May 27, 2009

Overview of the Process and Criteria for Evaluating Video Lottery Facility

Proposals

Staff Presentation to the

Video Lottery Facility Location Commission

2

Overview of Evaluation Process

2

Spring/Summer Summer/Fall Fall 2009

Commission Members

Commission Members

Individual reviews of proposals, site visits and public hearings, question

and answer sessions.

Individual reviews of proposals, site visits and public hearings, question

and answer sessions.

Staff to Commission Staff to Commission

Assessment and analysis of proposals across pre-defined statutory criteria

and sub-criteria approved by the

Commission; preparation of staff analyses and

reports for the Commission.

Assessment and analysis of proposals across pre-defined statutory criteria

and sub-criteria approved by the

Commission; preparation of staff analyses and

reports for the Commission.

Evaluation of Proposals

Evaluation of Proposals

Commission reviews staff analyses and reports on proposals and evaluates

proposals across statutory criteria and sub-criteria.

Commission receives Lottery Commission reports

on qualifications of applicants.

Commission reviews staff analyses and reports on proposals and evaluates

proposals across statutory criteria and sub-criteria.

Commission receives Lottery Commission reports

on qualifications of applicants.

Commission Decisions

Commission Decisions

Using individual assessments of

proposals and staff analyses/reports,

Commission makes final decisions on license

awards, subject to local zoning and permitting

approvals.

Using individual assessments of

proposals and staff analyses/reports,

Commission makes final decisions on license

awards, subject to local zoning and permitting

approvals.

3

Overview of Staff Analysis of Applicants

• PricewaterhouseCoopers (PwC), in conjunction with the commission staff, will analyze the applications to understand the proposed facilities, and will visit each of the proposed locations. Staff will also visit selected competitive facilities in conjunction with the commission.

• Based on these visits, the information in the applications, PwC’s experience and familiarity with facilities in other gaming markets, and observations in the market analysis described below, staff will prepare comments on each applicant’s proposed location, facilities, and project viability.

4

Applicant Analysis – Benchmarking

• PwC will prepare several benchmarks to support the commission’s analysis of the applicants

• It is anticipated that the following research would be summarized in documents suitable for use in working sessions with the commission

5

Market Analysis Benchmarks

• PwC will prepare

– An analysis of the market area with a drive-time approach

– Benchmarks on performance, including win per position, at comparable facilities.

6

Economic Impact Benchmarks

• PwC will prepare benchmarks of casino gaming economic impacts, including direct and indirect employment, wages and benefits, and taxes

7

Levels of Analysis

• All three levels of analysis will be performed within the context of the statutory criteria

– Level 1 – PwC Benchmark Research and Applicant Reporting

• PwC will conduct benchmark research and analysis to support the assessment of the applicants

• The staff will analyze the applications to identify key information and prepare for the assessment

8

Level 2 – Applicant Assessment

• Applicant assessment will be conducted on the basis of the statutory criteria, which have been expanded to identify key measures that can be evaluated

• Applicant assessment will be conducted utilizing a standard, pre-established analysis format approved by the commission

9

Level 3 – Staff Report and Supporting Documents

• The staff report, which will be used by the commission for decisionmaking purposes, will be based on the detailed assessment of each applicant (Level 2)

10

Statutory Evaluation Criteria:70% on Business and Market Factors

• The highest potential benefit and total revenues for the State, and potential revenues based on a market analysis

• The extent to which Maryland gaming participants would remain in the State and that a proposed facility would also become a regional/national tourist destination

• Capital construction plans and competiveness of a proposed facility

• Gross revenues to a facility operator

• The percentage of minority business enterprise ownership and proposed achievement of minority business participation goals

• The preservation of existing Maryland jobs and the creation of new jobs

11

Highest Potential Benefit and Highest Prospective Total Revenues to Be Derived

By the State

• Project viability (i.e., business plan with reasonable expectation of success, including viable financial ratios)

• Tax revenues to the State and local jurisdictions for first five years of operations from applicants

• Total VLT license fees

• Total project capital investment (as a measure of private new capital invested in the State)

• Any other financial contributions to local government and community organizations (e.g., funding improvements such as lighting on public streets or contributions to nonprofits)

12

Potential Revenues from a Proposed Location Based on Market Analysis

• Estimate of applicant’s gaming revenues for the first five years of operation

• Estimate of applicant’s total revenues (including non-gaming revenues such as hotel, food and beverage, and entertainment) for the first five years of operation

