RubinBrown Gaming Stats 2012

A Publication of RubinBrown LLP 12 Commercial & Tribal Gaming Stats

Welcome Letter

Welcome Letter Welcome from RubinBrown’s Hospitality and Gaming Partner-in-Charge Welcome to the 2012 edition of Gaming Stats, an annual publication published by RubinBrown’s Gaming Service Group as a benefit to the gaming industry. Our publication has been created to provide a comprehensive and comparative report of key gaming statistics for commercial and tribal gaming entities to allow for comparison of performance relative to your peers. The accompanying statistical information includes data for 2011 and represents 1,070 commercial and tribal properties in 35 states. In response to the needs of the industry, this year’s publication has been enhanced to provide additional national and regional data for both commercial and tribal entities. For each of the states offering commercial gaming, we have highlighted the headlines that caught our attention throughout the year. In addition, we have created a customized avenue for you to obtain supplementary gaming information for specific states (learn more on the back pocket). We are grateful for the partnerships we have formed with the many gaming industry leaders that continue to collaborate with us on our gaming initiatives. We hope our publication continues to prove to be a valuable comprehensive tool throughout the year. As always, I personally welcome your feedback on this issue of Gaming Stats. Please feel free to email me directly at chelle.adams@rubinbrown.com. Chelle F. Adams Partner-in-Charge Hospitality and Gaming Industry Group

Contents 1 Welcome Letter 2 Executive Summary 3 National Revenue Analysis 5 National Electronic Gaming Device Revenue Analysis 7 National Table Games Revenue Analysis 9 Commercial Gaming Headlines 15 National Indian Gaming Analysis 17 Regional Indian Gaming Analysis 19 Portland Region 20 Sacramento Region

21 Phoenix Region 22 St. Paul Region 23 Oklahoma City Region 24 Tulsa Region 25 Washington D.C. Region 26 Service and Acknowledgements

Executive Summary

Introduction Commercial & Tribal Gaming Stats is released by RubinBrown each April and provides a comprehensive and comparative report of key gaming statistics of commercial and tribal gaming operations (excluding racinos) across the nation. The Commercial Gaming Stats include high level national and regional comparisons as well as detailed state-by-state information of 2011 gross gaming revenues, tax contributions, admissions, electronic gaming devices, table games, and key headlines that impacted the gaming industry this past year. The Tribal Gaming Stats include an analysis of 2010 gross gaming revenues, number of operations, regional revenue trends and the developments within each of the seven National Indian Gaming Commission (NIGC) Regions. The tribal data focuses on select 2011 state contribution (revenues shared with state governments, in exchange for the exclusive right to offer Class III gaming) data and the 2010 national revenue results. The 2011 national tribal data will be available in July 2012. Information used to compile the statistics was obtained from the state gaming regulatory authorities and the National Indian Gaming Commission (see page 26 for the complete listing of sources). The data is compiled by RubinBrown’s Hospitality & Gaming Services group to provide a consolidated National analysis. General Industry Economic Update As a highly discretionary element of consumer spending, the gaming industry continues to be weighed down from the lingering impacts of the Great Recession of 2008 and has experienced nominal growth in 2010 and 2011. Within the United States, there are 35 states, excluding those that only offer pari-mutuel (racino) facilities, which offer commercial and/ or tribal casinos. Overall, the Casino Gaming industry (excluding pari-mutuel wagering and lotteries) generates approximately $58 billion a year, with a relatively equal split between tribal (46%) and commercial (54%) gaming. Focusing on commercial gaming, there are 648 land based and river-boat casinos located in 15 states. In 2011, the industry generated $32.5 billion in gaming revenues, increasing by 2.4%. Of the 15 states offering commercial gaming, 10 saw increased revenues during 2011. While the overall commercial gaming industry saw increased revenue, existing properties continue to face challenges. In the last year, several states have legalized or expanded commercial gaming which has increased the competition for pre-existing properties (see specific stories within the Commercial Gaming Headlines section starting on page 9).

Within the tribal gaming industry, there are 239 tribes operating 422 Class II and Class III casinos in 28 states. In 2010, Tribal gaming revenue remained flat at $26.8 billion. However, the 2011 state regulatory data indicates the tribal industry revenues increased in 2011. Until recently, tribes in states like New York and Kansas have benefitted from being the only source of casino gaming; however, state legalization efforts have shifted the landscape and increased the competition tribes experience from their commercial counterparts. Overall, with growth in key commercial and tribal markets (including markets such as Arizona and Illinois), analysts believe the U.S. gaming industry turned the corner in 2011 and has re-entered into a period of growth. The extent of the growth will remain highly contingent on the continued increases in consumer confidence and declines in unemployment. 2012 Industry Forecast As the industry continues to grow and develop, leaders are optimistic in the future of gaming. There is excitement over recovering numbers due to technological advances including new and revised standards and the introduction of mobile and internet gaming (iGaming). However, there is also uncertainty in the market relating to the upcoming changes in technology. The U.S. gaming industry will soon face a major challenge with the legalization of internet gaming and the regulation associated with it.

DISCLAIMER: Gaming Stats, a publication of RubinBrown LLP, is designed to provide general information regarding the subject matter covered. Although prepared by professionals, its contents should not be construed as the rendering of advice regarding specific situations. If accounting, legal or other expert assistance is needed, consult with your professional business advisor. Please call RubinBrown with any questions (contact information is located on the back cover).

