BETHLEHEM Just two weeks after the $1.3 billion sale of Sands Casino Resort Bethlehem collapsed under the threat that Pennsylvania may allow casino gambling in bars, Sands is launching a million-dollar campaign to stop the legislation behind it.

Sands this week is beginning a statewide ad war against proposed House legislation that would allow video gaming terminals in bars and truck stops. You'll soon be seeing doom-and-gloom commercials detailing how VGTs in every neighborhood will gut a statewide casino model that is yielding $1.4 billion in tax money a year.

To fund it, Sands is pumping more than $1 million into a newly formed lobbying organization called Pennsylvanians For Responsible Government. Sands officials say they expect other casinos to join in their fight, but none were announced Monday. The campaign includes radio ads, an internet landing page with the headline "Greetings from Pennsylvania, Land of 12,000 Casinos," and a 30-second television spot that suggests some lawmakers want to put the terminals in delis and nursing homes.

It sets up a heavyweight fight between casinos looking to keep their slot machine monopoly and the Pennsylvania Tavern Association, which wants its cut of the gambling pie.

"This proposal would destroy the brick-and-mortar casino industry and risk the nearly $1.4 billion in tax revenues that these establishments generate annually," lobbying group spokesman Michael Barley said. "Worse yet, because VGTs are designed to operate without employees, the 18,000 people casinos collectively employ in Pennsylvania will be put in serious jeopardy."

Proponents say the bill will prop up mom-and-pop taverns, while pumping hundreds of millions of tax dollars into the state budget.

The bill's main sponsor, Rep. Mark Mustio, R-Allegheny, said Monday that Sands' ad campaign is misleading.

"They are trying to create a boogieman and I'm not interested in playing that game," Mustio said. "If they can spend $1 million for an ad campaign, maybe we should raise their taxes."

Mustio said allowing five machines doesn't make a bar a casino, and the bill only allows the terminals in liquor-licensed establishments, truck stops and off-track betting facilities. Liquor Control Board records show that 35 nursing homes statewide have active liquor licenses but Mustio said he didn't know that, and the bill can be amended to exclude nursing homes as has been done with groceries that have licenses to sell beer or wine.

The bill's purpose, Mustio added, is to legalize and tax illegal terminals operating in social halls and taverns across the state.

"We don't have $1 million to fight Sands, but we have friends in the Senate and House," said Tavern Association President Tom Boock, who owns the Cottage Pub and Restaurant in Chambersburg, Franklin County. "We're not just going to back down to these billionaire casino owners."

Among those friends is Sen. Lisa Boscola, D-Northampton, whose Bethlehem office is roughly a mile from Sands. Boscola said she doesn't believe the terminals are a threat to the casino industry.

"They are entitled to have their ad campaign, but it's not going to change my vote one way or the other," Boscola said

Sands, arguably the state's most successful casino, may rule Pennsylvania's gambling landscape, but its executives are admittedly worried about VGTs. And they should be worried, said John Cunnane, a Wall Street gaming and leisure analyst for Stifel Investment Services, because House Bill 1010 calls for sweeping expansion. It would give the state's more than 16,000 establishments with liquor licenses a chance to have what are essentially tavern slot machines.

Sources have said Sands already has been damaged by the threat of the terminals. Sources in March said the world's largest casino company had a tentative deal to sell its south Bethlehem casino, hotel, outlet mall and concert venue to the world's second-largest, MGM Resorts International. Las Vegas Sands Corp. confirmed the casino had an interested buyer, but never commented on who it was. However, two weeks ago, sources said MGM pulled out of the deal, fearing that VGTs would be approved in Pennsylvania, if not this year then later.

Under the bill, bars, clubs and restaurants could have as many as five terminals each, and off-track betting facilities and truck terminals could have up to 10. Analysts estimate it would add 35,000 to 40,000 machines statewide. The combined number of slot machines at the state's 12 casinos is less than 27,000.

"That's an insane number of VGTs, and we've seen the impact that's had on casinos in places like Iowa and Illinois," Cunnane said. "It won't cause a mass exodus from casinos, but they will feel the pain, no doubt."

Cunnane explained that because Pennsylvania's casino model is built on the convenience gambler rather than Las Vegas or even Atlantic City, which cater to the destination gambler adding thousands of more convenient locations will have a major impact on the bottom line.

In Illinois, for example, its 10 riverboat casinos had $1.6 billion in gross revenues in 2012, before VGTs arrived. Last year, revenues were down to $1.4 billion, and the tax to the state fell nearly $100 million, to $477 million, according to figures compiled by the Illinois Gaming Board.

VGT proponents say there are 40,000 machines being played illegally in private clubs and bars, though state police put the number closer to 15,000. House estimates say it will produce $100 million in the first year and up to $500 million more in taxes down the road.

Based on testimony during gambling hearings in March, it appears that 11 of the state's 12 casinos will oppose the terminals. Hollywood Casino in Dauphin County supports them, largely because its owner, Penn National Gaming, owns a VGT business that includes more than 1,500 machines in Illinois.

There are some carrots in the bill to entice casinos to endorse it. The latest version would reduce the 54 percent slot machine tax in casinos to 49 percent, but that has not swayed Sands.

massad@mcall.com

Twitter @matthewassad21

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What House Bill 1010 legalizes: Up to five video gaming terminals similar to slot machines in liquor-licensed facilities, such as bars and restaurants, and up to 10 VGTs in truck stops and off-track betting facilities.

Where the bill stands: It was introduced in the House on Monday, where it could get amendments, but it's unclear how soon, or if, it will come for a vote. To become law, it would also need approval in the Senate, where there is far less support for VGTs.

Why Sands casino is waging an ad war against it: Sands executives fear the addition of 40,000 VGTs statewide would affect their bottom line by keeping people from visiting brick and mortar casinos.

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Sands Bethlehem casino waging ad war against tavern gambling - Allentown Morning Call