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Betting on the ‘Ripple Effect’

Penn National Likes Its Odds of Winning the Casino Contest

Penn National’s proposed Hollywood Casino Springfield

A view from the north of Penn National’s proposed Hollywood Casino Springfield.

Editor’s Note: This is the latest in a series of articles detailing the players and issues involved in the competition to place a resort casino in Western Mass. This segment focuses on Penn National Gaming Corp. and its plans for a casino in Springfield’s North End.

 

Tim Wilmott says that, if a company was going to build a casino in Springfield, it probably couldn’t pick a more challenging site for such a project than the one Penn National has chosen in Springfield’s North End.

After all, the $800 million proposal, to be called Hollywood Casino Springfield, involves relocating two of the city’s largest businesses — the Republican, its 330 employees, and its massive press operation, as well as Peter Pan Bus Lines and its more than 250 local employees — and then remediating those properties and making them ready for construction. Those moves come complete with myriad headaches and a very large price tag.

But this high degree of difficulty and the benefits to be derived from such an aggressive course are big parts of what makes this site so attractive to the Wyomissing, Pa.-based company, said Wilmott, its president.

Indeed, it is his belief that, by taking on a location that has, in addition to these stern logistical challenges, vast potential for further economic development, or what Penn National officials call a “ripple effect,” the casino operator has gained an edge in what all are expecting to be a spirited and expensive competition to win the license to operate in Western Mass.

“We took a look a lot of Western Mass. communities as we were deciding where to focus our efforts in this state,” he explained. “Clearly, we thought the Western Mass. region gave us the greatest chance of victory, and as we looked at the various locations in that zone, we felt that, to win the overall bid, we had to have the greatest community impact — and this site provides that.”

The relocation of the Republican and the creation of Republican Village Square

The relocation of the Republican and the creation of Republican Village Square in the heart of downtown are part of what Penn National officials call the “ripple effect.”

Detailing this potential impact during a wide-ranging interview with BusinessWest, Wilmott and others with the company said the printing operation at the Republican will obviously have to be relocated, probably to one of the business parks in the northeast corner of Springfield — Memorial II, near Smith & Wesson, or the Chicopee River Industrial Park that straddles the border with Chicopee. Also, the other units of the business — editorial, advertising, distribution, and more — would be relocated as well, probably to one of the downtown office buildings, providing a boost to the central business district.

Meanwhile, Peter Pan’s various business operations would also be relocated, Wilmott continued, with transportation-related units going across Main Street to a revitalized Union Station, and others (administrative personnel, for example) moving to Union Station or the center of the downtown.

“Given the energy that our development would have in that part of downtown Springfield, with the relocation of the Republican, the relocation of Peter Pan Bus Lines, and the revitalization of Union Station and the Paramount Theater,” said Wilmott, “we thought that all of these things give us a lot of credibility, both at the city level and at the state level. We think it gives us the best chance to win the bid.”

This potential ripple effect prompted Wilmott to draw comparisons between the Springfield initiative and a casino Penn National opened just over two months ago in Columbus, Ohio.

There, at the behest of city officials, the company essentially put aside a proposal to locate a casino in the arena district of the city, and instead blueprinted plans to place one on the site of a former Delphi Auto Parts manufacturing facility in a neighborhood plagued by poverty and crime.

“It was listed as one of the poorest communities, not only in Ohio but in all of the Midwest — their dubious distinction was to be listed as the ‘loneliest town in America’ at one point by one of the travel magazines,” said Eric Schippers, Penn National’s vice president of Public Affairs.

He told BusinessWest that the ripple effect in that community is still in its infancy stage, but there is evidence that the casino is becoming a catalyst for growth (much more on that later).

For this issue, BusinessWest continues its series of stories on the battle for the Western Mass. casino license with an in-depth look at Penn National’s plans for the North Side of Springfield, and how company officials believe it will more than stand up to the competition.