Commercial & Tribal Gaming Stats 2012 - RubinBrown 2

National Revenue Analysis

2011 Revenue Growth The U.S. gaming industry saw marginal growth in commercial gaming in 2011, increasing by $773 million, or 2.4%. While the industry experienced increased revenues, the results varied dramatically by region. On the East coast, Pennsylvania continues to exhibit strong growth. In November 2011, Pennsylvania surpassed New Jersey in monthly revenues and became the second largest U.S. commercial gaming state, generating $245.9 million as compared to the $245.1 million generated in New Jersey. This marked the first month in U.S. commercial gaming history where New Jersey was not in the top two states for monthly revenues. In December, the margin between Pennsylvania and New Jersey continued to widen, as Pennsylvania generated $254.9 million as compared to the $246.5 million generated in New Jersey. While Pennsylvania has experienced rapid growth since legalizing commercial gaming, its claim of becoming the second largest U.S. commercial gaming market was aided by its proximity to large metropolitan areas which has effectively siphoned millions of dollars in revenue from the once favored New Jersey casinos. With the continued decline in New Jersey gaming revenues and increased competition in surrounding states, the New Jersey legislature began laying the groundwork to expand gaming outside of Atlantic City in an effort to reclaim the revenues from the Philadelphia and New York City markets. The traditional riverboat facilities located along the Mississippi, Missouri, and Ohio rivers all experienced a treacherous 2011. In late

April and early May, continuous rainfall along the Ohio River Valley resulted in flooding along the lower Ohio and Mississippi rivers. In June and July, the snow melt and additional rains in the upper Missouri River Valley resulted in record flooding. The flooding in both of these regions resulted in many areas being declared federal disasters. Additionally, the flooding led to the closure of numerous casinos which translated into lost gaming tax revenue for state coffers and strained the bottom line of gaming operators. The states that posted the strongest gains in 2011 benefitted from expanded gaming. Most notably, Illinois posted revenue growth of 7.8%, its first increase in revenues since 2006. The increase is largely the result of the re-issuance of the 10th gaming license to the newly constructed Rivers Casino located near the Chicago O’Hare airport. In the first six months of 2011, Illinois experienced revenue declines of 3.1% year over year. Subsequent to the opening of Rivers Casino on July 15, 2011, Illinois experienced a 19.4%, year over year, revenue increase during the last six months of 2011. 2012 Industry Forecast In 2012, the overall gaming industry will see relatively strong growth as the expansion of gaming continues to spread across the nation and consumer confidence continues to grow. Even though the overall industry is expected to experience relatively strong growth, pre-existing facilities will face continued increased competition which will limit their ability to translate industry growth into growth of their bottom line.

Percentage of Commercial Gaming Revenues by State

Commercial Gaming Revenues by State (Thousands) 1

Casinos

2010

2011

% Change

IL 4.5%

IN 8.3%

CO 2.3%

Colorado

40

$759,610

$751,423

-1.1%

WV 3.0%

IA 4.4%

Illinois

10

$1,370,946

$1,477,601

7.8%

Indiana 2

13

$2,794,208

$2,697,070

-3.5%

KS, MD & SD <1%

PA 9.3%

Iowa 2

18

$1,368,074

$1,423,998

4.1%

LA 7.3%

Kansas 3

2

$37,788

$46,061

21.9%

Louisiana 2

18

$2,371,252

$2,374,244

0.1%

Maryland 4

2

$27,596

$155,709

464.2%

MI 4.4%

NJ 10.2%

Michigan

3

$1,377,929

$1,424,445

3.4%

Mississippi

30

$2,388,997

$2,237,074

-6.4%

MS 6.9%

Missouri

12

$1,787,915

$1,805,323

1.0%

Nevada

334

$10,404,731

$10,700,994

2.8%

New Jersey

11

$3,564,330

$3,317,721

-6.9%

MO 5.6%

Pennsylvania 2

10

$2,486,408

$3,025,049

21.7%

South Dakota

140

$106,187

$100,898

-5.0%

West Virginia 2

5

$887,650

$958,696

9.2%

NV 32.9%

Total

648

$31,723,621 $32,496,306

2.4%

1 Commercial gaming revenues are defined as revenues from casinos located in states that offered stand-alone casino facilities, meaning states that exclusively offer gaming through pari-mutuel (racino) facilities (e.g. Deleware and New York) have been excluded from this analysis. 2 The figures for Indiana, Iowa, Louisiana, Pennsylvania, and West Virginia include revenues from the casinos offering EGDs and/or Table Games. Note, the revenue generated from pari-mutuel wagering has been excluded from this analysis.

3 The second commercial Kansas casino opened on December 26, 2011, The Kansas Star Casino. The Boot Hill Casino, which operated for all 2010 and 2011 saw a 6% increase in revenues for 2011. The Kansas Star Casino generated $6 million in the last six days of 2011. 4 The first commercial Maryland casino, Hollywood Casino Perryville, opened on September 27, 2010. On January 4, 2011, Casino at Ocean Downs opened, becoming the state’s second commercial casino.

