Illinois Gaming Machine Operators Association. Economic Impact Study Casino Gaming. Final Report

Transcription

1 Illinois Gaming Machine Operators Association Economic Impact Study Casino Gaming Final Report May 2015

2 Contents Illinois Riverboat Casino Overview... 3 Historical Overview of Illinois Riverboat Gross Gaming Revenues... 4 Regional Casino Market Overview... 8 Illinois Gaming Revenues Casinos & VGTs Illinois Gaming Taxes Casinos & VGTs Illinois Gaming Tax Analysis by Casino / Casino Market Chicagoland Casinos Tax Analysis Jumer s Casino Tax Analysis Par-A-Dice Casino Tax Analysis Southwest Casinos Tax Analysis Harrah s Metropolis Casino Tax Analysis Illinois Gaming Tax Rate Comparison Statewide Riverboat Gaming Expansion in Illinois VGT Patron and Casino Patron Comparison VGT Market Impact on Existing Riverboat Casinos in Illinois Union Gaming Analytics (702)

3 Illinois Riverboat Casino Overview In 1990 the Illinois Legislature passed the Riverboat Gambling Act which legalized most forms of gambling on Illinois rivers (230 ILCS 10). As described in the act, the legislature intent of the law was to assist economic development and promote Illinois tourism. Under the law, numerous types of gambling are allowed including: baccarat, twenty-one, poker, craps, slot machines, roulette wheel and punch board, but it is limited to boats which navigate any stream in counties with less than 3,000,000 residents. The Riverboat Gambling Act authorized ten licenses throughout the state and none could be located in Cook County, a move aimed at protecting the Chicago area s horse-racing industry. In September of 1991, the first modern Illinois riverboat opened in Alton, with nine boats subsequently opened in East St. Louis, Aurora, Joliet (two), Metropolis, East Peoria, East Dubuque, Elgin, and Rock Island. Initially, all boats had to cruise, but in 1999 the law was changed to permit riverboats to permanently moor without conducting cruises. The gaming law came under a cloud due to a controversy involving the 10 th casino license. When the East Dubuque riverboat casino closed, an effort was made to transfer the license. A controversy over that 10 th license developed when a riverboat in Rosemont sought to secure the license. The Gaming Board rejected that effort because of concerns about ties to organized crime. Although the Gaming Board ultimately selected another Rosemont facility, that plan was nixed by Illinois Attorney General Lisa Madigan over a bankruptcy settlement. Ultimately, the license was rebid and awarded to a facility in Des Plaines. Union Gaming Analytics (702)

4 Historical Overview of Illinois Riverboat Gross Gaming Revenues We analyzed the historical gross gaming revenue ( GGR ) data, as reported by the Illinois Gaming Board for the past 10 years and note that GGR peaked in 2007 at $1.98bn and then declined during the recession ( ). The Smoke Free Illinois Act, which banned smoking in all enclosed workplaces beginning in January 1, 2008, severely reduced casino attendance (attendance was down 11.4% in 2008 compared to 2007) across the state and therefore lead to a decline in revenues (GGR was down 20.9% in 2008). GGR increased for the first time in 2011 (due to the opening of Rivers Casino) for two years, before declining again in 2013 and 2014 (Figure 1). We also analyzed the monthly GGR since 2010, and while volatile on a month-to-month basis, the monthly GGR trended higher from mid (due to the opening of Rivers Casino) through mid-2012 and then declined for approximately 6 months before peaking at $149.1 million in March of Monthly GGR declined for 10 months after it peaked in March of 2013 before increasing for 2 months and then began to steadily decline until December of 2014, when it increased for the first time in 8 months (Figure 2). Currently there are approximately 10,926 slots and 278 table games in the 10 riverboat casino locations (Figure 3). Figure 1: Historical Illinois Riverboat Gaming Annual GGR GGR ($mm) GGR YoY % change $2, % 10.0% $2, % $1, % -5.0% $1, % $ % -20.0% $ % Source: Illinois Gaming Board, Union Gaming Analytics Union Gaming Analytics (702)

