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The Pennsylvania Supreme Court has granted petitions for review filed by a group of state lawmakers and Philadelphia City Council challenging Philadelphia’s December decision to allow SugarHouse Casino to build on state-owned riparian lands.

The court granted on March 19 the petition filed by several state senators and representatives, including Sen. Vincent J. Fumo, in Fumo v. City of Philadelphia as well as the petition in a separate case filed the same week, City Council of Philadelphia v. City of Philadelphia. The court scheduled oral arguments in the consolidated cases for the May session in Harrisburg.

HSP Gaming, the parent company of SugarHouse, is an intervenor in the cases and has filed an application seeking to have the arguments moved to before the court’s April 14-17 session in Philadelphia or at least moved to that session.

In its application, HSP Gaming said a purchase agreement for the land near the old Jack Frost refinery site where SugarHouse is set to be built is scheduled to be executed on May 12, the same day as the oral arguments. At that time, the company would owe approximately $70 million, according to the application.

HSP Gaming’s attorney, Stephen A. Cozen of Cozen O’Connor, said the purchase agreement provides for an obligation to close on the deal within a certain number of days after the gaming license was issued. That day would be on or around May 12, he said.

When Mayor Michael Nutter moved into City Hall in January, he quickly had the new Commerce Department director revoke SugarHouse’ license to build on the riparian lands on the Delaware waterfront. HSP Gaming is appealing that decision in a separate case, but the court will hear arguments on a similar issue in Fumo.

The court limited the arguments to two main issues.

It will look at whether the state or the city of Philadelphia has the right to authorize construction on the submerged lands under the Delaware River and whether the city of Philadelphia may revoke a validly issued license while the appeal of the issuance of the license is before the Supreme Court, according to the court’s orders granting the

petitions.

Because the court, in its order, closed the pleadings and said it would take all other ancillary matters under advisement, HSP Gaming argued in its application none of the parties would be adversely affected by holding the arguments earlier.

“It’s unfair to ask us to put up $70 million when the issue of ‘is there or isn’t there a valid license’ still up in the air,” Cozen said.

HSP Gaming could still go ahead with the deal without the riparian lands, he said, but the company would have to submit a new development plan that would need to be approved.

Cozen said that despite the administration change, the city still agrees with HSP Gaming that the city has the right to grant a license to build on riparian lands. Nutter revoked the license because of what he said was a flawed process that was done too quickly, not because he didn’t feel the city had the right to issue the license, Cozen said.

At the arguments, he said, the Supreme Court will deal with the procedural issue of whether the city could revoke the license in the midst of an ongoing appeal. It will not examine whether the city could revoke the license due to the speed and process in which the previous administration granted the license, he said. The court has not issued any rulings or orders in HSP Gaming’s petition for review of Nutter’s revocation, Cozen said.

Despite Cozen’s characterization of the city’s position, recent legislation from the General Assembly seems to have caused the city to change its position.

The city law department does not comment on ongoing litigation, according to a spokesman for the department.

However, in its brief filed in opposition to HSP Gaming’s appeal of the revocation, an issue not before the high court in Fumo or City Council, the city said that in light of new legislation passed by the General Assembly and signed into law in late February by Gov. Edward G. Rendell, it does not support the granting of riparian rights by the city without the authorization of the state.

“On Feb. 22, 2008, Governor Rendell signed into law two acts of the General Assembly in which the General Assembly clarified that the power to grant a license to use commonwealth land rests solely and exclusively with the General Assembly, which must specifically authorize such a grant,” the brief stated. “The license at issue here was not so specifically authorized, and the commonwealth’s recent clarification is contrary to the city’s understanding when it issued the license.

“This court should accept the commonwealth’s and now the city’s view that the city lacked any right to issue the riparian license in the first instance and that the license was void ab initio. Therefore any discussion about the revocation is unnecessary as moot.”

In their petition in Fumo, the lawmakers said the Nov. 27 decision by the Philadelphia Commerce Department was not a decision the department could make legally and stepped upon the solitary decision-making role of the General Assembly to authorize HSP Gaming to construct up to a 5,000-slot machine facility on the 12 acres of submerged public lands in question.

HSP asked the General Assembly in October 2006 to convey to it the riparian rights, but that request was rejected.

“This matter, if left uncontested, would create a new precedent, permitting any developer, who was otherwise unsuccessful in obtaining legislative authorization to occupy submerged lands of the commonwealth or who did not wish to comply with legislatively imposed terms or conditions, to simply apply to the city of Philadelphia Commerce Department for a more favorable deal,” the lawsuit petition said.

The legislators stressed their lawsuit was not attacking the issue of gaming in Philadelphia but the issue of the authority of the Legislature to convey title or other interest in state property.

In a Dec. 3 per curiam opinion, the state Supreme Court ruled in HSP Gaming v. City Council for the City of Philadelphia that the City Council had no authority to delay the implementation of HSP’s development plan and declared the site a commercial entertainment district.

The Fumo lawsuit argues both the state constitution and the 1978 Dam Safety and Encroachments Act allow no conveyance of any property rights without the authorization of the Legislature. Act 321 of 1907 only allows the Philadelphia Commerce Department to permit the construction of wharves, piers and other boating-related structures on submerged state lands, according to the lawsuit.

Former City Solicitor Romulo Diaz Jr. said in a legal opinion on Nov. 13 that Section 10 of Act 321 authorized the Commerce Department to permit the development of riparian public lands and that the dam safety law did not affect the city’s power under Act 321, according to a memorandum included in the exhibits of the Fumo lawsuit. Stephanie Naidoff, then director of the Commerce Department, issued the license Nov. 27.

The lawmakers who filed the suit are state Sens. Fumo and Michael J. Stack and state Reps. Robert C. Donatucci, William F. Keller, Michael P. McGeehan, Michael H. O’Brien and John J. Taylor. Each of the legislators represents districts that are contiguous to the Delaware River. All the legislators are Democrats except for Taylor.

Catherine M. Recker of Welsh & Recker in Philadelphia represents the lawmakers.

“In scheduling oral argument, the court has signaled that it takes very seriously the important issue of the appropriate disposition of state land held for public good,” she said.

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