 

Roll of the Dice

Penn National staged an elaborate unveiling of its plans for the North End on Dec. 20 at the refurbished Paramount Theater.

The red carpet, with a decidedly Las Vegas-like look and feel, drew more than 200 people, and allowed Wilmott and other officials with the company to present long-awaited details on the Hollywood casino. Specific aspects of the plan had been kept under wraps, by and large, while the company hammered out an agreement to acquire an option on the Republican’s properties from the paper’s parent company, Advance Publications Inc., he said, according to an agreement was reached just days before the unveiling.

Penn National, an operator of casinos and racetracks that currently has 26 facilities in 18 states, is proposing a 300,000-square-foot casino-resort complex, including a 250-room hotel, 100,000 square feet of gaming space, 2,000 square feet of retail, and extensive renovations to the nearby Paramount. Company officials project roughly 2,500 construction jobs and 1,500 permanent jobs.

Plans call for what Jay Snowden, Penn National’s senior vice president, dubbed a “regionally focused” mix of restaurants and clubs, including a sports bar that would become former Boston College and New England Patriots star Doug Flutie’s first foray into the hospitality business.

Other planned restaurants include Davio’s, a chain of steakhouses owned by Springfield native Steve Difillippo; Ole Mexican, a Boston-based chain; b.good, a high-end burger chain; and a deli to be operated by the Scherff family, owners of the downtown Springfield landmark the Student Prince.

The broad plan has been formalized over the past several months, said Schippers, but in reality, it has been perhaps 20 years in the making.

Indeed, the proposal unveiled at the Paramount is similar in a great many ways to a concept first proposed by the late Peter L. Picknelly, then-president of Peter Pan Bus Lines, noted Schippers, adding that it made a good deal of sense in the early ’90s, and still does today.

That’s because it involves minimum disruption of residential neighborhoods; makes effective use of nearby highways, especially Routes 91 and 291, to create easy access; and creates economic-development opportunities in a low-income neighborhood — the North End.

“I don’t think he [the elder Picknelly] was envisioning some of the significant additional ripple effect that we’re going to bring about,” said Shippers. “But certainly his vision for revitalizing the North End and making it a gateway to the downtown is consistent with what we’re proposing.”

Wilmott agreed, and told BusinessWest that Picknelly’s two-decade-old vision eventually became the focus of the company’s efforts once it decided to enter the Massachusetts casino contest.

Elaborating, and echoing officials with other casino operators focusing on this market, Wilmott said Western Mass. (and, more specifically, Springfield) offers perhaps the clearest path to a casino license in the Bay State — most believe Suffolk Downs is a virtual lock for the Boston-area license, and the Southeastern Mass. license fight is complicated by possible participation by the Wampanoag tribe — and also the best geography.

And by that, he meant access to lucrative markets to the west, south, and east of the city, a location that makes entry into the Massachusetts market well worth the expense, and the risks, involved with such a gambit.

“As we look at every market, we look at the location and the proximity of customers to that specific location,” Wilmott explained. “As we look at the demographics of the Springfield MSA [metropolitan statistical area] with its location to Hartford, with its location to the west and Albany, and also to the east, we like what we see. When we look at all of these studies, proximity always wins the battle in terms of where customers want to visit a casino.

He said he sees little chance that three casinos in Massachusetts will saturate the regional market, because there remains limited competition from the two Connecticut casinos, which, while they are down somewhat from pre-recession days in terms of overall revenue, are still two of the largest casino operations in the country.

“There is always the risk that, over time, the state of Massachusetts, after its gets this initial lot of licenses, will fall in love with the revenue and say, ‘let’s open this to further expansion,’” he continued. “We run that risk in every jurisdiction we operate in, and it’s up to the lawmakers in that state to determine how far they want to go with this. It’s always a risk we run when we make investments in new jurisdictions.”