3 RubinBrown - Commercial & Tribal Gaming Stats 2012

• The Kansas City, Missouri market will see increased competition from the first Kansas state-owned facility opening in the region. • Louisiana and Mississippi will face additional competition as the new L’Auberge Casino & Hotel in Baton Rouge, Louisiana and the Jimmy Buffett’s Margaritaville Casino in Biloxi, Mississippi open in the summer of 2012. • In the Northeast, Maine will introduce its first full service casino in Oxford, Maine and Pennsylvania will introduce its eleventh casino, the Valley Forge Casino & Resort, located northeast of Philadelphia. • Western Pennsylvania and Eastern Indiana will see the introduction of commercial gaming in neighboring Cleveland and Cincinnati, Ohio as both Caesar’s Entertainment and Penn National look to capitalize on Ohio’s legalization of commercial gaming. The topic of gaming expansion will continue to be a focus in state legislatures. In Massachusetts, the governing and issuance of licenses for the recently legalized three resort-styled commercial casinos and one slot parlor will take center stage. Illinois will continue the discussion of expanding gaming as the governor and legislature work to compromise on the appropriate level of expansion. Other states such as Florida and New York will continue to explore the possibility of expanding gaming to include table games beyond their existing racino facilities. As brick and mortar facilities continue to face increased competition from new markets and facilities, the advent of internet gaming, or iGaming, is becoming a serious competitor in 2012. In December 2011, the Department of Justice reversed its opinion on the 1961 Wire Act, which historically prevented online wagering. The reversal of this interpretation has ignited a race between the federal government and individual states in developing regulation that permits and governs iGaming. State Gaming Taxes Consistent with commercial gaming revenues, state gaming tax revenues fluctuated by region but increased in total. Similar to the trends noted in 2010, the total state gaming tax revenues increased more than overall gaming revenues. The increase in gaming taxes paid is contributed to the growth experienced in new gaming markets. As a general rule, the mature gaming markets, such as Nevada, Mississippi, and New Jersey, have a lower effective tax rate than the newer markets, as the lure of increased tax revenues has been the catalyst for the expansion of gaming outside of Nevada and New Jersey. Meanwhile, the markets that have recently legalized gaming have higher tax rates as legislatures have used the increase in tax revenues as the primary point for justifying the expansion of gaming.

Gaming Revenue Tax Rate

Colorado

• 0.2375% - 19.0% graduated tax with 19.0% applied to revenues in excess of $13 million • 15.0% - 50.0% graduated tax with 50.0% applied to revenues in excess of $200 million • $3 admission tax per patron per gaming day • 15.0% - 40.0% graduated tax with 40.0% applied to revenues in excess of $600 million • $3 admission tax per patron per gaming day • 5.0% - 22.0% graduated tax with 22.0% applied to revenues in excess of $3 million • Racinos are subject to a 24% tax on adjusted gross receipts

Illinois

Indiana

Iowa

Kansas

• 27.0% of gaming revenues

Louisiana

• 21.5% of adjusted gross receipts for riverboats • 21.5% or $60 million (the greater) for land based facilities

Maryland

• 67.0% of gaming revenues

Michigan

• 19.0% of gaming revenues for permanent facilities • 24.0% of gaming revenues for temporary facilities

Mississippi

• 4.0% - 8.0% graduated state tax with all monthly revenues in excess of $134,000 taxed at 8.0% • 4.0% local tax • Annual gaming device taxes • 21.0% on adjusted gross receipts • $2 admission tax per patron per excursion (excursion is defined as a 2 hour period)

Missouri

Nevada

• 8.0% of gaming revenues • 1.25% - 2.50% investment alternative tax • 8.0% of gaming revenues • 1.25% - 2.50% investment alternative tax • 55.0% of gaming revenues on EGDs • 16.0% of gaming revenues on table games • 8.0% of gaming revenues • $2,000 annual gaming device tax per machine

New Jersey

Pennsylvania

South Dakota

West Virginia

• 53.0% net gaming EGD revenue (after a 4% administrative fee on gross revenue) on racetracks, of which 17.0% is distributed to other private entities within the racing industry • 53.0% of gaming revenues and a 4.7% capital reinvestment on historic resort EGD revenues • 35.0% of gaming revenues on table games

Gaming Tax Revenues by State

$1.5B

$1.1B

$750M

$375M

$0

Iowa

Illinois

Kansas

Indiana

Nevada

Missouri

Michigan

Louisiana

Maryland

Colorado

Mississippi

New Jersey

Pennsylvania

West Virginia

South Dakota

2010

2011

Commercial & Tribal Gaming Stats 2012 - RubinBrown 4

National Electronic Gaming Device Revenue Analysis

Electronic Gaming Devices (EGD) Revenues by State

the state’s gaming revenues, which was 19.9% below the national average of 82.8%. Excluding Maryland, since Maryland only offers EGDs, the percentage of revenues generated from EGDs was the highest in Iowa and South Dakota, both generated 91.2% of the state’s gaming revenues. Revenues per Electronic Gaming Device per Day Analyzing revenues per EGD per day provides an interesting perspective on the ability for regions to absorb additional competition within the industry: • Nevada, South Dakota and Colorado are the top three states in terms of the number of casinos; however, they produced the three lowest revenue amounts per machine per day. • Illinois produced the highest revenue per machine providing evidence that the state could support additional gaming. Contributing to the high revenue per machine is the state’s limit on the number of gaming machines allowed, resulting in a reduced number of machines per property. • Pennsylvania EGD revenues only increased by 5.8%; however, the state’s total gaming revenues increased by 21.7%. • Kansas experienced the largest increase in EGD revenues in 2011, recording a 22.3% increase.

