Missouri Gaming Commission Annual Report to the General Assembly Fiscal Year 1998

Table of Contents The Commissioners p 2-3

Message from the Chairman p 4-5

Section 313824 Report on Competitiveness p 6-8

Economic Impact of Riverboat Gaming p 9

Does the Gaming Money Really Go to Fund Education p 10-12

Dealing with Problem Gambling p 13

Understanding Boats in Basins p 14-17

The History of Riverboat Gambling in Missouri p 18-24

Charitable Bingo p 25

Financial Summary Reports p 27-32

Riverboat Gaming Licensee Financial Reports p 33-44

Home Dock Communities Use of Riverboat Gaming Funds p 45-50

Robert L Wolfson Chairman Robert L Wolfson is Chairman of the Board for Wolfson Capital Venture He is the co-founder of the St Louis Blues

of the National Hockey League and served as Vice-President and Treasurer of the SL Louis Blues Mr Wolfson established Feld Chevrolet in 1947 and has established many successful retail businesses In addition Mr Wolfson has successfully established several banking companies including Parkway Bank and Progress Bank both of which were eventually sold to Mark Twain Bank which has since been merged with Mercantile Bank Mr Wolfson has real estate holdings in the St Louis and Greater Washington DC areas

Mr Wolfson is currently or has been an officer in the following organizations Trustees of Brandeis University Trustees of Jewish Hospital Jewish Federation of Sf Louis Trustees of Jewish Community Centers Board of Governors ofWestwood Country Club and the International Board ofBoys Town ofItaly In addition Mr Wolpound~on is the recipient ofmany awards I from civic organizations and is well known for his philanthropic endeavors _J

~~~~mramp~

i~-1 1 ~

Dr Jenice Prather-Kinsey Secretary Dr Prather-Kinsey is a CPA and accounting professor at the University ofMissouri-Columbia She has published over

twenty articles in national and international academic accounting journals She has received numerous honors and awards for her research and teaching including a two year Research Associateship from Washington University and a KPMG Peat Marwick International Accounting Research Fellowship

Dr Prather-Kinsey holds leadership positions in the American Accounting Association the National Association of Black Accountants the American Institute of CPAs the Institute of Management Accountants and the Missouri Society of CPAs She was on the Price Waterhouse National Advisory Board and currently is on the MIZZOU Credit Union and the Board of Trustees of Second Missionary Baptist Church

1

ampaK-mwJiI~~~~~

~

Julian M Seeherman Vice-Chairman Mr Seeherman is the former Chairman of the Board of the Venture Stores Prior to becoming Chairman of the Board

Mr Seehernlan held various top executive positions with Venture He began his career as a retailer with Abraham amp Straus a division of Federated Department Stores in 1951 In 1977 Mr Seehennanjoined the May Co as President and CEO of Conshysumers Distributing Mr Seehemlan currently operates a consulting business

iiYil~$~~~~iIlI 4urro~

Mr Seehennan was inducted into the Discounting Hall of Fame in 1995 He is a recipient of the International Mass Retail Associations Partnership Award and was voted the 1991 Discounter of the Year by retail industry executives Mr Seeherman is cUlTently or has served onltthe boards ofWebster University the Boy Scouts Junior Achievement Civic Progress Jewish Community Center Association Jewish Hospital Greenfield Industries Inc and is involved in many other charitable and business organizations in the St Louis area

Robert C Smith Mr Smith is a retired senior partner in the firm of Smith Lewis Beckett Powell amp Roark He formerly served as a

Master in Federal Court on insurance litigation He has served as an arbitrator for the US and Midwest Arbitration Associashytions and as a Missouri Administrative Hearing Commissioner Mr Smith served as a member of the Missouri House ofRepreshysentatives from 1953-56 including two years as Speaker Pro-tern He was Mayor of Columbia from 1961-63 Mr Smith has served on numerous Missouri Bar Association boards including the Board of Governors from 1975-79 He has served as a member of the Stephens College Board of Curators President of Columbia Kiwanis President of the Missouri Symphony Society Member of the State Historical Society Board ofTrustees He has received the Missouri Bar Pro-bono Award Univershysity ofMissouri Alumni Faculty Award University ofMissouri Law School Citation of Merit Outdoor Writers Association Of America Ham Brown Service Award and is an Honorary Citizen of Fulton Missouri

Major LG Ullery (retired) Major Ullery retired from the Missouri State Highway Patrol as a Major in 1991 After retirement Major Ullery served

as Safety Director for Crabtree-Harmon Corp where he established and organized its safety department Major Ullery continues to work as a safety consultant for various organizations

During his 27-year career with the Highway Patrol Major Ullery was instrumental in developing programs to reduce fatalities on the highways and increase safety monitoring of the pUblic He implemented a statewide drug interdiction program reintroducing techniques and encouraging officers on the road to be alert to criminal activities and operations This program has been recognized as one of the best criminal apprehension efforts in the nation

Governor Carnahan amp Members of the General Assembly

I am pleased to present the Missouri Gaming Commisshysions annual report for fiscal year 1998 It is submitted to comply with the Commissions statutory reporting mandates and to provide you a status report of the riverboat gambling bingo and horse racing industries in Missouri

The riverboat gambling statute has two provisions reshyquiring the Gaming Commission to submit an annual report Because the two statutes have somewhat conflicting instructions the Commission submits this report to you now shortly after the conclusion of the states fiscal year to provide you with a yearshyend financial report and to give you ample time to review and evaluate the infonnation prior to commencing the next legislative session Of course the Commission will comply with the filing date in the statute and submit a supplemental report on January 15 1999 However it should be noted that among the Connnissions recommendations for legislation is that the two sections requiring an annual report be consolidated so that the report is due September 15th of each year

In addition to the statutory requirements the Commisshysions report covers other areas that it belicves are of interest to the states policy makers Two of the most fTequently asked questions of the Gaming Commission are (1) Where does the gambling money go and (2) Why is the Commission trying to take games of chance away from boats in basins when it granted pemlission after a thorough study of the issues to allow them These topics are reviewed in depth beginning on pages 10 and 13 respectively Furthennore the report contains a wide variety of financial reports that we hope will provide a thorough overview of the financial status of riverboat gaming operations

The Commission assumed responsibility for the regulation of charitable bingo on July 1 1994 Since that time the Conmlisshysion has concentrated on adopting guidelines that will ensure that criminal elements are not involved in the operation of bingo games In addition the Commission worked with the General Assembly to reduce bingo tax rates create a more user-friendly system of taxation that provides a meaningful audit trail that protects state revenue and ensures a level playing field for competitors

By vigilantly working to cooperate with Missouris charitable fraternal religious service and veterans organizations the Commission has been able to develop a system of regulation that is firm but fair and has been successful in ousting dozens of individuals and organizations whose only interest was selfish enrichment and not contributing to charitable causes However the Conunissions work in this area is not finished and it will continue to develop new and innovative ways to streamline regulatory process while standing firm on its demand for a well conducted industry free of crime and corruption

There is little I can report to you on the issue ofhorse racing Legislation that would have allowed the owner of a horse track to operate otf-track betting parlors failed this past legislashytive session The only applicants that have contacted the Comshymission have informed the staff that the ability to operate OTBs is a prerequisite to them filing an application in Missouri We continue to work with the Missouri Horse Racing Commission on issues regarding incentives for Missouri horse breeders and the operation of amateur racing in the state

To all those whom I have had the pleasure of working with over the past five years I express my gratitude for the opportunity to serve as Chairman of the Gaming Commission As 1 approach the end ofmy last teffil as mandated by statute I

look back on the accomshyplishments of the Commisshysion with a great deal of pride The General Asshysembly gave the Commisshysion the difficult and often controversial job of impleshymenting the peoples will to have riverboat gaming The Commission has implemented its charge by carefully adhering to our statutory guidelines While the Akin decision has been the source of legal conflict and public controversy it has not stopped the Commission fiom giving you what SBs 10amp11 contained as a core demand - a clean industry fiee from criminal influence When the Commission has discovered evidence of crime those responsible have been exposed and eliminated In addition the Commission has imposed strict penalties for violations of its standards for the conduct of gaming

In 1998 the Commission established a new division Corporate Securities and Finance to deal with specialized matters involving financial transactions tax issues and corporate law The pew division is modeled after similar groups within other agencies It includes approximately 15 staff members including an employee of the IRS who is assigned to the Commission under an intergovernmental agreement

In any organization the key ingredient is people All of my fellow COllumssioners have been dedicated to the creation of a new agency with integrity as its by-word They have worked

diligently to that end

More importantly we have been fortunate to have a superb staff It would be inappropriate to single out any inshydividuals Nevertheless the leadership of our Executive Director and the diligent work of his Deputy Directors their support staff our legal counsel the many members of the Missouri State Highway Patrol and the agents assigned to the Commission by the IRS have made it all possible Continuity is important The willingness of our staff to continue gives me comfort that the business and problems that lie ahead will be handled with professhysionalism and integrity

In closing the Commission looks forward to continuing its mission which is prominently displayed on the inside cover of this report To administer honestly equitably and efficiently the statutes and rules and regulations that govern the riverboat gamshying bingo and horse racing industries in Missouri

Sincerely

Robert L Wolfson Chairman

Effect of Tax Rate Missouri law currently imposes an 18 state

tax on the adjusted gross receipts (AGR) received from gambling games on riverboat casinos In addishytion the statute provides that the home dock city or county where each excursion gambling boat is located shall receive 2 ofAGR The local tax does not generate state funds and therefore is not subject to Article III Section J (d) of the Missouri Constitution which directs that all state funds derived from the proceeds of gambling be used for public education

The statute also imposes an admission fee on the operators of excursion gambling boats in the amount of two dollars ($2) per patron pcr excursion which is split between the home dock community and the state Furthermore pursuant to section 313824 RSMo excursion gambling boat operators are charged for the cost of gaming agents that are assigned to the riverboat with the responsibility of protecting the pUblic While the cost of Commission agents varies with each operation the average annual cost is apshyproximately $589200 per boat

Finally it should be noted that in addition to the special taxes imposed on gambling the riverboat operators are responsible for all other state and local taxes such as sales tax property tax and income tax that apply to other business owners The Commission regularly reviews the operators financial records to ensure that the appropriate local state and federal taxes are paid

Jurisdiction AGRTax Admission Fees license Fees

lllinois

15 up to 25 million 20010 betveen $25 to $50 million 25 between $50 to $75 million 30 between $75 and $100 million and 35 over $100 million

$25000 application fee $5000 rerxwal

$2 per patron per cmise (including camps a11d multiple rides)

j

Iowa

Sliding scale on AGR $0 to $1 million 5 $1 to $3 million 10 $3 million al1d up 20

$25000 application fee for a 9 )eaT tenu $1000 renewal fee pIllS $5 per passenger carrying capacity irxluding ere (millirmm capacity is 250)

ekly fee set by comlnssion of 65 of enforcerrent costs plus expellses to be divided equally atrollg

licensees Local adllnssion fee of $50 per patron per cruise (optional)

Missouri 200loofAGR

Ihe higrer of $50000 or full cost of imestigation relxwal fee of $25000 aunually

$2 per patron per cruise (including eomps and multiple rides) Full cost of enforcement (avg $589200 per boat per year)

Mississippi

Sliding scale of Ulmlhly revelUle from 4 to 8 Annual per ~ fee ranging from $50 for I ~x to $2800 for 27 to

35 gatlJes Local optional AGR tax of 4 to 8

-shy

NA NlA

Effective Tax Rate of Neighboring States

35 ~ shy

tf 30

f Q)

cu 25a gtlt (l 20lshy bull Effective Tax Rate ()

1 15 0 ()m10

5

0 Illinois Iowa Missouri

Based on Calendar Year 1997

The taxes specific to Missouri riverboat gaming opshyerators are higher than their competitors in adjoining from marketing efforts that could attract more customers thus generating more tax revenue and offering the possibility of additional capital investment

The table shown on page 6 compares Missouris rivshyerboat gambling tax rate to adjoining states In addition the chart below depicts the effective tax rates for each adjoining state The effective tax rate is the amount of tax paid as a percentage of gross revenue It should be noted that Illinois recently raised its taxes on riverboat gambling from a flat 20 ofAGR to the sliding scale depicted in Table A on page 6

Even with Illinois new higher tax rate its operators eHective tax rate remains lower than that ofMissouri operators While some consideration must be given to the fact that Missouri charges for the full cost of enforceshyment and Illinois does not a more compelling argushyment can be made that the

loss limits detrimental efiect on gross revenue is the prishymary reason for Illinois lower effective tax rate

Finally it should be noted that three Indian casinos are now operating in Kansas These facilities are not taxed and therefore are not represhysented in any of the tables or charts Nevertheless the Kansas Indian casinos have established themselves as fonnidable competitors of the riverboat gaming operations on the western side ofMisshysouri and are having an impact on state revenue

Effect of the Loss Limit There have been 110 changes in the competitive factors

relating to the loss limit since the commissions last full report was submitted to the General Assembly in January 1997 Neighboring states continue to post significantly higher win per admission numbers than operators in Missouri resulting in as much as 50 more gaming revenue per patron in those states than in Missouri

Statistical data and observations of customer patterns at facilities in Ill1nois and Kansas continue to indicate that the loss limit results in an export of Missouri dollars to neighboring

jurisdictions The accompanying tables and charts that are proshyvided clearly demonstrate that Missouri lags significantly behind

neighboring non-loss limit states in win per admission This information is provided to update and supplement the data proshyvided in the 1997 report

Finally the Commission has yet to see any evidence that the loss limit is an effective deterrent to the problem gambler While the Commission has adopted one of the most aggressive programs to combat problem gambling (see page 13) the loss limit has not proven to be an effective weapon in this battJe

Win Per Admission Missouri vs Adjoining States

$50

$40

$30

$20

$10

$0 IL Metropolis Council Bluffs

MO IA Alton Caruthersville St Joseph

$43

IMIlt

$33

st Louis E St Louis

$34

There are many questions regarding the economic impact of riverboat gaming in Misshysouri and the impact of gaming nationwide In 1997 Civic Progress of St Louis commissioned an independent study on the economic impact of gaming in Missouri Dr Charles Leven Professor Emeritus of Economics conducted the study released to the public in the spring of 1998 at Washington University and Dr Don Phares Professor of Economics and Public Policy at the University ofMissouri-St Louis

The Leven-Phares study was based on financial results for calendar year 1996 and included projections for calendar year 1997 The study asserted that in 1997 the casino gaming indusshytry in Missouri directly and indirectly generated more than threeshy

t quarters of a billion dollars worth of new spending in the states ~ economy Because of casino gaming personal income grew by ~

over $500 million State and local governments received over $225 million in new tax revenues Almost 18000 new jobs were added to the economy

t~middotmiddotmiddotmiddotmiddotmiddotmiddotImiddotmiddot The Missouri riverboat casino market is generally considshyered to be limited to local residents However because all of the

1 Missouri facilities are located near bordering states it appears 1 ~ that the casinos are able to attract a significant amount of out of1Ir state dollars The Leven-Phares study found that visitors from

out of state generated 30 percent of casino revenues Furthermore the study found that 17 percent of casino revenue came from reducshytions in spending outside the state by Missourians

On the other hand the study found that $265 million dollars of casino revenue carne from reduced household spending in Missouri However the study noted that while this is more than one half of Missourians total spending of $412 million at casinos it is relatively inconseshyquential when compared to total Missouri retail sales of$45 billion or personal income of $116 billion

Although the Leven-Phares study introduced important data and represents the most thorough examination of the ecoshynomic impact of casino gambling on the Missouri economy it did not go far enough In order to get a more complete picture of the economic impact that gambling has on Missourians and their economy social impact must be examined A study must atshytempt to estimate the number of problem gamblers and the extent of their impact on the Missouri economy No such study has been attempted in Missouri and the difficulty in quantifying such human factors represents an enormous chalshylenge

This is a question frequently asked of public officials The short answer is yes it does Pursuant to a constitutional amendment submitted by the General Assembly the voters adopted Article III Section 39( d) in 1992 which mandated that all state tax money derived fro111 the conduct ofgambling to be dedicated to public education

State statutes impose three taxes unique to riverboat gambling operators The only tax subject to Article III Section

3 9( d) is the 18 state tax on adshyjusted gtoss receipts (AGR) which produces the vast majority of revenue (Section 313822 RSMo) In addition the statute imposes a $2 admission fee that is split between the home dock community and the state (Section 313820 RSMo) Finally the statute allocates 2 of AGR as a local tax paid to the home dock community to be used for services necessary for the safety of the public visiting an excursion gambling boat (Section 313822(1) RSMo)

1994 Changes to the Foundation Formula

In 1994 the General As~embly passed Senate Bill 380 which made significant changes in the school foundation formula Among the changes was a provision that directed a large portion of the states tax on the gross revenues of riverboat gaming operators to the formula The remaining funds would be spent on capital improvement projects for the states colleges and universi-

Gaming Revenue for Education

200

CD 150 J c CD gt CD 100 bull BingoII x bull Riverboat ~ 50

o

1996 1997 1998

Fiscal Year

FiscdYea R h erlxxJt Birm 1995 $5661628204 $625370996 1996 $9973032067 $468417852 1997 $11841938902 $461557950 1998 $1444903789~- $4384 17486_

--~

ties until the legislature passed Senate Bill 301 in 1995 SB 301 would direct all the states portion of the AGR tax to elemcntary and secondary education Specifically the first $7 million is appropriated to the School Bond Fund to be used to pay the costs of the issuance of local school district bonds with the remaining

funds going to the school foundation formula As depicted in the chmis on pages 11 and 12 the gaming

revenue represents a significant portion of new funding for public education in each of the past four fiscal years In addition in less than 2 years the riverboat gambling revenue represents almost 6 of direct state aid for education

Excess Admission Fees to be Used for Education

The primary purpose of the states portion of the admisshysion fee is to fund the administrative and regulatory activities of the Gaming Commission TIllS insures that no general revenue is used for any function relating to riverboat gaming However the admission fee generates far more revenue than the Commission requires to operate In fiscal year 1997 the states portion ofthe admission fee exceeded the Commissions operating budget by more than $25 million

Therefore some mechanism is required to distribute the remainder of the states pOliion of the admission fee In 1998 Govemor Camallan proposed legislation that would direct the majority of the excess revenue generated by the states admission fee to early childhood education programs However because prior fiscal years the excess admission fee had been used for programs for community neighborhood organizations and vetershyans it was necessary to establish a schedule of funding each of these programs while providing that the majority of the funds be used for early childhood education The General Assembly responded by adopting HB 1519 which established the following distribution formula for the excess admission fees in the Gaming Commission Fund (1) The first $500000 is used to fund community neighborhood

organization programs for the homeless and to deter gang-re-

Source of Increase in Foundation Formula FY 95 to FY 98

Source of Funds

$14449037694 322

$304 90962106 678

bull Riverboat Funds

bull Other Funds

Table of Contents The Commissioners p 2-3

Message from the Chairman p 4-5

Section 313824 Report on Competitiveness p 6-8

Economic Impact of Riverboat Gaming p 9

Does the Gaming Money Really Go to Fund Education p 10-12

Dealing with Problem Gambling p 13

Understanding Boats in Basins p 14-17

The History of Riverboat Gambling in Missouri p 18-24

Charitable Bingo p 25

Financial Summary Reports p 27-32

Riverboat Gaming Licensee Financial Reports p 33-44

Home Dock Communities Use of Riverboat Gaming Funds p 45-50

Robert L Wolfson Chairman Robert L Wolfson is Chairman of the Board for Wolfson Capital Venture He is the co-founder of the St Louis Blues

of the National Hockey League and served as Vice-President and Treasurer of the SL Louis Blues Mr Wolfson established Feld Chevrolet in 1947 and has established many successful retail businesses In addition Mr Wolfson has successfully established several banking companies including Parkway Bank and Progress Bank both of which were eventually sold to Mark Twain Bank which has since been merged with Mercantile Bank Mr Wolfson has real estate holdings in the St Louis and Greater Washington DC areas

Mr Wolfson is currently or has been an officer in the following organizations Trustees of Brandeis University Trustees of Jewish Hospital Jewish Federation of Sf Louis Trustees of Jewish Community Centers Board of Governors ofWestwood Country Club and the International Board ofBoys Town ofItaly In addition Mr Wolpound~on is the recipient ofmany awards I from civic organizations and is well known for his philanthropic endeavors _J

~~~~mramp~

i~-1 1 ~

Dr Jenice Prather-Kinsey Secretary Dr Prather-Kinsey is a CPA and accounting professor at the University ofMissouri-Columbia She has published over

twenty articles in national and international academic accounting journals She has received numerous honors and awards for her research and teaching including a two year Research Associateship from Washington University and a KPMG Peat Marwick International Accounting Research Fellowship

Dr Prather-Kinsey holds leadership positions in the American Accounting Association the National Association of Black Accountants the American Institute of CPAs the Institute of Management Accountants and the Missouri Society of CPAs She was on the Price Waterhouse National Advisory Board and currently is on the MIZZOU Credit Union and the Board of Trustees of Second Missionary Baptist Church

1

ampaK-mwJiI~~~~~

~

Julian M Seeherman Vice-Chairman Mr Seeherman is the former Chairman of the Board of the Venture Stores Prior to becoming Chairman of the Board

Mr Seehernlan held various top executive positions with Venture He began his career as a retailer with Abraham amp Straus a division of Federated Department Stores in 1951 In 1977 Mr Seehennanjoined the May Co as President and CEO of Conshysumers Distributing Mr Seehemlan currently operates a consulting business

iiYil~$~~~~iIlI 4urro~

Mr Seehennan was inducted into the Discounting Hall of Fame in 1995 He is a recipient of the International Mass Retail Associations Partnership Award and was voted the 1991 Discounter of the Year by retail industry executives Mr Seeherman is cUlTently or has served onltthe boards ofWebster University the Boy Scouts Junior Achievement Civic Progress Jewish Community Center Association Jewish Hospital Greenfield Industries Inc and is involved in many other charitable and business organizations in the St Louis area

Robert C Smith Mr Smith is a retired senior partner in the firm of Smith Lewis Beckett Powell amp Roark He formerly served as a

Master in Federal Court on insurance litigation He has served as an arbitrator for the US and Midwest Arbitration Associashytions and as a Missouri Administrative Hearing Commissioner Mr Smith served as a member of the Missouri House ofRepreshysentatives from 1953-56 including two years as Speaker Pro-tern He was Mayor of Columbia from 1961-63 Mr Smith has served on numerous Missouri Bar Association boards including the Board of Governors from 1975-79 He has served as a member of the Stephens College Board of Curators President of Columbia Kiwanis President of the Missouri Symphony Society Member of the State Historical Society Board ofTrustees He has received the Missouri Bar Pro-bono Award Univershysity ofMissouri Alumni Faculty Award University ofMissouri Law School Citation of Merit Outdoor Writers Association Of America Ham Brown Service Award and is an Honorary Citizen of Fulton Missouri

Major LG Ullery (retired) Major Ullery retired from the Missouri State Highway Patrol as a Major in 1991 After retirement Major Ullery served

as Safety Director for Crabtree-Harmon Corp where he established and organized its safety department Major Ullery continues to work as a safety consultant for various organizations

During his 27-year career with the Highway Patrol Major Ullery was instrumental in developing programs to reduce fatalities on the highways and increase safety monitoring of the pUblic He implemented a statewide drug interdiction program reintroducing techniques and encouraging officers on the road to be alert to criminal activities and operations This program has been recognized as one of the best criminal apprehension efforts in the nation

Governor Carnahan amp Members of the General Assembly

I am pleased to present the Missouri Gaming Commisshysions annual report for fiscal year 1998 It is submitted to comply with the Commissions statutory reporting mandates and to provide you a status report of the riverboat gambling bingo and horse racing industries in Missouri

The riverboat gambling statute has two provisions reshyquiring the Gaming Commission to submit an annual report Because the two statutes have somewhat conflicting instructions the Commission submits this report to you now shortly after the conclusion of the states fiscal year to provide you with a yearshyend financial report and to give you ample time to review and evaluate the infonnation prior to commencing the next legislative session Of course the Commission will comply with the filing date in the statute and submit a supplemental report on January 15 1999 However it should be noted that among the Connnissions recommendations for legislation is that the two sections requiring an annual report be consolidated so that the report is due September 15th of each year

In addition to the statutory requirements the Commisshysions report covers other areas that it belicves are of interest to the states policy makers Two of the most fTequently asked questions of the Gaming Commission are (1) Where does the gambling money go and (2) Why is the Commission trying to take games of chance away from boats in basins when it granted pemlission after a thorough study of the issues to allow them These topics are reviewed in depth beginning on pages 10 and 13 respectively Furthennore the report contains a wide variety of financial reports that we hope will provide a thorough overview of the financial status of riverboat gaming operations