Penn National now finds itself in a two-way fight to get on a referendum ballot in Springfield — although there is a good chance that both its plan and another submitted by MGM Resorts International for the South End wind up before voters — and, for the moment, anyway, a three-way contest for the Western Mass. license, with Mohegan Sun’s proposal for Palmer still very much in the mix.

 

Headline News

As he gauged the fight ahead — without commenting on rival MGM’s plans (something both camps have been asked to refrain from by Springfield officials) — Wilmott said he liked his company’s chances moving forward.

The ripple effect is a big part of the reason why, he noted, but there are others as well, starting with access and traffic flow.

Snowden told BusinessWest that, beyond the additional development opportunities, the North End site offered perhaps the best scenario when it came to getting traffic in and out of a Springfield-based casino.

“The more time we spent in Springfield understanding the traffic-congestion problems that exist, we felt that the location in the North End offered the best solution,” he said. “That’s because, regardless of whether you’re coming from the north via 91 or 90, or from the south along 91, or from the east of 291, we have three separate ramping-system solutions. We really felt that this provided us the best point of access from any direction, and would help to mitigate the traffic concerns in Springfield.”

But what separates Penn National’s plans from others, Wilmott believes, is its ability to create new jobs and help spark economic-development activity in those areas of the city to which dislocated businesses and employees are moved.

In the case of the Republican and its non-printing operations, he noted that, while dozens of employees will be moved only a few blocks, the impact will be significant on retailers in the central business district and perhaps on the commercial real-estate market as a whole.

Meanwhile, he continued, relocation of the printing facilities and employees will help fill some industrial-park space in the northeast corner of the city.

George Arwady, publisher of the Republican, summed things up simply by saying, “we’re in the way here,” meaning the newspaper’s 180,000-square-foot facility, including the massive press, happens to be where the casino wants to go.

Getting out of the way will be a two-part process that will require some logistical maneuvering, he told BusinessWest, adding that a second, currently unused printing press owned by Advance Publications and currently warehoused in Michigan would be brought to Springfield to enable the company to continue printing its own newspaper, as well as several others it now prints in a growing business venture, while the current press is dismantled and moved.

“It’s a very unusual situation … we’re not a partner in this project, we’re not an investor, we’re not in the casino business — we’re just selling our property,” he explained, adding that, as the process advances, there could be triggers that would actually result in the start of construction of a new printing facility before a casino license is granted.

As for the non-printing operations and personnel, Arwady said the company is seeking to lease class A office space “in the heart of downtown.” He wasn’t more specific, and didn’t say how much space would be needed, but the Dec. 20 unveiling included some details of a facility to be known as “Republican Village Square.”

“The newspaper is actively seeking vacant Class A office space and public gathering space, and we already have had design firms looking at options,” said Arwady. “The Republican plans to use the power of its affiliated website, MassLive.com, to create an interactive, 21st-century village square to bring large numbers of people together for a wide range of fun and community-building activities; at lunchtime, after work, on the evenings and weekends, this aspect of the project will bring new energy and life to the very center of the city.

“Although the details are still under development, we plan to use our combined media strength in English and Spanish to make this new site the place to be in the entire region,” he continued. “Not just for browsing the web and enjoying a cup of coffee, but also for public meetings, blood drives, the creation of video on MassLive and YouTube, singing groups, art shows, and a thousand other purposes. … The goal would be to create a beehive of activity in the heart of downtown 24-7, instead of only during the workday. This would be good for our business, and also very, very good for the heart of our city.”

Meanwhile, Peter A. Picknelly, CEO of Peter Pan Bus Lines and a 50% partner with Penn National in the Hollwood Casino Springfield project, told BusinessWest that his company was always supportive of the city’s efforts to revitalize Union Station, and was asked on several occasions to be a tenant in that facility. The big problem with that equation, he went on, was redevelopment of the existing bus terminal and related facilities — or, to be more precise, lack of viable opportunities to do so.