When examining EGD revenues by state, the growth in revenues remains consistent with the overall trends. Of the thirteen states in the analysis, Nevada’s EGDs contributed the least to the state’s total gaming revenues. In Nevada, EGD revenue contributed 63.0% of

Electronic Gaming Device Revenues by State 1

2010

2011

% Change

Colorado

$684,349,371

$675,053,358

-1.4%

Illinois

$1,199,396,000

$1,271,908,000

6.0%

Indiana

$1,963,683,039

$1,892,473,071

-3.6%

Iowa

$1,251,115,771

$1,298,229,802

3.8%

Kansas

$32,046,415

$39,196,247

22.3%

Maryland

$27,596,428

$155,708,793

464.2%

Mississippi

$2,024,993,986

$1,894,028,971

-6.5%

Missouri

$1,585,911,930

$1,600,000,890

0.9%

Nevada

$6,637,267,659

$6,737,826,767

1.5%

New Jersey

$2,476,634,108

$2,342,936,626

-5.4%

Pennsylvania

$2,273,934,190

$2,405,867,897

5.8%

South Dakota

$97,418,227

$91,986,745

-5.6%

West Virginia

$738,611,000

$738,583,000

0.0%

1 Louisiana and Michigan were excluded from the analysis as gaming revenues is not broken down between electronic gaming devices and table games.

5 RubinBrown - Commercial & Tribal Gaming Stats 2012

Electronic Gaming Device Hold Percentages Overall hold percentages remained relatively consistent between years. Of the states included in the analysis, only ten states provided hold percentage information and six of those states had hold percentages of approximately 9.0%. Nevada had the lowest hold percentage of 6.3% followed by Colorado at 6.9%. Casinos in both of these states face significant competition, which has effectively driven down the hold percentages in the patrons’ favor. While properties in Colorado and Nevada have lowered their hold percentages from increased competition, casinos in South Dakota have been able to maintain a hold percentage of approximately 9.0%, which is one of the highest in the country. In comparing the hold percentages to effective tax rates, a direct correlation could not be established. Of the states examined, Pennsylvania has the highest EGD tax rate (55%), but the fourth lowest hold percentage (7.9%), which was 1.3 percentage points below the highest hold percentage (9.2%). Conversely, New Jersey has one of the lowest tax rates (8.0%), but one of the highest hold percentages (9.1%).

Electronic Gaming Devices Hold Percentages by State

6.8%

Colorado

6.9%

8.0%

Illinois

8.4%

9.1%

Indiana

9.2%

9.0%

Iowa

9.1%

7.4%

Mississippi

7.5%

9.1%

Missouri

9.2%

6.2%

Nevada

6.3%

8.9%

New Jersey

9.1%

7.6%

Pennsylvania

7.9%

9.1%

South Dakota

8.9%

9.0% 9.0%

West Virginia

5.0%

6.2%

7.5%

8.7%

10.0%

2010

2011

Electronic Gaming Device Revenue per Device per Day

$400

$300

$326.60

$319.09

$279.05

$274.26

$200

$248.64

$244.25

$236.20

$232.40

$222.49

$214.15

$202.35

$200.69

$197.42

$195.93

$191.64

$186.01

$179.63

$166.42

$158.35

$151.38

$100

$126.47

$124.59

$97.90

$95.05

$74.04

$69.74

$0

Iowa

Illinois

Kansas

Indiana

Nevada

Missouri

Maryland

Colorado

Mississippi

New Jersey

Pennsylvania

West Virginia

South Dakota

2010

2011

Commercial & Tribal Gaming Stats 2012 - RubinBrown 6

National Table Games Revenue Analysis

Table Games Revenues by State When examining table games revenues by state, Pennsylvania and West Virginia saw dramatic increases in table game revenues compared to the overall revenue growth seen on page 3. Both states introduced table games in 2010, resulting in 2011 as the first full year both states offered table games. Counter to the substantial increase seen in the Pennsylvania market, the neighboring New Jersey market saw a 10.4% decline in table games revenues. The decline in New Jersey table game revenues illustrates the challenges Atlantic City will continue to face

in the coming years. With increased gaming options outside New York City and Philadelphia, the ability for Atlantic City to attract

patrons continues to become increasingly difficult. Revenues per Table Game per Day

Counter to the trends observed in the EGD revenues, revenues per table game have a higher correlation to population centers than to number of units. In 2011, the top three states in terms of number of tables, Nevada, New Jersey, and Pennsylvania, produced the fourth, second, and third highest revenue per table amounts, respectively. Meanwhile, the states with casinos located in less populated areas produced the lowest revenues per table. In analyzing table game revenues, additional trends were noted: • In 2011, Illinois surpassed New Jersey, generating the most revenue per table game per day, recording $2,321 per table game. • Kansas, Pennsylvania, and West Virginia posted the largest increases in revenues per table, each state was in its first full year of offering table games. • Indiana table game revenues per unit declined by 1.2% between January and June; however, after the opening of the new Illinois Chicago casino, Indiana table revenues per unit declined 10.3% from July to December.