The Commission assumed responsibility for the regulation of charitable bingo on July 1 1994 Since that time the Conmlisshysion has concentrated on adopting guidelines that will ensure that criminal elements are not involved in the operation of bingo games In addition the Commission worked with the General Assembly to reduce bingo tax rates create a more user-friendly system of taxation that provides a meaningful audit trail that protects state revenue and ensures a level playing field for competitors

By vigilantly working to cooperate with Missouris charitable fraternal religious service and veterans organizations the Commission has been able to develop a system of regulation that is firm but fair and has been successful in ousting dozens of individuals and organizations whose only interest was selfish enrichment and not contributing to charitable causes However the Conunissions work in this area is not finished and it will continue to develop new and innovative ways to streamline regulatory process while standing firm on its demand for a well conducted industry free of crime and corruption

There is little I can report to you on the issue ofhorse racing Legislation that would have allowed the owner of a horse track to operate otf-track betting parlors failed this past legislashytive session The only applicants that have contacted the Comshymission have informed the staff that the ability to operate OTBs is a prerequisite to them filing an application in Missouri We continue to work with the Missouri Horse Racing Commission on issues regarding incentives for Missouri horse breeders and the operation of amateur racing in the state

To all those whom I have had the pleasure of working with over the past five years I express my gratitude for the opportunity to serve as Chairman of the Gaming Commission As 1 approach the end ofmy last teffil as mandated by statute I

look back on the accomshyplishments of the Commisshysion with a great deal of pride The General Asshysembly gave the Commisshysion the difficult and often controversial job of impleshymenting the peoples will to have riverboat gaming The Commission has implemented its charge by carefully adhering to our statutory guidelines While the Akin decision has been the source of legal conflict and public controversy it has not stopped the Commission fiom giving you what SBs 10amp11 contained as a core demand - a clean industry fiee from criminal influence When the Commission has discovered evidence of crime those responsible have been exposed and eliminated In addition the Commission has imposed strict penalties for violations of its standards for the conduct of gaming

In 1998 the Commission established a new division Corporate Securities and Finance to deal with specialized matters involving financial transactions tax issues and corporate law The pew division is modeled after similar groups within other agencies It includes approximately 15 staff members including an employee of the IRS who is assigned to the Commission under an intergovernmental agreement

In any organization the key ingredient is people All of my fellow COllumssioners have been dedicated to the creation of a new agency with integrity as its by-word They have worked

diligently to that end

More importantly we have been fortunate to have a superb staff It would be inappropriate to single out any inshydividuals Nevertheless the leadership of our Executive Director and the diligent work of his Deputy Directors their support staff our legal counsel the many members of the Missouri State Highway Patrol and the agents assigned to the Commission by the IRS have made it all possible Continuity is important The willingness of our staff to continue gives me comfort that the business and problems that lie ahead will be handled with professhysionalism and integrity

In closing the Commission looks forward to continuing its mission which is prominently displayed on the inside cover of this report To administer honestly equitably and efficiently the statutes and rules and regulations that govern the riverboat gamshying bingo and horse racing industries in Missouri

Sincerely

Robert L Wolfson Chairman

Effect of Tax Rate Missouri law currently imposes an 18 state

tax on the adjusted gross receipts (AGR) received from gambling games on riverboat casinos In addishytion the statute provides that the home dock city or county where each excursion gambling boat is located shall receive 2 ofAGR The local tax does not generate state funds and therefore is not subject to Article III Section J (d) of the Missouri Constitution which directs that all state funds derived from the proceeds of gambling be used for public education

The statute also imposes an admission fee on the operators of excursion gambling boats in the amount of two dollars ($2) per patron pcr excursion which is split between the home dock community and the state Furthermore pursuant to section 313824 RSMo excursion gambling boat operators are charged for the cost of gaming agents that are assigned to the riverboat with the responsibility of protecting the pUblic While the cost of Commission agents varies with each operation the average annual cost is apshyproximately $589200 per boat

Finally it should be noted that in addition to the special taxes imposed on gambling the riverboat operators are responsible for all other state and local taxes such as sales tax property tax and income tax that apply to other business owners The Commission regularly reviews the operators financial records to ensure that the appropriate local state and federal taxes are paid

Jurisdiction AGRTax Admission Fees license Fees

lllinois

15 up to 25 million 20010 betveen $25 to $50 million 25 between $50 to $75 million 30 between $75 and $100 million and 35 over $100 million

$25000 application fee $5000 rerxwal

$2 per patron per cmise (including camps a11d multiple rides)

j

Iowa

Sliding scale on AGR $0 to $1 million 5 $1 to $3 million 10 $3 million al1d up 20

$25000 application fee for a 9 )eaT tenu $1000 renewal fee pIllS $5 per passenger carrying capacity irxluding ere (millirmm capacity is 250)

ekly fee set by comlnssion of 65 of enforcerrent costs plus expellses to be divided equally atrollg

licensees Local adllnssion fee of $50 per patron per cruise (optional)

Missouri 200loofAGR

Ihe higrer of $50000 or full cost of imestigation relxwal fee of $25000 aunually

$2 per patron per cruise (including eomps and multiple rides) Full cost of enforcement (avg $589200 per boat per year)

Mississippi

Sliding scale of Ulmlhly revelUle from 4 to 8 Annual per ~ fee ranging from $50 for I ~x to $2800 for 27 to

35 gatlJes Local optional AGR tax of 4 to 8

-shy

NA NlA

Effective Tax Rate of Neighboring States

35 ~ shy

tf 30

f Q)

cu 25a gtlt (l 20lshy bull Effective Tax Rate ()

1 15 0 ()m10

5

0 Illinois Iowa Missouri

Based on Calendar Year 1997

The taxes specific to Missouri riverboat gaming opshyerators are higher than their competitors in adjoining from marketing efforts that could attract more customers thus generating more tax revenue and offering the possibility of additional capital investment

The table shown on page 6 compares Missouris rivshyerboat gambling tax rate to adjoining states In addition the chart below depicts the effective tax rates for each adjoining state The effective tax rate is the amount of tax paid as a percentage of gross revenue It should be noted that Illinois recently raised its taxes on riverboat gambling from a flat 20 ofAGR to the sliding scale depicted in Table A on page 6

Even with Illinois new higher tax rate its operators eHective tax rate remains lower than that ofMissouri operators While some consideration must be given to the fact that Missouri charges for the full cost of enforceshyment and Illinois does not a more compelling argushyment can be made that the

loss limits detrimental efiect on gross revenue is the prishymary reason for Illinois lower effective tax rate

Finally it should be noted that three Indian casinos are now operating in Kansas These facilities are not taxed and therefore are not represhysented in any of the tables or charts Nevertheless the Kansas Indian casinos have established themselves as fonnidable competitors of the riverboat gaming operations on the western side ofMisshysouri and are having an impact on state revenue

Effect of the Loss Limit There have been 110 changes in the competitive factors

relating to the loss limit since the commissions last full report was submitted to the General Assembly in January 1997 Neighboring states continue to post significantly higher win per admission numbers than operators in Missouri resulting in as much as 50 more gaming revenue per patron in those states than in Missouri

Statistical data and observations of customer patterns at facilities in Ill1nois and Kansas continue to indicate that the loss limit results in an export of Missouri dollars to neighboring

jurisdictions The accompanying tables and charts that are proshyvided clearly demonstrate that Missouri lags significantly behind

neighboring non-loss limit states in win per admission This information is provided to update and supplement the data proshyvided in the 1997 report

Finally the Commission has yet to see any evidence that the loss limit is an effective deterrent to the problem gambler While the Commission has adopted one of the most aggressive programs to combat problem gambling (see page 13) the loss limit has not proven to be an effective weapon in this battJe

Win Per Admission Missouri vs Adjoining States

$50

$40

$30

$20

$10

$0 IL Metropolis Council Bluffs

MO IA Alton Caruthersville St Joseph

$43

IMIlt

$33

st Louis E St Louis

$34

There are many questions regarding the economic impact of riverboat gaming in Misshysouri and the impact of gaming nationwide In 1997 Civic Progress of St Louis commissioned an independent study on the economic impact of gaming in Missouri Dr Charles Leven Professor Emeritus of Economics conducted the study released to the public in the spring of 1998 at Washington University and Dr Don Phares Professor of Economics and Public Policy at the University ofMissouri-St Louis

The Leven-Phares study was based on financial results for calendar year 1996 and included projections for calendar year 1997 The study asserted that in 1997 the casino gaming indusshytry in Missouri directly and indirectly generated more than threeshy

t quarters of a billion dollars worth of new spending in the states ~ economy Because of casino gaming personal income grew by ~

over $500 million State and local governments received over $225 million in new tax revenues Almost 18000 new jobs were added to the economy

t~middotmiddotmiddotmiddotmiddotmiddotmiddotImiddotmiddot The Missouri riverboat casino market is generally considshyered to be limited to local residents However because all of the

1 Missouri facilities are located near bordering states it appears 1 ~ that the casinos are able to attract a significant amount of out of1Ir state dollars The Leven-Phares study found that visitors from

out of state generated 30 percent of casino revenues Furthermore the study found that 17 percent of casino revenue came from reducshytions in spending outside the state by Missourians

On the other hand the study found that $265 million dollars of casino revenue carne from reduced household spending in Missouri However the study noted that while this is more than one half of Missourians total spending of $412 million at casinos it is relatively inconseshyquential when compared to total Missouri retail sales of$45 billion or personal income of $116 billion

Although the Leven-Phares study introduced important data and represents the most thorough examination of the ecoshynomic impact of casino gambling on the Missouri economy it did not go far enough In order to get a more complete picture of the economic impact that gambling has on Missourians and their economy social impact must be examined A study must atshytempt to estimate the number of problem gamblers and the extent of their impact on the Missouri economy No such study has been attempted in Missouri and the difficulty in quantifying such human factors represents an enormous chalshylenge

This is a question frequently asked of public officials The short answer is yes it does Pursuant to a constitutional amendment submitted by the General Assembly the voters adopted Article III Section 39( d) in 1992 which mandated that all state tax money derived fro111 the conduct ofgambling to be dedicated to public education

State statutes impose three taxes unique to riverboat gambling operators The only tax subject to Article III Section

3 9( d) is the 18 state tax on adshyjusted gtoss receipts (AGR) which produces the vast majority of revenue (Section 313822 RSMo) In addition the statute imposes a $2 admission fee that is split between the home dock community and the state (Section 313820 RSMo) Finally the statute allocates 2 of AGR as a local tax paid to the home dock community to be used for services necessary for the safety of the public visiting an excursion gambling boat (Section 313822(1) RSMo)

1994 Changes to the Foundation Formula

In 1994 the General As~embly passed Senate Bill 380 which made significant changes in the school foundation formula Among the changes was a provision that directed a large portion of the states tax on the gross revenues of riverboat gaming operators to the formula The remaining funds would be spent on capital improvement projects for the states colleges and universi-

Gaming Revenue for Education

200

CD 150 J c CD gt CD 100 bull BingoII x bull Riverboat ~ 50

o

1996 1997 1998

Fiscal Year

FiscdYea R h erlxxJt Birm 1995 $5661628204 $625370996 1996 $9973032067 $468417852 1997 $11841938902 $461557950 1998 $1444903789~- $4384 17486_

--~

ties until the legislature passed Senate Bill 301 in 1995 SB 301 would direct all the states portion of the AGR tax to elemcntary and secondary education Specifically the first $7 million is appropriated to the School Bond Fund to be used to pay the costs of the issuance of local school district bonds with the remaining

funds going to the school foundation formula As depicted in the chmis on pages 11 and 12 the gaming

revenue represents a significant portion of new funding for public education in each of the past four fiscal years In addition in less than 2 years the riverboat gambling revenue represents almost 6 of direct state aid for education

Excess Admission Fees to be Used for Education

The primary purpose of the states portion of the admisshysion fee is to fund the administrative and regulatory activities of the Gaming Commission TIllS insures that no general revenue is used for any function relating to riverboat gaming However the admission fee generates far more revenue than the Commission requires to operate In fiscal year 1997 the states portion ofthe admission fee exceeded the Commissions operating budget by more than $25 million

Therefore some mechanism is required to distribute the remainder of the states pOliion of the admission fee In 1998 Govemor Camallan proposed legislation that would direct the majority of the excess revenue generated by the states admission fee to early childhood education programs However because prior fiscal years the excess admission fee had been used for programs for community neighborhood organizations and vetershyans it was necessary to establish a schedule of funding each of these programs while providing that the majority of the funds be used for early childhood education The General Assembly responded by adopting HB 1519 which established the following distribution formula for the excess admission fees in the Gaming Commission Fund (1) The first $500000 is used to fund community neighborhood

organization programs for the homeless and to deter gang-re-

Source of Increase in Foundation Formula FY 95 to FY 98

Source of Funds

$14449037694 322

$304 90962106 678

bull Riverboat Funds

bull Other Funds

Robert L Wolfson Chairman Robert L Wolfson is Chairman of the Board for Wolfson Capital Venture He is the co-founder of the St Louis Blues

of the National Hockey League and served as Vice-President and Treasurer of the SL Louis Blues Mr Wolfson established Feld Chevrolet in 1947 and has established many successful retail businesses In addition Mr Wolfson has successfully established several banking companies including Parkway Bank and Progress Bank both of which were eventually sold to Mark Twain Bank which has since been merged with Mercantile Bank Mr Wolfson has real estate holdings in the St Louis and Greater Washington DC areas