“We’re in a building across the street [from Union Station], it works for us, we pay ourselves rent, we have vendors that pay us money,” he explained. “We’ve told the city that, while we support Union Station, we simply can’t leave this property abandoned and go next door and pay rent. That’s illogical, and no business person would do that.”

The proposed Hollywood casino effectively solves that problem, he went on, adding that the Penn National plan creates ripples by bolstering the Union Station initiative and requiring Peter Plan to relocate other departments in other parts of the city.

Elaborating, he said there are three business operations that would be moved: the bus-company operation would be moved into Union Station, while administration and support personnel would move to either Union Station or 31 Elm St., currently being developed by the Picknelly-owned company Opal Management, depending on space availability and lease structure in the station, among other conditions. The third facet of the business, maintenance, would be relocated to a new facility, he went on, adding that the company is currently looking at property on Tapley Street and other sites for new construction.

“This proposal is what I view as true urban renewal,” said Picknelly. “And that’s why we picked Penn National as a partner; they embraced this concept. We didn’t just want to build a casino in Springfield; we want to use a casino to help revitalize the city.”

 

Placing their Bets

This notion of urban renewal is the point that Penn National officials will be stressing as the process moves forward, said Wilmott, adding that the next stage involves finalizing proposals for review by both the city and the state.

Final bids are due by Jan. 3, he continued, adding that Springfield officials are looking for specific details on everything from revenue projections to traffic plans to human resources. The city will then decide if it wants to enter into negotiations with one or both operators on what’s known as local-impact fee. Ballot questions on one or both plans would come much later in the year.

Assessing the landscape, Penn National says the Springfield competition will be highly competitive, and one they believe could ultimately be decided — if other considerations, ranging from finances to impact on public safety to traffic, are relatively equal — by that community impact, or ripple effect, that Wilmott described.

And with that, he, Snowden, and Schippers returned to Columbus, Ohio and the company’s project there.

The casino opened just a few weeks ago, they stressed, but work that began well before the ceremonial ribbon was cut has created a growing sense of momentum in that neighborhood.

“We’ve worked with a coalition of business owners in West Columbus to talk about how we can be a catalyst for other positive development in that area,” said Schippers, “so there’s a new spring in the step of the business community there.

“Like in Springfield, we believe there is going to be a very positive ripple effect there after we’re underway and in a fully stable environment,” he continued, adding that among the developments are a new restaurant in the area near the casino, movement to redevelop an all-but-abandoned car lot, and action among elected officials to make investments in the infrastructure there.

“There have been road improvements, transportation studies have been conducted, and now it appears that the state will be investing more in getting better access and better roads to that area,” said Schippers. “Other businesses have announced plans to add shifts or make new investments, and people are exploring the addition of another hotel, which would create even more of a catalytic effect.”

The same types of things will likely take place in Springfield, said Snowden, starting with the activity to result from the need to relocate the two impacted businesses along Main Street.

“There won’t be just one construction project taking place in Springfield,” he noted. “You’re going to have the elements of the Republican relocation and the same with Peter Pan. It’s not just the breaking of ground in a single phase for the casino, hotel, parking, and restaurants, but also the ripple effect taking place at the same time.”

Wilmott agreed.

“That’s why we liked this site in the first place,” he said. “All things being equal — if we’re matching MGM in terms of impact fees to the community, for example — we think the site is more valuable to the long-term economic development of Springfield than other sites. And that’s why we believe that site should win out.”

 

Trump Card?

Time will tell if those at Penn National are right in their assessment of this contest and their proposal. For now, they are guardedly optimistic about their chances in this high-stakes competition, primarily because they like the hand they’re playing.

There are many aspects to their plan, but they’re betting that the ripple effect to be created by their $800 million facility will be the deciding factor — and ultimately enough to claim the prize in the middle of the table.

 

George O’Brien can be reached at obrien@businesswest.com

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