5 Figure 2: Historical Illinois Riverboat Gaming Monthly GGR Monthly GGR ($mm) Monthly GGR YoY % change $160 $150 $140 $130 $120 $110 $100 $90 $80 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov % 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% Source: Illinois Gaming Board, Union Gaming Analytics Figure 3: Illinois Riverboat Gaming Market Source: Illinois Gaming Board, Union Gaming Analytics Date Hotel 2014 GGR Total Gaming Property Opened Rooms Casino SF ($mm) Slots Tables Positions Rivers Casino ,687 $ , ,332 Harrah's Joliet Casino & Hotel ,000 $ , ,307 Grand Victoria Casino ,850 $ , ,336 Hollywood Casino Aurora ,384 $ , ,320 Hollywood Casino Joliet ,000 $ , ,265 Casino Queen ,000 $ , ,321 Par-A-Dice Casino ,116 $94.0 1, ,262 Harrah's Metropolis Casino & Hotel ,985 $81.7 1, ,248 Jumer's Casino & Hotel ,000 $76.6 1, ,178 Argosy Casino Alton ,000 $ ,024 Total 1, ,022 $1, , ,592 Union Gaming Analytics (702)

6 We also analyzed the historical gross gaming revenue ( GGR ) data, as reported by the Illinois Gaming Board for the past 10 years and excluded Rivers Casino from the analysis. Rivers Casino opened in July of 2011 and in 2012 became the highest grossing casino in the state of Illinois. Due to Rivers Casino s close proximity to the city of Chicago and affluent suburbs, the property continued to GGR experience growth in 2013 and 2014 while every other casino in the state experience declines in GGR for those two years. When you exclude Rivers Casino from the analysis in 2011 and 2012 Illinois GGR declined 5.4% and 6.0%, respectively compared to an increase of 7.5% and 10.9% for 2011 and 2012, respectively, when you include Rivers. When you exclude Rivers Casino from the analysis in 2013 and 2014 Illinois GGR declined 7.3% and 8.3%, respectively compared to a decrease of 5.3% and 5.7% for 2013 and 2014, respectively, when you include Rivers (Figure 1 and Figure 4). On a same-store basis, Illinois riverboat casinos have been in a state of constant revenue decline since Figure 4: Historical Illinois Riverboat Gaming Annual GGR excluding Rivers Casino Annual GGR ($mm) GGR YoY % change $2, % 10.0% $2, % $1, % -5.0% $1, % $ % -20.0% $ % Source: Illinois Gaming Board, Union Gaming Analytics Union Gaming Analytics (702)

7 We analyzed the annual slot and table GGR for the Illinois riverboat casinos for 2010 to While table GGR has increased every year, slot revenue increased from 2010 to 2012 before declining in 2013 and 2014 (Figure 5). Figure 5: Historical Illinois Riverboat Gaming Annual Slot & Table GGR Slot GGR ($mm) Table GGR ($mm) Slot GGR YoY % change Table GGR YoY % change $1, % $1, % $1, % $1, % $ % $ % $ % $ % $ % Source: Illinois Gaming Board, Union Gaming Analytics Union Gaming Analytics (702)

8 Regional Casino Market Overview We analyzed the historical gross gaming revenue ( GGR ) data for the regional gaming market as reported by each state s gaming board for the past 10 years. We define the regional gaming market as Illinois, Indiana, Mississippi, Louisiana, Missouri, Iowa, Pennsylvania, Ohio, and Michigan ( regional comp set ). It is important to note that the Pennsylvania gaming market opened in 2006, the Ohio gaming market opened in 2012 and the Illinois gaming market includes GGR from the VGT machines. These recently opened gaming markets will have an impact on the year-overyear comparisons. Figure 6 shows the annual GGR for all of the states in our regional comp set. As seen in Figure 7, most states, with the exception of Pennsylvania and Ohio, have all trended in nearly the same direction over the past 10 years. Figure 6: Historical Regional Gaming Market Annual GGR $3,500 Indiana Illinois Mississippi Louisiana Missouri Iowa Pennsylvania Ohio Michigan $3,000 $2,500 $2,000 $1,500 $1,000 $500 $ Source: Indiana Gaming Commission, Illinois Gaming Board, Mississippi Gaming Commission, Louisiana Gaming Control Board, Missouri Gaming Commission, Iowa Racing and Gaming Commission, Pennsylvania Gaming Control Board, Ohio Casino Control Commission, Michigan Gaming Control Board, Union Gaming Analytics Union Gaming Analytics (702)

