INDIAN GAMING INDUSTRY REPORT

Transcription

1 2015 Edition At the facility level, approximately 49 percent of Indian facilities experienced growth in revenue in 2010, while 51 percent experienced declines. In the extremes, about 5 percent grew 50 percent or more, while nearly 13 percent declined 10 percent or more. Casino City s With its success, Indian has had a transformational impact on many Native American tribes. It has enabled tribes to: Fund government operations; $12.4 billion in federal, state, local tax revenue; $1.5 billion in direct payments to federal, state, local governments. INDIAN GAMING Gaming revenue also continued to be highly concentrated In light of Indian s turnaround in 2010 among a small percentage of Indian facilities. In anecdotal evidence from 2011, the short-term to mid-term 2010, the top 5 percent of all Indian facilities, future outlook for Indian looks promising. Even which each generated $250 million or more, accounted for with only a slow recovery, 2010 was certainly something INDUSTRY REPORT approximately 38 percent of total revenue at all positive to build on. The economy will improve over Indian facilities. And while the top 30 percent of time, bringing back consumer confidence, disposable facilities, which each generated $50 million or income, spending on casino gambling, financing for more, accounted for about 85 percent of nationwide future casino developments however, maybe not all to revenue, the bottom 35 percent of their pre-recession levels. There is likely to be more By Alan Meister, Ph.D. facilities, which each generated $10 million or less, caution in moving forward with investing in future accounted for only 2 percent of nationwide developments. revenue. As in 2010, varying circumstances will exist. And thus performance will likely vary widely across Indian facilities, tribes, states. There are several potential sources of future Indian growth once the economy recovers: Support a variety of social economic programs services, such as health care, housing, utilities, safety, transportation, education, vocational training, elderly care, environmental natural resource services; Fund economic development efforts; Finance the development of other tribal enterprises. In addition to having a positive impact on Native American tribes, as well as on the industry, Indian continues to make significant contributions to the U.S. economy. Indian facilities, including their non- operations, directly generated approximately $28.6 billion in output supported about 306,000 jobs $12.6 billion in wages in calendar year Indian also led to output, jobs, wages outside of Indian facilities tribal reservations. Furthermore, all of this economic activity led to tax revenue other direct payments to federal, state, local governments, assistance to charitable organizations. In 2010, it is estimated that Indian directly indirectly led to approximately: $86.0 billion in output; Potawatomi Hotel & Casino, Milwaukee, Wisconsin 706,000 jobs; $29.2 billion in wages; 1) States where tribes were previously restricted in terms of supply but are now able to exp; 2) Conversions from Class II to Class III ; 3) Continued success with Class II, as long as regulations do not become significantly more restrictive; 4) Growth in smaller, less mature Indian states; 5) Growth in states that have limited competition /or unmet dem; 6) The abundance of new facilities under construction, existing facilities being exped, new casinos being proposed planned. While the mid-term outlook for Indian is positive, the long-term outlook for Indian is uncertain. Any number of things could negatively impact Indian. These potential threats include both non-market market factors. Potential non-market factors include legal challenges, legislation, regulations that restrict Indian limit its expansion. Potential market factors include: The maturation of markets; Increasing competition. IndianGamingReport.com Casino Casino City s City s Indian Indian Gaming Gaming Industry Industry Report Report Edition 3 CasinoCityPress.com 1

2 EXECUTIVE SUMMARY In the wake of the Great Recession, Indian, like much of the U.S. economy, showed signs of recovery in With gross domestic product (GDP) personal disposable income on the rise employment decreasing at a slower rate both nationwide in every state, Indian was able to turn things around in calendar year 2010 after coming off of its first-ever decline in calendar year 2009 (-1 percent) four straight years of slower growth (i.e., lower growth rates). On a nationwide basis, revenue at Indian facilities increased a little over 1 percent. This compared to improved, but inferior performance by the commercial casinos segment, which declined 0.1 percent, the card room segment, which declined about 2 percent. However, the racino segment continued to outperform Indian with growth of approximately 5 percent. Amidst its relative performance, Indian continued to be a significant segment of the industry. In 2010, Indian generated approximately 44 percent of all U.S. casino revenue (i.e., revenue generated at Indian facilities, commercial casinos, racinos). This was only a slightly smaller share than the commercial casinos segment, which led the way with approximately 45 percent of casino revenue. However, Indian continued to gain ground is poised to overtake the commercial casino segment in the near future. Despite the turnaround in its performance in 2010, Indian s relatively slow growth was still a part of the larger overall slowdown in the growth of Indian starting in Furthermore, the 2010 growth rate was significantly below its pre-recession growth rates approximately 15 percent from 2002 through 2005, 10 percent in 2006, 4 percent in 2007 (although the 2007 growth rate may have been negatively impacted in part by the beginning of the recession). Lower consumer confidence higher unemployment relative to their prerecession levels continued to result in decreased spending at facilities. Meanwhile, restricted lending more costly financing resulted in fewer casino developments (e.g., introductions of new facilities, major expansions renovations of existing facilities) as compared to previous years. While the slower growth in 2008, 2009, 2010 can be attributed in large part to the general slowdown in the U.S. economy, it cannot explain the slowdown