HARRISBURG — Penn National Gaming secured the right to put up a casino near Pennsylvania's southern border, submitting a winning bid Wednesday of just over $50 million and selecting a site that could draw heavily from Maryland.
Pennsylvania-based Penn National, one of the nation's largest casino operators, beat out three other bidders from among the owners of the state's 11 largest casinos, even as it sues to block the construction of new casinos authorized under a two-month-old law.
The Pennsylvania Gaming Control Board auctioned the rights to the casino — possibly the first of 10 new mini-casinos authorized — as the state government looks to the gambling industry for cash to help patch up a massive budget deficit.
Penn National plans to pay another $2.5 million for a certificate to operate 30 table games at the site.
The casino would go inside a 30-mile circle that includes the city of York and is bisected by Interstate 83, which connects to Baltimore, 30 miles (48 kilometers) south of Pennsylvania. The center of the circle is the borough of Yoe, about 10 miles (16 kilometers) from the Maryland border.
It must meet licensing requirements in the coming months before the deal goes through.
Should its lawsuit fail, Penn National views the new casino as market-share protection for its Hollywood Casino in nearby suburban Harrisburg, as well as an extra draw to the Baltimore and Washington, D.C., area, which is home to a handful of full-service casinos.
"We are going to be in cross-border competition and hope to penetrate even deeper into Maryland than we have thus far," said Eric Schippers, Penn National's vice president for public affairs. "It's one of our strategies."
The minimum bid was $7.5 million to operate up to 750 slot machines, making $50 million an eye-popping amount.
That is the same amount that applicants paid a decade ago for a license to operate up to 5,000 slot machines under Pennsylvania's original casino law that has made it the nation's No. 2 state in commercial casino revenue.
"This was really, frankly, looking in the mirror and saying, 'what do we think it's going to take and what are others willing to bid for that,' and that is the number we came up with," Schippers said.
However, Penn National officials said they felt they had an extra burden to win the bidding.
They complain that the law effectively allows competing casino owners to use the new mini-casinos to pick off Penn National's relatively far-flung customer base around its nearby Hollywood Casino, while the protections in the law are far more adequate for the rest of Pennsylvania's casinos.
On Tuesday, Penn National sued to prevent the construction of any new mini-casinos, saying the law violates its constitutional rights to equal protection and due process, as well as Pennsylvania's constitutional prohibitions against legislation that benefits a particular person or entity.
But said they also felt duty-bound to bid, in case their lawsuit is not successful.
"Frankly, it was an investment we felt like we had to make to protect a major market area for our casino," Schippers said. "That cannibalization would have been, in our view, very significant, which is why we filed our federal lawsuit against the law."
The gaming board, concerned about collusion in future auctions, would only confirm the number of bidders, and declined to say which other casinos bid or how much they bid.
One envelope handed to gaming board officials before the start of the public meeting was labeled Sands Bethworks, the Las Vegas Sands subsidiary that operates Sands Casino Resort Bethlehem. A Las Vegas Sands spokesman declined to discuss whether it bid, or how much.
The last of the auctions for the 10 mini-casino licenses is scheduled for May 16. However, if the state's casinos don't snap up all 10 licenses, regulators could schedule more auctions to take bids from out-of-state casino operators.