9 Figure 7: Historical Regional Gaming Market Annual GGR Year-over-Year Change % Indiana Illinois Mississippi Louisiana Missouri Iowa Pennsylvania Ohio Michigan 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% Source: Indiana Gaming Commission, Illinois Gaming Board, Mississippi Gaming Commission, Louisiana Gaming Control Board, Missouri Gaming Commission, Iowa Racing and Gaming Commission, Pennsylvania Gaming Control Board, Ohio Casino Control Commission, Michigan Gaming Control Board, Union Gaming Analytics Union Gaming Analytics (702)

10 We also analyzed the monthly GGR since 2010 for the regional comp set, and while volatile on a month-to-month basis, the monthly GGR trends have been consistent across most of the states. Illinois benefited from the opening of Rivers Casino in July of 2011 and Ohio has benefited from numerous casinos and racinos opening over this time frame (Figure 8 and Figure 9). Figure 8: Historical Regional Gaming Market Monthly GGR $350,000,000 Indiana Illinois Mississippi Louisiana Missouri Iowa Pennsylvania Ohio Michigan $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $0 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Source: Indiana Gaming Commission, Illinois Gaming Board, Mississippi Gaming Commission, Louisiana Gaming Control Board, Missouri Gaming Commission, Iowa Racing and Gaming Commission, Pennsylvania Gaming Control Board, Ohio Casino Control Commission, Michigan Gaming Control Board, Union Gaming Analytics Union Gaming Analytics (702)

11 Figure 9: Historical Regional Gaming Market Monthly GGR Year-over-Year Change % Indiana Illinois Mississippi Louisiana Missouri Iowa Pennsylvania Ohio Michigan 80.0% 60.0% 40.0% 20.0% 0.0% -20.0% -40.0% Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Source: Indiana Gaming Commission, Illinois Gaming Board, Mississippi Gaming Commission, Louisiana Gaming Control Board, Missouri Gaming Commission, Iowa Racing and Gaming Commission, Pennsylvania Gaming Control Board, Ohio Casino Control Commission, Michigan Gaming Control Board, Union Gaming Analytics Union Gaming Analytics (702)

12 We analyzed the monthly GGR since 2010 for Illinois and compared it to the regional comp set excluding Illinois to get a better understand of the trends for both of these markets. Illinois outpaced the regional comp set the year following the opening of Rivers Casino, then trended in-line with the regional comp set until the introduction of the VGT machines, when after the initial roll-out, Illinois has out-paced the regional comp set (Figure 10). If you exclude Ohio from the regional comp set, due to the recent openings and the impact this would have on the year-over-year comparison, the gap between Illinois and the regional comp set is even greater after the introduction of the VGTs in Illinois (Figure 11). Figure 10: Historical Illinois and Regional Comp Set excluding Illinois Monthly GGR Year-over-Year Change Illinois Regional Comp Set excluding Illinois 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Source: Indiana Gaming Commission, Illinois Gaming Board, Mississippi Gaming Commission, Louisiana Gaming Control Board, Missouri Gaming Commission, Iowa Racing and Gaming Commission, Pennsylvania Gaming Control Board, Ohio Casino Control Commission, Michigan Gaming Control Board, Union Gaming Analytics Union Gaming Analytics (702)

13 Figure 11: Historical Illinois and Regional Comp Set excluding Illinois & Ohio Monthly GGR Year-over-Year Change Illinois Regional Comp Set excluding Illinois & Ohio 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Source: Indiana Gaming Commission, Illinois Gaming Board, Mississippi Gaming Commission, Louisiana Gaming Control Board, Missouri Gaming Commission, Iowa Racing and Gaming Commission, Pennsylvania Gaming Control Board, Ohio Casino Control Commission, Michigan Gaming Control Board, Union Gaming Analytics Union Gaming Analytics (702)

14 Illinois Gaming Revenues Casinos & VGTs We analyzed the total Illinois gaming revenues data, as reported by the Illinois Gaming Board for the past 5 years for both the riverboat casinos and the VGT machines. As noted in Figure 12 and Figure 13, while slot revenue declined 6.7% and 7.1% in 2013 and 2014, respectively, both table revenue and VGT revenue increased. Additionally, VGT revenue now accounts for 31.1% of total Illinois gaming revenue. Collective state gaming revenue has increased at a compound annual growth rate ( CAGR ) of 11.6% since Figure 12: Total Illinois Gaming Revenues Riverboat Casinos & VGTs Total Total Total Total Slot Table VGT Illinois Casino GGR Gaming Revenue Gaming Revenue ($ in millions) GGR GGR NTI Gaming Revenue Change (YoY) Change (YoY) CAGR - '10-' $1,199 $172 $1, $1,272 $206 $1, % 7.8% 2012 $1,376 $262 $12 $1, % 11.7% 2013 $1,283 $268 $301 $1, % 12.2% 2014 $1,193 $271 $660 $2, % 14.6% 11.6% % of Total Revenue % 12.5% 100.0% % 13.9% 100.0% % 15.9% 0.7% 100.0% % 14.5% 16.2% 100.0% % 12.8% 31.1% 100.0% Source: Illinois Gaming Board, Union Gaming Analytics Union Gaming Analytics (702)