in Indian preceding the beginning of the recession at the end of In part, this pre-recession slowdown was the result of public policies that restricted the supply of Indian. These public policies have included proposed enacted legislation regulations, as well as judicial decisions tribal-state compacts. While Indian grew slightly on a nationwide basis in 2010, the performance of Indian varied widely across states facilities. At the state level, revenue growth varied from +61 percent in Alabama to -7 percent in North Carolina, with a strong majority of the states (19 of 28) experiencing growth over The fastest growing states after Alabama were Texas, Alaska, Louisiana, Washington, Michigan, Mississippi, New York. Florida Oklahoma also experienced growth in 2010 (approximately 1 percent 4 percent, respectively), but much less than in previous years. The fastest declining states after North Carolina were Idaho, Iowa, Connecticut, California. Indian continues to be very fragmented. The $26.7 billion in revenue $3.2 billion in non revenue in 2010 were generated by 239 Native American tribes operating 448 facilities in 28 states. However, revenue was highly concentrated within certain states. In 2010, the largest state in terms of revenue at Indian facilities continued to be California, with $6.8 billion. It alone accounted for just over 25 percent of revenue at Indian facilities nationwide. The top two states, California Oklahoma, generated a combined 38 percent of revenue. Meanwhile, the top five states, which added Connecticut, Florida, Washington to California Oklahoma, accounted for approximately 61 percent of revenue. The level of concentration for the top ten states, which added Arizona, Minnesota, Michigan, Wisconsin, New York to the top five states, was 86 percent of revenue. The states that made the largest positive contributions to nationwide revenue growth in 2010 were large Indian states with healthy growth rates (from high to low): Washington, Oklahoma, Michigan, New York. One relatively smaller state, Alabama, also made a significant contribution toward the overall nationwide growth of Indian with its strong growth. The states that made the largest negative contributions to nationwide Indian growth in 2010 were large Indian states that experienced declines (from low to high): California, Connecticut, Wisconsin, Minnesota. 2 2 Casino City s Casino Indian City s Gaming Indian Gaming Industry Industry Report Report 2012 Edition 2015 Edition

3 At the facility level, approximately 49 percent of Indian facilities experienced growth in revenue in 2010, while 51 percent experienced declines. In the extremes, about 5 percent grew 50 percent or more, while nearly 13 percent declined 10 percent or more. Gaming revenue also continued to be highly concentrated among a small percentage of Indian facilities. In 2010, the top 5 percent of all Indian facilities, which each generated $250 million or more, accounted for approximately 38 percent of total revenue at all Indian facilities. And while the top 30 percent of facilities, which each generated $50 million or more, accounted for about 85 percent of nationwide revenue, the bottom 35 percent of facilities, which each generated $10 million or less, accounted for only 2 percent of nationwide revenue. With its success, Indian has had a transformational impact on many Native American tribes. It has enabled tribes to: Fund government operations; Support a variety of social economic programs services, such as health care, housing, utilities, safety, transportation, education, vocational training, elderly care, environmental natural resource services; Fund economic development efforts; Finance the development of other tribal enterprises. In addition to having a positive impact on Native American tribes, as well as on the industry, Indian continues to make significant contributions to the U.S. economy. Indian facilities, including their non- operations, directly generated approximately $28.6 billion in output supported about 306,000 jobs $12.6 billion in wages in calendar year Indian also led to output, jobs, wages outside of Indian facilities tribal reservations. Furthermore, all of this economic activity led to tax revenue other direct payments to federal, state, local governments, assistance to charitable organizations. In 2010, it is estimated that Indian directly indirectly led to approximately: $86.0 billion in output; 706,000 jobs; $29.2 billion in wages; $12.4 billion in federal, state, local tax revenue; $1.5 billion in direct payments to federal, state, local governments. In light of Indian s turnaround in 2010 anecdotal evidence from 2011, the short-term to mid-term future outlook for Indian looks promising. Even with only a slow recovery, 2010 was certainly something positive to build on. The economy will improve over time, bringing back consumer confidence, disposable income, spending on casino gambling, financing for future casino developments however, maybe not all to their pre-recession levels. There is likely to be more caution in moving forward with investing in future developments. As in 2010, varying circumstances will exist. And thus performance will likely vary widely across Indian facilities, tribes, states. There are several potential sources of future Indian growth once the economy recovers: 1) States where tribes were previously restricted in terms of supply but are now able to exp; 2) Conversions from Class II to Class III ; 3) Continued success with Class II, as long as regulations do not become significantly more restrictive; 4) Growth in smaller, less mature Indian states; 5) Growth in states that have limited competition /or unmet dem; 6) The abundance of new facilities under construction, existing facilities being exped, new casinos being proposed planned. While the mid-term outlook for Indian is positive, the long-term outlook for Indian is uncertain. Any number of things could negatively impact Indian. These potential threats include both non-market market factors. Potential non-market factors include legal challenges, legislation, regulations that restrict Indian limit its expansion. Potential market factors include: The maturation of markets; Increasing competition. Casino Casino City s City s Indian Indian Gaming Gaming Industry Industry Report Report Edition 3 3

