A Tale of Two Cities: Chester, PA and Holyoke, MA

Testimony of Joseph A. Lashinger, Managing Member, Paper City Development Company, LLC to the Joint Legislative Committee on Economic Development and Emerging Technologies May 4, 2011
Mr. Chairman, Madame Chairwoman and Members of the Committee: My name is Joseph Lashinger and I am the Managing Member of Paper City Development Company, LLC, the entity that controls the property known as Wyckoff Country Club, located directly on Interstate 91 just 3.5 miles north of the Mass Pike interchange in Holyoke. Our site sits approximately seven miles closer to downtown Hartford than the Mohegan Sun and 14 miles closer than Foxwoods Resort Casino. Our site is also roughly 35 miles closer to Albany than the hugely successful Turning Stone Resort Casino located in Western NY. With approval of expanded gaming here in the Commonwealth, it is Paper City’s intention to develop a destination gaming, hotel and entertainment complex at this location. This facility, uniquely situated at the crossroads of Western Massachusetts, would be a true regional entertainment asset and economic growth engine. On many occasions during the last year, Governor Patrick has said that the gaming issue sucks all the air out of the State House, hindering progress on other critical issues you face. I’m here to reaffirm to you that the giant sucking sound that all of you really hear is from Connecticut, Rhode Island, Maine, and other locales where expanded gaming has yielded billions of dollars in tax revenue and economic activity for those states -1

much of it, by the way, generated by Massachusetts residents -and a huge lost revenue opportunity for the Commonwealth. Briefly about myself so that I may then begin to comment on the legislative task at hand. . . I thought you would be interested to know that I have been in your shoes as a legislator sponsoring, voting and acting on gaming legislation. I served seven terms in the Pennsylvania House of Representatives, representing a suburban Philadelphia district. I entered the gaming industry 21 years ago after leaving the General Assembly. I have acted as a registered lobbyist on behalf of gaming operators around the United States; I have also been a corporate executive with several major gaming companies -- some of whom are represented here today. And perhaps, most importantly, with my own private capital, I went on to develop a hugely successful gaming operation that was later acquired by Harrah’s Entertainment. Information about this project, known as Harrah’s at Chester Downs, is what I believe can be the most useful testimony that I can present to this Committee today. Let me state from the outset, I have very strong feelings that any gaming project has to have a compelling economic development rationale. That is how I approached the development in Chester, Pennsylvania -- against great odds, I might add -- and that is how Paper City Development Company has and will continue to approach Holyoke, Massachusetts. The stories of Chester and Holyoke are truly a tale of two cities. Harrah’s at Chester Downs is located in a small, hardscrabble city of approximately 37,000 residents just outside of Philadelphia. Chester, PA, like Holyoke, was a former industrial center which, in the last several decades, had lost much of its manufacturing base to foreign competition and, with it, nearly half its population. It faced high unemployment, increasing poverty, failing public schools and a school district in receivership, and significant public safety challenges. Does this story sound familiar? In 2002, I visited a 70-acre abandoned and heavily contaminated brownfield site along the Delaware River just south of Philadelphia. At one time these 70 acres served as the hub for merchant shipbuilding in the United States -- the home of Sun

Shipbuilding. During World War II, more than 40,000 employees earned a livelihood at this facility. We acquired the property, cleaned it up and developed a worldclass gaming venue at the site. This venue has also proven to be a vital catalyst for other groundbreaking economic development projects beyond the realm of the gaming enterprise. For example, revenue from this facility dedicated to the city and the county became the primary funding source for bonds that financed the county’s portion of the cost of constructing PPL Park – an 18,500 seat Major League Soccer (MLS) stadium that also hosts 40-50 other events each year. The stadium project is the result of combined commitments of $30 million from Delaware County and $47 million from the Commonwealth of Pennsylvania. The Delaware County Sports Authority, created in 2007, pays the county's share of $30 million through taxes generated from the operations of Harrah's at Chester Downs. Most incredibly, in February 2008, with this financial commitment in hand, Chester bested St. Louis, MO in the fierce competition to determine which city would be awarded the next MLS franchise. Our view of economic development is that it must be balanced with consideration certainly given to the operator who is assuming risk with the hope of achieving financial success, but developed in harmony with the community. Given the amount of capital investment required to develop these facilities, it can’t just simply be a “break-even” proposition with the host and neighboring communities on the outside looking in. All must prosper and it absolutely must be done in a sustainable fashion. The old development standard in the gaming industry was “build it and they will come.” Today, nothing could be further from the truth. When we arrived in Chester, the city had long ago experienced the loss of most of its primary manufacturing jobs – namely in shipbuilding and the automotive industry-- and its population had decreased from 65,000 to 37,000. Ironically, Holyoke grew to more than 60,000 residents at about the same time as Chester, but its foundation for success was borne from the paper industry. Over time, that industry similarly disappeared and, today, Holyoke’s population is almost identically cut in half

