Civic economics show 2010

KRGC: FACILITIES REVIEW BOARD MEETING

DECEMBER 1, 2010, TOPEKA, KANSAS

ECONOMIC IMPACT OF

PROPOSED GAMING FACILITIES

SOUTH CENTRAL GAMING

ZONE – SUMNER COUNTY

DECEMBER 1, 2010



BRIEF AGENDA

• About Civic Economics

• Overview of Scope

• Economic Impact Approach

• Economic Impact of Construction

• Economic Impact of Operations

• Non-Gaming Amenities



About Civic Economics

• Established in 2002

• Matt Cunningham in

Chicago, Dan

Houston in Austin

• Diverse practice in

scope and geography

• Not a gaming/tourism

practice



Scope of Work



Scope of Work

• Economic impact of construction and

operations of proposed facilities

– Development of IMPLAN inputs from

applicant submissions and Wells/Cummings

• Review of competition for non-gaming

activities

– Focus on this year’s unusual amenities



Economic Impact Approach




• IMPLAN, an industry-standard tool built on

input-output modeling

• Impacts calculated on a statewide basis

• Focus is on equitable treatment of

applicants

– Developed a single model for both applicants




• Used data supplied by applicants where

possible

– Any adjustments made for all applicants using

the same methodology

– Adjusted gaming and non-gaming revenues

and employment projections



NET Economic Impacts

• The most important thing to learn today:

– Economic impact analysis must focus on

activity that is new to the study area

– Activity that simply moves from one location

or firm to another is not new to the area, and

may be harmful to the local economy



NET Economic Impacts

• Export Revenue:

• This refers to the portion of gaming revenues derived from non-Kansas visitors that would not, absent the proposed casino, have occurred in Kansas.

• Import Substitution Revenue:

• This refers to the portion of gaming revenues derived from Kansas residents that would, absent the proposed casino, have occurred outside of Kansas.



Economic Impact Reporting

• Economic impacts are comprised of three

separate categories.

– Economic Output is the total production or

sales derived from the project.

– Employment is the total number of Kansans

employed both on a full and part time basis in

a given industry.

– Wages is the amount of salaries and benefits

paid to Kansas employees.



Economic Impact Reporting

• For each of the categories listed above a

direct effect, indirect effect, and induced

effect has been calculated.

– Direct effects capture the initial impact created.

– Indirect effects are additional impacts derived

from businesses providing products or services to

the selected industries.

– Induced effects are the result of increased

household spending due to the direct and indirect

effects.



Construction Impacts




• Temporary economic activity associated

with designing and building facilities and

associated infrastructure

• Used projected costs through 2016, but

assumed all activity in 2011

– FBO for Peninsula, not for Global

• Simply put, relative cost of proposed

facilities drives relative outcomes



Operating Impacts



Operating Impacts

• Used 2014 for first full year of analysis

– Comparable to last year’s 2013 analysis

• Steps to determine inputs:

– Gaming revenue and operational scale

– Calculation of net impacts from Cummings

and Wells analyses

– Final input modification for labor costs

• Wells/Cummings do not include Park City



Operating Impacts

• Three Scenarios for each proposal

– 2014: Development as proposed

– 2016: Development as proposed

– 2016: Assuming full build out

• Peninsula proposes FBO by 2016, so numbers are

unchanged in final scenario

• Note: Did not calculate impacts on

Peninsula alternate site. Impact reduced in

proportion to gaming revenue.