4 Growth of Gaming Revenue at Indian Gaming Facilities, EXECUTIVE SUMMARY In the wake of the Great Recession, Indian, like much of the U.S. economy, showed signs of recovery in With gross domestic product (GDP) personal disposable income on the rise employment decreasing at a slower rate both nationwide in every state, Indian was able to turn things around in calendar year 2010 after coming off of its first-ever decline in calendar year 2009 (-1 percent) four straight years of slower growth (i.e., lower growth rates). On a nationwide basis, revenue at Indian facilities increased a little over 1 percent. This compared to improved, but inferior performance by the commercial casinos segment, which declined 0.1 percent, the card room segment, which declined about 2 percent. However, the racino segment continued to outperform Indian with growth of approximately 5 percent. Amidst its relative performance, Indian continued to be a significant segment of the industry. In 2010, Indian generated approximately 44 percent of all U.S. casino revenue (i.e., revenue generated at Slowdown Indian of facilities, the U.S. commercial Economy, casinos, 2013 racinos). This was only a slightly smaller share than the commercial casinos segment, which led the way with approximately 45 percent of casino revenue. However, Indian continued to gain ground is poised to overtake the commercial casino segment in the near future. Despite the turnaround in its performance in 2010, Indian s relatively slow growth was still a part of the larger overall slowdown in the growth of Indian starting in Furthermore, the 2010 growth rate was significantly below its pre-recession growth rates approximately 15 percent from 2002 through 2005, 10 percent in 2006, 4 percent in 2007 (although the 2007 growth rate may have been negatively impacted in part by the beginning of the recession). Lower consumer confidence Slowdown higher unemployment of State Economies, relative to their 2013pre- recession levels continued to result in decreased spending at facilities. Meanwhile, restricted lending more costly financing resulted in fewer casino developments (e.g., introductions of new facilities, major expansions renovations of existing facilities) as compared to previous years. While the slower growth in 2008, 2009, 2010 can be attributed in large part to the general slowdown in the U.S. economy, it cannot explain the slowdown in Indian preceding the beginning of the recession at the result of public policies that restricted the supply of Indian. These public policies have included proposed enacted legislation regulations, as well as judicial decisions tribal-state compacts. While Indian grew slightly on a nationwide basis in 2010, the performance of Indian varied widely across states facilities. At the state level, revenue growth varied from +61 percent in Alabama to -7 percent in North Carolina, with a strong majority of the states (19 of 28) experiencing growth over The fastest growing states after Alabama were Texas, Alaska, Louisiana, Washington, Michigan, Mississippi, New York. Florida Oklahoma also experienced growth in 2010 (approximately 1 percent 4 percent, respectively), but much less than in previous years. The fastest declining states after North Carolina were Idaho, Iowa, Connecticut, California. Indian continues to be very fragmented. The $26.7 billion in revenue $3.2 billion in non revenue in 2010 were generated by 239 Native American tribes operating 448 facilities in 28 states. However, revenue was highly concentrated within certain states. In 2010, the largest state in terms of revenue at Indian facilities continued to be California, with $6.8 billion. It alone accounted for just over 25 percent of revenue at Indian facilities nationwide. The top two states, California Oklahoma, generated a combined 38 percent of revenue. Meanwhile, the top five states, which added Connecticut, Florida, Washington to California Oklahoma, accounted for approximately 61 percent of revenue. The level of concentration for the top ten states, which added Arizona, Minnesota, Michigan, Wisconsin, New York to the top five states, was 86 percent of revenue. The states that made the largest positive contributions to nationwide revenue growth in 2010 were large Indian states with healthy growth rates (from high to low): Washington, Oklahoma, Michigan, New York. One relatively smaller state, Alabama, also made a significant contribution toward the overall nationwide growth of Indian with its strong growth. The states that made the largest negative contributions to nationwide Indian growth in 2010 were large Indian states that experienced declines (from low to high): California, Connecticut, Wisconsin, Minnesota. Copyright 2015 by Alan Meister Casino City Press. All rights reserved. end of In part, this pre-recession slowdown was the No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of Alan Meister Casino City Press. 4 2 Casino City s Casino Indian City s Gaming Indian Gaming Industry Industry Report Report 2012 Edition 2015 Edition

5 At the facility level, approximately 49 percent of Indian facilities experienced growth in revenue in 2010, while 51 percent experienced declines. In the extremes, about 5 percent grew 50 percent or more, while nearly 13 percent declined 10 percent or more. $12.4 billion in federal, state, local tax revenue; APPENDIX D: MAP OF INDIAN GAMING GROWTH, 2013 $1.5 billion in direct payments to federal, state, local governments. Gaming revenue also continued to be highly concentrated among a small percentage of Indian facilities. In 2010, the top 5 percent of all Indian facilities, which each generated $250 million or more, accounted for approximately 38 percent of total revenue at all Indian facilities. And while the top 30 percent of facilities, which each generated $50 million or more, accounted for about 85 percent of nationwide revenue, the bottom 35 percent of facilities, which each generated $10 million or less, accounted for only 2 percent of nationwide revenue. With its success, Indian has had a transformational impact on many Native American tribes. It has enabled tribes to: Fund government operations; Support a variety of social economic programs services, such as health care, housing, utilities, safety, transportation, education, vocational training, elderly care, environmental natural resource