Tuesday, September 16, 2008Work Session V: GamingTiberius 1,2,5,68:30 a.m. to 10:00 a.m.

Secondary Effects of Gambling UsesMichael J. WatzaMichigan Gaming Control Board Member

Kitch Drutchas Wagner Valitutti & SherbrookDetroit, Michigan

Gaming and Local Authority to Regulate Tribal CasinosRobert J. MillerProfessor of LawLewis & Clark Law SchoolPortland, Oregon

Gambling Secondary Effects on Local Communities

ProsDirect Benefits• Local and Regional Tax and Fee Revenue

Detroit Casino Revenues & Wagering Taxes - 2007

MGM GRAND DETROIT MOTORCITY CASINO GREEKTOWN CASINO

MonthTotal Adjusted

RevenueState Wagering

Tax (12.1%)*Total Adjusted

RevenueState Wagering

Tax (12.1%)*Total Adjusted

RevenueState Wagering

Tax (12.1%)*Total Adjusted Gross

ReceiptsTotal State Wagering

Tax (12.1%)

January $40,503,320.38 $4,900,901.77 $40,452,401.96 $4,894,740.64 $28,439,733.74 $3,441,207.78 $109,395,456.08 $13,236,850.19

February $36,771,280.82 $4,449,324.98 $39,208,228.16 $4,744,195.61 $28,998,669.02 $3,508,838.95 $104,978,178.00 $12,702,359.54

March $47,402,120.22 $5,735,656.55 $42,894,972.21 $5,190,291.64 $33,427,503.33 $4,044,727.90 $123,724,595.76 $14,970,676.09

April $41,040,958.48 $4,965,955.98 $39,345,925.30 $4,760,856.96 $30,060,692.80 $3,637,343.83 $110,447,576.58 $13,364,156.77

May $41,417,910.37 $5,011,567.15 $36,787,442.36 $4,451,280.53 $27,394,026.36 $3,314,677.19 $105,599,379.09 $12,777,524.87

June $38,562,158.58 $4,666,021.19 $42,333,206.56 $5,122,317.99 $28,490,060.73 $3,447,297.35 $109,385,425.87 $13,235,636.53

July $41,334,381.05 $5,001,460.11 $42,676,452.96 $5,163,850.81 $29,281,394.59 $3,543,048.75 $113,292,228.60 $13,708,359.66

August $42,750,887.02 $5,172,857.33 $41,091,884.90 $4,972,118.07 $27,795,698.55 $3,363,279.52 $111,638,470.47 $13,508,254.93

September $35,279,291.62 $4,268,794.29 $39,884,824.57 $4,826,063.77 $26,308,063.80 $3,183,275.72 $101,472,179.99 $12,278,133.78

October $54,888,849.43 $6,641,550.78 $37,709,923.79 $4,562,900.78 $25,633,602.69 $3,101,665.93 $118,232,375.91 $14,306,117.49

November $46,783,708.09 $5,660,828.68 $38,306,560.95 $4,635,093.87 $28,115,302.02 $3,401,951.54 $113,205,571.06 $13,697,874.10

December * $46,746,114.32 $4,262,812.18 $39,522,591.73 $4,782,233.60 $27,375,747.95 $3,312,465.50 $113,644,454.00 $12,357,511.28

Total $513,480,980.38 $60,737,730.97 $480,214,415.45 $58,105,944.27 $341,320,495.58 $41,299,779.97 $1,335,015,891.41 $160,143,455.21

All Detroit CasinosCalendar Year 2007

* The tax roll-back for MGM with a rate of 8.1% for the State of Michigan and 10.9% for the City of Detroit, was effective as of October 3, 2007 & applied against December - January taxes.

Detroit Casino Revenues & Wagering Taxes - 2008

MGM GRAND DETROIT MOTORCITY CASINO GREEKTOWN CASINO

MonthTotal Adjusted

RevenueState Wagering

Tax (8.1%)*Total Adjusted

RevenueState Wagering

Tax (8.1%)*Total Adjusted

RevenueState Wagering

Tax (12.1%)*Total Adjusted Gross Receipts

Total State Wagering Tax (8.1% - 12.1%)

January $46,637,248.81 $3,777,617.15 $39,366,692.84 $4,763,369.83 $27,534,937.58 $3,331,727.45 $113,538,879.23 $11,872,714.43

February $47,021,788.41 $3,808,764.86 $38,326,971.88 $4,637,563.60 $26,999,351.20 $3,266,921.50 $112,348,111.49 $11,713,249.95

March $50,217,833.17 $4,067,644.49 $41,307,354.29 $3,838,172.81 $32,230,050.35 $3,899,836.09 $123,755,237.81 $11,805,653.39