Mr Wolfson is currently or has been an officer in the following organizations Trustees of Brandeis University Trustees of Jewish Hospital Jewish Federation of Sf Louis Trustees of Jewish Community Centers Board of Governors ofWestwood Country Club and the International Board ofBoys Town ofItaly In addition Mr Wolpound~on is the recipient ofmany awards I from civic organizations and is well known for his philanthropic endeavors _J

~~~~mramp~

i~-1 1 ~

Dr Jenice Prather-Kinsey Secretary Dr Prather-Kinsey is a CPA and accounting professor at the University ofMissouri-Columbia She has published over

twenty articles in national and international academic accounting journals She has received numerous honors and awards for her research and teaching including a two year Research Associateship from Washington University and a KPMG Peat Marwick International Accounting Research Fellowship

Dr Prather-Kinsey holds leadership positions in the American Accounting Association the National Association of Black Accountants the American Institute of CPAs the Institute of Management Accountants and the Missouri Society of CPAs She was on the Price Waterhouse National Advisory Board and currently is on the MIZZOU Credit Union and the Board of Trustees of Second Missionary Baptist Church

1

ampaK-mwJiI~~~~~

~

Julian M Seeherman Vice-Chairman Mr Seeherman is the former Chairman of the Board of the Venture Stores Prior to becoming Chairman of the Board

Mr Seehernlan held various top executive positions with Venture He began his career as a retailer with Abraham amp Straus a division of Federated Department Stores in 1951 In 1977 Mr Seehennanjoined the May Co as President and CEO of Conshysumers Distributing Mr Seehemlan currently operates a consulting business

iiYil~$~~~~iIlI 4urro~

Mr Seehennan was inducted into the Discounting Hall of Fame in 1995 He is a recipient of the International Mass Retail Associations Partnership Award and was voted the 1991 Discounter of the Year by retail industry executives Mr Seeherman is cUlTently or has served onltthe boards ofWebster University the Boy Scouts Junior Achievement Civic Progress Jewish Community Center Association Jewish Hospital Greenfield Industries Inc and is involved in many other charitable and business organizations in the St Louis area

Robert C Smith Mr Smith is a retired senior partner in the firm of Smith Lewis Beckett Powell amp Roark He formerly served as a

Master in Federal Court on insurance litigation He has served as an arbitrator for the US and Midwest Arbitration Associashytions and as a Missouri Administrative Hearing Commissioner Mr Smith served as a member of the Missouri House ofRepreshysentatives from 1953-56 including two years as Speaker Pro-tern He was Mayor of Columbia from 1961-63 Mr Smith has served on numerous Missouri Bar Association boards including the Board of Governors from 1975-79 He has served as a member of the Stephens College Board of Curators President of Columbia Kiwanis President of the Missouri Symphony Society Member of the State Historical Society Board ofTrustees He has received the Missouri Bar Pro-bono Award Univershysity ofMissouri Alumni Faculty Award University ofMissouri Law School Citation of Merit Outdoor Writers Association Of America Ham Brown Service Award and is an Honorary Citizen of Fulton Missouri

Major LG Ullery (retired) Major Ullery retired from the Missouri State Highway Patrol as a Major in 1991 After retirement Major Ullery served

as Safety Director for Crabtree-Harmon Corp where he established and organized its safety department Major Ullery continues to work as a safety consultant for various organizations

During his 27-year career with the Highway Patrol Major Ullery was instrumental in developing programs to reduce fatalities on the highways and increase safety monitoring of the pUblic He implemented a statewide drug interdiction program reintroducing techniques and encouraging officers on the road to be alert to criminal activities and operations This program has been recognized as one of the best criminal apprehension efforts in the nation

Governor Carnahan amp Members of the General Assembly

I am pleased to present the Missouri Gaming Commisshysions annual report for fiscal year 1998 It is submitted to comply with the Commissions statutory reporting mandates and to provide you a status report of the riverboat gambling bingo and horse racing industries in Missouri

The riverboat gambling statute has two provisions reshyquiring the Gaming Commission to submit an annual report Because the two statutes have somewhat conflicting instructions the Commission submits this report to you now shortly after the conclusion of the states fiscal year to provide you with a yearshyend financial report and to give you ample time to review and evaluate the infonnation prior to commencing the next legislative session Of course the Commission will comply with the filing date in the statute and submit a supplemental report on January 15 1999 However it should be noted that among the Connnissions recommendations for legislation is that the two sections requiring an annual report be consolidated so that the report is due September 15th of each year

In addition to the statutory requirements the Commisshysions report covers other areas that it belicves are of interest to the states policy makers Two of the most fTequently asked questions of the Gaming Commission are (1) Where does the gambling money go and (2) Why is the Commission trying to take games of chance away from boats in basins when it granted pemlission after a thorough study of the issues to allow them These topics are reviewed in depth beginning on pages 10 and 13 respectively Furthennore the report contains a wide variety of financial reports that we hope will provide a thorough overview of the financial status of riverboat gaming operations

The Commission assumed responsibility for the regulation of charitable bingo on July 1 1994 Since that time the Conmlisshysion has concentrated on adopting guidelines that will ensure that criminal elements are not involved in the operation of bingo games In addition the Commission worked with the General Assembly to reduce bingo tax rates create a more user-friendly system of taxation that provides a meaningful audit trail that protects state revenue and ensures a level playing field for competitors

By vigilantly working to cooperate with Missouris charitable fraternal religious service and veterans organizations the Commission has been able to develop a system of regulation that is firm but fair and has been successful in ousting dozens of individuals and organizations whose only interest was selfish enrichment and not contributing to charitable causes However the Conunissions work in this area is not finished and it will continue to develop new and innovative ways to streamline regulatory process while standing firm on its demand for a well conducted industry free of crime and corruption

There is little I can report to you on the issue ofhorse racing Legislation that would have allowed the owner of a horse track to operate otf-track betting parlors failed this past legislashytive session The only applicants that have contacted the Comshymission have informed the staff that the ability to operate OTBs is a prerequisite to them filing an application in Missouri We continue to work with the Missouri Horse Racing Commission on issues regarding incentives for Missouri horse breeders and the operation of amateur racing in the state

To all those whom I have had the pleasure of working with over the past five years I express my gratitude for the opportunity to serve as Chairman of the Gaming Commission As 1 approach the end ofmy last teffil as mandated by statute I

look back on the accomshyplishments of the Commisshysion with a great deal of pride The General Asshysembly gave the Commisshysion the difficult and often controversial job of impleshymenting the peoples will to have riverboat gaming The Commission has implemented its charge by carefully adhering to our statutory guidelines While the Akin decision has been the source of legal conflict and public controversy it has not stopped the Commission fiom giving you what SBs 10amp11 contained as a core demand - a clean industry fiee from criminal influence When the Commission has discovered evidence of crime those responsible have been exposed and eliminated In addition the Commission has imposed strict penalties for violations of its standards for the conduct of gaming

In 1998 the Commission established a new division Corporate Securities and Finance to deal with specialized matters involving financial transactions tax issues and corporate law The pew division is modeled after similar groups within other agencies It includes approximately 15 staff members including an employee of the IRS who is assigned to the Commission under an intergovernmental agreement

In any organization the key ingredient is people All of my fellow COllumssioners have been dedicated to the creation of a new agency with integrity as its by-word They have worked

diligently to that end

More importantly we have been fortunate to have a superb staff It would be inappropriate to single out any inshydividuals Nevertheless the leadership of our Executive Director and the diligent work of his Deputy Directors their support staff our legal counsel the many members of the Missouri State Highway Patrol and the agents assigned to the Commission by the IRS have made it all possible Continuity is important The willingness of our staff to continue gives me comfort that the business and problems that lie ahead will be handled with professhysionalism and integrity

In closing the Commission looks forward to continuing its mission which is prominently displayed on the inside cover of this report To administer honestly equitably and efficiently the statutes and rules and regulations that govern the riverboat gamshying bingo and horse racing industries in Missouri

Sincerely

Robert L Wolfson Chairman

Effect of Tax Rate Missouri law currently imposes an 18 state

tax on the adjusted gross receipts (AGR) received from gambling games on riverboat casinos In addishytion the statute provides that the home dock city or county where each excursion gambling boat is located shall receive 2 ofAGR The local tax does not generate state funds and therefore is not subject to Article III Section J (d) of the Missouri Constitution which directs that all state funds derived from the proceeds of gambling be used for public education

The statute also imposes an admission fee on the operators of excursion gambling boats in the amount of two dollars ($2) per patron pcr excursion which is split between the home dock community and the state Furthermore pursuant to section 313824 RSMo excursion gambling boat operators are charged for the cost of gaming agents that are assigned to the riverboat with the responsibility of protecting the pUblic While the cost of Commission agents varies with each operation the average annual cost is apshyproximately $589200 per boat

Finally it should be noted that in addition to the special taxes imposed on gambling the riverboat operators are responsible for all other state and local taxes such as sales tax property tax and income tax that apply to other business owners The Commission regularly reviews the operators financial records to ensure that the appropriate local state and federal taxes are paid

Jurisdiction AGRTax Admission Fees license Fees

lllinois

15 up to 25 million 20010 betveen $25 to $50 million 25 between $50 to $75 million 30 between $75 and $100 million and 35 over $100 million

$25000 application fee $5000 rerxwal

$2 per patron per cmise (including camps a11d multiple rides)

j

Iowa

Sliding scale on AGR $0 to $1 million 5 $1 to $3 million 10 $3 million al1d up 20

$25000 application fee for a 9 )eaT tenu $1000 renewal fee pIllS $5 per passenger carrying capacity irxluding ere (millirmm capacity is 250)

ekly fee set by comlnssion of 65 of enforcerrent costs plus expellses to be divided equally atrollg

licensees Local adllnssion fee of $50 per patron per cruise (optional)

Missouri 200loofAGR

Ihe higrer of $50000 or full cost of imestigation relxwal fee of $25000 aunually

$2 per patron per cruise (including eomps and multiple rides) Full cost of enforcement (avg $589200 per boat per year)

Mississippi

Sliding scale of Ulmlhly revelUle from 4 to 8 Annual per ~ fee ranging from $50 for I ~x to $2800 for 27 to

35 gatlJes Local optional AGR tax of 4 to 8

-shy

NA NlA

Effective Tax Rate of Neighboring States

35 ~ shy

tf 30

f Q)

cu 25a gtlt (l 20lshy bull Effective Tax Rate ()

1 15 0 ()m10

5

0 Illinois Iowa Missouri

Based on Calendar Year 1997

The taxes specific to Missouri riverboat gaming opshyerators are higher than their competitors in adjoining from marketing efforts that could attract more customers thus generating more tax revenue and offering the possibility of additional capital investment

The table shown on page 6 compares Missouris rivshyerboat gambling tax rate to adjoining states In addition the chart below depicts the effective tax rates for each adjoining state The effective tax rate is the amount of tax paid as a percentage of gross revenue It should be noted that Illinois recently raised its taxes on riverboat gambling from a flat 20 ofAGR to the sliding scale depicted in Table A on page 6

Even with Illinois new higher tax rate its operators eHective tax rate remains lower than that ofMissouri operators While some consideration must be given to the fact that Missouri charges for the full cost of enforceshyment and Illinois does not a more compelling argushyment can be made that the

loss limits detrimental efiect on gross revenue is the prishymary reason for Illinois lower effective tax rate

Finally it should be noted that three Indian casinos are now operating in Kansas These facilities are not taxed and therefore are not represhysented in any of the tables or charts Nevertheless the Kansas Indian casinos have established themselves as fonnidable competitors of the riverboat gaming operations on the western side ofMisshysouri and are having an impact on state revenue

Effect of the Loss Limit There have been 110 changes in the competitive factors

relating to the loss limit since the commissions last full report was submitted to the General Assembly in January 1997 Neighboring states continue to post significantly higher win per admission numbers than operators in Missouri resulting in as much as 50 more gaming revenue per patron in those states than in Missouri

Statistical data and observations of customer patterns at facilities in Ill1nois and Kansas continue to indicate that the loss limit results in an export of Missouri dollars to neighboring

jurisdictions The accompanying tables and charts that are proshyvided clearly demonstrate that Missouri lags significantly behind

neighboring non-loss limit states in win per admission This information is provided to update and supplement the data proshyvided in the 1997 report

Finally the Commission has yet to see any evidence that the loss limit is an effective deterrent to the problem gambler While the Commission has adopted one of the most aggressive programs to combat problem gambling (see page 13) the loss limit has not proven to be an effective weapon in this battJe

Win Per Admission Missouri vs Adjoining States

$50

$40

$30

$20

$10

$0 IL Metropolis Council Bluffs

MO IA Alton Caruthersville St Joseph

$43

IMIlt

$33

st Louis E St Louis

$34

There are many questions regarding the economic impact of riverboat gaming in Misshysouri and the impact of gaming nationwide In 1997 Civic Progress of St Louis commissioned an independent study on the economic impact of gaming in Missouri Dr Charles Leven Professor Emeritus of Economics conducted the study released to the public in the spring of 1998 at Washington University and Dr Don Phares Professor of Economics and Public Policy at the University ofMissouri-St Louis

The Leven-Phares study was based on financial results for calendar year 1996 and included projections for calendar year 1997 The study asserted that in 1997 the casino gaming indusshytry in Missouri directly and indirectly generated more than threeshy

t quarters of a billion dollars worth of new spending in the states ~ economy Because of casino gaming personal income grew by ~

over $500 million State and local governments received over $225 million in new tax revenues Almost 18000 new jobs were added to the economy

t~middotmiddotmiddotmiddotmiddotmiddotmiddotImiddotmiddot The Missouri riverboat casino market is generally considshyered to be limited to local residents However because all of the

1 Missouri facilities are located near bordering states it appears 1 ~ that the casinos are able to attract a significant amount of out of1Ir state dollars The Leven-Phares study found that visitors from

out of state generated 30 percent of casino revenues Furthermore the study found that 17 percent of casino revenue came from reducshytions in spending outside the state by Missourians

On the other hand the study found that $265 million dollars of casino revenue carne from reduced household spending in Missouri However the study noted that while this is more than one half of Missourians total spending of $412 million at casinos it is relatively inconseshyquential when compared to total Missouri retail sales of$45 billion or personal income of $116 billion

Although the Leven-Phares study introduced important data and represents the most thorough examination of the ecoshynomic impact of casino gambling on the Missouri economy it did not go far enough In order to get a more complete picture of the economic impact that gambling has on Missourians and their economy social impact must be examined A study must atshytempt to estimate the number of problem gamblers and the extent of their impact on the Missouri economy No such study has been attempted in Missouri and the difficulty in quantifying such human factors represents an enormous chalshylenge

This is a question frequently asked of public officials The short answer is yes it does Pursuant to a constitutional amendment submitted by the General Assembly the voters adopted Article III Section 39( d) in 1992 which mandated that all state tax money derived fro111 the conduct ofgambling to be dedicated to public education

State statutes impose three taxes unique to riverboat gambling operators The only tax subject to Article III Section

3 9( d) is the 18 state tax on adshyjusted gtoss receipts (AGR) which produces the vast majority of revenue (Section 313822 RSMo) In addition the statute imposes a $2 admission fee that is split between the home dock community and the state (Section 313820 RSMo) Finally the statute allocates 2 of AGR as a local tax paid to the home dock community to be used for services necessary for the safety of the public visiting an excursion gambling boat (Section 313822(1) RSMo)

1994 Changes to the Foundation Formula

In 1994 the General As~embly passed Senate Bill 380 which made significant changes in the school foundation formula Among the changes was a provision that directed a large portion of the states tax on the gross revenues of riverboat gaming operators to the formula The remaining funds would be spent on capital improvement projects for the states colleges and universi-

Gaming Revenue for Education

200

CD 150 J c CD gt CD 100 bull BingoII x bull Riverboat ~ 50

o

1996 1997 1998

Fiscal Year

FiscdYea R h erlxxJt Birm 1995 $5661628204 $625370996 1996 $9973032067 $468417852 1997 $11841938902 $461557950 1998 $1444903789~- $4384 17486_

--~

ties until the legislature passed Senate Bill 301 in 1995 SB 301 would direct all the states portion of the AGR tax to elemcntary and secondary education Specifically the first $7 million is appropriated to the School Bond Fund to be used to pay the costs of the issuance of local school district bonds with the remaining

funds going to the school foundation formula As depicted in the chmis on pages 11 and 12 the gaming

revenue represents a significant portion of new funding for public education in each of the past four fiscal years In addition in less than 2 years the riverboat gambling revenue represents almost 6 of direct state aid for education

Excess Admission Fees to be Used for Education

The primary purpose of the states portion of the admisshysion fee is to fund the administrative and regulatory activities of the Gaming Commission TIllS insures that no general revenue is used for any function relating to riverboat gaming However the admission fee generates far more revenue than the Commission requires to operate In fiscal year 1997 the states portion ofthe admission fee exceeded the Commissions operating budget by more than $25 million

Therefore some mechanism is required to distribute the remainder of the states pOliion of the admission fee In 1998 Govemor Camallan proposed legislation that would direct the majority of the excess revenue generated by the states admission fee to early childhood education programs However because prior fiscal years the excess admission fee had been used for programs for community neighborhood organizations and vetershyans it was necessary to establish a schedule of funding each of these programs while providing that the majority of the funds be used for early childhood education The General Assembly responded by adopting HB 1519 which established the following distribution formula for the excess admission fees in the Gaming Commission Fund (1) The first $500000 is used to fund community neighborhood

organization programs for the homeless and to deter gang-re-

Source of Increase in Foundation Formula FY 95 to FY 98

Source of Funds

$14449037694 322

$304 90962106 678

bull Riverboat Funds

bull Other Funds

Mr Seehennan was inducted into the Discounting Hall of Fame in 1995 He is a recipient of the International Mass Retail Associations Partnership Award and was voted the 1991 Discounter of the Year by retail industry executives Mr Seeherman is cUlTently or has served onltthe boards ofWebster University the Boy Scouts Junior Achievement Civic Progress Jewish Community Center Association Jewish Hospital Greenfield Industries Inc and is involved in many other charitable and business organizations in the St Louis area

Robert C Smith Mr Smith is a retired senior partner in the firm of Smith Lewis Beckett Powell amp Roark He formerly served as a

Master in Federal Court on insurance litigation He has served as an arbitrator for the US and Midwest Arbitration Associashytions and as a Missouri Administrative Hearing Commissioner Mr Smith served as a member of the Missouri House ofRepreshysentatives from 1953-56 including two years as Speaker Pro-tern He was Mayor of Columbia from 1961-63 Mr Smith has served on numerous Missouri Bar Association boards including the Board of Governors from 1975-79 He has served as a member of the Stephens College Board of Curators President of Columbia Kiwanis President of the Missouri Symphony Society Member of the State Historical Society Board ofTrustees He has received the Missouri Bar Pro-bono Award Univershysity ofMissouri Alumni Faculty Award University ofMissouri Law School Citation of Merit Outdoor Writers Association Of America Ham Brown Service Award and is an Honorary Citizen of Fulton Missouri

Major LG Ullery (retired) Major Ullery retired from the Missouri State Highway Patrol as a Major in 1991 After retirement Major Ullery served

as Safety Director for Crabtree-Harmon Corp where he established and organized its safety department Major Ullery continues to work as a safety consultant for various organizations

During his 27-year career with the Highway Patrol Major Ullery was instrumental in developing programs to reduce fatalities on the highways and increase safety monitoring of the pUblic He implemented a statewide drug interdiction program reintroducing techniques and encouraging officers on the road to be alert to criminal activities and operations This program has been recognized as one of the best criminal apprehension efforts in the nation

Governor Carnahan amp Members of the General Assembly

I am pleased to present the Missouri Gaming Commisshysions annual report for fiscal year 1998 It is submitted to comply with the Commissions statutory reporting mandates and to provide you a status report of the riverboat gambling bingo and horse racing industries in Missouri

The riverboat gambling statute has two provisions reshyquiring the Gaming Commission to submit an annual report Because the two statutes have somewhat conflicting instructions the Commission submits this report to you now shortly after the conclusion of the states fiscal year to provide you with a yearshyend financial report and to give you ample time to review and evaluate the infonnation prior to commencing the next legislative session Of course the Commission will comply with the filing date in the statute and submit a supplemental report on January 15 1999 However it should be noted that among the Connnissions recommendations for legislation is that the two sections requiring an annual report be consolidated so that the report is due September 15th of each year

In addition to the statutory requirements the Commisshysions report covers other areas that it belicves are of interest to the states policy makers Two of the most fTequently asked questions of the Gaming Commission are (1) Where does the gambling money go and (2) Why is the Commission trying to take games of chance away from boats in basins when it granted pemlission after a thorough study of the issues to allow them These topics are reviewed in depth beginning on pages 10 and 13 respectively Furthennore the report contains a wide variety of financial reports that we hope will provide a thorough overview of the financial status of riverboat gaming operations

The Commission assumed responsibility for the regulation of charitable bingo on July 1 1994 Since that time the Conmlisshysion has concentrated on adopting guidelines that will ensure that criminal elements are not involved in the operation of bingo games In addition the Commission worked with the General Assembly to reduce bingo tax rates create a more user-friendly system of taxation that provides a meaningful audit trail that protects state revenue and ensures a level playing field for competitors

By vigilantly working to cooperate with Missouris charitable fraternal religious service and veterans organizations the Commission has been able to develop a system of regulation that is firm but fair and has been successful in ousting dozens of individuals and organizations whose only interest was selfish enrichment and not contributing to charitable causes However the Conunissions work in this area is not finished and it will continue to develop new and innovative ways to streamline regulatory process while standing firm on its demand for a well conducted industry free of crime and corruption

There is little I can report to you on the issue ofhorse racing Legislation that would have allowed the owner of a horse track to operate otf-track betting parlors failed this past legislashytive session The only applicants that have contacted the Comshymission have informed the staff that the ability to operate OTBs is a prerequisite to them filing an application in Missouri We continue to work with the Missouri Horse Racing Commission on issues regarding incentives for Missouri horse breeders and the operation of amateur racing in the state

To all those whom I have had the pleasure of working with over the past five years I express my gratitude for the opportunity to serve as Chairman of the Gaming Commission As 1 approach the end ofmy last teffil as mandated by statute I

look back on the accomshyplishments of the Commisshysion with a great deal of pride The General Asshysembly gave the Commisshysion the difficult and often controversial job of impleshymenting the peoples will to have riverboat gaming The Commission has implemented its charge by carefully adhering to our statutory guidelines While the Akin decision has been the source of legal conflict and public controversy it has not stopped the Commission fiom giving you what SBs 10amp11 contained as a core demand - a clean industry fiee from criminal influence When the Commission has discovered evidence of crime those responsible have been exposed and eliminated In addition the Commission has imposed strict penalties for violations of its standards for the conduct of gaming

In 1998 the Commission established a new division Corporate Securities and Finance to deal with specialized matters involving financial transactions tax issues and corporate law The pew division is modeled after similar groups within other agencies It includes approximately 15 staff members including an employee of the IRS who is assigned to the Commission under an intergovernmental agreement

In any organization the key ingredient is people All of my fellow COllumssioners have been dedicated to the creation of a new agency with integrity as its by-word They have worked

diligently to that end

More importantly we have been fortunate to have a superb staff It would be inappropriate to single out any inshydividuals Nevertheless the leadership of our Executive Director and the diligent work of his Deputy Directors their support staff our legal counsel the many members of the Missouri State Highway Patrol and the agents assigned to the Commission by the IRS have made it all possible Continuity is important The willingness of our staff to continue gives me comfort that the business and problems that lie ahead will be handled with professhysionalism and integrity

In closing the Commission looks forward to continuing its mission which is prominently displayed on the inside cover of this report To administer honestly equitably and efficiently the statutes and rules and regulations that govern the riverboat gamshying bingo and horse racing industries in Missouri

Sincerely

Robert L Wolfson Chairman

Effect of Tax Rate Missouri law currently imposes an 18 state

tax on the adjusted gross receipts (AGR) received from gambling games on riverboat casinos In addishytion the statute provides that the home dock city or county where each excursion gambling boat is located shall receive 2 ofAGR The local tax does not generate state funds and therefore is not subject to Article III Section J (d) of the Missouri Constitution which directs that all state funds derived from the proceeds of gambling be used for public education

The statute also imposes an admission fee on the operators of excursion gambling boats in the amount of two dollars ($2) per patron pcr excursion which is split between the home dock community and the state Furthermore pursuant to section 313824 RSMo excursion gambling boat operators are charged for the cost of gaming agents that are assigned to the riverboat with the responsibility of protecting the pUblic While the cost of Commission agents varies with each operation the average annual cost is apshyproximately $589200 per boat

Finally it should be noted that in addition to the special taxes imposed on gambling the riverboat operators are responsible for all other state and local taxes such as sales tax property tax and income tax that apply to other business owners The Commission regularly reviews the operators financial records to ensure that the appropriate local state and federal taxes are paid

Jurisdiction AGRTax Admission Fees license Fees

lllinois

15 up to 25 million 20010 betveen $25 to $50 million 25 between $50 to $75 million 30 between $75 and $100 million and 35 over $100 million

$25000 application fee $5000 rerxwal

$2 per patron per cmise (including camps a11d multiple rides)

j

Iowa

Sliding scale on AGR $0 to $1 million 5 $1 to $3 million 10 $3 million al1d up 20

$25000 application fee for a 9 )eaT tenu $1000 renewal fee pIllS $5 per passenger carrying capacity irxluding ere (millirmm capacity is 250)

ekly fee set by comlnssion of 65 of enforcerrent costs plus expellses to be divided equally atrollg

licensees Local adllnssion fee of $50 per patron per cruise (optional)

Missouri 200loofAGR

Ihe higrer of $50000 or full cost of imestigation relxwal fee of $25000 aunually

