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National HBPA Forum “Life After Slots”

National HBPA Forum “Life After Slots”. Thursday, July 2, 2009 Panelist - Joe Santanna. The Perspective 2009 Projected Purses for PN & PID. Penn National Slots $ 28,200,000 Pari-Mutuel 11,050,000 Total $ 39,250,000 Presque Isle Downs Slots $ 20,085,000 Pari-Mutuel 1,325,000

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National HBPA Forum “Life After Slots”

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  1. National HBPA Forum“Life After Slots” Thursday, July 2, 2009 Panelist - Joe Santanna

  2. The Perspective2009 Projected Purses for PN & PID • Penn National • Slots $ 28,200,000 • Pari-Mutuel 11,050,000 • Total $ 39,250,000 • Presque Isle Downs • Slots $ 20,085,000 • Pari-Mutuel 1,325,000 • Total $ 21,410,000

  3. The “Latest”PA Table Games Legislation • Racino moves from: • Slots and Racetrack to • Full Casino and Racetrack • Horse racing Industry is not included in initial legislation • Substantial “tax” rate shift proposed: • From 55% • To 12% or 21% (2 bills)

  4. The Proposal • PA Table Games Impact Technical Memo • April 2009, Innovation Group • Slot Revenue will increase by 3.5% • $111,131,892 @ 55% = $ 61,122,541 • Table Game Revenue • $864,468,091 @ 12% = $103,736,171 • Total Additional Revenue $164,858,711

  5. The Actual • The ACTUAL effect at MTR in 2008 • Revenue from Poker $ 7,300,000 • Revenue from Tables 41,500,000 • Total (40 Poker,55 Table)$ 48,800,000 • Decrease in Slots -22,200,000 • Net Increase $ 26,600,000 • How do Table Games increase slot play if this is actual data from MTR 2008 SEC 10k filing?

  6. The Tax Race SwapPurses – Breeders – H & P • Slot Play Decrease $ 22,200,000 • Percentage to Horse Racing X 9% • Loss to Purses/Breeders $ 1,998,000 • Number of Locations in PA 12 • Total Exposure $ 23,976,000 • Hold Harmless Percentage Needed 4.1%

  7. Position on Possible Decrease • If gaming revenues are decreasing for all • No problem – misery loves company! • If gaming revenue is increasing from table games but decreasing from slots • Decreases can be attributable to: • Increased competition within and outside of state • Declining economic forces • Introduction of table games to site • A decrease is a decrease is a decrease!!

  8. The Tax Rate SwapState • Slot Play Decrease $ 22,200,000 • Percentage to State X 34% • Loss to State $ 7,548,000 • Number of Locations in PA 12 • Total Exposure $ 90,576,000 • Hold Harmless Percentage Needed 15.5%

  9. The Tax Rate SwapThe Casino Operator • Keep by Operator on Table Games 88% • Keep by Operator on Slots (Max) 48% • The Swap 40% • On $22,200,000 @ 40% = $ 8,880,000 • At 12 locations X 12 • The Swap $106,560,000

  10. Other Info From MTR 2008 SEC 10k Report • Operating margin increased to 12.1% from 11% in 2007 • Increase in Gross Profit from Gaming, food, beverage, and lodging • Average Daily (net) Win per slot machine decreased to $175 from $194 during 2007 • 2008 total “Poker Rake” was $7.3 million with an average daily poker rake per table of $507 • 2008 Table Game net win amounted to $41.5 million with a “Table Drop” of $225.1 million resulting in a “hold percentage” of 18.4% • Slots keep in PA in 2008 was 9.12% • Average daily net win per table was $2,104

  11. Primarily resulting from increased “Patron Traffic”from opening of Table Games • Gaming compensation and benefit costs increased by $11.9 million during 2008 • Addition of poker tables • Expanded 24/7 operations • Almost offset by below increases in profits • Increase in food, beverage, and lodging • $4.6 million or 22.2% • Gross profit increased $1.9 million or 34.9% • Room rates increased 26.4% • Other Revenue increased $1.9 million or 30.7%

  12. Conclusions • Table Games decrease Slot Play • Capital investment in Table Games is much less than Slot Machines • Only the Operator profits from the ancillary operations that prosper from Table Games • If Table games add revenue then everyone else, AT A MINIMUM, should be held harmless if they cannibalize slot revenues

  13. More Conclusions • Build a correct model that protects everyone’s interests • If not attractive to operators, expand slot to state approved maximums • Major Policy decision based upon one study funded by three of the current casino operators • Protect the demonstrable increase in quality of racing in PA as a result of Act 71

  14. Final Thoughts • Table Games Decrease Slot Play • Slot Play Increases when Live Racing is being conducted • Slot Play Increases on “Big Day” racing • Pari-mutuel handle decreases as slot machines increase • Pari-mutuel handle decreases as table games are opened

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