SugarHouse, Sugar Daddy?

Would the casino's "point-redemption" program benefit local businesses?

by Andrew Thompson

economists fighting

Depending on which economist you consult, the proposed construction of SugarHouse Casino could stimulate the local economy, or leech $217 million from businesses in Fishtown and Kensington.

Earlier this month, SugarHouse, the New Kensington Community Development Corp. and Fishtown Action (a pro-casino group in Fishtown also known as FACT) hashed out a "Community Benefits Agreement" in an attempt to allay community concerns about this latter possibility. The agreement has numerous elements, including internship programs for resident youths and a neighborhood liaison to field complaints. But the stipulation dealing most directly with the fears of local businesses is the creation of a "Neighborhood Partnership" program.

Under the partnership, casino players would be able to redeem "player points" racked up from slot machine use at local businesses. This, SugarHouse hopes, will ease concerns that residents will spend all their time and money shopping and dining at the casino.

The idea was suggested by FACT's Maggie O'Brien, who had come upon a similar "Neighborhood Partners" program at Meadows Racetrack and Casino in Washington, Pa.

The specifics of SugarHouse's point redemption program haven't been announced, but here's how it works at the Meadows: For every dollar that a player spends or wins at a slot machine, he earns one point. Eight thousand points cumulatively earned anytime (or 2,500 points earned on a single Sunday) can be redeemed for $10 worth of goods at any business partnered with the Meadows.

This may not sound like a great boon — $8,000 gets you $10? — but the casino gives out thousands of $10 gift cards a month, and more than $1 million a year, says Jamie John, the Meadows' marketing director.

The program works differently for small businesses than it does for larger chains. If a player redeems his points for a voucher at a local restaurant, he takes the voucher to the business and the business owner bills the Meadows. By contrast, Wal-Mart, Target and Sunoco sell their gift cards to the Meadows before players redeem them. So larger businesses get an injection of cash regardless of whether a player shops there. Only $100,000 of the aforementioned million each year are redeemed in smaller stores, according to John.

Still, at least some local businesses say they are benefiting. Marc Alfano, owner of Alfano's at the Quail restaurant, which is around the corner from the Meadows, estimates his revenues have increased by about 10 percent since the program's inception 18 months ago.

"It's been a great benefit," says state Rep. Tim Solobay (D-48th District).

Here in Philly, though, casino critics see the program as small consolation.

"If a particular store in Northern Liberties is going to lose $5,000 a year because of SugarHouse, because people are spending more money at SugarHouse than at their store, well, if they make back $500 because of this points program, then all told, they've lost $4,500," says Paul Boni, a lawyer for Casino-Free Philadelphia.

Indeed, some local business owners sound less than enthusiastic about the program.

"I'm not a fan of the casinos here at all, so there isn't anything that would make me feel like it's a good idea," says Paul Kimport, co-owner of the bar Johnny Brenda's and president of the Fishtown Business Association.

Brendan Hartranft, owner of Memphis Taproom in Kensington, says he isn't worried about SugarHouse stealing customers, but "I don't wanna be tangled up with them."

So who's right? Economists like Frederic Murphy of Temple University's Fox School of Business, who conducted an independent analysis on the potential economic impact of Philly's proposed casinos, argues that casino activities take the place of other recreation.

But other economists believe that businesses near the casinos will reap the benefits of increased traffic, point redemption program or not. Adam Rose, an economist at Pennsylvania State University, voiced this view when he testified to the National Gambling Impact Study Commission in 1998.

Rose's testimony is quoted on SugarHouse's Web site. But the testimony is cherry-picked from the Commission's two-year study. The entire report was much less conclusive, saying that "it is currently impossible to obtain even a rough approximation of a true cost/benefit calculation concerning the economic impact of legalized gambling." Which is likely in no small part because those who carried out the study had a hard time balancing testimony from speakers who sang casinos' praises, and the small business owners from Atlantic City who told them that no one comes into their stores anymore.

(andrew.thompson@citypaper.net)