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Foxwoods Casino: our property is worth less than zero
By Ed Goppelt
Monday, 04/23/07
(1177363195646)
The deal offered Pennsylvanians seemed too good to be true: get large wealthy corporations to pay taxes, lots of them, so ordinary folk could get a break on their property and wage taxes. In an ironic twist, Foxwoods Philadelphia Casino will soon attempt to persuade Philadelphia's tax assessor that its own property taxes are too high and should be lowered.
Philadelphia's Board of Revision of Taxes (BRT) will consider Foxwoods' appeal at a public hearing scheduled for May 10, 2007 at 10:00 am. The hearing is open to the public and will be held at the BRT's offices on the 8th floor of 34 S. 11th St.
Foxwoods paid $65 million to acquire the property at Reed and Columbus Blvd. in January, 2005, but hasn't paid any taxes on the property since the BRT raised its market value for the property to $45 million in August 2005. Prior to 2005, the BRT put the property's value at $11 million.
According to the Philadelphia Revenue Dept., Foxwoods Philadelphia Casino now owes the City $2.8 million in back taxes for 2006 and 2007, making it the third largest corporate tax deadbeat after Amtrak and Septa according to the Top 100 list maintained by Hallwatch (Note: the Foxwoods partnership was called "Roman Philadelphia Properties" at the time). HSP, the partnership behind the SugarHouse casino, is up-to-date on its property taxes for its North Delaware casino site.
Joshua Vincent, head of the Center for the Study of Economics, thinks Foxwoods should pay their taxes and wait to be reimbursed should they be successful on appeal. "Ethically of course they should pay and get reimbursed... if their appeal comes through," said Vincent.
When asked why Foxwoods hadn't paid any of its property tax for the past two years, Foxwoods' spokesman John Dorsey said he hadn't had time to speak with his client. "I don't have a response...I'm just going through some emails. As soon as I hear back from the client [Foxwoods], I'll get back to you."
An appraisal submitted by Foxwoods as part of its appeal suggests that its property may be worth less than zero. Appraiser Eugene Pasymowski offered a range of possible values for the 21 acre site ranging from a low of negative $900,000 to a high of $180,000 or about the value of a typical South Philly row home. Pasymowski's report implies that the BRT should deduct the cost to repair the site's deteriorating pier and bulkhead, which he estimates will cost his client over $7 million, in arriving at a fair value for the property.
When asked what approach the BRT had used in arriving at its market value for Foxwoods, Philadelphia Head Tax Assessor Gene Davey didn't identify a specific appraisal method, but replied in general terms. "Market value [is] based on judgement, experience, past sale, limited market type property, etc. I hope that this answers your questions," wrote Davey in an email. Hallwatch tried twice, but was unable to reach Davey by phone.
Ted Gwartney, the assessor of Bridgeport, CT, by contrast was specific, stating that the way to value a casino was using "an income, discounted cash flow approach, taking a look at ten years of experience. The question is what cap rates to use." Gwartney said the cap rate for a casino would be somewhere between 6 and 15%. Hallwatch believes the Foxwoods Casino will generate $40 million a year in profits for its investors. Applying the most conservative cap rate of 15%, Hallwatch believes the Foxwoods Casino property is worth at least $267 million.
Foxwoods' tax appeal began over a year ago and has bounced between the BRT and the courts. The casino first appealed its assessment in February 2006, but the BRT turned the casino down flat, in its March decision, offering no reduction whatsoever. Foxwoods appealed the BRT's decision to Common Pleas Court in April, 2006.
Just as the case was about to go to trial in January, 2007, Foxwoods lawyer Michael Weinstein told the Court that he and City lawyer James Zwolak wanted to send the appeal back to the "City's assessor for his review, with the goal of settling the case without a need for trial." Judge Gary DeVito ordered the appeal returned to the BRT in February, 2007.
Meanwhile the property tax relief Governor Rendell expected casinos to generate for Pennsylvanians hasn't materialized, at least not this year. "Slot-machine gambling in Pennsylvania will not provide enough revenue to allow school districts to cut property taxes for the 2007-08 school year," the AP reported in April. Rendell has proposed raising the sales tax a percentage point to make up for missing gambling money instead.
Contact author Ed Goppelt at webmaster @ hallwatch.org