15 Figure 13: Total Illinois Gaming Revenues Riverboat Casinos & VGTs Slot GGR ($mm) Table GGR ($mm) VGT NTI ($mm) Total IL Gaming Revenue YoY % change $2, % 14.0% $2,000 $1,500 $172 $206 $12 $262 $301 $268 $660 $ % 10.0% 8.0% $1, % $500 $1,199 $1,272 $1,376 $1,283 $1, % 2.0% $ % Source: Illinois Gaming Board, Union Gaming Analytics Union Gaming Analytics (702)

16 Illinois Gaming Taxes Casinos & VGTs We analyzed the total Illinois gaming taxes data, as reported by the Illinois Gaming Board for the past 5 years for both the riverboat casinos and the VGT machines. As noted in Figure 14 and Figure 15, while casino tax dollars declined 6.6% ($37.6 million) and 6.7% ($36.1 million) in 2013 and 2014, respectively, VGT tax dollars more than offset these declines. Additionally, VGT tax dollars now account for 28.3% of total Illinois gaming tax dollars. For the total state, gaming tax dollars has increased at a compound annual growth rate ( CAGR ) of 10.6% since Figure 14: Total Illinois Gaming Tax Dollars Riverboat Casinos & VGTs Casinos VGT Total Illinois State Share Local Share Total State Share Local Share Total State Share Local Share Total ($ in millions) of Taxes of Taxes Tax Dollars of Taxes of Taxes Tax Dollars of Taxes of Taxes Tax Dollars 2010 $383.5 $82.6 $466.1 $383.5 $82.6 $ $400.8 $88.7 $489.5 $400.8 $88.7 $ $476.2 $98.1 $574.3 $3.1 $0.6 $3.7 $479.3 $98.7 $ $444.2 $92.5 $536.7 $75.2 $15.0 $90.2 $519.4 $107.5 $ $413.8 $86.8 $500.6 $164.9 $33.0 $197.9 $578.7 $119.8 $698.5 % of Total Taxes % 17.7% 100.0% 82.3% 17.7% 100.0% % 18.1% 100.0% 81.9% 18.1% 100.0% % 17.0% 99.4% 0.5% 0.1% 0.6% 82.9% 17.1% 100.0% % 14.8% 85.6% 12.0% 2.4% 14.4% 82.8% 17.2% 100.0% % 12.4% 71.7% 23.6% 4.7% 28.3% 82.9% 17.1% 100.0% $ Change $17.3 $6.1 $23.4 $17.3 $6.1 $ $75.4 $9.4 $84.9 $3.1 $0.6 $3.7 $78.5 $10.1 $ ($32.0) ($5.6) ($37.6) $72.1 $14.4 $86.5 $40.1 $8.8 $ ($30.4) ($5.7) ($36.1) $89.7 $17.9 $107.6 $59.3 $12.2 $71.5 % Change % 7.4% 5.0% 4.5% 7.4% 5.0% % 10.6% 17.3% 19.6% 11.3% 18.1% % -5.7% -6.6% % % % 8.4% 8.9% 8.5% % -6.2% -6.7% 119.3% 119.4% 119.3% 11.4% 11.4% 11.4% CAGR - '10-'14 1.9% 1.3% 1.8% 10.8% 9.7% 10.6% Source: Illinois Gaming Board, Union Gaming Analytics Union Gaming Analytics (702)

17 Figure 15: Total Illinois Gaming Tax Dollars Riverboat Casinos & VGTs Casino Tax $ ($mm) VGT Tax $ ($mm) Total IL Gaming Tax $ YoY % change $ % $ % $600 $500 $4 $90 $ % 14.0% 12.0% $ % $300 $200 $100 $466 $489 $574 $537 $ % 6.0% 4.0% 2.0% $ % Source: Illinois Gaming Board, Union Gaming Analytics Union Gaming Analytics (702)

