Sources: Penn National Wants City Compensation For Arena District Property Value Drop

on Saturday, 25 September 2010.

Annexation Talks Continue Without Agreement As Penn Explores Other Options

By Patrick Preston
Published: September 24, 2010

COLUMBUS, Ohio --

Casino developer Penn National continues to engage the city of Columbus in a veritable high stakes poker game -- gambling that it can extract more money from the city as annexation negotiations continue -- with tens, even hundreds of millions of dollars in tax revenue at stake.

Multiple sources with direct knowledge of the annexation talks between the two parties told NBC 4's Patrick Preston that Penn National has asked the city of Columbus to "make the company whole" on the money it stands lose on the Arena District property that Penn purchased in January.

Before Ohio voters agreed in May to relocate the Columbus Hollywood Casino to the west side, Penn National spent $36 million to purchase land in downtown Columbus. Sources tell NBC 4 that private appraisals used by the city and county now value the property at about $11 million. In its second quarter financial report this year, Penn National announced it took a $30.5 million pre-tax impairment charge based on the falling value of the property.

Thus far, the city has resisted Penn's efforts to obtain compensation for the Arena District losses. Dan Williamson, spokesperson for Columbus Mayor Michael Coleman, told NBC 4 the city did not make a private assurance to Penn National that it would make the company whole. Williamson said Columbus will not compensate Penn National for its entire Arena District losses, either directly or in a roundabout way, such as through tax breaks.

As the city has maintained its stance in private discussions, sources tell NBC 4 that Penn National representatives have openly discussed keeping the casino and the casino tax revenues outside of Columbus. Instead, Penn National could leave the west side land on Georgesville Road in Franklin Township, where commissioners Don Cook and Timothy Guyton told NBC 4 they would welcome the casino and offer tax incentives to entice the company to remain part of Franklin Township.

Penn National estimates the future Columbus casino will generate $8 million in tax revenue for its host city each year, as well as income and property taxes. Cook and Guyton said that annual tax revenue would dramatically help the township provide additional services for residents. But to do so would require finding another source of water.

Columbus controls the water supply in the area, short of digging wells in the ground. Williamson said Penn National made a pledge to annex the casino property into Columbus, and the city expects that pledge to be kept.

Columbus is guaranteed an estimated $16.2 million in annual tax revenue from the casino by virtue of being Franklin County's largest city, with a population over 80,000. The $8 million in host city casino tax revenue would be on top of that money.

Penn National spokesperson Bob Tenenbaum said the company "fully intends" to annex the land into Columbus, but stopped short of assuring central Ohioans that the annexation will occur.

Tenenbaum said Penn National would not comment on the ongoing negotiations. The company is expected to break ground on the future Hollywood Casino Columbus in early 2011, with an anticipated opening in late 2012.