Table Games Revenues by State 1,2

2010

2011

% Change

Colorado

$75,260,952

$76,369,178

1.5%

Illinois

$171,550,000

$205,700,000

19.9%

Indiana

$386,640,674

$359,451,204

-7.0%

Iowa

$116,958,266

$125,768,376

7.5%

Kansas

$5,741,528

$6,862,840

19.5%

Mississippi

$311,275,253

$303,130,496

-2.6%

Missouri

$202,003,110

$205,321,976

1.6%

Nevada

$3,768,151,688

$3,963,258,628

5.2%

New Jersey

$1,087,696,250

$974,783,906

-10.4%

Pennsylvania

$212,473,870

$619,180,927

191.4%

South Dakota

$8,769,134

$8,911,243

1.6%

West Virginia

$139,039,353

$220,112,741

58.3%

1 Louisiana and Michigan were excluded from the analysis as gaming is not broken down between electronic gaming and table games. 2 Maryland was excluded from the analysis as the state has only legalized electronic gaming devices.

7 RubinBrown - Commercial & Tribal Gaming Stats 2012

Table Game Hold Percentages Within each state, overall table hold percentages remained relatively consistent between years; however, there was a wide range of percentages between states. Interestingly, the two states with the highest number of tables, Nevada (5,901 tables) and New Jersey (1,276 table) had the two lowest average table hold percentages, 13.2% and 15.2% respectively. In contrast to Nevada and New Jersey, Colorado has the highest hold percentage (24.3%), providing the patron with the most unfavorable payout. It is also noteworthy that Colorado is the only state with limited stakes gaming, capping a patron’s maximum wager at $100. While there are many factors that impact the differences in hold percentages between states, a primary cause for the variety is the popularity of games. The three most favorable games to a patron, Blackjack, Craps, and Baccarat, comprise 82% of Nevada’s total table game drop (excluding player banked poker games). Meanwhile, in the states with the three highest hold percentages, Colorado, Mississippi, and Iowa, the three games providing patron’s with the best odds only comprise 67 – 77% of the total drop.

Table Game Hold Percentages by State

23.9%

Colorado

24.3%

17.5%

Illinois

16.7%

18.8%

Indiana

18.7%

21.7% 21.6%

Iowa

23.1%

Mississippi

21.7%

20.2%

Missouri

20.6%

12.3%

Nevada

13.2%

15.6%

New Jersey

15.2%

20.4%

South Dakota

20.0%

10.0% 13.7% 17.5% 21.2% 25.0%

2010

2011

Table Game Revenue per Table per Day

$3,000

$2,250

$2,334.96

$2,320.62

$2,092.98

$2,007.86

$1,500

$1,884.86

$1,837.34

$1,800.15

$1,734.71

$1,667.07

$1,587.21

$1,412.07

$1,394.89

$1,330.81

$1,210.02

$750

$1,092.99

$1,048.17

$1,048.27

$1,043.65

$702.25

$672.56

$663.88

$670.79

$240.86

$242.73

$0

Iowa

Illinois

Kansas

Indiana

Nevada

Missouri

Colorado

Mississippi

New Jersey

Pennsylvania

West Virginia

South Dakota

2010

2011

Commercial & Tribal Gaming Stats 2012 - RubinBrown 8

Commercial GamingHeadlines

Photo courtesy of Rivers Casino located in Des Plaines, Illinois

Colorado Governor John Hickenlooper fires the entire gaming Commission. On July 6, 2011, the Colorado Governor replaced the entire Colorado Limited Gaming Control Commission after the Board unanimously approved a lower tax rate in May 2011. Colorado approved the use of promotional downloadable credits. On November 17, 2011, the Colorado Limited Gaming Control Commission approved the use of downloadable promotional credits. Casinos are expected to implement promotional credits by Spring 2012. Colorado’s new Commission considers a tax increase. Late in 2011, the Commission held several public meetings to discuss a potential increase in gaming taxes for commonly owned connected casinos. Currently, individual casinos may operate in connected buildings in an effort to spread revenue across several businesses, thereby taking advantage of the lower graduated tax rates.

Illinois Rivers Casino becomes the 10th casino in Illinois. On July 15, 2011, Illinois welcomed the opening of Rivers Casino in Des Plaines, a Chicago suburb, which claimed the 10th and last license available in Illinois. The opening of Rivers boosted Illinois gaming revenues, producing over $177 million in less than 6 months. Gaming expansion takes the attention of the political stage. Throughout 2011, gaming expansion was a central theme in both the state legislature and governor’s office, with the two branches of government never agreeing on the quantity of expansion. The legislature approved a measure that would have increased the number of gaming positions from 12,000 to 32,000. The issue is expected to continue into 2012.

Indiana Bankruptcy reorganization was a common theme in 2011. During 2011, Hoosier Park, Majestic Star Casino, and Majestic Star Casino II emerged from bankruptcy protection. Additionally, Indiana Live Casino filed for Chapter 11 bankruptcy protection in April 2011 and operated the remainder of the year under bankruptcy protection. Indiana considers land based casinos in Gary. In an effort to respond to increased competition from new casinos in neighboring Illinois and Michigan, the state legislature discussed approving land based casinos in Gary, Indiana. The measure ultimately did not pass in 2011, but continues to be discussed in 2012. Flooding along the Ohio River closes Horseshoe Casino twice. The Horseshoe Casino in Elizabeth, Indiana, closed twice in 2011 due to flooding along the Ohio River. Since 2000, flooding has cost the state an estimated $2.75 million in lost gaming tax revenues.