$2 per patron per cruise (including eomps and multiple rides) Full cost of enforcement (avg $589200 per boat per year)

Mississippi

Sliding scale of Ulmlhly revelUle from 4 to 8 Annual per ~ fee ranging from $50 for I ~x to $2800 for 27 to

35 gatlJes Local optional AGR tax of 4 to 8

-shy

NA NlA

Effective Tax Rate of Neighboring States

35 ~ shy

tf 30

f Q)

cu 25a gtlt (l 20lshy bull Effective Tax Rate ()

1 15 0 ()m10

5

0 Illinois Iowa Missouri

Based on Calendar Year 1997

The taxes specific to Missouri riverboat gaming opshyerators are higher than their competitors in adjoining from marketing efforts that could attract more customers thus generating more tax revenue and offering the possibility of additional capital investment

The table shown on page 6 compares Missouris rivshyerboat gambling tax rate to adjoining states In addition the chart below depicts the effective tax rates for each adjoining state The effective tax rate is the amount of tax paid as a percentage of gross revenue It should be noted that Illinois recently raised its taxes on riverboat gambling from a flat 20 ofAGR to the sliding scale depicted in Table A on page 6

Even with Illinois new higher tax rate its operators eHective tax rate remains lower than that ofMissouri operators While some consideration must be given to the fact that Missouri charges for the full cost of enforceshyment and Illinois does not a more compelling argushyment can be made that the

loss limits detrimental efiect on gross revenue is the prishymary reason for Illinois lower effective tax rate

Finally it should be noted that three Indian casinos are now operating in Kansas These facilities are not taxed and therefore are not represhysented in any of the tables or charts Nevertheless the Kansas Indian casinos have established themselves as fonnidable competitors of the riverboat gaming operations on the western side ofMisshysouri and are having an impact on state revenue

Effect of the Loss Limit There have been 110 changes in the competitive factors

relating to the loss limit since the commissions last full report was submitted to the General Assembly in January 1997 Neighboring states continue to post significantly higher win per admission numbers than operators in Missouri resulting in as much as 50 more gaming revenue per patron in those states than in Missouri

Statistical data and observations of customer patterns at facilities in Ill1nois and Kansas continue to indicate that the loss limit results in an export of Missouri dollars to neighboring

jurisdictions The accompanying tables and charts that are proshyvided clearly demonstrate that Missouri lags significantly behind

neighboring non-loss limit states in win per admission This information is provided to update and supplement the data proshyvided in the 1997 report

Finally the Commission has yet to see any evidence that the loss limit is an effective deterrent to the problem gambler While the Commission has adopted one of the most aggressive programs to combat problem gambling (see page 13) the loss limit has not proven to be an effective weapon in this battJe

Win Per Admission Missouri vs Adjoining States

$50

$40

$30

$20

$10

$0 IL Metropolis Council Bluffs

MO IA Alton Caruthersville St Joseph

$43

IMIlt

$33

st Louis E St Louis

$34

There are many questions regarding the economic impact of riverboat gaming in Misshysouri and the impact of gaming nationwide In 1997 Civic Progress of St Louis commissioned an independent study on the economic impact of gaming in Missouri Dr Charles Leven Professor Emeritus of Economics conducted the study released to the public in the spring of 1998 at Washington University and Dr Don Phares Professor of Economics and Public Policy at the University ofMissouri-St Louis

The Leven-Phares study was based on financial results for calendar year 1996 and included projections for calendar year 1997 The study asserted that in 1997 the casino gaming indusshytry in Missouri directly and indirectly generated more than threeshy

t quarters of a billion dollars worth of new spending in the states ~ economy Because of casino gaming personal income grew by ~

over $500 million State and local governments received over $225 million in new tax revenues Almost 18000 new jobs were added to the economy

t~middotmiddotmiddotmiddotmiddotmiddotmiddotImiddotmiddot The Missouri riverboat casino market is generally considshyered to be limited to local residents However because all of the

1 Missouri facilities are located near bordering states it appears 1 ~ that the casinos are able to attract a significant amount of out of1Ir state dollars The Leven-Phares study found that visitors from

out of state generated 30 percent of casino revenues Furthermore the study found that 17 percent of casino revenue came from reducshytions in spending outside the state by Missourians

On the other hand the study found that $265 million dollars of casino revenue carne from reduced household spending in Missouri However the study noted that while this is more than one half of Missourians total spending of $412 million at casinos it is relatively inconseshyquential when compared to total Missouri retail sales of$45 billion or personal income of $116 billion

Although the Leven-Phares study introduced important data and represents the most thorough examination of the ecoshynomic impact of casino gambling on the Missouri economy it did not go far enough In order to get a more complete picture of the economic impact that gambling has on Missourians and their economy social impact must be examined A study must atshytempt to estimate the number of problem gamblers and the extent of their impact on the Missouri economy No such study has been attempted in Missouri and the difficulty in quantifying such human factors represents an enormous chalshylenge

This is a question frequently asked of public officials The short answer is yes it does Pursuant to a constitutional amendment submitted by the General Assembly the voters adopted Article III Section 39( d) in 1992 which mandated that all state tax money derived fro111 the conduct ofgambling to be dedicated to public education

State statutes impose three taxes unique to riverboat gambling operators The only tax subject to Article III Section

3 9( d) is the 18 state tax on adshyjusted gtoss receipts (AGR) which produces the vast majority of revenue (Section 313822 RSMo) In addition the statute imposes a $2 admission fee that is split between the home dock community and the state (Section 313820 RSMo) Finally the statute allocates 2 of AGR as a local tax paid to the home dock community to be used for services necessary for the safety of the public visiting an excursion gambling boat (Section 313822(1) RSMo)

1994 Changes to the Foundation Formula

In 1994 the General As~embly passed Senate Bill 380 which made significant changes in the school foundation formula Among the changes was a provision that directed a large portion of the states tax on the gross revenues of riverboat gaming operators to the formula The remaining funds would be spent on capital improvement projects for the states colleges and universi-

Gaming Revenue for Education

200

CD 150 J c CD gt CD 100 bull BingoII x bull Riverboat ~ 50

o

1996 1997 1998

Fiscal Year

FiscdYea R h erlxxJt Birm 1995 $5661628204 $625370996 1996 $9973032067 $468417852 1997 $11841938902 $461557950 1998 $1444903789~- $4384 17486_

--~

ties until the legislature passed Senate Bill 301 in 1995 SB 301 would direct all the states portion of the AGR tax to elemcntary and secondary education Specifically the first $7 million is appropriated to the School Bond Fund to be used to pay the costs of the issuance of local school district bonds with the remaining

funds going to the school foundation formula As depicted in the chmis on pages 11 and 12 the gaming

revenue represents a significant portion of new funding for public education in each of the past four fiscal years In addition in less than 2 years the riverboat gambling revenue represents almost 6 of direct state aid for education

Excess Admission Fees to be Used for Education

The primary purpose of the states portion of the admisshysion fee is to fund the administrative and regulatory activities of the Gaming Commission TIllS insures that no general revenue is used for any function relating to riverboat gaming However the admission fee generates far more revenue than the Commission requires to operate In fiscal year 1997 the states portion ofthe admission fee exceeded the Commissions operating budget by more than $25 million

Therefore some mechanism is required to distribute the remainder of the states pOliion of the admission fee In 1998 Govemor Camallan proposed legislation that would direct the majority of the excess revenue generated by the states admission fee to early childhood education programs However because prior fiscal years the excess admission fee had been used for programs for community neighborhood organizations and vetershyans it was necessary to establish a schedule of funding each of these programs while providing that the majority of the funds be used for early childhood education The General Assembly responded by adopting HB 1519 which established the following distribution formula for the excess admission fees in the Gaming Commission Fund (1) The first $500000 is used to fund community neighborhood

organization programs for the homeless and to deter gang-re-

Source of Increase in Foundation Formula FY 95 to FY 98

Source of Funds

$14449037694 322

$304 90962106 678

bull Riverboat Funds

bull Other Funds

Governor Carnahan amp Members of the General Assembly

I am pleased to present the Missouri Gaming Commisshysions annual report for fiscal year 1998 It is submitted to comply with the Commissions statutory reporting mandates and to provide you a status report of the riverboat gambling bingo and horse racing industries in Missouri

The riverboat gambling statute has two provisions reshyquiring the Gaming Commission to submit an annual report Because the two statutes have somewhat conflicting instructions the Commission submits this report to you now shortly after the conclusion of the states fiscal year to provide you with a yearshyend financial report and to give you ample time to review and evaluate the infonnation prior to commencing the next legislative session Of course the Commission will comply with the filing date in the statute and submit a supplemental report on January 15 1999 However it should be noted that among the Connnissions recommendations for legislation is that the two sections requiring an annual report be consolidated so that the report is due September 15th of each year

In addition to the statutory requirements the Commisshysions report covers other areas that it belicves are of interest to the states policy makers Two of the most fTequently asked questions of the Gaming Commission are (1) Where does the gambling money go and (2) Why is the Commission trying to take games of chance away from boats in basins when it granted pemlission after a thorough study of the issues to allow them These topics are reviewed in depth beginning on pages 10 and 13 respectively Furthennore the report contains a wide variety of financial reports that we hope will provide a thorough overview of the financial status of riverboat gaming operations

The Commission assumed responsibility for the regulation of charitable bingo on July 1 1994 Since that time the Conmlisshysion has concentrated on adopting guidelines that will ensure that criminal elements are not involved in the operation of bingo games In addition the Commission worked with the General Assembly to reduce bingo tax rates create a more user-friendly system of taxation that provides a meaningful audit trail that protects state revenue and ensures a level playing field for competitors

By vigilantly working to cooperate with Missouris charitable fraternal religious service and veterans organizations the Commission has been able to develop a system of regulation that is firm but fair and has been successful in ousting dozens of individuals and organizations whose only interest was selfish enrichment and not contributing to charitable causes However the Conunissions work in this area is not finished and it will continue to develop new and innovative ways to streamline regulatory process while standing firm on its demand for a well conducted industry free of crime and corruption

There is little I can report to you on the issue ofhorse racing Legislation that would have allowed the owner of a horse track to operate otf-track betting parlors failed this past legislashytive session The only applicants that have contacted the Comshymission have informed the staff that the ability to operate OTBs is a prerequisite to them filing an application in Missouri We continue to work with the Missouri Horse Racing Commission on issues regarding incentives for Missouri horse breeders and the operation of amateur racing in the state

To all those whom I have had the pleasure of working with over the past five years I express my gratitude for the opportunity to serve as Chairman of the Gaming Commission As 1 approach the end ofmy last teffil as mandated by statute I

look back on the accomshyplishments of the Commisshysion with a great deal of pride The General Asshysembly gave the Commisshysion the difficult and often controversial job of impleshymenting the peoples will to have riverboat gaming The Commission has implemented its charge by carefully adhering to our statutory guidelines While the Akin decision has been the source of legal conflict and public controversy it has not stopped the Commission fiom giving you what SBs 10amp11 contained as a core demand - a clean industry fiee from criminal influence When the Commission has discovered evidence of crime those responsible have been exposed and eliminated In addition the Commission has imposed strict penalties for violations of its standards for the conduct of gaming

In 1998 the Commission established a new division Corporate Securities and Finance to deal with specialized matters involving financial transactions tax issues and corporate law The pew division is modeled after similar groups within other agencies It includes approximately 15 staff members including an employee of the IRS who is assigned to the Commission under an intergovernmental agreement

In any organization the key ingredient is people All of my fellow COllumssioners have been dedicated to the creation of a new agency with integrity as its by-word They have worked

diligently to that end

More importantly we have been fortunate to have a superb staff It would be inappropriate to single out any inshydividuals Nevertheless the leadership of our Executive Director and the diligent work of his Deputy Directors their support staff our legal counsel the many members of the Missouri State Highway Patrol and the agents assigned to the Commission by the IRS have made it all possible Continuity is important The willingness of our staff to continue gives me comfort that the business and problems that lie ahead will be handled with professhysionalism and integrity

In closing the Commission looks forward to continuing its mission which is prominently displayed on the inside cover of this report To administer honestly equitably and efficiently the statutes and rules and regulations that govern the riverboat gamshying bingo and horse racing industries in Missouri

Sincerely

Robert L Wolfson Chairman

Effect of Tax Rate Missouri law currently imposes an 18 state

tax on the adjusted gross receipts (AGR) received from gambling games on riverboat casinos In addishytion the statute provides that the home dock city or county where each excursion gambling boat is located shall receive 2 ofAGR The local tax does not generate state funds and therefore is not subject to Article III Section J (d) of the Missouri Constitution which directs that all state funds derived from the proceeds of gambling be used for public education

The statute also imposes an admission fee on the operators of excursion gambling boats in the amount of two dollars ($2) per patron pcr excursion which is split between the home dock community and the state Furthermore pursuant to section 313824 RSMo excursion gambling boat operators are charged for the cost of gaming agents that are assigned to the riverboat with the responsibility of protecting the pUblic While the cost of Commission agents varies with each operation the average annual cost is apshyproximately $589200 per boat

Finally it should be noted that in addition to the special taxes imposed on gambling the riverboat operators are responsible for all other state and local taxes such as sales tax property tax and income tax that apply to other business owners The Commission regularly reviews the operators financial records to ensure that the appropriate local state and federal taxes are paid

Jurisdiction AGRTax Admission Fees license Fees

lllinois

15 up to 25 million 20010 betveen $25 to $50 million 25 between $50 to $75 million 30 between $75 and $100 million and 35 over $100 million

$25000 application fee $5000 rerxwal

$2 per patron per cmise (including camps a11d multiple rides)

j

Iowa

Sliding scale on AGR $0 to $1 million 5 $1 to $3 million 10 $3 million al1d up 20

$25000 application fee for a 9 )eaT tenu $1000 renewal fee pIllS $5 per passenger carrying capacity irxluding ere (millirmm capacity is 250)

ekly fee set by comlnssion of 65 of enforcerrent costs plus expellses to be divided equally atrollg

licensees Local adllnssion fee of $50 per patron per cruise (optional)

Missouri 200loofAGR

Ihe higrer of $50000 or full cost of imestigation relxwal fee of $25000 aunually

$2 per patron per cruise (including eomps and multiple rides) Full cost of enforcement (avg $589200 per boat per year)

Mississippi

Sliding scale of Ulmlhly revelUle from 4 to 8 Annual per ~ fee ranging from $50 for I ~x to $2800 for 27 to

35 gatlJes Local optional AGR tax of 4 to 8

-shy

NA NlA

Effective Tax Rate of Neighboring States

35 ~ shy

tf 30

f Q)

cu 25a gtlt (l 20lshy bull Effective Tax Rate ()

1 15 0 ()m10

5

0 Illinois Iowa Missouri

Based on Calendar Year 1997

The taxes specific to Missouri riverboat gaming opshyerators are higher than their competitors in adjoining from marketing efforts that could attract more customers thus generating more tax revenue and offering the possibility of additional capital investment

The table shown on page 6 compares Missouris rivshyerboat gambling tax rate to adjoining states In addition the chart below depicts the effective tax rates for each adjoining state The effective tax rate is the amount of tax paid as a percentage of gross revenue It should be noted that Illinois recently raised its taxes on riverboat gambling from a flat 20 ofAGR to the sliding scale depicted in Table A on page 6

Even with Illinois new higher tax rate its operators eHective tax rate remains lower than that ofMissouri operators While some consideration must be given to the fact that Missouri charges for the full cost of enforceshyment and Illinois does not a more compelling argushyment can be made that the

loss limits detrimental efiect on gross revenue is the prishymary reason for Illinois lower effective tax rate

Finally it should be noted that three Indian casinos are now operating in Kansas These facilities are not taxed and therefore are not represhysented in any of the tables or charts Nevertheless the Kansas Indian casinos have established themselves as fonnidable competitors of the riverboat gaming operations on the western side ofMisshysouri and are having an impact on state revenue

Effect of the Loss Limit There have been 110 changes in the competitive factors

relating to the loss limit since the commissions last full report was submitted to the General Assembly in January 1997 Neighboring states continue to post significantly higher win per admission numbers than operators in Missouri resulting in as much as 50 more gaming revenue per patron in those states than in Missouri

Statistical data and observations of customer patterns at facilities in Ill1nois and Kansas continue to indicate that the loss limit results in an export of Missouri dollars to neighboring

jurisdictions The accompanying tables and charts that are proshyvided clearly demonstrate that Missouri lags significantly behind

neighboring non-loss limit states in win per admission This information is provided to update and supplement the data proshyvided in the 1997 report

Finally the Commission has yet to see any evidence that the loss limit is an effective deterrent to the problem gambler While the Commission has adopted one of the most aggressive programs to combat problem gambling (see page 13) the loss limit has not proven to be an effective weapon in this battJe

Win Per Admission Missouri vs Adjoining States

$50

$40

$30

$20

$10

$0 IL Metropolis Council Bluffs

MO IA Alton Caruthersville St Joseph

$43

IMIlt

$33

st Louis E St Louis

$34

There are many questions regarding the economic impact of riverboat gaming in Misshysouri and the impact of gaming nationwide In 1997 Civic Progress of St Louis commissioned an independent study on the economic impact of gaming in Missouri Dr Charles Leven Professor Emeritus of Economics conducted the study released to the public in the spring of 1998 at Washington University and Dr Don Phares Professor of Economics and Public Policy at the University ofMissouri-St Louis

The Leven-Phares study was based on financial results for calendar year 1996 and included projections for calendar year 1997 The study asserted that in 1997 the casino gaming indusshytry in Missouri directly and indirectly generated more than threeshy

t quarters of a billion dollars worth of new spending in the states ~ economy Because of casino gaming personal income grew by ~

over $500 million State and local governments received over $225 million in new tax revenues Almost 18000 new jobs were added to the economy

t~middotmiddotmiddotmiddotmiddotmiddotmiddotImiddotmiddot The Missouri riverboat casino market is generally considshyered to be limited to local residents However because all of the

1 Missouri facilities are located near bordering states it appears 1 ~ that the casinos are able to attract a significant amount of out of1Ir state dollars The Leven-Phares study found that visitors from

out of state generated 30 percent of casino revenues Furthermore the study found that 17 percent of casino revenue came from reducshytions in spending outside the state by Missourians

On the other hand the study found that $265 million dollars of casino revenue carne from reduced household spending in Missouri However the study noted that while this is more than one half of Missourians total spending of $412 million at casinos it is relatively inconseshyquential when compared to total Missouri retail sales of$45 billion or personal income of $116 billion

Although the Leven-Phares study introduced important data and represents the most thorough examination of the ecoshynomic impact of casino gambling on the Missouri economy it did not go far enough In order to get a more complete picture of the economic impact that gambling has on Missourians and their economy social impact must be examined A study must atshytempt to estimate the number of problem gamblers and the extent of their impact on the Missouri economy No such study has been attempted in Missouri and the difficulty in quantifying such human factors represents an enormous chalshylenge

This is a question frequently asked of public officials The short answer is yes it does Pursuant to a constitutional amendment submitted by the General Assembly the voters adopted Article III Section 39( d) in 1992 which mandated that all state tax money derived fro111 the conduct ofgambling to be dedicated to public education

State statutes impose three taxes unique to riverboat gambling operators The only tax subject to Article III Section

3 9( d) is the 18 state tax on adshyjusted gtoss receipts (AGR) which produces the vast majority of revenue (Section 313822 RSMo) In addition the statute imposes a $2 admission fee that is split between the home dock community and the state (Section 313820 RSMo) Finally the statute allocates 2 of AGR as a local tax paid to the home dock community to be used for services necessary for the safety of the public visiting an excursion gambling boat (Section 313822(1) RSMo)

1994 Changes to the Foundation Formula

In 1994 the General As~embly passed Senate Bill 380 which made significant changes in the school foundation formula Among the changes was a provision that directed a large portion of the states tax on the gross revenues of riverboat gaming operators to the formula The remaining funds would be spent on capital improvement projects for the states colleges and universi-

Gaming Revenue for Education

200

CD 150 J c CD gt CD 100 bull BingoII x bull Riverboat ~ 50

o

1996 1997 1998

Fiscal Year

FiscdYea R h erlxxJt Birm 1995 $5661628204 $625370996 1996 $9973032067 $468417852 1997 $11841938902 $461557950 1998 $1444903789~- $4384 17486_

--~

ties until the legislature passed Senate Bill 301 in 1995 SB 301 would direct all the states portion of the AGR tax to elemcntary and secondary education Specifically the first $7 million is appropriated to the School Bond Fund to be used to pay the costs of the issuance of local school district bonds with the remaining

funds going to the school foundation formula As depicted in the chmis on pages 11 and 12 the gaming

revenue represents a significant portion of new funding for public education in each of the past four fiscal years In addition in less than 2 years the riverboat gambling revenue represents almost 6 of direct state aid for education

Excess Admission Fees to be Used for Education

The primary purpose of the states portion of the admisshysion fee is to fund the administrative and regulatory activities of the Gaming Commission TIllS insures that no general revenue is used for any function relating to riverboat gaming However the admission fee generates far more revenue than the Commission requires to operate In fiscal year 1997 the states portion ofthe admission fee exceeded the Commissions operating budget by more than $25 million

Therefore some mechanism is required to distribute the remainder of the states pOliion of the admission fee In 1998 Govemor Camallan proposed legislation that would direct the majority of the excess revenue generated by the states admission fee to early childhood education programs However because prior fiscal years the excess admission fee had been used for programs for community neighborhood organizations and vetershyans it was necessary to establish a schedule of funding each of these programs while providing that the majority of the funds be used for early childhood education The General Assembly responded by adopting HB 1519 which established the following distribution formula for the excess admission fees in the Gaming Commission Fund (1) The first $500000 is used to fund community neighborhood

organization programs for the homeless and to deter gang-re-

Source of Increase in Foundation Formula FY 95 to FY 98

Source of Funds

$14449037694 322

$304 90962106 678

bull Riverboat Funds

bull Other Funds

look back on the accomshyplishments of the Commisshysion with a great deal of pride The General Asshysembly gave the Commisshysion the difficult and often controversial job of impleshymenting the peoples will to have riverboat gaming The Commission has implemented its charge by carefully adhering to our statutory guidelines While the Akin decision has been the source of legal conflict and public controversy it has not stopped the Commission fiom giving you what SBs 10amp11 contained as a core demand - a clean industry fiee from criminal influence When the Commission has discovered evidence of crime those responsible have been exposed and eliminated In addition the Commission has imposed strict penalties for violations of its standards for the conduct of gaming

In 1998 the Commission established a new division Corporate Securities and Finance to deal with specialized matters involving financial transactions tax issues and corporate law The pew division is modeled after similar groups within other agencies It includes approximately 15 staff members including an employee of the IRS who is assigned to the Commission under an intergovernmental agreement

In any organization the key ingredient is people All of my fellow COllumssioners have been dedicated to the creation of a new agency with integrity as its by-word They have worked

diligently to that end

More importantly we have been fortunate to have a superb staff It would be inappropriate to single out any inshydividuals Nevertheless the leadership of our Executive Director and the diligent work of his Deputy Directors their support staff our legal counsel the many members of the Missouri State Highway Patrol and the agents assigned to the Commission by the IRS have made it all possible Continuity is important The willingness of our staff to continue gives me comfort that the business and problems that lie ahead will be handled with professhysionalism and integrity

In closing the Commission looks forward to continuing its mission which is prominently displayed on the inside cover of this report To administer honestly equitably and efficiently the statutes and rules and regulations that govern the riverboat gamshying bingo and horse racing industries in Missouri

Sincerely

Robert L Wolfson Chairman

Effect of Tax Rate Missouri law currently imposes an 18 state

tax on the adjusted gross receipts (AGR) received from gambling games on riverboat casinos In addishytion the statute provides that the home dock city or county where each excursion gambling boat is located shall receive 2 ofAGR The local tax does not generate state funds and therefore is not subject to Article III Section J (d) of the Missouri Constitution which directs that all state funds derived from the proceeds of gambling be used for public education

The statute also imposes an admission fee on the operators of excursion gambling boats in the amount of two dollars ($2) per patron pcr excursion which is split between the home dock community and the state Furthermore pursuant to section 313824 RSMo excursion gambling boat operators are charged for the cost of gaming agents that are assigned to the riverboat with the responsibility of protecting the pUblic While the cost of Commission agents varies with each operation the average annual cost is apshyproximately $589200 per boat

Finally it should be noted that in addition to the special taxes imposed on gambling the riverboat operators are responsible for all other state and local taxes such as sales tax property tax and income tax that apply to other business owners The Commission regularly reviews the operators financial records to ensure that the appropriate local state and federal taxes are paid

Jurisdiction AGRTax Admission Fees license Fees

lllinois

15 up to 25 million 20010 betveen $25 to $50 million 25 between $50 to $75 million 30 between $75 and $100 million and 35 over $100 million

$25000 application fee $5000 rerxwal

$2 per patron per cmise (including camps a11d multiple rides)

j

Iowa

Sliding scale on AGR $0 to $1 million 5 $1 to $3 million 10 $3 million al1d up 20

$25000 application fee for a 9 )eaT tenu $1000 renewal fee pIllS $5 per passenger carrying capacity irxluding ere (millirmm capacity is 250)

ekly fee set by comlnssion of 65 of enforcerrent costs plus expellses to be divided equally atrollg

licensees Local adllnssion fee of $50 per patron per cruise (optional)

Missouri 200loofAGR

Ihe higrer of $50000 or full cost of imestigation relxwal fee of $25000 aunually

$2 per patron per cruise (including eomps and multiple rides) Full cost of enforcement (avg $589200 per boat per year)

Mississippi

Sliding scale of Ulmlhly revelUle from 4 to 8 Annual per ~ fee ranging from $50 for I ~x to $2800 for 27 to

35 gatlJes Local optional AGR tax of 4 to 8

-shy

NA NlA

Effective Tax Rate of Neighboring States

35 ~ shy

tf 30

f Q)

cu 25a gtlt (l 20lshy bull Effective Tax Rate ()

1 15 0 ()m10

5

0 Illinois Iowa Missouri

Based on Calendar Year 1997