13

Extent to Which the Proposed Location Encourages Maryland Gaming Participants

to Remain in the State

• Access to the proposed facility (e.g., proximity to interstate)

• Regional competition (list or map of key competitive facilities within a determined area)

• Facility attractiveness to satisfy Maryland gaming participants

• Potential for a gaming facility at the proposed location to retain Maryland gaming participants

14

Extent to Which the Proposed Location Demonstrates That the Facility Will Be a Substantial Regional and

National Tourist Destination

• Potential for facility to attract tourists, including branding, planned marketing positioning, and marketing plans to attract tourists (e.g., planned target markets, planned partnerships with local lodging and tourism facilities)

• Local tourism infrastructure (e.g., availability of facilities that can work as mutual complements with the gaming facility to function as a more attractive tourism destination, such as local lodging, meeting, food and beverage, entertainment, golf, and RV facilities)

• Entertainment or additional attractions at the proposed facility (e.g., celebrity chef restaurants and performances by popular artists)

• Proximity to transportation infrastructure (e.g., airport, train station, and bus terminal)

15

Proposed Capital Construction Plans

• Capital construction plans

– Total project cost

– Project construction timeline (including timeline of temporary and permanent facilities, and point by which required level of investment will be achieved)

16

Proposed Facilities and Amenities

• Gaming features

• Non-gaming features

• Layout

• Design/theme/vision

• Access

• Parking

• Suitability of design to surroundings

17

Competitiveness of Proposed Facility

• Hours of operation

• Player tracking system or frequent player programs

• Branding (e.g., Trump)

• Development experience

• Management and operating experience

• Branded food and beverage or shows

• Consumer protection policies and procedures

18

Amount of Gross Revenues to Be Allocated to the Operator Over the Term

of the License

• Percentage less than or equal to State mandated maximum percentage of 33%

19

Minority Business Enterprises

• Percent of ownership by entities meeting the definition of Minority Business Enterprise (MBE) under Title 14, Subtitle 3 of the State Finance and Procurement Article

• Contents of the licensee’s plan to achieve minority business participation goals in accordance with the requirements described under Section 9-1A-10(A)(1) and (2) of this subtitle

– Minority business participation planned in construction

– Percentage of intended employees from minority communities

– Intended purchasing from minority businesses

– Minority recruiting plan

– Minority business participation demonstrated in applicant’s existing business operations

20

Extent to Which the Proposed Location Will Preserve Existing Maryland Jobs and the Number of Net New Jobs to Be Created

– Jobs created (construction, ramp-up, and stabilized)

– Percentage of employees living in Maryland

– Recruitment history and policies (e.g., history of recruiting locally in a recently opened facility)

21

Statutory Evaluation Criteria:15% on Economic Development Factors

• Wages and benefits for newly created jobs

• Any additional economic development in the area

22

Anticipated Wages and Benefits for New Jobs to Be Created

• Total new jobs created (construction, ramp-up, and stabilized)

• Total wages and benefits for new jobs (construction, ramp-up, and stabilized)

• Average wages for new jobs

• Benefits, including health insurance

• Local hiring (i.e., giving preference in hiring from communities within 10 miles of the proposed facility)

• Retirement benefits, including consistency with requirements applicable to applicants that are racetrack owners

23

Any Additional Economic Development Planned in the Area of the Proposed

Facility• Additional components of the development (e.g., hotel)

• Timing of the additional components (e.g., timing of opening/sales)

• Total development cost of additional components

• New jobs created by the additional components (construction, ramp-up, and stabilized)

• Total wages and benefits for new jobs created by the additional components (construction, ramp-up, and stabilized)

24

Statutory Evaluation Criteria:15% on Location Siting Factors

• Existing transportation infrastructure surrounding a proposed facility

• Any negative impacts on residential communities

• The need for any public infrastructure expenditures

25

Existing Transportation Infrastructure Surrounding the Proposed Facility

Location

• Proximity to interstate and other road infrastructure

• VLT facility ingress and egress

• Proximity to public transportation infrastructure (e.g., train stations, airports, and bus terminals)

26

Negative Impact, If Any, of a Proposed Facility Location on the Surrounding

Residential Community

• Status of local zoning and permitting

• Proximity to major residential communities

• Proximity to any schools, colleges, universities, and hospitals

• Public safety and security

• Traffic

27

Need for Additional Public Infrastructure Expenditures at the Proposed Facility

• Availability and proximity of public infrastructure (e.g., hospitals, fire stations, police stations, and gas stations)

• Applicant determination of additional public infrastructure needs