services; Fund economic development efforts; Finance the development of other tribal enterprises. In addition to having a positive impact on Native American tribes, as well as on the industry, Indian continues to make significant contributions to the U.S. economy. Indian facilities, including their non- operations, directly generated approximately $28.6 billion in output supported about 306,000 jobs $12.6 billion in wages in calendar year Indian also led to output, jobs, wages outside of Indian facilities tribal reservations. Furthermore, all of this economic activity led to tax revenue other direct payments to federal, state, local governments, assistance to charitable organizations. In 2010, it is estimated that Indian directly indirectly led to approximately: $86.0 billion in output; 706,000 jobs; $29.2 billion in wages; In light of Indian s turnaround in 2010 anecdotal evidence from 2011, the short-term to mid-term future outlook for Indian looks promising. Even with only a slow recovery, 2010 was certainly something positive to build on. The economy will improve over time, bringing back consumer confidence, disposable income, spending on casino gambling, financing for future casino developments however, maybe not all to their pre-recession levels. There is likely to be more caution in moving forward with investing in future developments. As in 2010, varying circumstances will exist. And thus performance will likely vary widely across Indian facilities, tribes, states. There are several potential sources of future Indian growth once the economy recovers: 1) States where tribes were previously restricted in terms of supply but are now able to exp; 2) Conversions from Class II to Class III ; 3) Continued success with Class II, as long as regulations do not become significantly more restrictive; 4) Growth in smaller, less mature Indian states; 5) Growth in states that have limited competition /or unmet dem; 6) The abundance of new facilities under construction, existing facilities being exped, new casinos being proposed planned. While the mid-term outlook for Indian is positive, the long-term outlook for Indian is uncertain. Any number of things could negatively impact Indian. These potential threats include both non-market market factors. Potential non-market factors include legal challenges, legislation, regulations that restrict Indian limit its expansion. Potential market factors include: The maturation of markets; Increasing competition. Casino Casino City s City s Indian Indian Gaming Gaming Industry Industry Report Report Edition 3 5

6 EXECUTIVE SUMMARY ABOUT THE AUTHOR In the wake of the Great Recession, Indian, like result of public policies that restricted the supply of Indian much of the U.S. economy, showed signs of recovery Alan in P. Meister,. These Ph.D. public policies have included proposed With gross domestic product (GDP) personal Principal Economist enacted legislation regulations, as well as judicial disposable income on the rise employment decreasing Nathan Associates decisions Inc. tribal-state compacts. at a slower rate both nationwide Ph.D., in every M.A., state, B.A., Indian Economics, University of California, Irvine was able to turn things around in calendar year While Indian grew slightly on a nationwide basis 2010 Telephone: after coming (949) off of its first-ever decline in calendar in 2010, the performance of Indian varied 3 Park widely Plaza year Facsimile: 2009 (-1 percent) (949) four straight years of slower across states facilities. At the state level, Suite 1980 growth (i.e., lower ameister@nathaninc.com growth rates). On a nationwide basis, revenue growth varied from +61 Irvine, percent CA in revenue at Indian facilities increased a little Alabama to -7 percent in North Carolina, with a strong over Dr. 1 percent. Meister This an compared economist to improved, specializing but in inferior the application majority of economic of the states analysis (19 of to 28) public experiencing policy, litigation, growth over performance regulatory, by the commercial strategic business casinos matters. segment, which He has extensive experience The fastest analyzing growing states economic after Alabama issues related were to the declined 0.1 percent, industry, including the card Indian room segment,, which commercial Texas, casinos, Alaska, racinos, Louisiana, card rooms, Washington, racetracks, Michigan, online declined. about His 2 percent. work has However, included the industry racino segment market analyses, Mississippi, economic New York. fiscal Florida impact studies, Oklahoma public also policy continued analysis, to outperform evaluations Indian of regulations, with economic growth of assessments experienced of l-in-trust growth in 2010 (approximately applications, analyses 1 percent of tribalstate compacts revenue sharing, feasibility analyses, tribal socioeconomic needs assessments, surveys, approximately 5 percent. 4 percent, respectively), but much less than in previous years. The fastest declining states after North Carolina economic research, analysis, expert testimony in litigation regulatory matters. Dr. Meister has also Amidst its relative performance, Indian continued were Idaho, Iowa, Connecticut, California. to be conducted a significant years segment of independent, of the scholarly industry. research In on the industry authored a number of 2010, publications, Indian most generated notably approximately his annual study, 44 percent the Indian Gaming Indian Industry continues Report. His to be very fragmented. work is relied The upon by of all the U.S. casino industry, revenue governments, (i.e., revenue the investment $26.7 community. billion in He has presented revenue his $3.2 work billion at various in non revenue before the in 2010 California were generated State Senate by 239 on Native generated academic, at Indian professional, facilities, industry commercial conferences casinos, testified racinos). issues. Furthermore, This was only his a slightly research smaller share analyses than have been American relied upon tribes before operating the 448 United States facilities Supreme in 28 Court the commercial the World casinos Trade segment, Organization, which led the way cited with by the Supreme states. However, Court. In addition, revenue he was was previously highly concentrated approximately