18 Illinois Gaming Tax Analysis by Casino / Casino Market We took a more detailed look at the gaming tax dollars generated by each casino or each casino market and the gaming tax dollars generated by the counties within a 60 minute drive time of each casino or casino market. We analyzed the Chicagoland casinos (Grand Victoria, Rivers Casino, Hollywood Aurora, Hollywood Joliet, and Harrah s Joliet), Jumer s casino, Par-A-Dice casino, the southwest casino market (Argosy Casino Alton and Casino Queen), and Harrah s Metropolis. For our analysis, we used the distance from each casino to the center of each county and therefore, some of the drive times may overlap with some counties that are not included in our analysis. Additionally, if any counties were included in two casinos or casino market drive times, we assigned the county to the closest casino. Chicagoland Casinos Tax Analysis We analyzed the five (5) casinos that make up the Chicagoland casino market and the thirteen (13) counties that are within a 60 minute drive time of these five casinos. The counties included in this analysis are Boone, Cook, DeKalb, DuPage, Grundy, Kane, Kankakee, Kendall, Lake, LaSalle, Livingston, McHenry, and Will (Figure 16). As noted in Figure 17, while Chicagoland casino tax dollars declined 5.1% ($22.2 million) and 4.8% ($19.5 million) in 2013 and 2014, respectively, VGT tax dollars within a 60-minute drive time radius more than offset these declines ($33.1 million in 2013 and $83.6 million in 2014). At the end of 2014, there were 1,949 VGT establishments and 8,129 VGT machines within a 60-mintue drive time radius of the five Chicagoland casinos. Union Gaming Analytics (702)

19 May 9, 2015 Figure 16: Chicagoland Casino Drive Times and Corresponding Counties (30-minute drive time radius in red and 60minute in green) Source: ESRI, Union Gaming Analytics Union Gaming Analytics (702)

20 Figure 17: Chicagoland & VGT Counties (within a 60-minute drive time radius) Tax Dollars VGT Total Chicagoland Tax Dollars Total within 60 Total Number of Establishment VGT ($ in millions) Tax Dollars Minutes Tax Dollars Counties Count Count 2010 $317.2 $ $348.0 $ $431.8 $1.4 $ $409.6 $33.1 $ ,215 5, $390.1 $83.6 $ ,949 8,129 $ Change $30.8 $ $83.8 $1.4 $ ($22.2) $31.7 $ ($19.5) $50.6 $31.0 % Change % 9.7% % 24.5% % 2.2% % 7.0% CAGR - '10-'14 5.3% 10.5% Source: Illinois Gaming Board, ESRI, Union Gaming Analytics Union Gaming Analytics (702)

21 May 9, 2015 Jumer s Casino Tax Analysis We analyzed the Jumer s Casino and the four (4) counties that are within a 60 minute drive time of the casino. The counties included in this analysis are Henry, Mercer, Rock Island, and Warren (Figure 18). As noted in Figure 19, while Jumer s Casino s tax dollars declined 9.7% ($2.2 million) and 8.9% ($1.8 million) in 2013 and 2014, respectively, VGT tax dollars within a 60-minute drive time radius almost offset the decline in 2013 and more than offset the decline in 2014 ($1.9 million in 2013 and $3.9 million in 2014). At the end of 2014, there were 156 VGT establishments and 532 VGT machines within a 60-mintue drive time radius of the Jumer s Casino (Figure 19). Figure 18: Jumer s Casino Drive Times and Corresponding Counties (30-minute drive time radius in red and 60minute in green) Source: ESRI, Union Gaming Analytics Union Gaming Analytics (702)

22 Figure 19: Jumer s Casino & VGT Counties (within a 60-minute drive time radius) Tax Dollars VGT Total Jumers Tax Dollars Total within 60 Total Number of Establishment VGT ($ in millions) Tax Dollars Minutes Tax Dollars Counties Count Count 2010 $20.5 $ $22.4 $ $23.0 $0.0 $ $20.8 $1.9 $ $18.9 $3.9 $ $ Change $2.0 $ $0.6 $0.0 $ ($2.2) $1.9 ($0.4) 2014 ($1.8) $2.0 $0.2 % Change % 9.7% % 2.8% % -1.6% % 0.7% CAGR - '10-'14-1.9% 2.8% Source: Illinois Gaming Board, ESRI, Union Gaming Analytics Union Gaming Analytics (702)

