ECONOMIC ANALYSIS OF CASINO APPLICANTS IN MISSOURI

MARTIN ROMITTI, PH.D.DIRECTOR OF ECONOMIC & PUBLIC POLICY RESEARCH

UMASS DONAHUE INSTITUTE

Missouri Existing Casinos

• In November 1992 a referendum to allow riverboat gambling was approved by 64% of Missouri voters.

• Missouri riverboat gaming casinos must be located within 1,000 feet of the main channel of the Missouri and Mississippi rivers. • Proposition A in 2008 repealed the law that prevents gamblers from losing no more than $500 in two hours and placed a cap on the number of casino licenses in Missouri at 13.

OverviewMissouri Gaming

Commission Issue:

Last License along Big Rivers

Conflicting Market Research

Community Interest Many Goals

Answer the “Economic” Question: Objective Analysis Research Talent and Tools

Existing and Proposed Casinos Sized by Total Gaming Positions

Study Process Background Data Collection and Research

Existing and New Applicant Questionnaires Customer Data by Zip Code Analysis of Newer Casinos and 2008 Illinois Smoking Ban

Develop and Test Gravity Model Set up Gravity Model in GIS Use Collected Data from Casinos to Fine Tune Model Develop Worst, Average, and Best Case Scenarios

Conduct Economic Impact Analysis Apples-to-Apples Comparisons Test Scenarios Relative Impact to Community

Background Data Collection and Research

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$140,000,000

$160,000,000

$180,000,000

LUMIERE and SMOKEBAN

RIVER CITY

Missouri Casinos Adjusted Gross Receipts (AGR)3-Month Moving Average

ALL MISSOURI CASINOS

OUT STATE CASINOS

KANSAS CITY CASINOS

ST. LOUIS CASINOS

LOSS LIMIT REPEAL

Current Casino Environment and Trends

Speedway Casino Opens in 2012 Estimated 2012 AGR Impacts:

Kansas Speedway AGR: $175M Net New Total Market AGR: $57M (33%) Missouri Loss 2012 AGR: $118M (-

16%)

Kansas City Speedway Casino Impacts

$607

$725

$580

$600

$620

$640

$660

$680

$700

$720

$740

2009 2010 2011 2012

Kansas City Projected AGRIn Millions

Market with Kansas Speedway Casino

Kansas Speedway Casino Zip Code AGR Probability Estimates

Develop and Test Gravity Model Use Collected Data from Casinos to Fine

Tune Model Geographic Market Areas (30-Mi. Urban, 60-

Mi. Rural) Adjust Distance Exponent for Customer

AttractionKansas City

St. Louis Southeast MO

Develop and Test Gravity Model Develop Worst, Average, and Best Case

Scenarios Consider Alternatives

Worst Case: Gravity model only Average Case: Middle point between Worst/Best Cases Best Case: In urban scenarios reduce gravity model

cannibalization by 3% for each casino given St. Louis example. In rural scenario no displacement given distance to nearest existing casino of over 80 miles.

How Do Different Scenarios Alter the Results (if clear winner in ALL scenarios then stronger case)

Casino ApplicantsWorst Case

Average Case

Best Case

IOC-Cape Girardeau 89% 94% 100%Paragon-Sugar Creek 13% 21% 29%Casino Celebration-STL City 34% 45% 56%

Percent Net New Casino AGR Estimates for Each Scenario

Casino Celebration

Isle ofCapri

Paragon Gaming

St. LouisCity

Cape Girardeau

SugarCreek

Investment $132 M $125 M $107 M

Gaming Positions 1,636 1,168 1,480

Casino AGR $126.1 M $80.9 M $103.4 M

Casino Jobs 565 516 573

Net New Casino AGR

$56.8 M $76.2 M $21.7 M

New Gaming & Admin. Taxes

$15.7 M $20.7 M $5.8 M

New TotalJobs

476 726 280

New State GDP $45.2 M $55.0 M $20.2 MAp

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es*

Rese

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Fin

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s**

** Findings for average scenario includes net new figures reflecting cannibalization of existing casinos. Net new AGR, gaming taxes, employment, and GDP are annual averages for seven years (two construction and five operation years). Total employment includes direct and indirect jobs calculated in the economic model.

* Information reported by applicants. All dollar figures in millions. AGR is annual average over five years.

Conduct Economic Impact Analysis Research Findings

Final Findings different than Applicant Figures

All Scenarios point to IOC – Cape Girardeau for Economic and Gaming Revenue Impact

In December 2010, the MGC unanimously selected IOC – Cape Girardeau in public meeting.

Community ContextEMPLOYMENT Paragon-Sugar Creek has

largest direct employment but when displacement considered it would be much smaller. IOC – Cape Girardeau, with the smallest direct employment, would have the largest percentage impact to labor pool.

WAGES Higher wages in KC and St. Louis

Metro. IOC - Cape Girardeau wages closer to the Metro’s average than the other applicants.

GROSS REGIONAL PRODUCT IOC - Cape Girardeau and

Casino Celebration have similar GRP. Impact to local economy larger in Cape Girardeau than other Metro locations.

Casino Employment

2009 MSA Unemp. Rate

Casino Emp. as % of MSA

Unemp.IOC-Cape Girardeau 516 7.9% 13.74%Paragon-Sugar Creek 573 8.6% 0.64%Casino Celebration-STL City 565 9.9% 0.40%

Casino Applicants

Employment Context

Casino Avg. Wage

MSA Avg. Wage

% of MSA Avg. Wage

IOC-Cape Girardeau $28,191 $29,763 95%Paragon-Sugar Creek $35,191 $41,783 84%Casino Celebration-STL City $34,690 $42,578 81%

Wage Context

Casino Applicants

Added GRP (Avg.) MSA GRP % of GRP

IOC-Cape Girardeau $47.6 M 3 Billion 1.60%Paragon-Sugar Creek $19.7 M 101 Billion 0.02%Casino Celebration-STL City $44.9 M 128 Billion 0.03%

GRP Context

Casino Applicants

ECONOMIC ANALYSIS OF CASINO APPLICANTS IN MISSOURIPREPARED BY UMASS DONAHUE INSTITUTE