9 RubinBrown - Commercial & Tribal Gaming Stats 2012

Photo courtesy of Penn National Gaming and Hollywood Casino at Kansas Speedway located in Kansas City, Kansas.

Iowa Grand Falls Casino Resort opens in Northwestern Iowa. On June 9, 2011, the Grand Falls Casino Resort in Larchwood, Iowa, opened, becoming the state’s 18th commercial casino. The casino is located in the Northwestern corner of the state and offers 900 slot machines and 36 table games. Iowa Governor proposed Casino tax hike. In presenting the state’s budget, Governor Terry Brandstad proposed increasing the gaming tax rate from 22% – 24% to 36% and offset by lower commercial income and property tax rates. The measure ultimately did not pass.

Kansas Boot Hill Casino & Resort holds ground breaking for a new hotel. On May 11, 2011, the Boot Hill Casino & Resort, the state’s first commercial casino which opened on December 16, 2009, began construction on a 108 room hotel that is scheduled to open in early 2012. Kansas Star Casino became the state’s second commercial casino. On December 26, 2011, the Kansas Star Casino opened just south of Wichita, Kansas, in neighboring Sumner County. The casino is the state’s second commercial casino and will provide direct competition to tribal casinos located in neighboring Oklahoma.

Louisiana Baton Rouge casino moves

forward with construction. Pinnacle Entertainment’s L’Auberge Casino and Hotel, offering a 74,000 square foot gaming floor, 1,500 slot machines, 50 table games, a poker room, and 206 room hotel, is scheduled to open in the summer of 2012. Construction for Mojito Pointe has been extended to begin March 16, 2012. Creative Casinos of Louisiana, L.L.C. asked the state for a thirty day extension in order to receive more funding for the $400 million project. The casino is expected to open in 2013 creating over 2,000 jobs.

Commercial & Tribal Gaming Stats 2012 - RubinBrown 10

Commercial GamingHeadlines

Maryland Casino at Ocean Downs opened its doors to the public on January 4, 2011. The casino has a 34,000 square foot casino floor with 750 slot machines. The property also has an entertainment facility and seasonal racing at its Ocean Downs Racetrack. Proposal on Baltimore casino proceeds. Caesars Entertainment and Rock Gaming LLC submitted a proposal to build a $310 million casino near downtown Baltimore. The proposed casino includes 3,750 slot machines, multiple restaurants and a 4,000 car parking facility. The proposed casino is anticipated to be approved during the first half of 2012.

Michigan Greek town becomes a permanent facility in 2011 with the grand opening of the first phase of remodeling. The renovation included a 10,000 square foot “super pit”, the Fringe bar, VIP promotions area, cage and club booth. The casino will also be breaking ground on a new 850 car parking facility early 2012. Three of five board members retired from the Michigan Gaming Control Board in December 2011. On December 31, 2011, three of the five board member positions were vacant as two board members retired after their terms expired and one board member retired a year early. The new board members will face increased challenges in 2012 with the Detroit economy continuing to suffer and increased competition from commercial gaming in Toledo, Ohio.

Mississippi Flooding of the Mississippi River in May 2011 cost the Tunica casinos approximately $87 million in lost revenues. The Tunica Convention and Visitors Authority estimated the flood also cost the state $7 million in lost gaming tax revenue. The casinos resumed business within a month of the flood. Margaritaville Resort Casino secured financing for the $197 million project and will begin construction in 2012. The 30,000 square foot gaming floor consisting of 1,300 slot machines and 46 tables games was approved in November 2011 and is scheduled to open in June of 2013. The casino will also offer a 396 room hotel, entertainment venue and trademark Margaritaville Restaurant.

11 RubinBrown - Commercial & Tribal Gaming Stats 2012

Missouri Terrible’s Frontier Casino forced to temporarily close due to flooding in late June of 2011. The casino was reopened to the public on September 29, 2011. The casino floor remained unaffected, but the remainder of the building needed $3.5 million in repairs. River City announces plans to construct a 200 room hotel, 10,000 square foot event center and a 1,700-car garage. The project will cost Pinnacle Entertainment $82 million to complete and is scheduled to open late 2013. Construction begins on the Isle of Capri’s Cape Girardeau in late 2011. The $125 million casino, event center, and three restaurants are scheduled for completion in late 2012.

Nevada The Sahara, the last original Rat Pack casino, closed on May 16, 2011. The casino was once known as ‘the jewel of the desert’ and played host to the Rat Pack, including Humphrey Bogart, Frank Sinatra, Dean Martin, and Sammie Davis, Jr. In November 2011, a plan to remodel the casino-hotel was approved. Las Vegas city leaders are hoping the remodel will bring new life to the north end of the Las Vegas Strip. Internet poker play is approved by the Nevada Gaming Commission on December 22, 2011. The commission is the first in the nation to approve internet poker play and will open the door for many other jurisdictions in the future.

New Jersey New Jersey is looking to expand gaming through boutique casinos. On January 5, 2011, the Casino Control Act was expanded to include a pilot program for the development of two small-scale casinos, defined as a casino- hotel with 200 – 500 hotel rooms. The deadline for applicants is April 20, 2012. In March 2011, the New Jersey governor vetoed an online gaming bill. The current Casino Control Act restricts gaming to Atlantic City and the governor believes online gaming websites operated by casinos within city limits does not meet the state constitutional requirements.