23 Par-A-Dice Casino Tax Analysis We analyzed the Par-A-Dice Casino and the eleven (11) counties that are within a 60 minute drive time of the casino. The counties included in this analysis are Fulton, Knox, Logan, Marshall, Mason, McLean, Peoria, Putnam, Stark, Tazewell, and Woodford (Figure 20). As noted in Figure 21, while Par-A-Dice Casino s tax dollars declined 10.9% ($3.7 million) and 16.3% ($5.0 million) in 2013 and 2014, respectively, VGT tax dollars within a 60-minute drive time radius more than offset these declines ($9.4 million in 2013 and $17.1 million in 2014). At the end of 2014, there were 509 VGT establishments and 1,917 VGT machines within a 60-mintue drive time radius of the Par-A-Dice Casino (Figure 21). Figure 20: Par-A-Dice Casino Drive Times and Corresponding Counties (30-minute drive time radius in red and 60- minute in green) Source: ESRI, Union Gaming Analytics Union Gaming Analytics (702)

24 Figure 21: Par-A-Dice Casino & VGT Counties (within a 60-minute drive time radius) Tax Dollars VGT Total Par-A-Dice Tax Dollars Total within 60 Total Number of Establishment VGT ($ in millions) Tax Dollars Minutes Tax Dollars Counties Count Count 2010 $34.0 $ $33.8 $ $34.1 $0.3 $ $30.4 $9.4 $ , $25.4 $17.1 $ ,917 $ Change ($0.2) ($0.2) 2012 $0.3 $0.3 $ ($3.7) $9.0 $ ($5.0) $7.7 $2.7 % Change % -0.6% % 1.8% % 15.5% % 6.8% CAGR - '10-'14-7.0% 5.7% Source: Illinois Gaming Board, ESRI, Union Gaming Analytics Union Gaming Analytics (702)

25 May 9, 2015 Southwest Casinos Tax Analysis We analyzed the two (2) casinos that make up the Southwest casino market and the ten (10) counties that are within a 60 minute drive time of these two casinos. The counties included in this analysis are Bond, Calhoun, Clinton, Greene, Jersey, Macoupin, Madison, Monroe, St. Clair, and Washington (Figure 22). As noted in Figure 23, while Southwest Casinos tax dollars declined 8.8% ($5.2 million) and 15.7% ($8.5 million) in 2013 and 2014, respectively, VGT tax dollars within a 60-minute drive time radius more than offset the decline in 2013 and almost offset the decline in 2014 ($5.9 million in 2013 and $13.4 million in 2014). At the end of 2014, there were 513 VGT establishments and 1,837 VGT machines within a 60-mintue drive time radius of the two Southwest casinos (Figure 23). Figure 22: Southwest Casinos Drive Times and Corresponding Counties (30-minute drive time radius in red and 60minute in green) Source: ESRI, Union Gaming Analytics Union Gaming Analytics (702)

26 Figure 23: Southwest Casinos & VGT Counties (within a 60-minute drive time radius) Tax Dollars Argosy / VGT Casino Total Queen Tax Dollars Total within 60 Total Number of Establishment VGT ($ in millions) Tax Dollars Minutes Tax Dollars Counties Count Count 2010 $61.3 $ $60.0 $ $59.5 $0.2 $ $54.2 $5.9 $ , $45.7 $13.4 $ ,837 $ Change ($1.3) ($1.3) 2012 ($0.5) $0.2 ($0.3) 2013 ($5.2) $5.7 $ ($8.5) $7.5 ($1.0) % Change % -2.1% % -0.6% % 0.9% % -1.7% CAGR - '10-'14-7.1% -0.9% Source: Illinois Gaming Board, ESRI, Union Gaming Analytics Union Gaming Analytics (702)

27 May 9, 2015 Harrah s Metropolis Casino Tax Analysis We analyzed the Harrah s Metropolis Casino and the seven (7) counties that are within a 60 minute drive time of the casino. The counties included in this analysis are Alexander, Johnson, Massac, Pope, Pulaski, Union, and Williamson (Figure 24). As noted in Figure 25, while Harrah s Metropolis Casino s tax dollars declined 16.4% ($4.3 million) and 5.7% ($1.2 million) in 2013 and 2014, respectively, VGT tax dollars within a 60-minute drive time radius offset some of the decline in 2013 and more than offset the decline in 2014 ($1.3 million in 2013 and $3.0 million in 2014). At the end of 2014, there were 95 VGT establishments and 394 VGT machines within a 60-mintue drive time radius of the Harrah s Metropolis Casino (Figure 25). Figure 24: Harrah s Metropolis Casino Drive Times and Corresponding Counties (30-minute drive time radius in red and 60-minute in green) Source: ESRI, Union Gaming Analytics Union Gaming Analytics (702)

