Penn National Gaming Sells Erie, Pa., Off-Track Betting Parlor

A new owner is expected to take over the Downs at Erie off-track betting parlor, but the arrangement will last only until MTR Gaming Group Inc. buys it for $7 million.

Penn National Gaming Inc. is selling the Pocono Downs harness racing track in Wilkes-Barre and five OTB parlors, including the Downs at Erie, to the Mohegan Tribal Gaming Authority, the two sides announced Friday.

The Pocono Downs property is on 400 acres near the Pocono Mountain resort.

A closing on the transaction, which is expected to net Penn National about $175 million, is expected before the end of this year, subject to approval from the Pennsylvania Harness Racing Commission. Penn National said it will use the sales proceeds to reduce its debt.

Penn National is selling Pocono Downs to meet the requirements of the state's new slot-machine law, which restricts ownership to 100 percent of a first licensed slots casino and no more than 33 percent of a second one.

Penn National Gaming also owns Penn National Race Course, a thoroughbred horse racing track near Harrisburg, where it plans to add slot machines.

The Mohegan Tribal Gaming Authority plans to put in slot machines at Pocono Downs, too.

The authority manages and runs the Mohegan Sun, a casino that features slot machines and gaming tables in Uncasville, Conn.

The authority is an agency of the Mohegan Tribe of Indians of Connecticut, which is a federally recognized tribe with a 405-acre reservation in southeastern Connecticut, near Uncasville.

The Mohegan Tribal Gaming Authority will become the new owner of the Downs at Erie, 7700 Peach St., but only until MTR buys the facility and its 12 acres.

MTR has an agreement with Penn National to buy the Downs at Erie for $7 million. That was part of an agreement to settle Penn National's appellate court appeal of MTR's horse racing license.

Carol Weld King, a Washington, D.C.-based attorney for the authority, said the authority will honor the agreement made between MTR and Penn National.

"We have not altered the terms of the agreement, nor do we intend to," she said.

MTR will buy the Erie off-track betting parlor when Presque Isle Downs Inc., an MTR subsidiary, begins parimutuel wagering at its proposed thoroughbred horse racing track in Erie County or slot-machine gaming, said Robert Ruben, a Bethesda, Md.-based attorney for MTR.

However, if MTR starts slot-machine gaming before the horse racing track is built -- a good bet -- then the company can defer the purchase of the OTB parlor for one year so that it has time to get the track up and running, Ruben said, citing the agreement.

Bill Velardo, chief executive for the Mohegan Tribal Gaming Authority, said there will be no change in employment for the 60 people who work at the Erie OTB parlor while the authority owns it.

But that will change when MTR buys the property.

Greg Rubino, the local representative for MTR, said that off-track betting will be incorporated into the main racetrack building when it opens either in Summit Township, the city of Erie or McKean Township.

While MTR's plans for the OTB parlor site aren't yet decided, Rubino said that possible uses for the site will be consistent with what's already on upper Peach Street in Summit -- restaurants, hotels and retail shops.

MTR has agreed to give the OTB parlor employees first crack at jobs at the horse racing track and gaming complex.

Rubino still hopes that Presque Isle Downs could start running a slots casino by mid-2005, though construction of a horse racing track will take about two years.

Presque Isle Downs is still waiting to hear whether the Pennsylvania Supreme Court will hear another appeal of its thoroughbred racing license from a potential horse racing competitor from Pittsburgh. And Presque Isle Downs hasn't picked a site, though its license is for Summit Township and any transfer would require approval from the Pennsylvania Horse Racing Commission.