Spring 2013 issue of Horizons

Las Vegas Unique to the national trend, the positive growth in Las Vegas Strip gaming revenues proved that increased regional gaming does not reduce the destination gaming experience that Vegas offers. In 2012, the Las Vegas Strip gaming revenues increased 2.3% to $6.21 billion. While positive, the reduced growth continues to be attributed more to the expansion of gaming in Asia and the decline in international high-rollers. Tribal Gaming The tribal gaming industry consists of 240 sovereign tribal nations, operating 421 casinos, located in 28 states. Since 2007, the tribal gaming industry has opened 37 new tribal casinos and produced a steady five year compounded annual growth rate of 1.8%. Beyond the opening of new casinos, tribes continue to reinvest in their existing facilities by expanding the gaming floors, hotels, restaurants, and resort amenities, such as golf courses and spas. The expansion of gaming has intensified the competition and come at a cost to pre- existing casino operations; however, gaming expansion continues to produce growth for the overall gaming industry. Furthermore, this trend of gaming expansion does not appear to be slowing down, as both tribal and state governments continue to view gaming as a vehicle to generate revenues for government programs. State Gaming Tax Revenues In 2012, state gaming tax revenues increased 8.5% or $661.4 million. The state gaming tax growth rate continues to outpace the overall gaming revenue growth, as newer states have imposed gaming tax rates as high as 67.0% of net gaming revenues. Translation: For every dollar earned by a casino, only $0.33 goes towards operational expenses, payroll, capital improvements, and net income. As a comparison, the two

states to offer gaming the longest, Nevada since 1931 and New Jersey since 1976, have gaming revenue tax rates of 6.75% and 9.25%, respectively. During 2012, Indiana state legislators decreased the tax rate on racinos, applying the tax rate to 99% of gaming revenues, as opposed to 100%. Looking towards 2013, Indiana legislators are looking at ways to bolster the gaming industry amidst increased competition from commercial casinos in Ohio and Illinois and tribal casinos in Michigan. Measures currently being discussed include the reduction of the overall tax rate, providing a tax credit for promotional awards, eliminating the admissions tax, and authorizing land-based casinos. In Maryland, the state with the nation’s highest tax rate of 67.0%, legislators approved a tax break for casinos. Once implemented, the tax rate on gaming machine revenues will vary by casino and range from 50.0% to 62.0%, with additional requirements on casino operators to purchase the gaming machines. The reduction in tax rates will improve the market’s competitiveness with neighboring jurisdictions. Contrary to the trends seen in Indiana and Maryland, Colorado increased the gaming tax rate, restoring the tax rates in effect from 2008 through June 2011. In 2011, the tax rates were lowered by the Colorado Limited Gaming Control Commission, which resulted in the Governor firing the entire Commission. Gaming Expansion for 2013 and Beyond In 2013 and beyond, gaming operators will see additional gaming expansion challenges with Massachusetts issuing three full-scale casino licenses and one slots-only license, Maryland legalizing table games, Illinois pursuing the expansion of five new casinos, and Florida continuing to look at gaming expansion. Existing properties will also face increased challenges with more states legalizing video lottery games at local truck stops, restaurants, and bars.

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