The taxes specific to Missouri riverboat gaming opshyerators are higher than their competitors in adjoining from marketing efforts that could attract more customers thus generating more tax revenue and offering the possibility of additional capital investment

The table shown on page 6 compares Missouris rivshyerboat gambling tax rate to adjoining states In addition the chart below depicts the effective tax rates for each adjoining state The effective tax rate is the amount of tax paid as a percentage of gross revenue It should be noted that Illinois recently raised its taxes on riverboat gambling from a flat 20 ofAGR to the sliding scale depicted in Table A on page 6

Even with Illinois new higher tax rate its operators eHective tax rate remains lower than that ofMissouri operators While some consideration must be given to the fact that Missouri charges for the full cost of enforceshyment and Illinois does not a more compelling argushyment can be made that the

loss limits detrimental efiect on gross revenue is the prishymary reason for Illinois lower effective tax rate

Finally it should be noted that three Indian casinos are now operating in Kansas These facilities are not taxed and therefore are not represhysented in any of the tables or charts Nevertheless the Kansas Indian casinos have established themselves as fonnidable competitors of the riverboat gaming operations on the western side ofMisshysouri and are having an impact on state revenue

Effect of the Loss Limit There have been 110 changes in the competitive factors

relating to the loss limit since the commissions last full report was submitted to the General Assembly in January 1997 Neighboring states continue to post significantly higher win per admission numbers than operators in Missouri resulting in as much as 50 more gaming revenue per patron in those states than in Missouri

Statistical data and observations of customer patterns at facilities in Ill1nois and Kansas continue to indicate that the loss limit results in an export of Missouri dollars to neighboring

jurisdictions The accompanying tables and charts that are proshyvided clearly demonstrate that Missouri lags significantly behind

neighboring non-loss limit states in win per admission This information is provided to update and supplement the data proshyvided in the 1997 report

Finally the Commission has yet to see any evidence that the loss limit is an effective deterrent to the problem gambler While the Commission has adopted one of the most aggressive programs to combat problem gambling (see page 13) the loss limit has not proven to be an effective weapon in this battJe

Win Per Admission Missouri vs Adjoining States

$50

$40

$30

$20

$10

$0 IL Metropolis Council Bluffs

MO IA Alton Caruthersville St Joseph

$43

IMIlt

$33

st Louis E St Louis

$34

There are many questions regarding the economic impact of riverboat gaming in Misshysouri and the impact of gaming nationwide In 1997 Civic Progress of St Louis commissioned an independent study on the economic impact of gaming in Missouri Dr Charles Leven Professor Emeritus of Economics conducted the study released to the public in the spring of 1998 at Washington University and Dr Don Phares Professor of Economics and Public Policy at the University ofMissouri-St Louis

The Leven-Phares study was based on financial results for calendar year 1996 and included projections for calendar year 1997 The study asserted that in 1997 the casino gaming indusshytry in Missouri directly and indirectly generated more than threeshy

t quarters of a billion dollars worth of new spending in the states ~ economy Because of casino gaming personal income grew by ~

over $500 million State and local governments received over $225 million in new tax revenues Almost 18000 new jobs were added to the economy

t~middotmiddotmiddotmiddotmiddotmiddotmiddotImiddotmiddot The Missouri riverboat casino market is generally considshyered to be limited to local residents However because all of the

1 Missouri facilities are located near bordering states it appears 1 ~ that the casinos are able to attract a significant amount of out of1Ir state dollars The Leven-Phares study found that visitors from

out of state generated 30 percent of casino revenues Furthermore the study found that 17 percent of casino revenue came from reducshytions in spending outside the state by Missourians

On the other hand the study found that $265 million dollars of casino revenue carne from reduced household spending in Missouri However the study noted that while this is more than one half of Missourians total spending of $412 million at casinos it is relatively inconseshyquential when compared to total Missouri retail sales of$45 billion or personal income of $116 billion

Although the Leven-Phares study introduced important data and represents the most thorough examination of the ecoshynomic impact of casino gambling on the Missouri economy it did not go far enough In order to get a more complete picture of the economic impact that gambling has on Missourians and their economy social impact must be examined A study must atshytempt to estimate the number of problem gamblers and the extent of their impact on the Missouri economy No such study has been attempted in Missouri and the difficulty in quantifying such human factors represents an enormous chalshylenge

This is a question frequently asked of public officials The short answer is yes it does Pursuant to a constitutional amendment submitted by the General Assembly the voters adopted Article III Section 39( d) in 1992 which mandated that all state tax money derived fro111 the conduct ofgambling to be dedicated to public education

State statutes impose three taxes unique to riverboat gambling operators The only tax subject to Article III Section

3 9( d) is the 18 state tax on adshyjusted gtoss receipts (AGR) which produces the vast majority of revenue (Section 313822 RSMo) In addition the statute imposes a $2 admission fee that is split between the home dock community and the state (Section 313820 RSMo) Finally the statute allocates 2 of AGR as a local tax paid to the home dock community to be used for services necessary for the safety of the public visiting an excursion gambling boat (Section 313822(1) RSMo)

1994 Changes to the Foundation Formula

In 1994 the General As~embly passed Senate Bill 380 which made significant changes in the school foundation formula Among the changes was a provision that directed a large portion of the states tax on the gross revenues of riverboat gaming operators to the formula The remaining funds would be spent on capital improvement projects for the states colleges and universi-

Gaming Revenue for Education

200

CD 150 J c CD gt CD 100 bull BingoII x bull Riverboat ~ 50

o

1996 1997 1998

Fiscal Year

FiscdYea R h erlxxJt Birm 1995 $5661628204 $625370996 1996 $9973032067 $468417852 1997 $11841938902 $461557950 1998 $1444903789~- $4384 17486_

--~

ties until the legislature passed Senate Bill 301 in 1995 SB 301 would direct all the states portion of the AGR tax to elemcntary and secondary education Specifically the first $7 million is appropriated to the School Bond Fund to be used to pay the costs of the issuance of local school district bonds with the remaining

funds going to the school foundation formula As depicted in the chmis on pages 11 and 12 the gaming

revenue represents a significant portion of new funding for public education in each of the past four fiscal years In addition in less than 2 years the riverboat gambling revenue represents almost 6 of direct state aid for education

Excess Admission Fees to be Used for Education

The primary purpose of the states portion of the admisshysion fee is to fund the administrative and regulatory activities of the Gaming Commission TIllS insures that no general revenue is used for any function relating to riverboat gaming However the admission fee generates far more revenue than the Commission requires to operate In fiscal year 1997 the states portion ofthe admission fee exceeded the Commissions operating budget by more than $25 million

Therefore some mechanism is required to distribute the remainder of the states pOliion of the admission fee In 1998 Govemor Camallan proposed legislation that would direct the majority of the excess revenue generated by the states admission fee to early childhood education programs However because prior fiscal years the excess admission fee had been used for programs for community neighborhood organizations and vetershyans it was necessary to establish a schedule of funding each of these programs while providing that the majority of the funds be used for early childhood education The General Assembly responded by adopting HB 1519 which established the following distribution formula for the excess admission fees in the Gaming Commission Fund (1) The first $500000 is used to fund community neighborhood

organization programs for the homeless and to deter gang-re-

Source of Increase in Foundation Formula FY 95 to FY 98

Source of Funds

$14449037694 322

$304 90962106 678

bull Riverboat Funds

bull Other Funds

Effect of Tax Rate Missouri law currently imposes an 18 state

tax on the adjusted gross receipts (AGR) received from gambling games on riverboat casinos In addishytion the statute provides that the home dock city or county where each excursion gambling boat is located shall receive 2 ofAGR The local tax does not generate state funds and therefore is not subject to Article III Section J (d) of the Missouri Constitution which directs that all state funds derived from the proceeds of gambling be used for public education

The statute also imposes an admission fee on the operators of excursion gambling boats in the amount of two dollars ($2) per patron pcr excursion which is split between the home dock community and the state Furthermore pursuant to section 313824 RSMo excursion gambling boat operators are charged for the cost of gaming agents that are assigned to the riverboat with the responsibility of protecting the pUblic While the cost of Commission agents varies with each operation the average annual cost is apshyproximately $589200 per boat

Finally it should be noted that in addition to the special taxes imposed on gambling the riverboat operators are responsible for all other state and local taxes such as sales tax property tax and income tax that apply to other business owners The Commission regularly reviews the operators financial records to ensure that the appropriate local state and federal taxes are paid

Jurisdiction AGRTax Admission Fees license Fees

lllinois

15 up to 25 million 20010 betveen $25 to $50 million 25 between $50 to $75 million 30 between $75 and $100 million and 35 over $100 million

$25000 application fee $5000 rerxwal

$2 per patron per cmise (including camps a11d multiple rides)

j

Iowa

Sliding scale on AGR $0 to $1 million 5 $1 to $3 million 10 $3 million al1d up 20

$25000 application fee for a 9 )eaT tenu $1000 renewal fee pIllS $5 per passenger carrying capacity irxluding ere (millirmm capacity is 250)

ekly fee set by comlnssion of 65 of enforcerrent costs plus expellses to be divided equally atrollg

licensees Local adllnssion fee of $50 per patron per cruise (optional)

Missouri 200loofAGR

Ihe higrer of $50000 or full cost of imestigation relxwal fee of $25000 aunually

$2 per patron per cruise (including eomps and multiple rides) Full cost of enforcement (avg $589200 per boat per year)

Mississippi

Sliding scale of Ulmlhly revelUle from 4 to 8 Annual per ~ fee ranging from $50 for I ~x to $2800 for 27 to

35 gatlJes Local optional AGR tax of 4 to 8

-shy

NA NlA

Effective Tax Rate of Neighboring States

35 ~ shy

tf 30

f Q)

cu 25a gtlt (l 20lshy bull Effective Tax Rate ()

1 15 0 ()m10

5

0 Illinois Iowa Missouri

Based on Calendar Year 1997

The taxes specific to Missouri riverboat gaming opshyerators are higher than their competitors in adjoining from marketing efforts that could attract more customers thus generating more tax revenue and offering the possibility of additional capital investment

The table shown on page 6 compares Missouris rivshyerboat gambling tax rate to adjoining states In addition the chart below depicts the effective tax rates for each adjoining state The effective tax rate is the amount of tax paid as a percentage of gross revenue It should be noted that Illinois recently raised its taxes on riverboat gambling from a flat 20 ofAGR to the sliding scale depicted in Table A on page 6

Even with Illinois new higher tax rate its operators eHective tax rate remains lower than that ofMissouri operators While some consideration must be given to the fact that Missouri charges for the full cost of enforceshyment and Illinois does not a more compelling argushyment can be made that the

loss limits detrimental efiect on gross revenue is the prishymary reason for Illinois lower effective tax rate

Finally it should be noted that three Indian casinos are now operating in Kansas These facilities are not taxed and therefore are not represhysented in any of the tables or charts Nevertheless the Kansas Indian casinos have established themselves as fonnidable competitors of the riverboat gaming operations on the western side ofMisshysouri and are having an impact on state revenue

Effect of the Loss Limit There have been 110 changes in the competitive factors

relating to the loss limit since the commissions last full report was submitted to the General Assembly in January 1997 Neighboring states continue to post significantly higher win per admission numbers than operators in Missouri resulting in as much as 50 more gaming revenue per patron in those states than in Missouri

Statistical data and observations of customer patterns at facilities in Ill1nois and Kansas continue to indicate that the loss limit results in an export of Missouri dollars to neighboring

jurisdictions The accompanying tables and charts that are proshyvided clearly demonstrate that Missouri lags significantly behind

neighboring non-loss limit states in win per admission This information is provided to update and supplement the data proshyvided in the 1997 report

Finally the Commission has yet to see any evidence that the loss limit is an effective deterrent to the problem gambler While the Commission has adopted one of the most aggressive programs to combat problem gambling (see page 13) the loss limit has not proven to be an effective weapon in this battJe

Win Per Admission Missouri vs Adjoining States

$50

$40

$30

$20

$10

$0 IL Metropolis Council Bluffs

MO IA Alton Caruthersville St Joseph

$43

IMIlt

$33

st Louis E St Louis

$34

There are many questions regarding the economic impact of riverboat gaming in Misshysouri and the impact of gaming nationwide In 1997 Civic Progress of St Louis commissioned an independent study on the economic impact of gaming in Missouri Dr Charles Leven Professor Emeritus of Economics conducted the study released to the public in the spring of 1998 at Washington University and Dr Don Phares Professor of Economics and Public Policy at the University ofMissouri-St Louis

The Leven-Phares study was based on financial results for calendar year 1996 and included projections for calendar year 1997 The study asserted that in 1997 the casino gaming indusshytry in Missouri directly and indirectly generated more than threeshy

t quarters of a billion dollars worth of new spending in the states ~ economy Because of casino gaming personal income grew by ~

over $500 million State and local governments received over $225 million in new tax revenues Almost 18000 new jobs were added to the economy

t~middotmiddotmiddotmiddotmiddotmiddotmiddotImiddotmiddot The Missouri riverboat casino market is generally considshyered to be limited to local residents However because all of the

1 Missouri facilities are located near bordering states it appears 1 ~ that the casinos are able to attract a significant amount of out of1Ir state dollars The Leven-Phares study found that visitors from

out of state generated 30 percent of casino revenues Furthermore the study found that 17 percent of casino revenue came from reducshytions in spending outside the state by Missourians

On the other hand the study found that $265 million dollars of casino revenue carne from reduced household spending in Missouri However the study noted that while this is more than one half of Missourians total spending of $412 million at casinos it is relatively inconseshyquential when compared to total Missouri retail sales of$45 billion or personal income of $116 billion

Although the Leven-Phares study introduced important data and represents the most thorough examination of the ecoshynomic impact of casino gambling on the Missouri economy it did not go far enough In order to get a more complete picture of the economic impact that gambling has on Missourians and their economy social impact must be examined A study must atshytempt to estimate the number of problem gamblers and the extent of their impact on the Missouri economy No such study has been attempted in Missouri and the difficulty in quantifying such human factors represents an enormous chalshylenge

This is a question frequently asked of public officials The short answer is yes it does Pursuant to a constitutional amendment submitted by the General Assembly the voters adopted Article III Section 39( d) in 1992 which mandated that all state tax money derived fro111 the conduct ofgambling to be dedicated to public education

State statutes impose three taxes unique to riverboat gambling operators The only tax subject to Article III Section

3 9( d) is the 18 state tax on adshyjusted gtoss receipts (AGR) which produces the vast majority of revenue (Section 313822 RSMo) In addition the statute imposes a $2 admission fee that is split between the home dock community and the state (Section 313820 RSMo) Finally the statute allocates 2 of AGR as a local tax paid to the home dock community to be used for services necessary for the safety of the public visiting an excursion gambling boat (Section 313822(1) RSMo)

1994 Changes to the Foundation Formula

In 1994 the General As~embly passed Senate Bill 380 which made significant changes in the school foundation formula Among the changes was a provision that directed a large portion of the states tax on the gross revenues of riverboat gaming operators to the formula The remaining funds would be spent on capital improvement projects for the states colleges and universi-

Gaming Revenue for Education

200

CD 150 J c CD gt CD 100 bull BingoII x bull Riverboat ~ 50

o

1996 1997 1998

Fiscal Year

FiscdYea R h erlxxJt Birm 1995 $5661628204 $625370996 1996 $9973032067 $468417852 1997 $11841938902 $461557950 1998 $1444903789~- $4384 17486_

--~

ties until the legislature passed Senate Bill 301 in 1995 SB 301 would direct all the states portion of the AGR tax to elemcntary and secondary education Specifically the first $7 million is appropriated to the School Bond Fund to be used to pay the costs of the issuance of local school district bonds with the remaining

funds going to the school foundation formula As depicted in the chmis on pages 11 and 12 the gaming

revenue represents a significant portion of new funding for public education in each of the past four fiscal years In addition in less than 2 years the riverboat gambling revenue represents almost 6 of direct state aid for education

Excess Admission Fees to be Used for Education

The primary purpose of the states portion of the admisshysion fee is to fund the administrative and regulatory activities of the Gaming Commission TIllS insures that no general revenue is used for any function relating to riverboat gaming However the admission fee generates far more revenue than the Commission requires to operate In fiscal year 1997 the states portion ofthe admission fee exceeded the Commissions operating budget by more than $25 million

Therefore some mechanism is required to distribute the remainder of the states pOliion of the admission fee In 1998 Govemor Camallan proposed legislation that would direct the majority of the excess revenue generated by the states admission fee to early childhood education programs However because prior fiscal years the excess admission fee had been used for programs for community neighborhood organizations and vetershyans it was necessary to establish a schedule of funding each of these programs while providing that the majority of the funds be used for early childhood education The General Assembly responded by adopting HB 1519 which established the following distribution formula for the excess admission fees in the Gaming Commission Fund (1) The first $500000 is used to fund community neighborhood

organization programs for the homeless and to deter gang-re-

Source of Increase in Foundation Formula FY 95 to FY 98

Source of Funds

$14449037694 322

$304 90962106 678

bull Riverboat Funds

bull Other Funds

Effective Tax Rate of Neighboring States

35 ~ shy

tf 30

f Q)

cu 25a gtlt (l 20lshy bull Effective Tax Rate ()

1 15 0 ()m10

5

0 Illinois Iowa Missouri

Based on Calendar Year 1997

The taxes specific to Missouri riverboat gaming opshyerators are higher than their competitors in adjoining from marketing efforts that could attract more customers thus generating more tax revenue and offering the possibility of additional capital investment

The table shown on page 6 compares Missouris rivshyerboat gambling tax rate to adjoining states In addition the chart below depicts the effective tax rates for each adjoining state The effective tax rate is the amount of tax paid as a percentage of gross revenue It should be noted that Illinois recently raised its taxes on riverboat gambling from a flat 20 ofAGR to the sliding scale depicted in Table A on page 6

Even with Illinois new higher tax rate its operators eHective tax rate remains lower than that ofMissouri operators While some consideration must be given to the fact that Missouri charges for the full cost of enforceshyment and Illinois does not a more compelling argushyment can be made that the

loss limits detrimental efiect on gross revenue is the prishymary reason for Illinois lower effective tax rate

Finally it should be noted that three Indian casinos are now operating in Kansas These facilities are not taxed and therefore are not represhysented in any of the tables or charts Nevertheless the Kansas Indian casinos have established themselves as fonnidable competitors of the riverboat gaming operations on the western side ofMisshysouri and are having an impact on state revenue

Effect of the Loss Limit There have been 110 changes in the competitive factors

relating to the loss limit since the commissions last full report was submitted to the General Assembly in January 1997 Neighboring states continue to post significantly higher win per admission numbers than operators in Missouri resulting in as much as 50 more gaming revenue per patron in those states than in Missouri

Statistical data and observations of customer patterns at facilities in Ill1nois and Kansas continue to indicate that the loss limit results in an export of Missouri dollars to neighboring

jurisdictions The accompanying tables and charts that are proshyvided clearly demonstrate that Missouri lags significantly behind

neighboring non-loss limit states in win per admission This information is provided to update and supplement the data proshyvided in the 1997 report

Finally the Commission has yet to see any evidence that the loss limit is an effective deterrent to the problem gambler While the Commission has adopted one of the most aggressive programs to combat problem gambling (see page 13) the loss limit has not proven to be an effective weapon in this battJe

Win Per Admission Missouri vs Adjoining States

$50

$40

$30

$20

$10

$0 IL Metropolis Council Bluffs

MO IA Alton Caruthersville St Joseph

$43

IMIlt

$33

st Louis E St Louis

$34

There are many questions regarding the economic impact of riverboat gaming in Misshysouri and the impact of gaming nationwide In 1997 Civic Progress of St Louis commissioned an independent study on the economic impact of gaming in Missouri Dr Charles Leven Professor Emeritus of Economics conducted the study released to the public in the spring of 1998 at Washington University and Dr Don Phares Professor of Economics and Public Policy at the University ofMissouri-St Louis

The Leven-Phares study was based on financial results for calendar year 1996 and included projections for calendar year 1997 The study asserted that in 1997 the casino gaming indusshytry in Missouri directly and indirectly generated more than threeshy

t quarters of a billion dollars worth of new spending in the states ~ economy Because of casino gaming personal income grew by ~

over $500 million State and local governments received over $225 million in new tax revenues Almost 18000 new jobs were added to the economy

t~middotmiddotmiddotmiddotmiddotmiddotmiddotImiddotmiddot The Missouri riverboat casino market is generally considshyered to be limited to local residents However because all of the

1 Missouri facilities are located near bordering states it appears 1 ~ that the casinos are able to attract a significant amount of out of1Ir state dollars The Leven-Phares study found that visitors from

out of state generated 30 percent of casino revenues Furthermore the study found that 17 percent of casino revenue came from reducshytions in spending outside the state by Missourians

On the other hand the study found that $265 million dollars of casino revenue carne from reduced household spending in Missouri However the study noted that while this is more than one half of Missourians total spending of $412 million at casinos it is relatively inconseshyquential when compared to total Missouri retail sales of$45 billion or personal income of $116 billion

Although the Leven-Phares study introduced important data and represents the most thorough examination of the ecoshynomic impact of casino gambling on the Missouri economy it did not go far enough In order to get a more complete picture of the economic impact that gambling has on Missourians and their economy social impact must be examined A study must atshytempt to estimate the number of problem gamblers and the extent of their impact on the Missouri economy No such study has been attempted in Missouri and the difficulty in quantifying such human factors represents an enormous chalshylenge

This is a question frequently asked of public officials The short answer is yes it does Pursuant to a constitutional amendment submitted by the General Assembly the voters adopted Article III Section 39( d) in 1992 which mandated that all state tax money derived fro111 the conduct ofgambling to be dedicated to public education

State statutes impose three taxes unique to riverboat gambling operators The only tax subject to Article III Section

3 9( d) is the 18 state tax on adshyjusted gtoss receipts (AGR) which produces the vast majority of revenue (Section 313822 RSMo) In addition the statute imposes a $2 admission fee that is split between the home dock community and the state (Section 313820 RSMo) Finally the statute allocates 2 of AGR as a local tax paid to the home dock community to be used for services necessary for the safety of the public visiting an excursion gambling boat (Section 313822(1) RSMo)

1994 Changes to the Foundation Formula

In 1994 the General As~embly passed Senate Bill 380 which made significant changes in the school foundation formula Among the changes was a provision that directed a large portion of the states tax on the gross revenues of riverboat gaming operators to the formula The remaining funds would be spent on capital improvement projects for the states colleges and universi-

Gaming Revenue for Education

200

CD 150 J c CD gt CD 100 bull BingoII x bull Riverboat ~ 50

o

1996 1997 1998

Fiscal Year

FiscdYea R h erlxxJt Birm 1995 $5661628204 $625370996 1996 $9973032067 $468417852 1997 $11841938902 $461557950 1998 $1444903789~- $4384 17486_

--~

ties until the legislature passed Senate Bill 301 in 1995 SB 301 would direct all the states portion of the AGR tax to elemcntary and secondary education Specifically the first $7 million is appropriated to the School Bond Fund to be used to pay the costs of the issuance of local school district bonds with the remaining

funds going to the school foundation formula As depicted in the chmis on pages 11 and 12 the gaming

revenue represents a significant portion of new funding for public education in each of the past four fiscal years In addition in less than 2 years the riverboat gambling revenue represents almost 6 of direct state aid for education

Excess Admission Fees to be Used for Education

The primary purpose of the states portion of the admisshysion fee is to fund the administrative and regulatory activities of the Gaming Commission TIllS insures that no general revenue is used for any function relating to riverboat gaming However the admission fee generates far more revenue than the Commission requires to operate In fiscal year 1997 the states portion ofthe admission fee exceeded the Commissions operating budget by more than $25 million

Therefore some mechanism is required to distribute the remainder of the states pOliion of the admission fee In 1998 Govemor Camallan proposed legislation that would direct the majority of the excess revenue generated by the states admission fee to early childhood education programs However because prior fiscal years the excess admission fee had been used for programs for community neighborhood organizations and vetershyans it was necessary to establish a schedule of funding each of these programs while providing that the majority of the funds be used for early childhood education The General Assembly responded by adopting HB 1519 which established the following distribution formula for the excess admission fees in the Gaming Commission Fund (1) The first $500000 is used to fund community neighborhood

organization programs for the homeless and to deter gang-re-

Source of Increase in Foundation Formula FY 95 to FY 98

Source of Funds

$14449037694 322

$304 90962106 678

bull Riverboat Funds

bull Other Funds

Effect of the Loss Limit There have been 110 changes in the competitive factors

relating to the loss limit since the commissions last full report was submitted to the General Assembly in January 1997 Neighboring states continue to post significantly higher win per admission numbers than operators in Missouri resulting in as much as 50 more gaming revenue per patron in those states than in Missouri

Statistical data and observations of customer patterns at facilities in Ill1nois and Kansas continue to indicate that the loss limit results in an export of Missouri dollars to neighboring

jurisdictions The accompanying tables and charts that are proshyvided clearly demonstrate that Missouri lags significantly behind

neighboring non-loss limit states in win per admission This information is provided to update and supplement the data proshyvided in the 1997 report

Finally the Commission has yet to see any evidence that the loss limit is an effective deterrent to the problem gambler While the Commission has adopted one of the most aggressive programs to combat problem gambling (see page 13) the loss limit has not proven to be an effective weapon in this battJe

Win Per Admission Missouri vs Adjoining States

$50

$40

$30

$20

$10

$0 IL Metropolis Council Bluffs

MO IA Alton Caruthersville St Joseph

$43

IMIlt

$33

st Louis E St Louis

$34

There are many questions regarding the economic impact of riverboat gaming in Misshysouri and the impact of gaming nationwide In 1997 Civic Progress of St Louis commissioned an independent study on the economic impact of gaming in Missouri Dr Charles Leven Professor Emeritus of Economics conducted the study released to the public in the spring of 1998 at Washington University and Dr Don Phares Professor of Economics and Public Policy at the University ofMissouri-St Louis

The Leven-Phares study was based on financial results for calendar year 1996 and included projections for calendar year 1997 The study asserted that in 1997 the casino gaming indusshytry in Missouri directly and indirectly generated more than threeshy

t quarters of a billion dollars worth of new spending in the states ~ economy Because of casino gaming personal income grew by ~

