New Castle News

April 17, 2013

Authority to vote on Citigroup for track bond issue

Debbie Wachter
New Castle News

NEW CASTLE — A county authority will vote publicly on an underwriter for a revenue bond issue for a proposed racetrack.

The Lawrence County Industrial Development Authority will meet at 10 a.m. April 24 at the Lawrence County Economic Development Corp. office to act on the county commissioners’ recommendation of Citigroup Global Markets Inc. as the lending institution for a revenue bond.

Commissioner chairman Dan Vogler explained Tuesday the county has contracted with Cohen and Grigsby, a Pittsburgh law firm, to help put together the issuance of a $50 million bond transaction that would help fund the racetrack/casino venture being considered for Mahoning Township.

The bond issue would be paid off with anticipated revenue from the county’s share of the proceeds from casino revenues, Vogler explained.

“We’re setting the stage, if you will, for our share of the financing,” Vogler said at the commissioners meeting. “Nothing will go beyond this until Endeka pulls together everything that they need to do.”

Endeka Entertainment, the Philadelphia-based company proposing to build the track and casino, has a May 31 deadline to satisfy all its requirements with the state harness racing commission to retain its harness racing license. Those requirements include assurance its funding mechanisms are in place.

The company plans to spend between $225 million and $250 million on the project, a company partner said last month. Penn National Gaming would manage the operation.

The commissioners Tuesday voted to recommend to the LCIDA that Citigroup Global Markets Inc. be the institution to underwrite the county’s share of the funds.

The LCIDA members are Robert Powell, John DiMuccio, Robert Foht, Nancy Bonk and Richard Russo.

The commissioners emphasized that no tax money will be involved, nor will the county have any liability.

Vogler explained the loan will be repaid solely using a portion of the county’s share of its proceeds from the casino revenue.

The commissioners have pledged up to 50 percent of the county’s share of gross table game revenues and part of the slot machine and gaming proceeds to back the bonds.

“This has never been done before,” county administrator James Gagliano said Tuesday afternoon. “Whoever buys those notes is banking on the fact that the casino will be making money.”

Because the bond issue will be based strictly on anticipated revenues, whoever buys the notes is taking the gamble, he said.

“The commissioners were absolutely adamant that there will be no county liability in this, and we’ve been assured all along in the process there will be none, and that’s written into the agreement.”

Lawrence County Controller David Gettings explained that revenue bonds differ from general obligation bonds in that they depend upon on future revenue.

“These are not guaranteed,” he said.

Gagliano emphasized the county’s role is none other than pledging part of its casino revenues of $50 million to go back into the development.

“Our involvement is completed as of today with the passage of the resolution, agreeing Citigroup is the entity that should put this together,” Gagliano said. “If LCIDA agrees, then at some point, when we’re going to have a casino, Citigroup will put (the bond issue) together, then get it out on the market.”

Gagliano explained its payback term and interest rates have not yet been determined. Those will be determined when the track owners are ready for the funds, after they have put up their own money.

Gettings added, “This is going to be the last money going in, not the first money.”