commissioned 45 percent by the of National casino Indian revenue. Gaming Commission within to certain independently states. In 2010, analyze the the largest economic state in effects terms of of However, proposed Indian regulatory continued changes. to He gain leads ground the Gaming is Industry revenue Indian at Indian Gaming consulting facilities practices continued at to Nathan be poised Associates, to overtake as the well commercial as its Native casino American segment Advisory in the Services. California, with $6.8 billion. It alone accounted for just near future. over 25 percent of revenue at Indian Dr. Meister provides economic research, analysis, expert facilities testimony nationwide. in various The top types two states, of litigation California matters, Despite including the turnaround antitrust, in intellectual its performance property, in 2010, labor Indian employment, Oklahoma, general generated commercial a combined litigation, 38 percent of class actions. s He has relatively conducted slow growth damage was analyses still a part involving of the larger a wide range revenue. of claims, Meanwhile, including: the top anticompetitive five states, which conduct; added tortious overall interference slowdown with in the current growth of Indian prospective business; starting breach Connecticut, of contract; Florida, breach of Washington fiduciary duty; to California breach of in covenant Furthermore, of good the faith 2010 growth fair dealing; rate was patent, trademark, Oklahoma, trade accounted dress infringement; for approximately misappropriation 61 percent of of significantly trade secrets; below its wage pre-recession hour disputes; growth rates fraud; business interruption. revenue. The level of concentration for the top approximately 15 percent from 2002 through 2005, 10 ten states, which added Arizona, Minnesota, Michigan, percent In his in 2006, public policy 4 percent work, in Dr Meister (although has the conducted 2007 economic Wisconsin, analysis New to York identify to the top measure five states, the effects was 86 of: growth construction, rate may have expansion, been negatively operation impacted of in various part by types percent of businesses; of regulations; revenue. legislation; taxation; the the beginning passage of of ballot the recession). initiatives; Lower government consumer programs services; publicly funded projects; sporting confidence entertainment higher events; unemployment commercial relative mixed-use to their pre-developmentrecession work levels has included continued economic to result in decreased fiscal impact spending analyses, The states in that low-income made the largest areas; positive medical contributions research. to His nationwide assessments of the revenue contribution growth in of 2010 businesses were large at industries facilities. to the Meanwhile, economy, restricted cost-benefit lending analyses, surveys. Indian states with healthy growth rates (from high more costly financing resulted in fewer casino to low): Washington, Oklahoma, Michigan, New developments (e.g., introductions of new facilities, York. One relatively smaller state, Alabama, also made a Dr. Meister has significant experience developing implementing statistical analyses surveys. He has major expansions renovations of existing facilities) as significant contribution toward the overall nationwide conducted this work in wide range of contexts, including compared to previous years. growth analyses of Indian of: liability with damages its strong in growth. litigation The matters, public policy issues, racial profiling, forensic testing, states skill that versus made chance the largest games. negative Prior contributions to joining Nathan to While Associates, the slower Dr. growth Meister in 2008, was 2009, a teaching 2010 assistant can be for five nationwide years the Indian University of growth California, in 2010 Irvine, were large where he attributed assisted in large with part teaching to the courses general slowdown on probability, in the statistics, U.S. Indian econometrics, states survey that experienced design. In declines addition, (from he low worked economy, for a market it cannot research explain the firm slowdown that implemented in Indian surveys for to the high): motion California, picture Connecticut, industry. Wisconsin, preceding the beginning of the recession at the Minnesota. end of In part, this pre-recession slowdown was the Casino Casino City s Casino City s Indian City s Indian Gaming Indian Gaming Gaming Industry Industry Industry Report Report Report Edition 2015 Edition Edition

7 At the facility level, approximately 49 percent of $12.4 billion in federal, state, local tax revenue; Indian facilities experienced ABOUT growth NATHAN in ASSOCIATES INC. revenue in 2010, while 51 percent experienced declines. Nathan In the Associates extremes, about is one 5 of percent the oldest grew 50 percent most respected or more, economic $1.5 consulting billion direct firms payments in the United to federal, States. state, When while Robert nearly Nathan 13 percent founded declined it in , percent a hful or more. of consulting economists local governments. adapted the economic techniques that had proved so valuable to the U.S. government during World War II to solve the problems facing U.S. industries Gaming revenue foreign also governments. continued to be Trained highly concentrated in economic analysis In light of research, Indian s they believed turnaround that in they 2010 could use economic among principles a small percentage data of to Indian guide policies facilities. operations In in anecdotal a way that evidence would from ultimately 2011, the make short-term a positive to mid-term difference 2010, the in top people s 5 percent lives. of all Indian facilities, future outlook for Indian looks promising. Even which each generated $250 million or more, accounted for with only a slow recovery, 2010 was certainly something Now, more than 65 years later, grounded in the same principles guided by the same core values, our approximately 38 percent of total revenue at all positive to build on. The economy will improve over employees are motivated by the belief that we can make a difference. Our consulting staff has grown many times Indian facilities. And while the top 30 percent of time, bringing back consumer