Operational Scale

• Applicants projected both non-gaming and

gaming revenues

– Gaming revenue applied here is average of

Cummings and Wells mid-case

• Non-gaming revenues were adjusted in

proportion to average Wells/Cummings

and applicant gaming estimates



Revenue Forecasts

Number of Slot Machines 1550 Number of Slot Machines 1500

Number of Gaming Tables 60 Number of Gaming Tables 52

Number of Hotel Rooms 80 Number of Hotel Rooms 150

Number of Restaurants 3 Number of Restaurants 3

Estimated gaming revenue: Applicant 140,438,700$ Estimated gaming revenue: Applicant 165,812,555$

Estimated gaming revenue: Wells 108,685,160$ Estimated gaming revenue: Wells 178,683,731$

Estimated gaming revenue: Cummings 141,200,000$ Estimated gaming revenue: Cummings 192,100,000$

Average of Wells & Cummings 124,938,360$ Average of Wells & Cummings 185,391,866$

Ratio of Wells/Cummings to Applicant 0.89 Ratio of Wells/Cummings to Applicant 1.12

Hotel Revenue 1,953,483$ Hotel Revenue 4,201,793$

Food & Beverage Revenue 8,661,821$ Food & Beverage Revenue 13,254,002.59$

Retail Revenue 73,394$ Retail Revenue 1,235,116.12$

Entertainment 1,565,747$ Entertainment N/A

Other Revenue (Travel Plaza) 6,227,404$ Other Revenue (Fees and Leases) 926,959.33$

ADJUSTED REVENUE FORECASTS, 2014 (in 2014 dollars)

Based on contractually obligated development scheduled for completion by 2014

GAMING REVENUE PROJECTIONS

ADJUSTED NON-GAMING REVENUE PROJECTIONS

PROJECT SCOPEPROJECT SCOPE

SOURCE: Applicant Submissions, Wells Scenario 3, Cummings GB4, PB4, Civic Economics

PENINSULA GAMING, MULVANE


ADJUSTED NON-GAMING REVENUE PROJECTIONS

GLOBAL GAMING, WELLINGTON



Revenue Forecasts











Food & Beverage Revenue 9,524,790$ Food & Beverage Revenue 15,105,642$

Retail Revenue 80,524$ Retail Revenue 1,223,782$

Entertainment 1,889,621$ Entertainment 7,259,386$

Other Revenue (Travel Plaza) 7,985,813$ Other Revenue (Fees and Leases) 1,056,459$


GLOBAL GAMING, WELLINGTON PENINSULA GAMING, MULVANE

GAMING REVENUE PROJECTIONS GAMING REVENUE PROJECTIONS

ADJUSTED NON-GAMING REVENUE PROJECTIONS ADJUSTED NON-GAMING REVENUE PROJECTIONS


PROJECT SCOPE PROJECT SCOPE

Based on contractually obligated develoment scheduled for completion by 2016



Revenue Forecasts






Adjusted up based on 200 additional slots






Food & Beverage Revenue 10,583,100$ Food & Beverage Revenue 15,104,517$

Retail Revenue 89,471$ Retail Revenue 1,223,691$

Entertainment 2,099,579$ Entertainment 7,258,845$

Other Revenue (Travel Plaza) 8,873,126$ Other Revenue (Fees and Leases) 1,056,381$


Based on applicant's proposed full build-out

GLOBAL GAMING, WELLINGTON PENINSULA GAMING, MULVANE


ADJUSTED NON-GAMING REVENUE PROJECTIONS*ADJUSTED NON-GAMING REVENUE PROJECTIONS


Values carried from above

* Non-gaming revenue for Global is projected to increase in proportion to additional slot machines

PROJECT SCOPE PROJECT SCOPE




Net Gaming Revenue Adjustment

• Cummings and Wells analysis allows an

estimate of gaming revenue flows among

states

• This analysis uses the sum of:

– Import Substitution

– Export



Money Flows Across State Lines



Adjustment for Labor Cost

• Applicant submissions over three years are

widely divergent on jobs and labor costs

• IMPLAN assumes excessive labor relative to

revenue for a new industry in Kansas

• Solution: We have applied the average of

current applicant labor cost submissions:



Finally, on to the numbers …



Operating Impact

YEAR OPERATOR TOTAL OUTPUT

2014 GLOBAL 118,749,883$

PENINSULA 144,652,664$

2016 GLOBAL 136,237,230$


2016 FBO GLOBAL 156,263,782$


Source: Applicant Submissions, IMPLAN, Civic Economics

OPERATING IMPACTS COMPARISON

ECONOMIC OUTPUT IN THEN-YEAR DOLLARS

RELATIVE IMPACTS



Operating Impact, Global



Operating Impact, Peninsula



Non-Gaming Competitive Impacts

• New Gaming Spending

• Non-Gaming Amenities



New Gaming Spending by Kansans

• Remaining projected revenue after NET is new gaming spending by Kansans

• This is money that previously went to other discretionary activity

• Beyond scope here to evaluate sources of that money, but totals are as follows



New Gaming Spending by Kansans

• Primary competitive impact on region is

diversion of discretionary spending to

gaming from other activities

• In comparing proposals, these values

should be thought of as an offset against

economic impact gains from gaming



Standard Non-Gaming Amenities

• Global

– Food and beverage

services

– Hotel rooms

– Entertainment venue

– Golf course

improvements

• Peninsula

– Food and beverage

services

– Hotel rooms

– Entertainment venue



Novel Non-Gaming Amenities

• Global Road Race

Course

– To open after 2016, so

not included in impact

analysis above

– Rough cost of $7

Million

• Peninsula Equestrian

Center

– Arena, barns, and

support facilities for

horse shows, rodeos,

etc.



Global Road Race Course

• Global has not provided an impact study or data

that would allow us to produce one

• Global did not include incremental gaming

revenue from track in submissions

• Auto racing and gaming may well make a

complementary match, as anticipated at Kansas

Speedway

• Should additional information appear, Civic

Economics will review at Board’s request



Peninsula Equestrian Center

• Peninsula provided a

study by Crossroads

Consulting estimating

events, attendance,

and impact

• Civic Economics was

asked to consider the

reasonability of that

study

• We reviewed that and

another Crossroads

study for York County,

SC

• We do not take a

position on the

gaming benefits of

horse facilities



Crossroads Study

• Use of IMPLAN

appears solid

• Outputs of a model

are driven by inputs,

so that is the issue

here

• Are estimates of

events, usage,

visitation, and visitor

spending reasonable

for this facility?

• Two items for

comparison:

– OKC Fair Park

– York County, SC



Crossroads Assumptions



Crossroads Impact Findings



State Fair Park, OKC

• Peninsula Facility

• 560 stalls (400

Permanent)

• Indoor arena seating

~4000 for equine

events

• State Fair Park

• 2520 stalls (1189

permanent)

• Indoor arena seating

~10,000 for equine

events



State Fair Park, OKC

• 2010 events (from

okstatefairpark.com):

– 27 distinct events,

some of which overlap

– 114 event days

– Average 4.2

days/event

– Assuming usage days

at 1.179, total usage at

134 days

• “Horse Show Capital

of the World”

• Site does not include

visitation numbers

• Unable to find

economic impact

study of the facility



OKC State Fair Park vs. Peninsula

• OKC accommodates

3x to 4x as many

horses

• Primary arena seats

more 2x

• 27 events, 114 event

days, 134 usage days

• Crossroads forecasts

usage of 75% - 88%

of that achieved at far

larger OKC facility



York County, SC

• Crossroads provided

feasibility and impact

study to York County

in 2009

• Multi-Use Events

Center highly focused

on equine and ag

events

• Separate design

study proposes 300-

600 stalls with an

indoor, climate-

controlled arena



York County, SC

• Due to different event

classes, cannot make

clear comparisons

between event

forecasts

• Mid-, high-impact

events (25-28)

comparable to

estimates for Sumner

(21-24)

• Visitation forecast for

Sumner exceeds

those for York by

~2.5x

• Visitor difference

drives difference in

total spending and

impacts



Crossroads: Two Questions

• How can Sumner

facility perform at

75% or better

compared to much

larger OKC?

• Why is visitation

forecast much higher

at Sumner than at

York?

• Your satisfaction with these answers will drive

Board’s reading of Morowitz estimates of

incremental gaming revenue due to facility.



Thank you.

CivicEconomics.com

dhouston@ or mattc@

Civic economics show 2010

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