over $500 million State and local governments received over $225 million in new tax revenues Almost 18000 new jobs were added to the economy

t~middotmiddotmiddotmiddotmiddotmiddotmiddotImiddotmiddot The Missouri riverboat casino market is generally considshyered to be limited to local residents However because all of the

1 Missouri facilities are located near bordering states it appears 1 ~ that the casinos are able to attract a significant amount of out of1Ir state dollars The Leven-Phares study found that visitors from

out of state generated 30 percent of casino revenues Furthermore the study found that 17 percent of casino revenue came from reducshytions in spending outside the state by Missourians

On the other hand the study found that $265 million dollars of casino revenue carne from reduced household spending in Missouri However the study noted that while this is more than one half of Missourians total spending of $412 million at casinos it is relatively inconseshyquential when compared to total Missouri retail sales of$45 billion or personal income of $116 billion

Although the Leven-Phares study introduced important data and represents the most thorough examination of the ecoshynomic impact of casino gambling on the Missouri economy it did not go far enough In order to get a more complete picture of the economic impact that gambling has on Missourians and their economy social impact must be examined A study must atshytempt to estimate the number of problem gamblers and the extent of their impact on the Missouri economy No such study has been attempted in Missouri and the difficulty in quantifying such human factors represents an enormous chalshylenge

This is a question frequently asked of public officials The short answer is yes it does Pursuant to a constitutional amendment submitted by the General Assembly the voters adopted Article III Section 39( d) in 1992 which mandated that all state tax money derived fro111 the conduct ofgambling to be dedicated to public education

State statutes impose three taxes unique to riverboat gambling operators The only tax subject to Article III Section

3 9( d) is the 18 state tax on adshyjusted gtoss receipts (AGR) which produces the vast majority of revenue (Section 313822 RSMo) In addition the statute imposes a $2 admission fee that is split between the home dock community and the state (Section 313820 RSMo) Finally the statute allocates 2 of AGR as a local tax paid to the home dock community to be used for services necessary for the safety of the public visiting an excursion gambling boat (Section 313822(1) RSMo)

1994 Changes to the Foundation Formula

In 1994 the General As~embly passed Senate Bill 380 which made significant changes in the school foundation formula Among the changes was a provision that directed a large portion of the states tax on the gross revenues of riverboat gaming operators to the formula The remaining funds would be spent on capital improvement projects for the states colleges and universi-

Gaming Revenue for Education

200

CD 150 J c CD gt CD 100 bull BingoII x bull Riverboat ~ 50

o

1996 1997 1998

Fiscal Year

FiscdYea R h erlxxJt Birm 1995 $5661628204 $625370996 1996 $9973032067 $468417852 1997 $11841938902 $461557950 1998 $1444903789~- $4384 17486_

--~

ties until the legislature passed Senate Bill 301 in 1995 SB 301 would direct all the states portion of the AGR tax to elemcntary and secondary education Specifically the first $7 million is appropriated to the School Bond Fund to be used to pay the costs of the issuance of local school district bonds with the remaining

funds going to the school foundation formula As depicted in the chmis on pages 11 and 12 the gaming

revenue represents a significant portion of new funding for public education in each of the past four fiscal years In addition in less than 2 years the riverboat gambling revenue represents almost 6 of direct state aid for education

Excess Admission Fees to be Used for Education

The primary purpose of the states portion of the admisshysion fee is to fund the administrative and regulatory activities of the Gaming Commission TIllS insures that no general revenue is used for any function relating to riverboat gaming However the admission fee generates far more revenue than the Commission requires to operate In fiscal year 1997 the states portion ofthe admission fee exceeded the Commissions operating budget by more than $25 million

Therefore some mechanism is required to distribute the remainder of the states pOliion of the admission fee In 1998 Govemor Camallan proposed legislation that would direct the majority of the excess revenue generated by the states admission fee to early childhood education programs However because prior fiscal years the excess admission fee had been used for programs for community neighborhood organizations and vetershyans it was necessary to establish a schedule of funding each of these programs while providing that the majority of the funds be used for early childhood education The General Assembly responded by adopting HB 1519 which established the following distribution formula for the excess admission fees in the Gaming Commission Fund (1) The first $500000 is used to fund community neighborhood

organization programs for the homeless and to deter gang-re-

Source of Increase in Foundation Formula FY 95 to FY 98

Source of Funds

$14449037694 322

$304 90962106 678

bull Riverboat Funds

bull Other Funds

There are many questions regarding the economic impact of riverboat gaming in Misshysouri and the impact of gaming nationwide In 1997 Civic Progress of St Louis commissioned an independent study on the economic impact of gaming in Missouri Dr Charles Leven Professor Emeritus of Economics conducted the study released to the public in the spring of 1998 at Washington University and Dr Don Phares Professor of Economics and Public Policy at the University ofMissouri-St Louis

The Leven-Phares study was based on financial results for calendar year 1996 and included projections for calendar year 1997 The study asserted that in 1997 the casino gaming indusshytry in Missouri directly and indirectly generated more than threeshy

t quarters of a billion dollars worth of new spending in the states ~ economy Because of casino gaming personal income grew by ~

over $500 million State and local governments received over $225 million in new tax revenues Almost 18000 new jobs were added to the economy

t~middotmiddotmiddotmiddotmiddotmiddotmiddotImiddotmiddot The Missouri riverboat casino market is generally considshyered to be limited to local residents However because all of the

1 Missouri facilities are located near bordering states it appears 1 ~ that the casinos are able to attract a significant amount of out of1Ir state dollars The Leven-Phares study found that visitors from

out of state generated 30 percent of casino revenues Furthermore the study found that 17 percent of casino revenue came from reducshytions in spending outside the state by Missourians

On the other hand the study found that $265 million dollars of casino revenue carne from reduced household spending in Missouri However the study noted that while this is more than one half of Missourians total spending of $412 million at casinos it is relatively inconseshyquential when compared to total Missouri retail sales of$45 billion or personal income of $116 billion

Although the Leven-Phares study introduced important data and represents the most thorough examination of the ecoshynomic impact of casino gambling on the Missouri economy it did not go far enough In order to get a more complete picture of the economic impact that gambling has on Missourians and their economy social impact must be examined A study must atshytempt to estimate the number of problem gamblers and the extent of their impact on the Missouri economy No such study has been attempted in Missouri and the difficulty in quantifying such human factors represents an enormous chalshylenge

This is a question frequently asked of public officials The short answer is yes it does Pursuant to a constitutional amendment submitted by the General Assembly the voters adopted Article III Section 39( d) in 1992 which mandated that all state tax money derived fro111 the conduct ofgambling to be dedicated to public education

State statutes impose three taxes unique to riverboat gambling operators The only tax subject to Article III Section

3 9( d) is the 18 state tax on adshyjusted gtoss receipts (AGR) which produces the vast majority of revenue (Section 313822 RSMo) In addition the statute imposes a $2 admission fee that is split between the home dock community and the state (Section 313820 RSMo) Finally the statute allocates 2 of AGR as a local tax paid to the home dock community to be used for services necessary for the safety of the public visiting an excursion gambling boat (Section 313822(1) RSMo)

1994 Changes to the Foundation Formula

In 1994 the General As~embly passed Senate Bill 380 which made significant changes in the school foundation formula Among the changes was a provision that directed a large portion of the states tax on the gross revenues of riverboat gaming operators to the formula The remaining funds would be spent on capital improvement projects for the states colleges and universi-

Gaming Revenue for Education

200

CD 150 J c CD gt CD 100 bull BingoII x bull Riverboat ~ 50

o

1996 1997 1998

Fiscal Year

FiscdYea R h erlxxJt Birm 1995 $5661628204 $625370996 1996 $9973032067 $468417852 1997 $11841938902 $461557950 1998 $1444903789~- $4384 17486_

--~

ties until the legislature passed Senate Bill 301 in 1995 SB 301 would direct all the states portion of the AGR tax to elemcntary and secondary education Specifically the first $7 million is appropriated to the School Bond Fund to be used to pay the costs of the issuance of local school district bonds with the remaining

funds going to the school foundation formula As depicted in the chmis on pages 11 and 12 the gaming

revenue represents a significant portion of new funding for public education in each of the past four fiscal years In addition in less than 2 years the riverboat gambling revenue represents almost 6 of direct state aid for education

Excess Admission Fees to be Used for Education

The primary purpose of the states portion of the admisshysion fee is to fund the administrative and regulatory activities of the Gaming Commission TIllS insures that no general revenue is used for any function relating to riverboat gaming However the admission fee generates far more revenue than the Commission requires to operate In fiscal year 1997 the states portion ofthe admission fee exceeded the Commissions operating budget by more than $25 million

Therefore some mechanism is required to distribute the remainder of the states pOliion of the admission fee In 1998 Govemor Camallan proposed legislation that would direct the majority of the excess revenue generated by the states admission fee to early childhood education programs However because prior fiscal years the excess admission fee had been used for programs for community neighborhood organizations and vetershyans it was necessary to establish a schedule of funding each of these programs while providing that the majority of the funds be used for early childhood education The General Assembly responded by adopting HB 1519 which established the following distribution formula for the excess admission fees in the Gaming Commission Fund (1) The first $500000 is used to fund community neighborhood

organization programs for the homeless and to deter gang-re-

Source of Increase in Foundation Formula FY 95 to FY 98

Source of Funds

$14449037694 322

$304 90962106 678

bull Riverboat Funds

bull Other Funds

This is a question frequently asked of public officials The short answer is yes it does Pursuant to a constitutional amendment submitted by the General Assembly the voters adopted Article III Section 39( d) in 1992 which mandated that all state tax money derived fro111 the conduct ofgambling to be dedicated to public education

State statutes impose three taxes unique to riverboat gambling operators The only tax subject to Article III Section

3 9( d) is the 18 state tax on adshyjusted gtoss receipts (AGR) which produces the vast majority of revenue (Section 313822 RSMo) In addition the statute imposes a $2 admission fee that is split between the home dock community and the state (Section 313820 RSMo) Finally the statute allocates 2 of AGR as a local tax paid to the home dock community to be used for services necessary for the safety of the public visiting an excursion gambling boat (Section 313822(1) RSMo)

1994 Changes to the Foundation Formula

In 1994 the General As~embly passed Senate Bill 380 which made significant changes in the school foundation formula Among the changes was a provision that directed a large portion of the states tax on the gross revenues of riverboat gaming operators to the formula The remaining funds would be spent on capital improvement projects for the states colleges and universi-

Gaming Revenue for Education

200

CD 150 J c CD gt CD 100 bull BingoII x bull Riverboat ~ 50

o

1996 1997 1998

Fiscal Year

FiscdYea R h erlxxJt Birm 1995 $5661628204 $625370996 1996 $9973032067 $468417852 1997 $11841938902 $461557950 1998 $1444903789~- $4384 17486_

--~

ties until the legislature passed Senate Bill 301 in 1995 SB 301 would direct all the states portion of the AGR tax to elemcntary and secondary education Specifically the first $7 million is appropriated to the School Bond Fund to be used to pay the costs of the issuance of local school district bonds with the remaining

funds going to the school foundation formula As depicted in the chmis on pages 11 and 12 the gaming

revenue represents a significant portion of new funding for public education in each of the past four fiscal years In addition in less than 2 years the riverboat gambling revenue represents almost 6 of direct state aid for education

Excess Admission Fees to be Used for Education

The primary purpose of the states portion of the admisshysion fee is to fund the administrative and regulatory activities of the Gaming Commission TIllS insures that no general revenue is used for any function relating to riverboat gaming However the admission fee generates far more revenue than the Commission requires to operate In fiscal year 1997 the states portion ofthe admission fee exceeded the Commissions operating budget by more than $25 million

Therefore some mechanism is required to distribute the remainder of the states pOliion of the admission fee In 1998 Govemor Camallan proposed legislation that would direct the majority of the excess revenue generated by the states admission fee to early childhood education programs However because prior fiscal years the excess admission fee had been used for programs for community neighborhood organizations and vetershyans it was necessary to establish a schedule of funding each of these programs while providing that the majority of the funds be used for early childhood education The General Assembly responded by adopting HB 1519 which established the following distribution formula for the excess admission fees in the Gaming Commission Fund (1) The first $500000 is used to fund community neighborhood

organization programs for the homeless and to deter gang-re-

Source of Increase in Foundation Formula FY 95 to FY 98

Source of Funds

$14449037694 322

$304 90962106 678

bull Riverboat Funds

bull Other Funds

funds going to the school foundation formula As depicted in the chmis on pages 11 and 12 the gaming

revenue represents a significant portion of new funding for public education in each of the past four fiscal years In addition in less than 2 years the riverboat gambling revenue represents almost 6 of direct state aid for education

Excess Admission Fees to be Used for Education

The primary purpose of the states portion of the admisshysion fee is to fund the administrative and regulatory activities of the Gaming Commission TIllS insures that no general revenue is used for any function relating to riverboat gaming However the admission fee generates far more revenue than the Commission requires to operate In fiscal year 1997 the states portion ofthe admission fee exceeded the Commissions operating budget by more than $25 million

Therefore some mechanism is required to distribute the remainder of the states pOliion of the admission fee In 1998 Govemor Camallan proposed legislation that would direct the majority of the excess revenue generated by the states admission fee to early childhood education programs However because prior fiscal years the excess admission fee had been used for programs for community neighborhood organizations and vetershyans it was necessary to establish a schedule of funding each of these programs while providing that the majority of the funds be used for early childhood education The General Assembly responded by adopting HB 1519 which established the following distribution formula for the excess admission fees in the Gaming Commission Fund (1) The first $500000 is used to fund community neighborhood

organization programs for the homeless and to deter gang-re-

Source of Increase in Foundation Formula FY 95 to FY 98

Source of Funds

$14449037694 322

$304 90962106 678

bull Riverboat Funds

bull Other Funds

-------

Increase in Foundation Formula Source of Funds

100 494 51

$91700000 $92730middot869679 ~ ~

200

co Q) 150gtshy 0

- poundL 0shyQ) gt 100

0 () Cf)

co () 0shy() 50C

a FY94 FY95 FY96

lated violence and crimes_ (2) $3 million to the Veterans Commission Capital Improvement

Trust Fund for the construction maintenance or renovation of veterans homes and cemeteries

(3) $3 million to the Missouri National Guard Trust Fund (4) $3 million for the Missouri College Guarantee Fund (5) The remaimng funds are to be used for the Early Childhood

Development Education and Care Fund to be used for early childhood education

86 $159310932

bull Riverboat Funds bull Other Funds

FY97 FY98

(6) Ifthe funds used in (5) exceed $27 million in a given year up to an additional $15 million shall be distributed to the Missouri college guarantee fund

It is important to note that the admission fee is not derived from the conduct of gaming and therefore not constitutionally required to be used for education Therefore while the bulk of the money is used for education purposes the portions used for Missouri veterans and the National Guard do not violate constitutional restriction on the use of state funds derived from the conduct of gaming

Voluntary Exclusions for Problem Gamblers One of the most difficult challenges for regulators of

casino gambling is finding ways to combat problem gambling In Missouri we have broken new ground with a program that is helping hundreds of problem gamblers deal with their compulsive tendencies

The program is called the List of Disassociated Persons and it allows problem gamblers to begin to take personal responshysibility for their problem by voluntarily excluding themselves from Missouri riverboat casinos

Professional treatment counselors have advised the Comshymission that the only way for problem gamblers to begin the continuing road to recovery is for them to admit they have a problem and take personal responsibility for it The Commission chose to make these requirements the cornershystone of its Disassocishyated Persons program

The purpose of the program is to proshyvide a person with a gambling problem an incentive to refrain from visiting riverboat casinos in Missouri and to protect the problem gambler from receiving direct marketing materishy

als ii-om Missouri casino operators It must be stressed that it is the responsibility of the problem gambler to seek treatment and to refrain from visiting Missouri riverboat casinos It is not the responsibility of the Gaming Commission or the casino operators to prevent the problem gambler from entering the casino - this would be an impossible task and an invitation for failure Furshythennore treatment counselors have advised the Commission that such a policy would actually have a negative impact on long-term treatment because someone else would be taking responsibility for the problem gamblerS conduct However casino companies do have an obligation to remove disassociated persons once their identity is discovered

Therefore the Commissions program provides that the consequence of visiting a Missouri riverboat casino is that if discovered the person will be arrested for trespassing and will forfeit any chips tokens or credits in their possession at the time of arrest

In exchange for the agreement of the problem gambler to refrain from visiting Missouri riverboat casinos the Commission requires the casino operators to refrain from offering people on the Disassociated Persons List incentives to visit the casino such as free dinners free stays in the hotel etc It is the responsibility of the Disassociated Person to notifY the Commission ofany violations of this policy

It is important to note that entrance into the Disassociated Persons program is a lifetime commitment Treatment counselors have advised the Commission that a gambling addiction requires lifetime treatment and that a person is never cured but continushyally recovering

Although the program is still in its infancy the initial results are encouraging

Voluntary Exclusions for Problem Gamblers One of the most difficult challenges for regulators of

casino gambling is finding ways to combat problem gambling In Missouri we have broken new ground with a program that is helping hundreds of problem gamblers deal with their compulsive tendencies

The program is called the List of Disassociated Persons and it allows problem gamblers to begin to take personal responshysibility for their problem by voluntarily excluding themselves from Missouri riverboat casinos

Professional treatment counselors have advised the Comshymission that the only way for problem gamblers to begin the continuing road to recovery is for them to admit they have a problem and take personal responsibility for it The Commission chose to make these requirements the cornershystone of its Disassocishyated Persons program

The purpose of the program is to proshyvide a person with a gambling problem an incentive to refrain from visiting riverboat casinos in Missouri and to protect the problem gambler from receiving direct marketing materishy

als ii-om Missouri casino operators It must be stressed that it is the responsibility of the problem gambler to seek treatment and to refrain from visiting Missouri riverboat casinos It is not the responsibility of the Gaming Commission or the casino operators to prevent the problem gambler from entering the casino - this would be an impossible task and an invitation for failure Furshythennore treatment counselors have advised the Commission that such a policy would actually have a negative impact on long-term treatment because someone else would be taking responsibility for the problem gamblerS conduct However casino companies do have an obligation to remove disassociated persons once their identity is discovered

Therefore the Commissions program provides that the consequence of visiting a Missouri riverboat casino is that if discovered the person will be arrested for trespassing and will forfeit any chips tokens or credits in their possession at the time of arrest

In exchange for the agreement of the problem gambler to refrain from visiting Missouri riverboat casinos the Commission requires the casino operators to refrain from offering people on the Disassociated Persons List incentives to visit the casino such as free dinners free stays in the hotel etc It is the responsibility of the Disassociated Person to notifY the Commission ofany violations of this policy

It is important to note that entrance into the Disassociated Persons program is a lifetime commitment Treatment counselors have advised the Commission that a gambling addiction requires lifetime treatment and that a person is never cured but continushyally recovering

Although the program is still in its infancy the initial results are encouraging

Introduction Over the past several months the most frequently asked

question of any member of the Ganling Commission or its staff has been Why is the Commission trying to take the licenses away from the boats in basins when it granted the licenses in the first place Understandably this question has befuddled many citizens lawmakers and those employed in the casino industry

The short answer is that when the licenses were issued the Commission had an obligation to abide by the statutory definition of Missouri and Mississippi River adopted by the legislature When the Missouri Supreme Court stmck down that law the Commission had an obligation to enforce the new law announced by the Court It is that simple

To examine the issue more thoroughly one must first look to the statute defining the Missouri and Mississippi Rivers passed by the legislature in 1994

Senate Bill 740 and Dockside Hearings In 1994 the legislature added the following definition of the

Missouri and Mississippi Rivers to the riverboat gaming law

laquoMissouri River and Mississippi River [means] the watcr bed andbanks of those rivers including any space filled by the water of those rivers for docking purposes in a manner approved by the commission but shall not include any artifishycial space created after May 20 1994 and is located more than one thousand feet from the closest edge of the main chalmel of the river as established by the United States Army Corps ofEngineers

In addition the legislature defined dock as

the location which contains any natural or artificial space inlet hollow or basin in or adjashycent to a bank of the Mississippi or Missouri Rivers next to a wharf or landing [for] gamshybling excursion [passengers] but shall not include any artificial space created after May 20 1994 and is located more than one thousand feet from the closest edge of the main channel of the river as established by the United States Anny Corps of Engineers

Pursuant to well-established canons of constitutional interpreshytation the Gaming Commission is obligated to presume the

constitutionality of statutes It has no authority to declare a statute unconstitutional All the currently lishycensed boats located basins were subject to lengthy public hearings designed to evaluate whether the riverboat was located in a manner allowed by the statute The Commission heard expert testimony on the subject and solicited testimony from public At each such hearing save one there was no objection by any group or citizen to locating the facility in an artificial basin as provided by statute Each basin was approved after a determination that it complied with the statutory definitions previously cited

On only one occasion was the constitutionality of a location questioned In that instance the Commission ruled that because the statute defined the Missouri River as including artificial basins that the boat was located on the river Although that decision of the Gaming Commission could have been appealed to the Westem District Court of Appeals and then to the Supreme Court no such appeal was filed Later in the Akin case a reshyspected circuit court judge would issue a ruling similar to that the Commission

However on November 25 1997 the Supreme Court disshyagreed with the lower court and declared the definition of river in the gaming statute invalid to the extent that it conflicts with Courts ruling that an artificial basin must be filled with water that touches the surface stream [ofthe river] (for considerable

distances) and thereby contiguous to the surface stream [of the river] The law has now changed and the Commission must enforce the new law

It is now the charge of the Gaming Commission to determine who complies with the Akin ruling To the extent that a project shydoes not comply its license for games of chance must be reshyvoked The Commission moved quickly to set this process in motion While the Courts initial ruling was issued on November 25 1997 the final mandate did not issue until December 23 1997 On January 9 1998 the Commission was scheduled to issue preliminary disciplinary orders revoking the license for games of chance to all boats located in artificial basins that are not contiguous with the surface stream of the Missoun or Mississhysippi lliver

The preliminary disciplinary orders are documents that allege that a company is not in compliance with the law Preliminary disciplinary orders do not become effective for 30 days during which time each licensee is afforded the opportunity to request a hearing contesting the Commissions preliminary order If the licensee requests a hearing the riverboat can continue operating pending the outcome of the hearing

However the riverboat gaming operators stopped the Commission from issuing the preliminary

orders by obtaining an Order of Prohibition from tIle Cole County Circuit Court The operators lawsuit alleged that the Commissions hearing process did not provide sufficient due process in violation of the US and Missouri Constitutions The Commission appealed the lower cOUl1 ruling and on May 28 1998 the Missouri Supreme Court ruled in favor of the Commisshysion by holding that the Commissions procedure complies with constitutional due process and has the appropriate remedies for judicial review to avoid ineparable hann to any of the parties State ex rei Riverside Joint Venture et at vs Missouri Gaming Commission

On June 23 J998 the Commission issued preliminary disciplinary orders to Boyd Kansas City Inc Hilton Kansas City Corporation Han-ahs North Kansas City Corporation Kansas City Station Corporation Riverside Joint Venture and Han-ahs Maryland Heights LLC Riverside Joint Venture and Players MH LP and St Joseph Riverboat Partners However the riverboats are entitled to a hearing to prove that they comply with the Akin ruling The process is as follows

At the hearing the riverboat licensee is given the opportunity to prove that it complies with the Akin ruling An independent hearing officer who will make a recommendation to the Commisshy

sion will conduct the hearing The five members of the Commisshysion will ultimately be responsible for deciding the matter The Commission may accept modify or reject the fmdings of the hearing officer If the ruling is adverse to the licensee it can appeal to the Western District Court ofAppeals and then to the Supreme Court

Should a license come up for renewal while a hearing or appeal is pending the licensee will be eligible for renewal continshygent upon the outcome of the disciplinary hearing This proceshydure is consistent with the way the Commission has handled disciplinary actions over the past several years The process is not new and was not created specifically to deal with the boats in basins situation

Jhe Myth of the Cruising Riverboat Requirement

One of the most common myths that has perpetuated throughshyout Missouris experience with riverboat gaming is the claim that the original referendum promised cruising riverboats The assertion is simply not true The law has never required that all boats cruise that any boat cruise all the time or that any boat cruise when it is unsafe to do so

The original law adopted by the people granted a specific exemption from cruising for the Admiral and five other sites along the downtown St Louis riverfront In addition the legislashytion exempted all boats from cruising from the beginning of

November until the end of March

_ Furthermore the Tourism Commission had the authority to set the minimum number of cruises from April until October Therefore the boats could be docked for substantial periods during these months Moreover the original referendum allowed the boat operator to operate while remaining docked for mechanical problems adshyverse weather or other condishytions adversely affecting safe navigation