confidence, disposable over, we have exped our services geographical reach while remaining small enough to personally facilities, which each generated $50 million or income, spending on casino gambling, financing for ensure the quality of our work. more, accounted for about 85 percent of nationwide future casino developments however, maybe not all to Generally, our revenue, services the bottom for public 35 percent private of sector clients in their United pre-recession States levels. around There the is likely world to include: be more facilities, which each generated $10 million or less, caution in moving forward with investing in future Analysis of the economic impacts of public policy accounted for only 2 percent of nationwide developments. Analysis of testimony economic issues in regulatory proceedings revenue. Expert analysis testimony on liability damages in litigation matters As in 2010, varying circumstances will exist. And thus Analysis of infrastructure planning, policy, investment With its success, Indian has had a transformational performance needs, feasibility will likely vary widely across Indian Economic development consulting impact on many Native American tribes. It has enabled facilities, tribes, states. Analysis of the economic costs benefits of recognizing enforcing intellectual property rights tribes to: Nathan Associates has served a wide variety of clients in the public There are private several potential sectors throughout sources of future the United Indian States, Africa Fund government the Middle operations; East, Asia, South America, Latin America, growth the Caribbean, once the economy Europe: recovers: Support Publicly a variety privately of social held companies economic programs 1) States where tribes were previously restricted in terms Law services, firms such as health care, housing, utilities, of supply but are now able to exp; safety, Trade transportation, associations education, vocational training, elderly Native care, American environmental tribes natural resource 2) Conversions from Class II to Class III ; services; U.S. federal government agencies 3) Continued success with Class II, as long as State local governments Fund economic development efforts; regulations do not become significantly more Foreign governments restrictive; Nathan Finance Associates the brings development significant of other industry tribal enterprises. experience expertise to cases, projects, studies. Our staff of expert witnesses, economists, accountants, financial analysts 4) Growth has experience in smaller, in less a wide mature range Indian of industries, states; particularly In addition the to having industry. a positive impact on Native 5) Growth in states that have limited competition American tribes, as well as on the industry, Indian /or unmet dem; Gaming Industry continues to make significant contributions to the U.S. economy. Indian facilities, including their Nathan Associates has extensive experience conducting 6) research The abundance analysis of new to help our facilities clients under assess non- operations, directly generated approximately business market opportunities navigate economic, regulatory, construction, legal, existing legislative facilities challenges. being exped, Our $28.6 billion in output supported about 306,000 jobs clients include operators, suppliers, developers, investors, associations, new casinos being state, proposed local, tribal planned. $12.6 billion in wages in calendar year Indian governments, regulatory agencies. also led to output, jobs, wages outside of While the mid-term outlook for Indian is positive, Nathan Indian Associates facilities experts have tribal a reputation reservations. for objective, insightful, the long-term comprehensive, outlook for high-quality Indian research is uncertain. analysis. Furthermore, Our work all of is this grounded economic in sound activity economic led to tax theory, guided Any number by extensive of things industry could knowledge, negatively impact supported Indian by relevant revenue data other market direct payments research, to federal, customized state, to the circumstances. These of potential each matter. threats Despite include both the non-market complexity local governments, of our work, we assistance convey to data, charitable analyses, results in straightforward, market factors. simplified Potential non-market terms so that factors they include can organizations. be easily understood. In 2010, it For is estimated these reasons, that Indian our experts are routinely legal challenges, called upon legislation, to analyze regulations complex issues that restrict in disputed directly matters, indirectly their led to work approximately: is widely accepted well-respected Indian by the limit its industry, expansion. governments, regulators, academics, consultants, courts, the media, the public. $86.0 billion in output; Nathan Associates provides a variety of services to the Potential industry, market including factors include: 706,000 Market jobs; analysis The maturation of markets; $29.2 Feasibility billion studies in wages; Increasing competition. Casino Casino City s City s Indian Indian Gaming Gaming Industry Industry Report Report Edition 3 7 Casino City Press, 95 Wells Avenue, Newton, MA x 610 Fax: CasinoCityPress.com 225

8 EXECUTIVE SUMMARY Economic fiscal impact studies that quantify the impact of existing facilities future In the wake of the Great developments Recession, Indian on surrounding, like communities result of public competitors policies that restricted the supply of Indian much of the U.S. Public economy, policy analysis showed signs of recovery in. These public policies have included proposed With gross Expert domestic research, product analysis, (GDP) testimony personal in litigation enacted matters, legislation including cases regulations, involving as well claims as judicial of alleged disposable income breach on of the contract, rise breach employment of fiduciary decreasing duty, breach decisions of good tribal-state faith fair dealing, compacts. anticompetitive at a slower rate conduct, both nationwide unfair competition, in every state, tortious Indian interference with current prospective business was able Gaming to turn facility things performance around in calendar assessments year While Indian grew slightly on a nationwide basis 