28 Figure 25: Harrah s Metropolis Casino & VGT Counties (within a 60-minute drive time radius) Tax Dollars VGT Harrah's Total Metropolis Tax Dollars Total within 60 Total Number of Establishment VGT ($ in millions) Tax Dollars Minutes Tax Dollars Counties Count Count 2010 $32.2 $ $25.2 $ $25.9 $0.0 $ $21.7 $1.3 $ $20.4 $3.0 $ $ Change ($7.0) ($7.0) 2012 $0.7 $0.0 $ ($4.3) $1.3 ($3.0) 2014 ($1.2) $1.7 $0.4 % Change % -21.6% % 2.9% % -11.4% % 1.9% CAGR - '10-' % -7.6% Source: Illinois Gaming Board, ESRI, Union Gaming Analytics Union Gaming Analytics (702)

29 Illinois Gaming Tax Rate Comparison We analyzed and compared the Illinois gaming tax rates for riverboat boat casinos and VGTs. While the Riverboat Gambling Act imposes two taxes on riverboat casinos, a tax on admissions and a wagering tax, the VGTs only pay one tax. Additionally, the wagering taxes on the riverboat casinos are based on a graduated scale while the taxes on the VGTs are a fixed rate (30% of NTI). The admission tax for riverboat casinos was changed in 2005 and effective August 23, 2005, the admissions tax was set at $2 a person for patrons of Jumer s Casino & Hotel. For all other licensees the admissions tax was set at $3 per person. From each admission, $1 goes to the host community where a riverboat gaming operation is located and the remainder goes to the State. In addition, each local government that serves as a host community for a casino licensee receives a share in an amount equal to five percent (5%) of AGR. The Riverboat Gambling Act defines adjusted gross receipts as gross receipts less winnings paid out to gamblers. The Legislature has amended the wagering tax on riverboat casinos over the years and in 1998, the wagering tax changed from a flat twenty percent (20%) to a graduated tax rate based on annual adjusted gross receipts (Figure 26). Figure 26: Illinois Riverboat Gambling Tax Rates Adjusted Gross Receipts ("AGR") Tax Rate AGR up to and including $25 million 15.0% AGR in excess of $25 million but not exceeding $50 million 22.5% AGR in excess of $50 million but not exceeding $75 million 27.5% AGR in excess of $75 million but not exceeding $100 million 32.5% AGR in excess of $100 million but not exceeding $150 million 37.5% AGR in excess of $150 million but not exceeding $200 million 45.0% AGR in excess of $200 million 50.0% Source: Illinois Gaming Board, Union Gaming Analytics As noted in Figure 27, 4 of the 10 riverboat casinos in Illinois have paid on average less than 30% in taxes over the past 5 years. However, with the recent decline in revenues for the riverboat casinos, excluding Rivers Casino, over the past two years, the tax rate for the riverboat casinos has been declining. In 2014, 7 of the 10 riverboat casinos paid less than 30% in taxes. Union Gaming Analytics (702)