Upon receiving inforshymation from the United States Coast Guard and the US Army Corps of Engineers that rivers in Missouri present certain safety hazards that must be accounted for the legislature adopted a procedure for evaluating safety risks The riverboat gaming statute provides that all boats shall cruise unless the Commisshysion finds that the best interest ofMissouri and the safety of the public indicate the need for continuous docking Section 313805 (15) RSMo The statute also provides that in order for a boat to remain dockside the applicant must demonstrate that the project would benefit land-based development and permashynent job creation Therefore the law clearly instructs the Comshymission to consider projects that have significant investments in land-based development

The statute requires the Commission to hold hearings to

determine whether it is safe for each riverboat to cruise The result of each of these hearings has been that it is unsafe for vessels of this size carrying thousands of passengers to cruise The Gaming Commission has received uncontroverted testimony from dozens of experts including the United States Coast Guard who have attested to the perils of large passenger vessels cruising in high traffic areas on the Missouri River

The testimony by these experts regarding the perils of placing large passenger vessels in the navigable portions of these rivers was alanningly evidenced by three recent accidents involvshying Missouri riverboat gaming operations The first at the Aztar riverboat in Caruthersville involved a 30 by 70 barge half loaded with gravel that broke loose and struck the boarding ramp of the Aztar casino The second accident was the well-publicized incident where a grain barge broke loose and struck the entrance ramp to the Admiral in St Louis The collision broke the power lines COIDlected to the boat requiring the use of emergency generators Several months later another barge would strike the Admiral as further evidence of the dangers involved in being situated near the path of commercial river traffic

Fortunately in each instance tragedy was avoided and no one was injured The avoidance of injury is largely because of Gaming Commission policies regarding safety inspections and pennits and the fact that the vessels remain dockside thus minishymizing the risk ofcollision and maximizing the utilization of rescue facilities However the incidents demonstrate that the safest location for these facilities is in a protected basin off the navigable waterway The Coast Guard has consistently informed the Commission that protected basins represent the safest mode of operation for riverboat casinos

Introduction November 3 1998 marks the 6th amriversary of the Misshy

souri voters approval of riverboat gambling in Missouri Howshyever policy debates and legal wrangling delayed the opening of the states ftrst riverboat gambling operation until May 27 1994 The industry now holds 16 licenses at 10 casino properties and employs approximately 12000 people with an rumual payroll of approxishymately $269 million

Nevertheless rec~nt litigation has result in great uncertainty for many Missourians eIl1ployed in the riverboat gambling industry On November 23 1997 the Missouri Supreme Court issued its ruling in Alan y Missouri Gaming Commission The court held that to the extent that the legislatures deftnition of the Missomi and Mississippi Rivers authorized games of chance in basins that are not contiguous with the surface stream of those rivers the definition is unconstitutional

The Supreme Courts final decision in Akin was issued on December 23 1997 and on January 9 1998 the Commission issued Preliminary Orders for Disciplinary Action to all licensees operating riverboats in basins that are not contiguous to the surface stream ofthe Missouri or Mississippi River The discishyplinary actions propose that the companies authority to conduct games of chance be revoked The proposed orders are currently being appealed and affect 5 of the states 9 riverboat casino propshyerties

In light of the substantial policy issues now facing the General Assembly regarding riverboat gambling in Missouri the Commission thought it would be beneftcial to recount the history of the industrys creation its evolution and its prospects for the future

The 1992 Referendum In 1991 the Missouri General Assembly adopted House

Bill 149 ordering that the issue as to whether Missouri should allow riverboat gambling be referred to the voters On November 3 1992 Missouri voters approved the referendum by a 63 majority The ballot language for this measure read as follows

Authorizes riverboat gambling excursions on the Mississippi and Missouri Rivers regulated by the State Tourism Commission Excursions may originate where locally approved by the voters Five hundred dollar maximum loss limit per person per excursion The proposal is intended to produce increased General Revshyenue

While the original ballot language certainly implies that all gambling would occur during an excursion and thus that the boat would be cruising the rivers the text of the amendment plainly states otherwise The proposal passed by the people defined a gambling excursion as the time during which gambling games may be operated on an excursion gambling boat whether docked or during a cruise Gambling games may be continuously operated on an excursion gambling boat which is continuously docked (Missouri Session Laws 1991 HB 149149 sect A(sect 1) adopted by referendum eff Nov 3 1992) (emphasis added)

In fact the original referendum passed by the people specifically exempted boats on the S1 Louis riverfront from ever cruising the river Furthermore no boat would ever have to cruise from November to March Moreover the referendum allowed

exceptions from the cruising requirement in the case ofmechan ishycal problems adverse weather or other conditions adversely affecting safe navigation during the duration of the problem or condition or as authorized by the Commission during the off season

Therefore it is clear that the original referendwn did not promise cruising riverboats Not all boats were required to cruise none of the boats were required to cruise five months of the year and all boats could be exen1]Jted from cruising if it would pose safety problems

The Original Referendum Gets a Makeover Prior to the election 10 decide riverboat gambling in 1992

critics of some provisions of the referendum language began to emerge On October 23 1992 the Kansas City Star reported that the law did not bar convicted felons from holding a license to

i ~ ~

I ~

operate a gambling boat In addition some public officials began to question whether the tourism Commission was the proper agency to regulate the gambling industry whieh was predicted to be a significant tourist attraction (KC Star October 26 1992)

As a result after the referendum had been approved by the voters legislation wao introduced supported by then Governorshyelect Carnahan to place more stringent requirements on riverboat gamb ling licclLoces and to create a strong Gaming Commission to regulate the new industry

Senate Bills 10 amp 11 On April 29 1993 Governor Carnahan signed into law SBs

10 amp 11 creating the five member gaming Commission The bill carried an emergency clause and the Governor immediately apshypointed the first members

The Commission was given much more authority over the gaming industry than had previously been given to the Tourism Commission The COImnission could prioritize applications issue liquor licenses assess a wide array ofadministrative penalties inspect the licensees premises at any time decide the number type and location of gambling boats determine the times during which gambling may occur have access to all closed records relating applicants for licenses conduct hearings and be a trier of fact with regard to alleged violations of the gaming act and require licensees to release all information on its finances

In addition the industry was held to a higher standard having to prove its suitability for licensure by clear and convincing evidence rather than a preponderance of the evidence as had been the case under the provisions ofthe original referendum Felons are prohibited fi-om holding gaming licenses under the new act and the Commission is empowered to reopen licensing hearings at any time These requirements made it clear that a riverboat gambling

license was a privilege granted at the sole discretion of the State of Missouri and that the license carried no property rights

The Commission was vested with a strict code ofethics that prohibited members and staff from being employed by or having any financial interest in an applicant or licensee during their tenure with the Commission or for a two year period thereafter

Continuous Docking Language Clarified Senate Bills 10 amp 11 also added new language clarifYing

the original referendums vague provisions relating to cruising riverboats While SBs 10 amp 11 were being debated the legislature was made aware that the US Coast Guard had serious concerns about the safety of large passenger vessels on the Missouri River In a letter to the Missouri Port Authority Association dated Februshyary 5 1993 US Coast Guard Commander SP Cooper stated that I am concerned about the safety issues attendant to the operation of these [riverboat gambling] vessels Cooper went on to say that The large numbers ofpassengers on these vessels pose special problems for public safety organizations The Coast Guard willllot have a pennanent presence in these communities but will assist if resources are available

In response to the safety concerns raised by Captain Cooshyper local public officials in Kansas City and other safety experts SBs 10 amp 11 adopted a procedure for allowing the Commission to order riverboats to remain continuously docked if the safety of the public indicates the need for continuous docking (SBs 10 amp 11 Section 3 (15)

However some legislators and local public officials beshylieved dockside gaming was important for reasons other than safety Some public officials were concerned that riverboat compashynies might not honor commitments to home dock communities if the operation did not have immediate success In 1993 several

riverboat operators in Iowa had pulled anchor and sailed south in hopes oftaking advantage of the more favorable regulatory envishyronment in Mississippi

In order to address this issue language was added that would require the Commission to consider economic feasibility or impact that would benefit land based development and permanent job creation when making its decision whether dockside gaming was in the best interest ofMissouri However officials from the St Louis area did not want the issue of continuously docked boats tied to additional infrastructure requirements They believed that S1 Louis already had sufficiently developed its riverfront and therefore added language to the bill exempting the City of S1 Louis from the aforementioned requirement

Gaming Commission Begins Work

Supreme Court Intervention - Round One Troy Harris v Missouri Gaming Commission

On February 22 1994 the Misshysouri Supreme Court issued its opinion in Troy Harris v Missouri Garning Commis- sioll wherein it ruled that the legislature did not have the authority to allow games of chance 011 riverboats The Commisshysion argued that it was the voters who authorized games of chance by adopting the referendum language in November 1992 The Court agreed that the people lawfully authorized games of chance in the 1992 referendmn However it ruled that because the General Assembly

repealed the sections ofthe referendum authorizing games of chance and reenacted congruous language in SBs 10 amp 11 that the new law was an act of the General Assembly not the people and therefore subject to the limitations ofArticle III sect 39(9) ofthe Missouri Constitution prohibiting the General Assembly from authorizing games ofchance

The Court in Harris also found the language exempting the Admiral and the lease sites along the St Louis riverfront from cruising to be a facially special law Because special laws are presumed unconstitutional ill1leSS the party defending the law can demonstrate a substantial justification for the special treatment the Court remanded the issue back to circuit court for an evidenshytiary hearing

The Legislative Response to Harris The legislature responded quicldy to the Supreme Courts

decision in Harris by filing HJR 43 a constitutional amendment that would authorize the General Assembly to pennit games of chance on the Missouri and Mississippi Rivers The joint resolushytion was drafted to address the very nan-ow question raised by the court as to whether or not the General Assembly has the authority to authorize games of chance on riverboats (Transcript of Senate Ways amp Means Committee hearing February 2 1994 page 1)

The language adopted by the House Ways amp Means Comshymittee read in pertinent pmi as follows

Article III Section 39(e) Notwithstanding any prohibitions contained in this constitution includshying but not limited to the prohibition contained in subdivision (9) of section 39 of tlus article the General Assembly is authorized to pennit lotteries gift enterprises and games of skill or chance upon

the Mississippi and Missouri rivers as may be defined by the General Assembly

It appears that this language would have avoided the result in Akin whereby the Court ruled that the General Assembly did not have the authority to define the tenn river

This language concerned some members of the Senate because of the fear that by allowing the General Assembly to define the Missouri and Mississippi River it may allow for a broad definition that could be expanded to other areas of the state such as the Lake ortlle Ozarks (Transcript pages 8-9) Nevertheless the language that emerged from the Senate while more specific would be sinIilar to the House language

Section 39(e) The General Assembly may authoshyrize the issuance of licenses to pennit lotteries gift enterprises and games of skill or chance to be conducted on floating facilities upon the Missouri River and the Mississippi River in such numbers locations and manner all as or may be provided by law and regulations adopted pursuant to law and subject to such taxes as provided by law arId fees as provided by law or regulation adopted pursuant to law

However as the legislation moved through the process to a conference committee concern over the breadth of the language granting the General Assembly authority to pennit games of chance continued to grow The House rejected the Senates language and passed the House version The Senate refused to adopt the House version and both side appeared deadlocked Finally the following compromise language was adopted as a conference committee substitute

The general assembly is authorized to pennit only upon the Missouri and Mississippi Rivers lotteries gift enterprises and games of skill or chance to be conducted on excursion gambling boats and floating facilities

The conference committee substitute was adopted by both houses with bi-partisan support The Senate vote was 23-10 and the House vote was 107-48

While HJR 43 was truly agreed to and [mally passed in time to put the question before the voters in the April 5 1994 election the measure was defeated with 527011 in favor and 528278 opposed

The General Assembly was now faced with implementing the referendum adopted by 63 of the voters in 1992 without the games of chance that Harris declared to require constitutional authority In addition it was becoming increasingly clear that serious safety problems on the Missouri and Mississippi Rivers may preclude riverboat casinos from being able to cruise (Transhyscript page

Therefore the General Assembly adopted SB 740 which defined games of skill specifically authorized boats to be located in artificial basins and made minor revisions to the process for determining the conditions under which a boat may operate while continuously docked In addition the bill added new ethical standards and conflict of interest rules for the Gaming Commisshysion General Assembly Attorney Generals office Missouri State Highway Patrol peace officers and other public officials SB 740 was truly agreed to and finally passed with an emergency clause (EC) on May 12 1994 1be bill had bi-partisan support was adopted by a vote of 21-11 in the Senate (EC 24-8) and 93-63 in the House (EC 110-50)

On May 22 1994 the Commission implemented the provisions of the riverboat gambling act as amended by SB 740 and granted the first excursion gambling boat licenses to President Riverboat Casino on the Admiral and S1 Charles Riverfront Stashytion The licenses permitted the operators to offer only games of skill The inability to provide games of chance most importantly slot machines left the Missouri operators at a distinct disadvantage from their competitors in Illinois While Missourians initially flocked to the newer more elaborate Missouri riverboats the attraction soon dissipated In the first six months ofoperation the Missouri boatgt attracted fewer customers and generated less revshyenue than their Illinois competitors in East St Louis and Alton

The markets on the west side of the state presented a different situation Without competition from casinos in the same market with competitive advantages the riverboats licensed in Riverside and St Joseph on June 22 1994 fared better than their S1 Louis market counterparts Nevertheless the games of skill offered by the riverboats did not generate sufficient revenue to make the casinos profitable

In response to Harris and the failed April 1994 constitushytional amendment an initiative petition effort was mounted to allow voters to again decide whether riverboat casinos in Missouri should be allowed to ofler ganles of chance The effOlt was sucshycessful and on June 6 1994 the Secretary of State certified the following proposed constitutional amendment for the November 8 1994 ballot

Shall the General Assembly be authorized to pennit only upon the Mississippi River and the Missouri River lotteries gift enterprises and games ofchance to be conducted on excursion gambling boats and floating facilities This proposal would increase state

--

revenues from existing gaIning boats approximately $30000000 per year Impact on local governments unknown

The First Boat in a Basin While the licensees offering only games of skill were not

operating profitably in the summer of 1994 it did not deter the company constructing the first boat in a basin from completing its elaborate gambling complex containing the states first landshybased entertainment amenities On September 22 1994 the Commission issued a license for games of skill to Harrahs for its $89 million facility in North Kansas City

The Harrahs North Kansas City project consisted of a 60000 square foot land-based pavilion containing three restaurants and a permanently moored excursion gambling boat located in a protected coffer cell basin The facility offered 1800 parking spaces on its 60 acre site

It is important to note that when Missouri voters approved constitutional amendment authorizing games of chance on riverboat casinos with 943652 in favor and 807707 opposed a boat in a basin was licensed and operating at the Harrahs North Kansas City project Pursuant to voter approval the Commission amended the licenses ofArgosy-Riverside Harrahs-North Kansas City President Riverboat Casino-St Louis St Charles Riverfront Station and S1 Joseph Riverboat Partners to allow games ofchance on December 91994

The Dramatic Impact of Games of Chance The advent of games of chance would dramatically impact

the casino gambling industry in Missouri The most significant game of chance the slot machine now accounts for over 60 of total casino revenue As depicted in the chart on page 22 casino

revenue would more than double for the first quarter offiscal year 1996 when casinos offered games ofchance as opposed to the first quarter of fiscal year 1995 when riverboats were limited to games of skill

The addition ofgames of chance would also lead to the construction of bigger more elaborate projects through the addition of new facilities as well as the expansion of existing properties For example shortly after games of chance were introduced Station Casinos opened a second riverboat at its property in St Charles The new facility is larger and more lavish than its predeshycessor and would provide the necessary revenue base for the expansion of its non-gaming land-based amenities

Similarly armed with games of chance Harrahs North Kansas City quickly moved to expand its facility On April 12 1995 Harrahs advised the Commission of its request for approval ofa $70 million expansion The expansion proposal included a 200 room hotel 10000 square feet ofmeeting space a covered parking garage with 765 spaces a swimming pool exercise facilishyties video arcade gift shop expanded restaurant seating a full service car wash and a second gaming vessel with 40000 square feet ofgaming space to be located in a protected artificial basin The proposal was given tinal approval by the Commission on May 15 1996

Boat in Basin Controversy Emerges Although the fust boat in a basin had been operating since

September 22 1994 the first objection to allowing a riverboat to be located in a basin arose during Hiltons request for continuous docking status for its project in Kansas City On March 16 1995 attorneys representing Roy Fischer appeared at the Hilton dockside hearing to protest Hiltons proposal to locate its excursion gamshybling boat in a protected coffer celL Mr Fischer owned land in the

St Louis area that was under contract to a gaming company wishshying to build a project near a competing proposal for a boat in a basin in Maryland Heights

Mr Fischer argued that the Hilton proposal did not comply with the Missouri Constitution or the gaming statute He claimed that the voters approved cruising riverboats and while the legislashyture had provided for nalTOW exceptions to the cruising requireshyment it did not include artificial basins The Commission ruled that because the legislature defined the Missouri river as including artificial basins located within 1000 feet of the main channel that the Hilton boat was for purposes ofthe statute in the river Since the Commission did not have the authority to strike down the statute but was under an obligation to presume that it was constitushytional it followed the statute found that the Hilton boat met the criteria for continuous docking and granted it a license Although

this decision could have been appealed to the Westem District Court ofAppeals where the constitutionality ofthe statute could have been challenged Mr Fischer chose not to do so and the Commissions decision stood

On August 29 1996 over 17 months after the Conunission issued its ruling in the Hilton dockside case W Todd Akin filed a declaratory judgement action in Cole County Circuit Court seeking a determination that the statutes defming the Missouri and Mississippi rivers in the gaming act were unconstitutional The Cole COlll1ty Circuit Court would rule in favor of the Commission by issuing a fmding similar to the Commissions ruling in the Hilton dockside case However on November 251997 the Missouri Supreme Court would reverse the lower court decision and declare the gaming statute unconstitutional to the extent that it allows games of chance on riverboat casinos that are not contiguous to the surface stream of

Before and After Games of Chance September thru November

$40

en ti $30m u (])

a en 1994en ce g $20 1995ltl~

-0 2 en ~

0 $10 ltC

$0 Argosy Harrahs NKC President Stations St Charles St Joseph

the river As noted in the

section entitled Undershystanding Boats in Basins beginning on page 13 the Commission is currently seeking to revoke licenses for games of chance for facilities not in compliance with Akin The industry successfully submitted a ballot proposal that would reverse the impact ofAkin and it awaits consideration by the voters on November 3 1998

---

Number of Bingo Operators Continue to Decline The number of charitable bingo operators in Missouri declined in FY

98 for the third consecutive year As the chart at right depicts all classificashytions ofcharity bingo licenses have decreased The reason for the reduction is varied Some organizations were significantly weakened by the 120 tax increase dedicated to veterans homes that was imposed for approximately 10 months from 1993 to 1994 111e tax was repealed by SB 427 in 1994 however the legislation also included strict new standards that prevented convicted felons from being involved with bingo and gave the Gaming Conunission new tools to drive criminal elements out ofbingo and el1S~lle that taxes were properly paid loese new provisions led to some organizations being forced out of bingo and other vohllltarily surrendered their attributed to the increase in the number of licensed riverboat casinos in Missouri and adjoining states as wcll as the addition ofIndian casinos in Kansas Furthermore high stakes Indian bingo in Oklahoma as well as tour bus trips to high stakes Indian bingo halls in Iowa Ohio Oklahoma and as far away as Wisconsin continue to draw Missouri patrons away from resident charity bingo games that are faced with a myriad ofconstitutional restrictions

The introduction of progressive games and the availability ofpull tab games ofiering larger prizes have helped the charities to compete Nevertheshyless when faced with direct competition flom a riverboat or Indian casino or high stake1 Indian bingo hall the Missouri charitable operator is at a severe di sad vantage

900 Court Strikes Down Ban on Bingo 800

700Advertising 600

One of the most important events efiecting 500charitable bingo in Missouri occurred when United 400States District Court Judge Howard F Sachs has

issued a ruling in Association aCharitable Games 0 300 Missouri v Missouri Gaming Commission which 200 strikes down Missouris constitutional ban on the 100 advcltising of charity bingo games The twenty-one

0page opinion strikes down Article III Scction Regular

39(a)(7) of the Missouri Constitution ruling that it infringes on the charities First and Fourteenth

Amendment rights in violation ofthe United States Constitution Judge Sachs order also permanently enjoins the Gaming Commission from enforcing the provisions ofArticle III Section 39(a)(7)

The decision clears the way for charitable bingo operators suppliers and hall providers to begin advertising campaigns The new authority should allow charitable bingo operators to better compete with state lotteries Indian bingo halls and riverboat casino operations in Missouri and adjoining states

Seminars Help Charities Understand Rules The Gaming Commissions Bingo Division conducted a series of

three training seminars for charitable bingo operators in FY 98 loe training seminars which will be offered again in FY 99 are designed to help charity game operators understand the rules regulating bingo and to more effectively and efficiently process financial information required for proper oversight In addition the seminars offer state regulators the opportunity to interact with bingo workers and consider suggestions for changes in the regulatory process

During the seminars surveys are taken regarding specific changes charities would like to make to bingo rules or statutes As a result of input from seminar participants the Commission recently revised its regulation regarding bingo game starting times

bull FY96 BFY97

FY98

Manufacturer Hall Provider

Type of License

Special Pull-Tab Only Supplier

Type of License

Gaming Commission Fund Balance Report

Fiscal Year 1998

AMOUNT SUBTOTAL TOTAL

BEGINNING BALANCE 711191 $3184394214

REVENUE

Fees

A amp B Applicalion

Levell Occup AppflCation

Levell Occup Application

Supplier Application

Levell Occup Annual Fee

Levell Occup Annual Fee

Suppijer Annual Fee

Penalties

Level II Suppfier ApprlCation

tevelll Supplier Annual Fee

Admissions

LIcenses

A amp BAnnual

Liquor License

other

Administrative Income

Enforcement Reimbursemenls

Inlarest

TOTAL REVENUE

$39868096

$5111271

$55730000

$7044649

$1462534

$75852667

$15625005

$1000000

$566789

$755207

$3950971689

$85000000

$850000

$51738266

$4153987907

$85850000

$899797869

$5139635776

EXPENDITUREmiddot GAMING

Personal Servlee

Gaming Salaries

MSH P Salaries

MSHP Fringe Benefit

Gaming Fringe Benefit

$187943115

$528428065

$231211872

$86794952 $1034378004

AMOUNT SUBTOTAL TOTAL

Expense amp Equipement

Travel amp Vehicle Exp $23829354

Ob Expense $6405728

Ollice amp Comm Equip Purchase $4518882

Communicalions Expense $14404186

Inst amp Phys Plant Expense $11235062

Inst amp Phys Plant Equip Purchase $1546929

Data Processin~ Exp amp Equip $57427802

Professional Services $88852560

Ott19 r Ex pense $12078261

Refunds $53925585

Lease Payment $27348085 $301572434

Total Gaming Expenditures $1335950436

EXPENDITUREmiddot OTHER

Personal Services

DOR Salaries $2391600

Marney General Salaries $5832900

Audi1Drs Office Salaries $1062390 $9266890

Expense amp Equipment

OT for AukJ Tschnician $1619798

OT lor Radio Inslaller $1511316

MSHP Gasoline $14805461

MSHP Auk) Maintenance amp Repair $7042260

MSHP Vehicle Purchase $76505300

AuditorS Olice Expenses $1175403

Altorney General Expenses $1146543

Div ofYouUl Services $48004117

Dellerred Compensationmiddot Transler $4262061

Miscellaneous Translers $3065630774 $3221703033

Total Other Expenditures $3230969923

FUND BALANCE $3757089629

PROJECT SUMMAltY

UCENSE FY1998

UCENSEE DATE ADMISSIONS

PRESIDENT RIVERBOAT CASINO 27-MaY-94 3015066

MISSOURI INC I~------

ST CHARLES RIVERFRONT 27-May-94 I 5113507

STAllONINC 28middotDcc-94

MlSSOUFlI GAMING COMPANY 22-Jun-94 3356555

ST JOSEPH RIVERBOAT 24-JJnmiddot94 763663

PARTNERS ------shy

HARRAHS NOfmI 22middotSepmiddot94 6597496

KANSAS cm COOP 15-May-OO

AlTAR MISSOURI COOP 27middotprmiddot95 695910

BOYD KANSAS cm COOP (1) 13-Sep-95 1547667

I HILTON KANSAS cm CORP 11l-0I-96 26amp1567

__--shy

KANSAS cmSTAllON COOP 16-Janmiddot97 7257251

PLAYERS MARYLAND 11middotMarmiddot97 4435341

HElGHlS CORP

HARRAHS MARYLAND 11middotMar-97 4131872

HElGHlS CORP

GRAND TOTALS 39547895--shy --------shy

ADMISSION FEES FV 1998 GAMING TAX

STATE I ADJUSTED LOCAl

TOTAL LOCAL PORllON GROSS RECEIPTS TOTAL PORllON

6030132 3015006 57589734 11518154 1151815

-----shy

10227014 5113507 111750192 22350038 223i004

-shy

6713110 3356555 67185278 13437058 1343706

1527326 763663 17657758 3531551 353155

13194992 6597496 155261028 31052206 3105221

1391820 695910 22233407 4446681 444666

3095334 1547667 36149283 7239955 723995

5267134 2633567 50160689 10025829 1002563

---shy

14514502 7257251 129557501 25911500 2591150

-----shy rshy ------shy

8870682 4435341 76791268 15370264 1537026

8263744 4131872 78337484 15667497 1566750

79095790 39547895 802673621 160550732 16055073

ESTlMAlED GMlNG STATE CAPITAl TABLE SLOT GAMING SPACE

PORTION INVESlMENl EMPLOYEES GAMES MACHINe POSIllONS (SQFl)

10366338 62400000 868 60 1240 1441 58000

- -shy

20115034 172000000 1335 85 1853 2138 47000

12093350 104833803 848 45 1061 1205 30000

3178396 31718000 40B 21 450 520 18000

2]946985 171600000 1927 77 2076 2303 61600

4002013 56350000 438 24 454 544 10400

bull

6515959 147117343 652 45 1117 1255 28000

9023246 119600000 619 48 1023 1181 30000

-------shy

23320350 303000000 2205 178 3094 3755 140000

- -

I 13833238 140416374 1031 80 1330 1637

_

14100747 229852000 1502 47 1292 1428 52000

144495659 1539089520 12033 110 14990 17407 527000

bullbull Formulas used by the Licensees to arrive at total The ligures published in this report are subject to

Boyd Gaming closed casino operations on

ADMISSIONS SUMMARY

Fiscal Year Ended June 30 1998 STAlE

MQfUIJ ~tGQ~Y AZIAB 60YD IIAIlI1A1SNKC tlAllllAHS Mfj tll19fi lCsIARQIJ JgtLAVeas MESIDENI sroCHARI-sect SLlQ IQIAL

- JuI-97 46445800 12062600 27223800 121113000 63468600 37366000 132031400 75297000 55445600 88156200 12257000 670867000-shyAug-97 49935Q00 13694800 30333400 123247000 70461200 40902400 131404200 79956200 60164800 85255600 13070200 698444800

Sep-97 44201200 10771000 25757200 109841000 64971200 37801000 113801200 74779000 52686800 77543600 11699000 623852200 CJc97 52785200 10897000 29040600 108844400 66751600 40190400 114598000 68037000 51116800 64938200 11884400 639083800

Nov-97 55723800 11271000 2103000 108798400 67689600 40793200 120821200 69977400 51733000 82454200 11765200 645330000 shy -D00-97 56960800 11124600 25778200 104257600 62190000 37978400 1~402600 64596400 51869800 85468200 10890200 632516800

JaIl-98 64211000 11954000 28123800 114445200 63632200 43555000 124575600 73506200 53506400 90047600 11520600 679077600