2010 after coming Analysis off of of its market first-ever entry decline competition in calendar in 2010, the performance of Indian varied widely year 2009 (-1 Analysis percent) of competition, four straight years market of slower power, harm across to states competition antitrust facilities. litigation At the state matters level, growth (i.e., lower Evaluations growth rates). of game On performance a nationwide basis, revenue growth varied from +61 percent in revenue Skill at v. Indian chance game facilities assessments increased a little Alabama to -7 percent in North Carolina, with a strong over 1 percent. Survey This compared design, implementation, to improved, but inferior data analysis majority of the states (19 of 28) experiencing growth over performance by Market the commercial research casinos segment, which The fastest growing states after Alabama were declined 0.1 percent, the card room segment, which Texas, Alaska, Louisiana, Washington, Michigan, Nathan Associates experts have conducted research analysis of all segments of the industry: declined about 2 percent. However, the racino segment Mississippi, New York. Florida Oklahoma also continued to outperform Indian Indian with growth of experienced growth in 2010 (approximately 1 percent approximately Commercial 5 percent. casinos 4 percent, respectively), but much less than in previous Racetrack casinos years. The fastest declining states after North Carolina Amidst its relative Lotteries performance, Indian continued were Idaho, Iowa, Connecticut, California. to be a significant Pari-mutuel segment wagering of the industry. In 2010, Indian Charitable generated approximately 44 percent Indian continues to be very fragmented. The of all U.S. casino Card rooms revenue (i.e., revenue $26.7 billion in revenue $3.2 billion in non revenue in 2010 were generated by 239 Native generated at Indian Convenience facilities, gambling commercial casinos, racinos). Internet This was only a slightly smaller share than American tribes operating 448 facilities in 28 the commercial casinos segment, which led the way with states. However, revenue was highly concentrated approximately Our experts 45 percent have studied of casino the revenue. industry in all 48 within states certain which states. it exists. In 2010, We the have largest analyzed state in nationwide, terms of However, state, Indian regional, local continued to gain markets ground examined is planned revenue existing at Indian facilities. continued We also have to be poised experience to overtake analyzing the commercial the integration casino segment development in the of California, non- with $6.8 amenities billion. at It alone accounted facilities. for Our just near experience future. expertise transcend the U.S. market, over 25 as percent we also of research revenue analyze at Indian international. Nathan Associates experts have conducted related facilities research nationwide. analysis The top on two behalf states, of California clients in a variety Despite of matters, the turnaround including its performance in 2010, Indian Oklahoma, generated a combined 38 percent of s relatively slow growth was still a part of the larger revenue. Meanwhile, the top five states, which added overall slowdown Litigation, in the growth arbitration, of Indian mediation starting Connecticut, Florida, Washington to California in Furthermore, Regulatory the proceedings 2010 growth rate was Oklahoma, accounted for approximately 61 percent of significantly below Public its policy pre-recession matters growth rates revenue. The level of concentration for the top approximately Public 15 percent government from 2002 through relations 2005, 10 ten states, which added Arizona, Minnesota, Michigan, percent in 2006, Business 4 percent operations in 2007 (although development the 2007 matters Wisconsin, New York to the top five states, was 86 growth rate may have been negatively impacted in part by percent of revenue. In addition to our consulting work, our experts have conducted independent, scholarly research analyses of the beginning of the recession). Lower consumer the industry, regularly publishing articles studies, presenting our work at academic, professional, confidence higher unemployment relative to their prerecession levels continued to result in decreased spending nationwide revenue growth in 2010 were large The states that made the largest positive contributions to industry conferences. Our experts consulting scholarly work is regularly cited in industry trade publications. at facilities. Meanwhile, restricted lending Indian states with healthy growth rates (from high more costly financing resulted in fewer casino to low): Washington, Oklahoma, Michigan, New Indian Gaming developments (e.g., introductions of new facilities, York. One relatively smaller state, Alabama, also made a major Nathan expansions Associates renovations has special of expertise existing facilities) conducting as research significant contribution analysis of Indian toward. the overall Our nationwide experts are compared frequently to previous called years. upon to assess the economic fiscal growth impacts of Indian of the introduction, with its development, strong growth. operation, The regulation of Indian facilities on tribes states their that surrounding made the communities. largest negative We contributions also research to While analyze the slower the impacts growth in of 2008, outside 2009, forces 2010 competition, can be public nationwide policies, Indian events, growth alleged in unlawful 2010 were conduct large by attributed others in large on Indian part to the general facilities slowdown tribes. in the U.S. Indian states that experienced declines (from low economy, it cannot explain the slowdown in Indian to high): California, Connecticut, Wisconsin, Nathan Associates experts have researched analyzed many facets of Indian : preceding the beginning of the recession at the Minnesota. end of All In part, 28 states this pre-recession in which it is slowdown operated was the All stages of development, including in construction, new, existing facilities 8 2 Casino City s Casino Indian City s Gaming Indian Gaming Industry Industry Report Report 2012 Edition 226 Casino City Press, 95 Wells Avenue, Newton, MA Ph: Fax: Edition CasinoCityPress.com