Commercial & Tribal Gaming Stats 2012 - RubinBrown 12

Commercial GamingHeadlines

Photo courtesy of SugarHouse Casino located in Philadelphia, Pennsylvania

Pennsylvania Late in 2011, Pennsylvania surpassed New Jersey becoming the second largest commercial gaming state. In November 2011, Pennsylvania edged out New Jersey in monthly gaming revenues. This was the first time in U.S. gaming history that New Jersey was not in the top two states for commercial gaming. Pennsylvania’s climb to number two is attributed to the development of casinos closer to the New York, Philadelphia, and Pittsburg markets. Pennsylvania’s final resort license, awarded to Nemacolin Woodlands Resort, is under appeal. In April 2011, the Pennsylvania Gaming Control Board awarded the final resort casino license to Nemacolin Woodlands Resort. A competitor in the proposal process, Mason Dixon Resorts, has appealed the decision citing “irregularities” in the award process. Nemacolin’s chosen operator, Isle of Capri, cannot break ground until the appeal process is concluded.

South Dakota Casino revenues suffer after the first full year of a state wide non smoking ban. In November 2011, voters approved a smoking ban that included bars, restaurants and casinos. After the first full year of the smoking ban, casinos saw revenues decline 5%. To help mitigate the impact of the ban, casinos have constructed outdoor smoking areas, but revenues are still suffering from the effects on the ban. Four casinos sue the South Dakota Department of Revenue over promotional play. The state currently taxes casinos on promotional play incentives, as the incentives are included in calculating gaming revenue. The casinos are suing the state, claiming that the promotional play should not be taxed as it is “phantom revenue.”

West Virginia Table Games lead to record gaming revenues in West Virginia. In 2011, West Virginia generated a record setting $958 million in gaming revenues. The record revenues were attributed to 2011 being the first full year table games were offered. West Virginia assists casinos in upgrading gaming machines. In March 2011, the legislature passed a bill that established an annual fund of $10 million a year to assist West Virginia casinos purchase new gaming machines. The government program is funded through the revenues collected from casino tax revenues.

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Commercial & Tribal Gaming Stats 2012 - RubinBrown 14

National Indian Gaming Analysis

For the third consecutive year, tribal gaming revenues have remained relatively flat, indicating that Indian gaming has evolved into a mature market. In 2010, the 422 Indian casinos generated $26.5 billion, which matched the $26.5 billion generated by the 419 casinos operating in 2009. The evolution into a mature market is evident in the market saturation with both tribal and commercial casinos, which is fostering greater competition between the two sectors. Most recently, tribal casinos, which historically were the only source of gaming in states like New York and Kansas, are facing competition from state licensed casinos or slot-only racinos. To compete with the increased competition, tribal casinos are expanding their current properties and opening new casinos with the expectations that it will create gaming revenue growth in future years. Industry Analysis After reporting a decline in revenues in 2009, the first decline in over ten years, the industry stabilized in 2010, reporting flat revenue growth. Although national tribal gaming revenues did not increase from 2009 to 2010, revenues have increased 107.03% since 2001. However, since 2007, national tribal gaming revenues have only increased 1.53%.

Ten Year History of Indian Gaming Revenues

$30B

$23B

$26.7B

$26.5B

$26.5B

$26.1B

$24.9B

$22.6B

$15B

$19.5B

$16.8B

$14.7B

$8B

$12.8B

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 $0

Number of Casinos by Revenue Range

90

90

88

85

68

74

72

71

69

68

67

66

63

61

45

53

53

52

52

50

47

22

23

21

21

0

$250M & Over

Under $3M $3M-$10M $10M-$25M $25M-$50M $50-$100M $100M- $250M

FY 2008

FY 2009

FY 2010

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This decline in tribal gaming revenue growth over the last few years can be attributed to two primary factors. First, the economic recession during the end of the last decade caused a decrease in consumer discretionary spending. The second important factor, while not as drastic, is the increase in competition from commercial casinos. With multiple states opening new commercial properties, tribal casinos are finding ways to differentiate themselves. Differentiation seems to be possible through renovation and expansion of current properties; however tribal casinos are physically limited due to their tribal lands. In order to expand into new territories, tribes must receive approval from federal and state governments. Regulatory approval is a slow process as a result of much opposition not only from state officials, but also from local residents. Industry Trends A common theme for tribal casinos over the last year was to increase their number of service offerings to their patrons by creating a “destination like resort” at their current properties. Many tribes have added hotels, spas, new restaurants, and even event and convention centers to their casinos to attract a broader range of patrons. Tribal casinos are hoping to draw patrons in with new games and slot machines, but also keep patrons at the property longer with new hotel rooms and restaurants. Multiple tribes have reevaluated or renegotiated their state compacts in order to expand their gaming floors and increase the number of slot machines at their properties. Patrons are enticed by the new service offerings, but remain attracted to the new games and machines where they can test their luck. The true market leaders in the tribal gaming industry will not only differentiate themselves through renovation and expansion, but will also expand into new territory through the acquisition of new tribal lands or the establishment of commercial gaming enterprises. In 2011, the Department of Interior reversed an earlier ruling requiring that casinos be within commuting distance of reservations. The reversal now allows tribes to build off- reservation casinos by placing the land into a trust by the Interior Department. In acquiring land for gaming there is a two step process that must occur. First, the Secretary of the Interior (which also oversees the Bureau of Indian Affairs) must approve the land taken into trust after determining that the casino is in the best interests of the tribes and not detrimental to the surrounding community. Secondly, the governor of the state where the land is located must concur with the federal government’s determination. In California, two tribes have received initial approval from the Secretary of Interior and are awaiting the governor to concur with the decision. As some tribes look to expand tribal territory by securing land in trust, the Chickasaw Nation continues to be a market leader by looking beyond its borders. Through the establishment of Global Gaming Solutions, the Chickasaw Nation is operating various commercial racinos within the United States and has developed various international joint ventures. However, it is still uncertain if “off-reservation” casinos, along with the renovation of current properties, can revitalize the growth once experienced by the tribal gaming industry.