30 Figure 27: Illinois Riverboat Casinos Annual Tax Rates Alton Harrahs Hollywood Casino Hollywood Harrahs Grand Rivers Argosy Jumers Metropolis Par-A-Dice VGT Joliet Queen Aurora Joliet Victoria Casino % 25.8% 28.6% 29.5% 31.0% 32.0% 34.0% 38.8% 40.3% % 26.2% 26.3% 29.3% 31.4% 31.8% 33.5% 37.1% 38.8% 34.7% % 26.2% 27.5% 29.3% 30.0% 31.0% 31.8% 31.7% 36.4% 36.2% 44.6% % 25.5% 25.4% 28.3% 30.0% 30.4% 31.1% 30.9% 35.5% 35.0% 44.5% % 24.7% 25.0% 27.1% 30.0% 29.5% 29.5% 29.7% 35.5% 33.2% 44.4% Average 24.8% 25.7% 26.6% 28.7% 30.0% 30.6% 31.2% 32.0% 36.6% 36.7% 42.1% Source: Illinois Gaming Board, Union Gaming Analytics We analyzed and compared the Illinois gaming tax rates for both the riverboat casinos and VGTs to other regional gaming markets (Figure 28). Figure 28: Regional Tax Rates Tax on Tax on Jurisdiction Slot Revenue Table Games New Jersey 9.3% 9.3% Missouri 21.0% 21.0% Iowa (riverboats) - graduated, up to a maximum of 22.0% 22.0% Iowa (racetracks) - graduated, up to a maximum of (1) 24.0% 24.0% Connecticut 25.0% - Massachusetts (Zone 1, 2 and 3) 25.0% 25.0% Illinois (VGT) 30.0% - Ohio (land-based) 33.0% 33.0% Ohio (racino) 33.5% - Illinois (riverboats) - graduated (2) 15% - 50% (34.2% average in 2014) 15% - 50% Indiana (racino) - graduated 25% - 35% 25% - 35% New York Casinos (3) 37.0% 10.0% Indiana (riverboat and land-based) - graduated 15% - 40% 15% - 40% Maine 48.2% 16.0% Massachusetts (Slot Parlor) 49.0% - Pennsylvania 55.0% 14.0% Rhode Island 62.0% 18.0% Maryland 67.0% 20.0% New York Racinos (4) 67.5% - (1) Applies to racetracks with slots and table games with gaming revenue exceeding $100 million. (2) The average tax rate for the Illinois riverboat casinos was 34.2% in (3) Three new licenses were awarded in the state (Catskills / Orange County, Southern Tier and Capital Region). (4) Some New York racinos pay an effective tax rate of ~70%. Source: American Gaming Association, Union Gaming Analytics Union Gaming Analytics (702)

31 Statewide Riverboat Gaming Expansion in Illinois It is difficult to forecast the impact that statewide riverboat gaming expansion would have on the VGT market due to many unknown variables, including, but not limited to, the number of new riverboat casinos, locations of each new riverboat casino, the size and scope of the projects, and the anticipated opening dates. However, we do believe that statewide gaming expansion in Illinois would be detrimental to both the VGT market and the state of Illinois. The expansion of riverboat casinos in Illinois would impact certain VGT markets by potentially catering to and drawing customers to their facility from other counties located up to 120 minutes from the new riverboat casinos, and therefore shifting gaming tax revenues from counties that don t have the new casinos to the ones that do. Additionally, as seen in Figure 27, 7 of the 10 riverboat casinos paid less than 30% in taxes in 2014 and therefore there is the potential for the new riverboat casinos to pay less in gaming taxes than currently offered by the VGT market. Finally, VGT machines are offered in every county within the state of Illinois and therefore, every county is benefiting from VGT gaming tax revenue. This would not be the case with statewide riverboat gaming expansion in Illinois. Union Gaming Analytics (702)

32 VGT Patron and Casino Patron Comparison The VGT patrons, while they exhibit some of the same characteristics as the casino patron, differ in a few noticeable ways. The majority of the VGT patron frequents the VGT establishments in their local municipality instead of traveling to the riverboat casinos due to the close proximity and easy accessibility of the VGT establishments. Due to the max bet limit on VGT machines of $2 per wager, VGT patrons wagers often tend to be of a lower denomination than those of casino patrons wagers. Lastly, due to the max jackpot of $500 per wager, VGT patrons view VGT gaming more as another form of entertainment than other forms of gambling. Union Gaming Analytics (702)

33 VGT Market Impact on Existing Riverboat Casinos in Illinois On a same store basis (excluding Rivers Casino which opened in July 2011), Illinois riverboat casinos have experienced a decline in GGR since It started in 2008, with the introduction of the Smoke Free Illinois Act, which banned smoking in all enclosed workplaces and lead to a severe reduction in casino attendance (attendance was down 11.4% in 2008 compared to 2007) across the state and therefore lead to a decline in revenues (GGR was down 20.9% in 2008) and continued through 2014, with GGR down 8.3% (Figure 4). Based on our analysis (Figure 1, Figure 2, Figure 4, and Figure 12) there does not appear to have been any meaningful cannibalization from the VGT market on the existing riverboat casinos. However, it is important to note that with the scenarios described above regarding growth in the VGT market (non- Chicago opt out municipalities decide to opt in and/or Chicago opts in), there is the potential for increased cannibalization from the VGT market on the existing riverboat casinos. This issue would need to be further studied to determine the cannibalization impact that the growth in the VGT market would have on the existing riverboat casinos in Illinois. Union Gaming Analytics (702)