to go over the data used to arrive at the $218 million figure.

Attempts over three weeks through Tuesday to get detailed comment from Harrah's, which employed 1,672 on June 30, were unsuccessful.

"We don't have any updates for you," Katie Dougherty, spokeswoman for Harrah's owner, Caesars Entertainment, said in an e-mail Dec. 11.

Real estate tax bills will land at Harrah's door on the heels of a 25 percent slide in its winnings from slot machines, to $249.6 million in the year ended June 30, from a peak of $332.8 million in fiscal 2008, its first full year.

The addition of table games in 2010 helped, but not enough to stem an overall decline. Table games brought in $80.3 million in fiscal 2013, about the same as in 2012.

The cost to build Harrah's in Chester, whose formal corporate name is Chester Downs & Marina L.L.C., was $405 million. The company had debt of $330 million as of Sept. 30, according to a regulatory filing by its immediate parent, Caesars Entertainment Operating Co.

Chester Downs was decently profitable in 2012, according to a report by Deutsche Bank Securities Inc. Deutsche Bank said the casino earned $69 million - based on an adjusted measure of operating profits - in the 12 months ended December 2012.

That translated into an 18.7 percent operating profit margin - topping the 17 percent figure at the Borgata, Atlantic City's biggest and most resilient casino.

Harrah's casino is not the only Chester property losing its Keystone Opportunity Zone benefits. The benefits also end this year for PPL Park, which cost $115 million to build.

However, PPL Park, which the county has valued at $60 million on an interim basis, will not join the real estate tax rolls because it is owned by a government body, the Delaware County Chester Waterfront Industrial Development Authority.


hbrubaker@phillynews.com

215-854-4651

@InqBrubaker

|
|
|
|
|