Indian Gaming Facilities by State

Number of Class II and Class III Gaming Facilities

State

Number of Tribes Operating Gaming Facilities

1

Alabama

1

3

2

Alaska

2

2

3

Arizona 1

15

22

4

California

60

62

5

Colorado

2

2

6

Connecticut

2

2

7

Florida

2

8

8

Idaho

4

7

9

Iowa 1

3

3

10

Kansas 1

5

5

11

Louisiana

3

3

12

Michigan

12

22

13

Minnesota

11

35

14

Mississippi

1

3

15

Montana

7

9

16

Nebraska 1

3

4

17

Nevada 1

2

2

18

New Mexico

14

22

19

New York

3

6

20

North Carolina

1

2

21

North Dakota

5

7

22

Oklahoma 1

32

110

23

Oregon

9

9

24

South Dakota 1

9

10

25

Texas

1

1

26

Washington

23

32

27

Wisconsin

11

25

28

Wyoming

2

4

239

422

Total 1

1 There are 239 tribes operating casinos within the United States. Of the 239 tribes, six tribes operate casinos in multiple states. The Number of Tribes Operating Gaming Facilities, by individual state, includes all tribes operating casinos within the respective states.

Commercial & Tribal Gaming Stats 2012 - RubinBrown 16

Regional Indian Gaming Analysis

Regional Performance The National Indian Gaming Commission (NIGC) monitors tribal gaming for seven different regions across the United States. The two largest regions, based on total revenue, continue to be Portland and Sacramento. Combined, these regions generated 50.9% of all tribal gaming revenues, but only make up 21.1% of the industry’s facilities. The Portland region has grown consistently since 2008, but the Sacramento region posted lower revenues in 2010 than in 2009. The next regional leader is St. Paul with 16.8% of the national revenues. St. Paul also posted lower revenues in 2009 and grew minimally in 2010. The Oklahoma City region has grown the most over the last three years posting growth of 17.6%, 12.0%, and 4.9% from 2008 to 2010, respectively. This region, however, only consists of 6.0% of the nation’s tribal gaming revenues. The region with the largest negative revenue growth over the last three years is the Phoenix region. The region has had a decline in revenues of -8.5% or -$235.1 million since 2008. The region does, however, still generate 9.6% of the nation’s tribal gaming revenue.

According to the NIGC, the number of casino operations only increased by 3 properties in 2010, increasing from 419 in 2009 to 422 in 2010. When classifying the casinos by revenue ranges, the fluctuations in the number of properties appeared to be the results of casinos shifting between different ranges. In 2010, casinos generating revenues less than $10 million experienced the largest increase, increasing by 7 properties, or 5.0%. Meanwhile, casinos with revenues between $10 million and $50 million decreased by 8 properties, or -5.1%, indicating the increase in smaller casinos is a result of the mid-size casinos generating less revenues. The tribal gaming industry has evolved into a mature market and is feeling the effects of the recession, saturation and increased competition from commercial casinos. To compete in the market, tribal casinos are looking to differentiate their facilities by expanding their service offerings and updating their facilities in order to attract a broader range of patrons.

Indian Gaming Revenues by Region

Alaska

St. Paul $4.4B (09 = $4.4B) 119 Ops (09 = 120 Ops)

Portland $2.7B (09 = $2.5B) 50 Ops (09 = 49 Ops)

Washington

Maine

Montana

Vermont

North Dakota

Minnesota

Oregon

New Hampshire

Idaho

Wisconsin

Massachusetts

South Dakota

New York

Michigan

Rhode Island

Wyoming

Connecticut

Iowa

Nevada

Pennsylvania

New Jersey

Nebraska

Ohio

Maryland Delaware

Indiana

Illinois

Sacramento $6.8B (09 = $7.0B) 62 Ops (09 = 62 Ops)

Utah

West Virginia

Colorado

California

Virginia

Kansas

Missouri

Washington D.C. $6.7B (09 = $6.8B) 27 Ops (09 = 28 Ops)

Kentucky

North Carolina

Tennessee

Oklahoma

South Carolina

Arizona

Arkansas

New Mexico

Mississippi

Georgia

Alabama

Phoenix $2.5B (09 = $2.6B) 48 Ops (09 = 47 Ops)

Texas

Louisiana

Florida

Tulsa $1.8B (09 = $1.7B) 65 Ops (09 = 64 Ops)

Oklahoma City $1.6B (09 = $1.5B) 51 Ops (09 = 49 Ops)

17 RubinBrown - Commercial & Tribal Gaming Stats 2012