Tribe's money troubles cloud casino effort
By Jennifer Lin
Inquirer Staff Writer
Three years ago, when the Mashantucket Pequot tribe put up $30 million to operate a slots parlor on the Delaware River, its name was synonymous with megaprofits from gaming.
Today, it means megaproblems.
The tribe, which has run the Foxwoods Casino in Ledyard, Conn., since 1992, is struggling with $2.3 billion in debt and facing such a bleak future that tribal leaders ousted their chairman on Tuesday.
For the Philadelphia venture, the Pequots' unraveling finances will, at the least, complicate an investor group's efforts to build their new casino.
On Friday, the Pennsylvania State Gaming Control Board ordered the partners to keep the project at the original waterfront site and abandon a less costly plan to relocate to the old Strawbridge & Clothier department store. The board gave them two years to have 1,500 slots operating at a casino on Columbus Boulevard in South Philadelphia.
The partners - including charitable trusts for the families of developer Ron Rubin, New Jersey Nets co-owner Lewis Katz, and Comcast-Spectacor chairman Ed Snider - have to come up with new money for the more expensive waterfront gaming hall.
If the tribe were a strong partner - it holds a 30 percent stake - it could step up to the plate. But industry observers say that if the Pequots cannot chip in more capital, the other partners may have to seek another gaming company as investor and operator.
Others question the tribe's ability to successfully manage a casino here.
"Will the tribe be able to run the operation, especially if their dollars continue to sink up in Connecticut?" Rep. Paul Clymer, a Bucks County Republican member of the state House Gaming Oversight Committee, asked in an interview yesterday.
Gary Armentrout, president of the tribe's Foxwoods development business, said the Pequots' money troubles in New England would have no effect on Philadelphia. The tribe's capital contribution to the project, he said, was fully funded, meaning it had already been paid.
Local investors, minus the tribe, were prepared to cover the undisclosed cost of renovating the Strawbridge store, according to testimony in April before the gaming board.
By blocking that plan, regulators are forcing the investor group back to square one.
The developers will have to pay for the South Philadelphia project with a mix of borrowed money and cash from equity partners. In Philadelphia's other casino project - SugarHouse on North Delaware Avenue in Fishtown/Northern Liberties - equity investors have put up almost half of the $340 million cost of an interim facility.
The Foxwoods investors have committed $160 million to the project, including the cost of a license, $50 million; and 16 acres on Columbus Boulevard, $65 million.
State regulators have ordered the Foxwoods investors to come up with a plan by Oct. 16 on how they will have 1,500 slot machines operating at the Columbus Boulevard site.
In an order signed Tuesday, the board also said it wanted to know by Dec. 1 what the project will look like and by March 1 how the partners will pay for it.
A person familiar with the project called the deadlines "nearly impossible to meet."
Maureen Garrity, a spokeswoman for the Foxwoods project, said, "We have a team of professionals working to meet that timeline."
"We've been assured by [the Pequots] that their issues in Connecticut won't be a distraction here," Garrity said. "At this point we'll take them at their word that will continue to be the case."
Brian Ford, an executive with a partnership representing major local investors, likened the tribe's problems to "difficulty in a family."
"It creates a distraction," he said.
Regulators in Harrisburg, meanwhile, are keeping close tabs on the situation.
We do have an interest in developments with the Mashantucket Pequot tribe," said Kevin O'Toole, executive director of the gaming board. "We're asking for monthly updates on various aspects of their project."
O'Toole said it was "too early to draw any conclusions from news clippings" on what the impact of recent events for the tribe would have on the project.
Asked what would happen if Foxwoods partners miss their first deadline, O'Toole said, "We'll cross that bridge when we get to it."