[toc]The money troubles in Pennsylvania extend beyond the state’s budget woes. The longer state legislators drag their feet on a budget compromise, the more local governments feel their own purse strings tightening.
Bethlehem still wants Sands to settle host fee issue
One community desperate for a resolution is the city of Bethlehem. While some Pennsylvania casinos are still voluntarily paying host fees to their local communities, Sands Bethlehem is not one of them.
The Pennsylvania Supreme Court struck down the casino host fee as illegal almost a year ago. Nonetheless, the state and the casinos still do not have an alternative.
Interestingly enough, the gambling expansion plan stuck in legislative limbo proposes a solution. However, the House Republicans holding up the budget process are holding up the gambling bill with it.
Bethlehem Mayor Robert Donchez wrote to new Sands Bethlehem President Brian Carr imploring him to pay the fees. August was the first time Bethlehem had to get by without a payment from Sands.
Ron Reese, arepresentative from Sands explained the company’s dilemma about payment to Lehigh Valley Live:
“We are proud to be an important part of Bethlehem and the Lehigh Valley community and are in fact accruing for the payment of the fee. However, especially as a publicly-traded company, we cannot pay or pledge to pay a fee that does not currently exist.”
Bethlehem’s credit rating is on the line
The city budget expected $9.8 million in host fees from Sands this year. It will end up with around $8.1 million of that amount. The seven-figure shortfall could have far-reaching effects.
The city is currently restructuring some of its debt. The city improved its bond rating in recent years. This shortfall in Sands funds could mean its credit rating turns around again.
In his letter to Sands, Donchez addressed this issue. “The result could be an unwillingness to grant the improved rating, or even worse, reduce it based on the ongoing lack of clarity on this revenue stream,” he explained.
Standard & Poors is evaluating the city’s rating this month. Meanwhile, local lawmakers are refinancing loans in an attempt to save over $750,000 in interest payments.
Thankfully, the situation in Bethlehem is not quite as dire as it could be. The city has enough savings to get through the rest of the year with no additional casino payments. However, that is only a temporary solution. Plus, a $1 million shortfall is very different than the complete dissolution of almost $10 million in annual payments the city has come to rely on.
For now, it appears the city can only wait and see. Given Sands Corporation’s opposition of online gambling, it is unclear how much the gambling expansion package will help this casino town either.