to 39,000. Both cities have seen extraordinarily high unemployment, especially in their significant minority populations and even more so among minority youth. And, again, similar to Chester, for at least the last decade and longer, Holyoke’s household median income has been sizably lower than the state and national averages and residents living below the poverty line have been significantly higher. According to the most recent Census estimates, 28.3% of Holyoke families live below poverty level, compared with 9.8% nationally. While it’s certainly no secret that Holyoke is one of the most economically challenged cities in the Commonwealth, the promise for this city and its future are bright with development of a world-class resort casino destination. Prior to opening its doors, Harrah’s almost immediately hired 1,100 full-time employees and, just a year ago, added an additional 500 employees. These numbers immediately catapulted Chester Downs to one of the top five employers in the county. There was no “ramp-up” period, no dependency on government subsidies or corporate tax breaks, and no excessive financial incentive packages provided in exchange for hollow promises about job creation that have left many states holding the bag. We just turned on the lights and our economic success story was launched! I challenge you to name another industry that can do that. . .an industry that sees new venues achieving maximum demand the same day they open their doors. Furthermore, name a business or industry that pays its taxes on the top line revenue number beginning day one? But let’s not shortchange the number of union trade jobs that will be created through the 12-18 months of construction. We project that a Holyoke casino will create up to 2,000 construction jobs and 2,500 permanent jobs for persons employed at the casino, 350-room hotel, spa, entertainment venue, restaurants and retail shops. By the way, the centerpiece of our hotel development will be a replica of the iconic Summit House that once graced the top of Mt. Tom, invoking a nostalgic reminder of Holyoke's glorious past. Also, with the Pioneer Valley being a mecca for horse breeding,

riding shows, stables and other equestrian activities, we are evaluating the development of an equestrian venue at the site so as to retain some of its sylvan setting. Not lost on us is what this industry means relative to jobs and direct economic activity in Western Massachusetts annually. Let me touch briefly on the type of jobs and enhanced quality of life created for employees of gaming facilities. Please dismiss any criticism of the types of jobs that the gaming industry creates. They are, in fact, varied in skill level, with workers generously compensated with a full menu of benefits and one important item often overlooked -- a transferable skill. These positions often are the first time that a person has job mobility, a liberating experience for many. Beyond the most obvious benefits that a Holyoke casino would provide -- namely, jobs and tax revenue – I want to highlight some other elements of our grand vision to spark economic growth, opportunity and activity in the Pioneer Valley:

Our innovative “Holyoke NOW!” Partnership for Regional Progress is a voluntary, revenue sharing plan that will include our host community, Holyoke, and several contiguous communities. Under this plan -- the details of which are directly behind me -- we are recognizing these communities as important and valued partners in the success we hope to achieve at Wyckoff. 2.5% of the net gaming revenues generated annually at our venue will be distributed to these communities to assist them in the delivery of local services, enhance public safety, enrich the overall quality of life for local residents, or even buttress tax stabilization or tax relief efforts. This is discretionary money for cities and towns to use in funding police, fire, teachers or other vital government services – and our commitment to these communities will come in addition to any increase in local aid received from the Commonwealth through the proposed 25% tax rate on gross gaming revenues. Our proposal will entail a strong commitment to local hiring when it comes to filling the jobs at a Holyoke casino -- we call it “Holyoke First!” Paper City will adopt a hiring

preference program similar to what we implemented in Chester, where we worked with local leaders to develop an acceptable level of preference criteria for host community residents to be first in line when it came hiring at Chester Downs. When we talk about building a resort casino in Holyoke, it’s important to not only recognize the thousands of immediate, well-paying jobs that we will directly create on site, but also the sizable number of jobs that will be created in related tourism and by private vendors supplying goods and services to the Holyoke enterprise.