April $46,864,254.06 $3,796,004.58 $40,703,507.79 $3,296,984.13 $28,572,470.64 $3,457,268.95 $116,140,232.49 $10,550,257.66

May $52,973,612.49 $4,290,862.61 $41,948,166.18 $3,397,801.46 $28,131,129.20 $3,403,866.63 $123,052,907.87 $11,092,530.71

June $0.00 $0.00

July $0.00 $0.00

August $0.00 $0.00

September $0.00 $0.00

October $0.00 $0.00

November $0.00 $0.00

December * $0.00 $0.00

Total $243,714,736.94 $19,740,893.69 $201,652,692.98 $19,933,891.83 $143,467,938.97 $17,359,620.62 $588,835,368.89 $57,034,406.14

All Detroit CasinosCalendar Year 2008

* The tax roll-back for MGM & Motor City with a rate of 8.1% for the State of Michigan and 10.9% for the City of Detroit, was effective as of October 3, 2007 & and December 31, 2007 respectively.

Indirect Benefits• Employment (Construction and post construction)

• Local customer spending

• Local employee spending

• Local and regional development of supporting businesses (Construction and post construction)

• Population enhancement

• Convention development

• Tourist development

Pros (continued)

CONS *The greatest single difficulty with looking at the literature concerning the problems with gambling is surprisingly, the paucity of hard evidence

from what I would deem reliable and substantive sources of verifiable data. Many authors of this literature admit this readily. Much of this literature is permeated with speculation and conjecture. The exception appears to be with respect to the pathological gambler comprising an unknown percentage of the general population.

A. Pathological or Problem Gamblers

                The one likely verifiable problem with gambling                Estimates of .3% to 5% of the population                 Estimates of ripple effect out to 5-8 additional people                At Risk Population: Youth                                                    College population                                                    Elderly                                                    Ethnic minorities                                                    Poor

                Requires: Care and support resources                                  Pre emptive education and advertising                                            Monitoring and research                                  Impact: 50 mile radius?                Industry to pay this cost? vs disproportionate taxation?

B. Regressive Taxation

Impact on the poor double as they tend to be disproportionate users of the system and the least likely to enjoy the benefits of the government revenue collected from the industry?

C. Increased Reliance upon existing social welfare programs

D. Increased Reliance upon existing police resources(Internal Casino issues)

E. Increased Crime?

F. Overall loss of community wealth?

G. Consumer shift from traditional recreational/entertainment businesses                (Carl’s)   H. Electronic Gaming Machines (EGMs)?                (Favorite villain of much of the literature)

I. Disproportionate Local and Regional Political Influence

J. Casino BBBBBBankruptcy??

CONS (continued)

Casino Bankruptcy

Issue:Balance Local Regulation with Federal Bankruptcy Law and Jurisdiction

• Working with the Bankruptcy Court• Patience• Motive for Filing

Biography of Michael J. Watza

• Michael J. Watza is a graduate of the Detroit College of Law, now known as the Michigan State University College of Law. He is a share holder and co-chair of the commercial litigation and governmental affairs group at the law firm of Kitch Drutchas Wagner Valitutti & Sherbrook. Mr. Watza's areas of concentration include litigated, legislative and administrative solutions on behalf of municipal, non profit and private sector clients alike.

• Michael has represented clients in State and Federal trial courts throughout the State of Michigan and argued in both the State and U.S. Court of Appeals as well as attended to regulatory matters before the Michigan Public Service Commission, Tax Tribunal, Department of Labor and Economic Growth and Federal Communications Commission. Mr. Watza has also represented his clients' interests in the halls of the Michigan Legislature through the negotiation and drafting of legislation on various issues including tort reform, telecommunications, cable, pipeline regulation and the formation of inter-governmental authorities .

• He serves as General Counsel to PROTEC, a consortium of several dozen Michigan municipalities with unique interest in local government right of way issues, founded by former City of Dearborn Mayor Michael Guido.

• Michael also sits on several Boards including the Michigan Gaming Control Board, Michigan State Bar Association Public Corporation and Administrative Law Section, Covenant House Central School Board of Detroit Michigan and is the Chairman of the City of Novi Economic Development Corporation .

• He is Chairman of Panel #9 for the Michigan Attorney Grievance Commission, has been an adjunct member of the Michigan State University Law School Faculty, teaching a course on Ethics and the Practice of Law and serves as a mediator for the Wayne County Mediation Tribunal.

• In 2007, Mike was honored with a “Super Lawyer” designation by his peers as noted in the national publication of the same name.

Michigan Gaming Control Board

Kitch Drutchas Wagner Valitutti & SherbrookOne Woodward Avenue, Suite 2400Detroit, MI 48226Direct Dial (313) 965-7983FAX (313) 965-7403Email Address: Mike.Watza@kitch.com