9 At the facility level, approximately 49 percent of $12.4 billion in federal, state, local tax revenue; Indian Nationwide, facilities state, experienced regional, growth local in markets revenue Class in 2010, II while III 51 percent experienced declines. In the extremes, about 5 percent grew 50 percent or more, $1.5 billion in direct payments to federal, state, Non- amenities, including hotels, restaurants, retail while nearly 13 percent declined 10 percent or more. local stores, governments. entertainment venues, spas, meeting space/convention centers Impacts on tribal governments tribal members, competitors, Gaming revenue also continued to be highly concentrated In light of Indian other s businesses, turnaround non-tribal in 2010 governments, markets, entire economies among a small percentage of Indian facilities. In anecdotal evidence from 2011, the short-term to mid-term Our 2010, experts the have top 5 analyzed percent of a all wide Indian array of issues facilities, related to Indian future, outlook including for Indian looks promising. Even which each generated $250 million or more, accounted for with only a slow recovery, 2010 was certainly something Impacts of planned, new, existing facilities approximately 38 percent of total revenue at all positive on tribes to build surrounding on. The economy communities will improve over Gaming facility performance Indian facilities. And while the top 30 percent of time, bringing back consumer confidence, disposable Game facilities, performance which each generated $50 million or income, spending on casino gambling, financing for more, Public accounted policies, for about such as 85 legislation, percent of nationwide regulations, ballot future propositions casino developments however, maybe not all to L-into-trust revenue, the bottom acquisitions 35 percent for of their pre-recession levels. There is likely to be more facilities, Gaming-related which each generated agreements, $10 million such as or compacts, less, amendments caution to in compacts, moving forward agreements with investing with local in future accounted governments for only 2 percent of nationwide developments. revenue. Revenue sharing Damages resulting from alleged unlawful conduct, including As 2010, breach varying of contract, circumstances breach will of exist. fiduciary And duty, thus With breach its success, of good Indian faith has fair had dealing, a transformational anticompetitive conduct, performance unfair will competition, likely vary widely across tortious Indian impact interference on many Native with current American tribes. prospective It has enabled business facilities, tribes, states. Competition, tribes to: market power, harm to competition in antitrust litigation matters Other segments of the industry associated There industries are several potential sources of future Indian Fund government operations; growth once the economy recovers: Nathan Associates provides a wide range of economic consulting services related to Indian, including Support Market analyses a variety of social economic programs 1) States where tribes were previously restricted in terms Industry services, studies such as health care, housing, utilities, of supply but are now able to exp; safety, Feasibility transportation, studies education, vocational training, elderly care, environmental natural resource 2) Conversions from Class II to Class III ; Economic fiscal impact studies services; Public policy analysis 3) Continued success with Class II, as long as Fund Expert economic research, development analysis, efforts; testimony in litigation matters regulations do not become significantly more Tribal needs assessments impact analyses restrictive; Finance Survey design, the development implementation, of other tribal data enterprises. analysis Market research 4) Growth in smaller, less mature Indian states; We In extensively addition to study having market a positive conditions, impact on regulations, Native legal decisions, 5) Growth public in policies, states that have political limited issues competition affecting Indian American tribes, so that as well they as can on be the properly industry, considered Indian assessed /or in our unmet analyses. dem; continues to make significant contributions to the In addition U.S. economy. to our consulting Indian work, facilities, our experts including have their conducted 6) independent, The abundance scholarly of new research facilities analyses under of Indian non-, regularly operations, publishing directly generated articles approximately studies, presenting construction, our work existing at academic, facilities professional, being exped, industry $28.6 conferences. billion in output Most notable supported is the about annual 306,000 Indian jobs Gaming Industry new Report, casinos a being nationally proposed recognized planned. report that provides $12.6 nationwide billion in wages state-by-state in calendar Indian year Indian data analyses. Our experts also consulting led to output, scholarly jobs, wages research outside of analyses of Indian While the mid-term have outlook been relied for Indian upon by the is positive, Indian industry, tribal facilities non-tribal tribal reservations. governments, the U.S. Supreme the long-term Court, outlook the investment for Indian community, is uncertain. academics, Furthermore, other all of this consultants, economic activity news led to outlets tax industry Any number trade publications. of things could Our negatively work has impact also Indian been relied revenue upon before other the direct payments to federal, state,. These potential threats include both non-market local governments, assistance to charitable market factors. Potential non-market factors include organizations. U.S. Supreme In 2010, Court it is estimated that Indian legal challenges, legislation, regulations that restrict directly National indirectly Indian led Gaming to approximately: Commission Indian limit its expansion. U.S. Department of the Interior, Bureau of Indian Affairs $86.0 World billion Trade in Organization output; Potential market factors include: 706,000 jobs; The maturation of markets; $29.2 billion in wages; Increasing competition. Casino Casino City s City s Indian Indian Gaming Gaming Industry Industry Report Report Edition 3 9 Casino City Press, 95 Wells Avenue, Newton, MA x 610 Fax: CasinoCityPress.com 227