Paper City is also excited to commit to a policy that we call “Buy Massachusetts First!” Simply put, at a resort casino built in Holyoke, Massachusetts vendors will be given a preference in the way we buy goods and services. Whether purchasing furniture, restaurant equipment, food or construction materials – if a Massachusetts-based company comes in with a competitive bid, we intend to give them preference over out-of-state or foreign vendors. Quality of the goods and services being provided should and will always be a consideration, but the “Buy Massachusetts First!” mantra will be a guiding principle in how we conduct day-to-day operations and procurement. To that end, we shortly hope to establish a vendor program database to pre-qualify prospective vendors. This policy will generate millions of dollars annually for the local and regional economies. With the award of a gaming license to Holyoke, we view this as an essential component of our stewardship and corporate responsibility. And, finally, in Holyoke, I’m proud to say that we have an unprecedented and singularly unique opportunity here in Massachusetts and, perhaps, nationally to develop a resort casino operated almost entirely with green power. No other gaming venue proposed thus far anywhere in the state can lay claim to that! For the same reasons that MIT, Harvard, Boston University, UMass, EMC, Cisco Systems and the Commonwealth recently chose Holyoke as the place to develop a $168 million high performance computing center, so too presents one of the most compelling rationales for why Holyoke is such an attractive location to develop a destination resort casino -- the

availability of inexpensive, environmentally-friendly hydroelectric power from the Connecticut River. Holyoke Gas and Electric (HG&E) currently offers some of the lowest retail electric rates available in the state and, most importantly, the power they sell has a carbon footprint that is 25% of that of the average New England utility. Over 80% of the power sold by HG&E is from carbon neutral sources, with the vast majority of that generated through hydro facilities. The exciting announcement two weeks ago that HG&E will develop a 5.4 megawatt solar array on 30 acres of property in Holyoke in a joint venture with Constellation Energy -- one of the largest solar projects to be undertaken anywhere in New England to date -- coupled with HG&E’s proposal to develop 10 megawatts of wind power on Mt. Tom -- reaffirm the city’s current status as the epicenter for green power generation and renewable energy development here in Massachusetts. To conclude, in order to make this all a reality, it is critical that a regulatory framework must exist. First, we are firmly committed to the idea that expanded gaming in Massachusetts must be a proposition which yields beneficial economic impacts statewide. As such, we believe it imperative that a Western Massachusetts dedicated zone be maintained consisting of the Commonwealth’s four western counties. Second, based on our own independent analysis of regional gaming demand, we believe that in order to capitalize and maintain sustainable tax revenue and positive economic impact, any facility sited in the Western Massachusetts zone should be required to have not more than a $400 million capital build and a $50 million casino licensing fee, reflecting the region’s smaller size. This concept is validated and supported by major market studies completed by two of the most qualified and universally respected gaming analytics firms in the U.S., Spectrum Gaming and The Innovation Group. Third, some credit for public purpose transportation and utility infrastructure improvements undertaken by a developer against “cap ex” requirements should be a consideration. Virtually every venue proposed to date will have significant on- and offsite infrastructure costs to contend with. Beneficial public

purpose and comprehensively addressing existing traffic issues in close proximity to where facilities are proposed should be an overlying theme in evaluating the legitimacy of including such a provision in any resulting legislation. With this framework in place we are firmly committed to creating thousands of local jobs, generating millions in annual tax revenue, and boosting the local economy by providing preference to Massachusetts vendors when it comes to the procurement of goods and services. This is our vision for the development of a destination resort casino in Holyoke, a plan in which our partners, our host and neighboring communities and, most importantly, local taxpayers and residents all win. That concludes my formal remarks and I am certainly available to answer any questions you may have. Thank you.


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