Feb-98 64523600 12245800_0--24843400 10887120~ 70162000 48301800 1163~4~_ 70188200 54224400 84469000 12282000 666447800---

Mar-98 64875600 12208800 I 28861200 116534200 76134400 50417200_ ~84840oo 75423800 55031400 95485400 12753800 7162098001--shy ------shy shy

Apr-OOf-shy

58958400 10829000_--22917800 105066800 76801200 49537~ ~796oo 79932000 8347600 f-85233800 11415200 621418600

May-~ ~78378oo 11458800 22379400 103214800 74607800 50931400 120335800 84449000 56803800 82317200 15844000 680179800

Jun-98 54852800 10064600 19971600 95265600 1-- 69504600 48939400 115280200 70926000 52062800 81332400 17351000 636151000__shy-shy

- ----- --__ - shy c-- lQI~L 671311000 139182000 309533400 13194992~ 826374400 526713400 1451450200 ~87068200 603013200 1022701400 152732600 7909579000

- shy ---shy

Fiscal Year Ended June 30 1997 STAlE

IMQNItI ABGQS( AZJAS flOD tLABBAIIS flKC IIAHBAtlSMtI HlIJQN KcsIAIlQ~ P_lAYERS PmsJDEffl S1ampHABkES SJLw Ti)IAI J

-JuI-96 63344400 14062200 64923600 132012800 56577200 114893600 13478200 459292000

Aug-96 r- 82960400 14911800 57511000 140582400 62129000 115239400 14014600 467348600 f----~ - ----shy

Sep-96 ~3074oo 12481200 53636000 129795400 _82891400 104058200 13249400 433419000 -shy

CJc96 54064000 11817000 49327800 127195800 30645800 60144400 105243800 13507400 451946000---shyNov-96 56037800 12406600 40123200 122425000 51018600 58063400 107115600 12285400 459475600

Dec-96 56723800 1206i800 37402600 128369000 45836000 55978400 107557400 12391800 456324800--- Jan-97 50268000 11022000 33215000 112072800 38359600 107237600 46535800 1028114~_ 12020400 513542600-shy - shy

Febmiddot97 52407800 12732200 28803600 103874600 31086400 167718000 54495600 120388000 13762400 585288800---shyMar-97 54110000 13196200 31000400 117072800 53035600 33843000 158291600 54728000 55521600 112627200 14504600 6~7931 000--- -shy --- Apr-97 51779000 10787800 27776200 120231200 55161800 32425000 110967200 63366200 53039000 90637400 1250020~_ 628691000-----shyMaymiddot97 48976800 11002600 29489800 118187000 65059800 32043000 128140600 64866400 55814800 95478400 13075000 662134200

Jun-97 44705200 10785600 24509600 112941600 57206400 27780000 126707800 61610400 53544000 80392400 11581800 611764800

~

TQJA~ 652684600 147271000--- 477718800 1464760400 230483600 323037400 799062800 244571000 674734800 1256442800 156371200 6427138400

L- -

TAX SUMMARY

Fiscal Year Ended June 30 1998

1shy - shyMONTH MlGQ~Y AllAR ao-YQ

~97_ 103885840 35969785 618(8102

Aug-97 107598495 39994006 70420696

5ep-97 93838926 37041965 59354817

0097 106844786 33528915 67151835

Nov-97 f-- 100345336 33623570 58500240

Decmiddot97 104740514 36137836 58728169

Janmiddot98 127790608 37892423 65713905

Febmiddot98 124029550 40823756 57394319

Marmiddot98 125564705 40432198 67142793

Aprmiddot98 119129939 37104277 56326758

~98 113473237 37472225 5335699

Junmiddot98 116463624 34647176 48058144

f--------

IOJAL 13437O~560 444668132 723995477

tlAB1iA~~ ~AaBAIIS M~ HIJJON K~tlmiddot

275047819 107790267 74670455 219668049

266344318 118898181 75493081 225775682

253948121 114029974 70451785 198988638

247670005 123283217 72682254 198890462

257248749 125951518 75511594 208498696

235034489 113446034 75455313 203275080

266530468 125825940 84927032 220816197

252238300 13138998 93033175 206200892

283262667 150736030 95667042 228265226

262232833 150825517 92068167 219332592

259591421 163657514 99088349 235839216

246065390 140566494 93534693 225599298

3105220580 1566749684 1002582940 2591150028

il $TAlE PLAY~BS PR~ [t~ABLES _ c~I~L I()I~~

121771589 102643300 198456581 26374693 1328156480 128384864 114230170 182732252 29727109 1359598854 111539616 101079699 170582875 27453926 1238310342 116681218 97456134 186900408 29250163 1280353397 118567531 98658072 176872332 28700316 1282477954

116726921 98512809 188033506 27026966 1257117637 ~-

130098238 105313044 196194061 27768988 1388870904

124603269 106390146 178564026 28715751 1343732182

132127359 107038674 206536133 29894685 1466669512

148286693 16573734 188844283 28222781 1316947574 155256067 107607461 178280391 33743570 1437335150 134983080 96312133 182996984 36276177 1355503193

-- 1537026445 1151815376 2235003832 353155125 16055073179

Fiscal Year Ended June 30 1997

Mlltilll A~ AZIAH ItOYD ~H~NKtl liABBMsMl middot~ILIO~middot KCSJ~mN NAy~

I II i(

ELECTRONIC GAMING DEVICE STATISTICS

SLOT SLOT SLOT SLOT SLOT SLOT SLOT SLOT ACTUAL ACTUAL ACTUAL ACTUAL I HANDLE HANDLE HANDLE HANDLE WIN WIN WIN WIN PAYOUT 00 PAYOUT PAYOUT PAYOUT 00

FY98 FY 97 FY96 FY95 FYOO FY 97 FY 96 FY95 FY98 FY97 FY96 FY95 i 1

BOAT 7m -6199 7196 - 697 7195 bull 6196 794 bull 6195 7197 shy 6100 796 bull 6117 795 - 6196 7194 - 6195 71l1 - 6198 700 - 6117 7196 - 6100 794 bull 695

ARGOSY 106244975380 92418880490 9382091354) 45007837075 5245353725 5054992404 5942816233 3495045434 95OOIk 94530 93666 92235

WAR 20253220450 1963957125 19227927825 2630226700 1661451900 1579369500 1593438135 213569075 91797 91958( 91713 9188Ok

BOYD 53798844770 78200197200 62310037200 2869033586 3672975897 3867941946 94007 95303k 93793

~ARRAHS MH 117780402120 24888294985 5853322268 1279453269 95030 94959)

HARRAHSNKC 225014108285 231611410000 lm263846Jl3 85064064875 11724475616 11425500771 9321993358 4669010328 94769 95007 94755 94511

IHILTON 636414911830 36192047535 3705606Il64 1896935492 94177 94753

~CSTATION 162377455786 75747171824 9191699342 3984731000 94339 94739k

PLAYERS 101460073410 240roJ56775 5393384624 13OIl284662 94694 94582

i

PRESIDENT 73588683920 78567721900 79074762100 41647920200 4690709652 4830099303 4947361639 2691737644 93626 93852 93743 93057

IsTATION-ST CHAS 161922747110 189376051956 146662198670 61912001305 9083225512 10329557455 9243915720 4527476595 94390 94545 93706 926871

~T JO FRONTIER 19576383825 22056308406 22823200890 10085003450 1334616538 1354112447 1576400799 1070967293 93181 93861 93093 93342

STATE TOTALS 1105658393886 872717726700 601853504908 252348053605 60743081885 46715942360 36493947830 16867806369 94506 94648 93936 93316

ARGOSY - RIVERSIDE

Fiscal Year Ended June 30 1998 TOTAL TABLE TABLEOF TABLE SLOT SLOTOF SLOT WIN PER DAILY WIN DAILY WIN DAILY WIN DAJLYWIN

- MONTH AGR AGR TOTAL AGR WIN AGA TOTALAGR PAYOUT ADMISSIONS ADMISSION PER TABLE PEA SLOT PERPOSmON PER SQ FOOT

Julmiddot97

Aug-97

Sep-97

Oc~97

Nov-97

Decmiddot97

Janmiddot98

Feb-98

Mar-98

Apr-98

May-98

Junmiddot98

5194292

5379925

4691946

5351741

5007765

5237026

6389530

6201477

6278235

5956497

5673662

5823181

1250539

1404517

1157264

1333638

lv30105

1249075

1482965

1240486

1107522

1210306

1137267

i128057

I 2408

2611

2466

2492

2057

2385

2321

2000

1764

2032

2004

1937

2408

2556

2310

2438

1943

2304

2612

2225

1934

2278

2423

2371

3943753

3975407

3534682

4018103

39n660

3987950

4906566

4960992

5170713

4746191

4536394

4695124

7592

7389

7534

7508

7943

7615

7679

8000

8236

7968

7996

8Q6310

9412

9452

9487

9406

9543

9535

9496

9502

9520

9525

9547

9506

232229

249675

221006

263926

278619

284804

321055

322618

324378

294792

289189

274264

2237

2155

2123

2028

1797

1839

1990

1922

1935

2021

1962

2123 1--shy

80163

900_33

74184

85490

66032

80069

95062

79518

70995

n5B4

72902

72311 _

13428

13536

12035

13681

13543

13578

16706

16891

17605

16160

15446

15986

14811

15341

13379

15260

14279

14933

18219

17683

17902

16985

16178

16604

I sn

598

521

595

556

582

710

689

698

662

630

647

_____

TOTALS 67185278 14731741 2193 2315 52453537 7807 9506 33565~ 2002 78695 14~_ 15965 622

Fiscal Year Ended June 30 1997 TOTAL

MONTH AGR

Jul-96 7242647

Aug-96 7073796

Sep-96 6247587

Oct-96 5654429

Nov-96 6050324

Dec-96 5987073

Jan-97 5355953

Feb-97 5460117

TABLE

AGR

2299519

2265205

1642527

1558573

1748389

1736423

1456656

1572456

5497775 I 1308018Marmiddot97

TABLEOF

TOTALAGR

3175

3202

2629

2756

2890

2900

2720

2880

2379

5455728 1261102 f 2312Apr-97

5266768 1368628 I 2599Maymiddot97

4609823 1134599 I 2461Jun-97

69902019 19352095 I 2768TOTALS

TABLE

WIN

2681

2660

2345

2322

25_83

2580

2461

2430

2190

2212

2491

2268

2454

SLOT

AGR

4943128

4808591

4605060

4095856

4301935

4250650

3899296

3887662

4189757

4194626

3898140

3475225

50549924

SLOT OF

TOTALAGR

6825

6798

7371

7244

7110

7100

7280

7120

7621

7688

7401

75_39

7232k

SLOT

PAYOUT

9431

9448

9428

9478

9460

9479

9454

9450

9452

9428

9464

9471

9453

ADMISSIONS

316722

314802

286537

270320

280189

283619

251340

262039

270550

258895

244884

223526

3263423

WIN PER

ADMISSION

2287

22-47

2180

2092

2159

2111

2131

2084

2032

2107

2151

2062

2142

DAILY WIN

PER TABLE

132156

130184

94398

89573

100482

99794

83716

90371

75173

72477

78657

65207

92682

DAILY WIN

PER SLOT

17308

16837

16124

14341

15063

14883

13653

13612

14670

14687

13649

12168

14750

DAILY WIN DAlLY WIN

PER SQFOOTPER POSITION

20564 805

20085 786

In39 694

16055 628

67217179

16999 665 I 15207 595

60715503

15610 611

15490 606

14954 585

13089 512

16539 shy 647

constitutionality of statutes It has no authority to declare a statute unconstitutional All the currently lishycensed boats located basins were subject to lengthy public hearings designed to evaluate whether the riverboat was located in a manner allowed by the statute The Commission heard expert testimony on the subject and solicited testimony from public At each such hearing save one there was no objection by any group or citizen to locating the facility in an artificial basin as provided by statute Each basin was approved after a determination that it complied with the statutory definitions previously cited

On only one occasion was the constitutionality of a location questioned In that instance the Commission ruled that because the statute defined the Missouri River as including artificial basins that the boat was located on the river Although that decision of the Gaming Commission could have been appealed to the Westem District Court of Appeals and then to the Supreme Court no such appeal was filed Later in the Akin case a reshyspected circuit court judge would issue a ruling similar to that the Commission

However on November 25 1997 the Supreme Court disshyagreed with the lower court and declared the definition of river in the gaming statute invalid to the extent that it conflicts with Courts ruling that an artificial basin must be filled with water that touches the surface stream [ofthe river] (for considerable

distances) and thereby contiguous to the surface stream [of the river] The law has now changed and the Commission must enforce the new law

It is now the charge of the Gaming Commission to determine who complies with the Akin ruling To the extent that a project shydoes not comply its license for games of chance must be reshyvoked The Commission moved quickly to set this process in motion While the Courts initial ruling was issued on November 25 1997 the final mandate did not issue until December 23 1997 On January 9 1998 the Commission was scheduled to issue preliminary disciplinary orders revoking the license for games of chance to all boats located in artificial basins that are not contiguous with the surface stream of the Missoun or Mississhysippi lliver

The preliminary disciplinary orders are documents that allege that a company is not in compliance with the law Preliminary disciplinary orders do not become effective for 30 days during which time each licensee is afforded the opportunity to request a hearing contesting the Commissions preliminary order If the licensee requests a hearing the riverboat can continue operating pending the outcome of the hearing

However the riverboat gaming operators stopped the Commission from issuing the preliminary

orders by obtaining an Order of Prohibition from tIle Cole County Circuit Court The operators lawsuit alleged that the Commissions hearing process did not provide sufficient due process in violation of the US and Missouri Constitutions The Commission appealed the lower cOUl1 ruling and on May 28 1998 the Missouri Supreme Court ruled in favor of the Commisshysion by holding that the Commissions procedure complies with constitutional due process and has the appropriate remedies for judicial review to avoid ineparable hann to any of the parties State ex rei Riverside Joint Venture et at vs Missouri Gaming Commission

On June 23 J998 the Commission issued preliminary disciplinary orders to Boyd Kansas City Inc Hilton Kansas City Corporation Han-ahs North Kansas City Corporation Kansas City Station Corporation Riverside Joint Venture and Han-ahs Maryland Heights LLC Riverside Joint Venture and Players MH LP and St Joseph Riverboat Partners However the riverboats are entitled to a hearing to prove that they comply with the Akin ruling The process is as follows

At the hearing the riverboat licensee is given the opportunity to prove that it complies with the Akin ruling An independent hearing officer who will make a recommendation to the Commisshy

sion will conduct the hearing The five members of the Commisshysion will ultimately be responsible for deciding the matter The Commission may accept modify or reject the fmdings of the hearing officer If the ruling is adverse to the licensee it can appeal to the Western District Court ofAppeals and then to the Supreme Court

Should a license come up for renewal while a hearing or appeal is pending the licensee will be eligible for renewal continshygent upon the outcome of the disciplinary hearing This proceshydure is consistent with the way the Commission has handled disciplinary actions over the past several years The process is not new and was not created specifically to deal with the boats in basins situation

Jhe Myth of the Cruising Riverboat Requirement

One of the most common myths that has perpetuated throughshyout Missouris experience with riverboat gaming is the claim that the original referendum promised cruising riverboats The assertion is simply not true The law has never required that all boats cruise that any boat cruise all the time or that any boat cruise when it is unsafe to do so

The original law adopted by the people granted a specific exemption from cruising for the Admiral and five other sites along the downtown St Louis riverfront In addition the legislashytion exempted all boats from cruising from the beginning of

November until the end of March

_ Furthermore the Tourism Commission had the authority to set the minimum number of cruises from April until October Therefore the boats could be docked for substantial periods during these months Moreover the original referendum allowed the boat operator to operate while remaining docked for mechanical problems adshyverse weather or other condishytions adversely affecting safe navigation

Upon receiving inforshymation from the United States Coast Guard and the US Army Corps of Engineers that rivers in Missouri present certain safety hazards that must be accounted for the legislature adopted a procedure for evaluating safety risks The riverboat gaming statute provides that all boats shall cruise unless the Commisshysion finds that the best interest ofMissouri and the safety of the public indicate the need for continuous docking Section 313805 (15) RSMo The statute also provides that in order for a boat to remain dockside the applicant must demonstrate that the project would benefit land-based development and permashynent job creation Therefore the law clearly instructs the Comshymission to consider projects that have significant investments in land-based development

The statute requires the Commission to hold hearings to

determine whether it is safe for each riverboat to cruise The result of each of these hearings has been that it is unsafe for vessels of this size carrying thousands of passengers to cruise The Gaming Commission has received uncontroverted testimony from dozens of experts including the United States Coast Guard who have attested to the perils of large passenger vessels cruising in high traffic areas on the Missouri River

The testimony by these experts regarding the perils of placing large passenger vessels in the navigable portions of these rivers was alanningly evidenced by three recent accidents involvshying Missouri riverboat gaming operations The first at the Aztar riverboat in Caruthersville involved a 30 by 70 barge half loaded with gravel that broke loose and struck the boarding ramp of the Aztar casino The second accident was the well-publicized incident where a grain barge broke loose and struck the entrance ramp to the Admiral in St Louis The collision broke the power lines COIDlected to the boat requiring the use of emergency generators Several months later another barge would strike the Admiral as further evidence of the dangers involved in being situated near the path of commercial river traffic

Fortunately in each instance tragedy was avoided and no one was injured The avoidance of injury is largely because of Gaming Commission policies regarding safety inspections and pennits and the fact that the vessels remain dockside thus minishymizing the risk ofcollision and maximizing the utilization of rescue facilities However the incidents demonstrate that the safest location for these facilities is in a protected basin off the navigable waterway The Coast Guard has consistently informed the Commission that protected basins represent the safest mode of operation for riverboat casinos

Introduction November 3 1998 marks the 6th amriversary of the Misshy

souri voters approval of riverboat gambling in Missouri Howshyever policy debates and legal wrangling delayed the opening of the states ftrst riverboat gambling operation until May 27 1994 The industry now holds 16 licenses at 10 casino properties and employs approximately 12000 people with an rumual payroll of approxishymately $269 million

Nevertheless rec~nt litigation has result in great uncertainty for many Missourians eIl1ployed in the riverboat gambling industry On November 23 1997 the Missouri Supreme Court issued its ruling in Alan y Missouri Gaming Commission The court held that to the extent that the legislatures deftnition of the Missomi and Mississippi Rivers authorized games of chance in basins that are not contiguous with the surface stream of those rivers the definition is unconstitutional

The Supreme Courts final decision in Akin was issued on December 23 1997 and on January 9 1998 the Commission issued Preliminary Orders for Disciplinary Action to all licensees operating riverboats in basins that are not contiguous to the surface stream ofthe Missouri or Mississippi River The discishyplinary actions propose that the companies authority to conduct games of chance be revoked The proposed orders are currently being appealed and affect 5 of the states 9 riverboat casino propshyerties

In light of the substantial policy issues now facing the General Assembly regarding riverboat gambling in Missouri the Commission thought it would be beneftcial to recount the history of the industrys creation its evolution and its prospects for the future

The 1992 Referendum In 1991 the Missouri General Assembly adopted House

Bill 149 ordering that the issue as to whether Missouri should allow riverboat gambling be referred to the voters On November 3 1992 Missouri voters approved the referendum by a 63 majority The ballot language for this measure read as follows

Authorizes riverboat gambling excursions on the Mississippi and Missouri Rivers regulated by the State Tourism Commission Excursions may originate where locally approved by the voters Five hundred dollar maximum loss limit per person per excursion The proposal is intended to produce increased General Revshyenue

While the original ballot language certainly implies that all gambling would occur during an excursion and thus that the boat would be cruising the rivers the text of the amendment plainly states otherwise The proposal passed by the people defined a gambling excursion as the time during which gambling games may be operated on an excursion gambling boat whether docked or during a cruise Gambling games may be continuously operated on an excursion gambling boat which is continuously docked (Missouri Session Laws 1991 HB 149149 sect A(sect 1) adopted by referendum eff Nov 3 1992) (emphasis added)

In fact the original referendum passed by the people specifically exempted boats on the S1 Louis riverfront from ever cruising the river Furthermore no boat would ever have to cruise from November to March Moreover the referendum allowed

exceptions from the cruising requirement in the case ofmechan ishycal problems adverse weather or other conditions adversely affecting safe navigation during the duration of the problem or condition or as authorized by the Commission during the off season

Therefore it is clear that the original referendwn did not promise cruising riverboats Not all boats were required to cruise none of the boats were required to cruise five months of the year and all boats could be exen1]Jted from cruising if it would pose safety problems

The Original Referendum Gets a Makeover Prior to the election 10 decide riverboat gambling in 1992

critics of some provisions of the referendum language began to emerge On October 23 1992 the Kansas City Star reported that the law did not bar convicted felons from holding a license to

i ~ ~

I ~

operate a gambling boat In addition some public officials began to question whether the tourism Commission was the proper agency to regulate the gambling industry whieh was predicted to be a significant tourist attraction (KC Star October 26 1992)

As a result after the referendum had been approved by the voters legislation wao introduced supported by then Governorshyelect Carnahan to place more stringent requirements on riverboat gamb ling licclLoces and to create a strong Gaming Commission to regulate the new industry

Senate Bills 10 amp 11 On April 29 1993 Governor Carnahan signed into law SBs

10 amp 11 creating the five member gaming Commission The bill carried an emergency clause and the Governor immediately apshypointed the first members

The Commission was given much more authority over the gaming industry than had previously been given to the Tourism Commission The COImnission could prioritize applications issue liquor licenses assess a wide array ofadministrative penalties inspect the licensees premises at any time decide the number type and location of gambling boats determine the times during which gambling may occur have access to all closed records relating applicants for licenses conduct hearings and be a trier of fact with regard to alleged violations of the gaming act and require licensees to release all information on its finances

In addition the industry was held to a higher standard having to prove its suitability for licensure by clear and convincing evidence rather than a preponderance of the evidence as had been the case under the provisions ofthe original referendum Felons are prohibited fi-om holding gaming licenses under the new act and the Commission is empowered to reopen licensing hearings at any time These requirements made it clear that a riverboat gambling

license was a privilege granted at the sole discretion of the State of Missouri and that the license carried no property rights

The Commission was vested with a strict code ofethics that prohibited members and staff from being employed by or having any financial interest in an applicant or licensee during their tenure with the Commission or for a two year period thereafter

Continuous Docking Language Clarified Senate Bills 10 amp 11 also added new language clarifYing

the original referendums vague provisions relating to cruising riverboats While SBs 10 amp 11 were being debated the legislature was made aware that the US Coast Guard had serious concerns about the safety of large passenger vessels on the Missouri River In a letter to the Missouri Port Authority Association dated Februshyary 5 1993 US Coast Guard Commander SP Cooper stated that I am concerned about the safety issues attendant to the operation of these [riverboat gambling] vessels Cooper went on to say that The large numbers ofpassengers on these vessels pose special problems for public safety organizations The Coast Guard willllot have a pennanent presence in these communities but will assist if resources are available

In response to the safety concerns raised by Captain Cooshyper local public officials in Kansas City and other safety experts SBs 10 amp 11 adopted a procedure for allowing the Commission to order riverboats to remain continuously docked if the safety of the public indicates the need for continuous docking (SBs 10 amp 11 Section 3 (15)

However some legislators and local public officials beshylieved dockside gaming was important for reasons other than safety Some public officials were concerned that riverboat compashynies might not honor commitments to home dock communities if the operation did not have immediate success In 1993 several

riverboat operators in Iowa had pulled anchor and sailed south in hopes oftaking advantage of the more favorable regulatory envishyronment in Mississippi

In order to address this issue language was added that would require the Commission to consider economic feasibility or impact that would benefit land based development and permanent job creation when making its decision whether dockside gaming was in the best interest ofMissouri However officials from the St Louis area did not want the issue of continuously docked boats tied to additional infrastructure requirements They believed that S1 Louis already had sufficiently developed its riverfront and therefore added language to the bill exempting the City of S1 Louis from the aforementioned requirement

Gaming Commission Begins Work

Supreme Court Intervention - Round One Troy Harris v Missouri Gaming Commission

On February 22 1994 the Misshysouri Supreme Court issued its opinion in Troy Harris v Missouri Garning Commis- sioll wherein it ruled that the legislature did not have the authority to allow games of chance 011 riverboats The Commisshysion argued that it was the voters who authorized games of chance by adopting the referendum language in November 1992 The Court agreed that the people lawfully authorized games of chance in the 1992 referendmn However it ruled that because the General Assembly

repealed the sections ofthe referendum authorizing games of chance and reenacted congruous language in SBs 10 amp 11 that the new law was an act of the General Assembly not the people and therefore subject to the limitations ofArticle III sect 39(9) ofthe Missouri Constitution prohibiting the General Assembly from authorizing games ofchance

The Court in Harris also found the language exempting the Admiral and the lease sites along the St Louis riverfront from cruising to be a facially special law Because special laws are presumed unconstitutional ill1leSS the party defending the law can demonstrate a substantial justification for the special treatment the Court remanded the issue back to circuit court for an evidenshytiary hearing

The Legislative Response to Harris The legislature responded quicldy to the Supreme Courts

decision in Harris by filing HJR 43 a constitutional amendment that would authorize the General Assembly to pennit games of chance on the Missouri and Mississippi Rivers The joint resolushytion was drafted to address the very nan-ow question raised by the court as to whether or not the General Assembly has the authority to authorize games of chance on riverboats (Transcript of Senate Ways amp Means Committee hearing February 2 1994 page 1)

The language adopted by the House Ways amp Means Comshymittee read in pertinent pmi as follows

Article III Section 39(e) Notwithstanding any prohibitions contained in this constitution includshying but not limited to the prohibition contained in subdivision (9) of section 39 of tlus article the General Assembly is authorized to pennit lotteries gift enterprises and games of skill or chance upon

the Mississippi and Missouri rivers as may be defined by the General Assembly

It appears that this language would have avoided the result in Akin whereby the Court ruled that the General Assembly did not have the authority to define the tenn river

This language concerned some members of the Senate because of the fear that by allowing the General Assembly to define the Missouri and Mississippi River it may allow for a broad definition that could be expanded to other areas of the state such as the Lake ortlle Ozarks (Transcript pages 8-9) Nevertheless the language that emerged from the Senate while more specific would be sinIilar to the House language

Section 39(e) The General Assembly may authoshyrize the issuance of licenses to pennit lotteries gift enterprises and games of skill or chance to be conducted on floating facilities upon the Missouri River and the Mississippi River in such numbers locations and manner all as or may be provided by law and regulations adopted pursuant to law and subject to such taxes as provided by law arId fees as provided by law or regulation adopted pursuant to law

However as the legislation moved through the process to a conference committee concern over the breadth of the language granting the General Assembly authority to pennit games of chance continued to grow The House rejected the Senates language and passed the House version The Senate refused to adopt the House version and both side appeared deadlocked Finally the following compromise language was adopted as a conference committee substitute

The general assembly is authorized to pennit only upon the Missouri and Mississippi Rivers lotteries gift enterprises and games of skill or chance to be conducted on excursion gambling boats and floating facilities

The conference committee substitute was adopted by both houses with bi-partisan support The Senate vote was 23-10 and the House vote was 107-48

While HJR 43 was truly agreed to and [mally passed in time to put the question before the voters in the April 5 1994 election the measure was defeated with 527011 in favor and 528278 opposed

The General Assembly was now faced with implementing the referendum adopted by 63 of the voters in 1992 without the games of chance that Harris declared to require constitutional authority In addition it was becoming increasingly clear that serious safety problems on the Missouri and Mississippi Rivers may preclude riverboat casinos from being able to cruise (Transhyscript page

Therefore the General Assembly adopted SB 740 which defined games of skill specifically authorized boats to be located in artificial basins and made minor revisions to the process for determining the conditions under which a boat may operate while continuously docked In addition the bill added new ethical standards and conflict of interest rules for the Gaming Commisshysion General Assembly Attorney Generals office Missouri State Highway Patrol peace officers and other public officials SB 740 was truly agreed to and finally passed with an emergency clause (EC) on May 12 1994 1be bill had bi-partisan support was adopted by a vote of 21-11 in the Senate (EC 24-8) and 93-63 in the House (EC 110-50)

On May 22 1994 the Commission implemented the provisions of the riverboat gambling act as amended by SB 740 and granted the first excursion gambling boat licenses to President Riverboat Casino on the Admiral and S1 Charles Riverfront Stashytion The licenses permitted the operators to offer only games of skill The inability to provide games of chance most importantly slot machines left the Missouri operators at a distinct disadvantage from their competitors in Illinois While Missourians initially flocked to the newer more elaborate Missouri riverboats the attraction soon dissipated In the first six months ofoperation the Missouri boatgt attracted fewer customers and generated less revshyenue than their Illinois competitors in East St Louis and Alton

The markets on the west side of the state presented a different situation Without competition from casinos in the same market with competitive advantages the riverboats licensed in Riverside and St Joseph on June 22 1994 fared better than their S1 Louis market counterparts Nevertheless the games of skill offered by the riverboats did not generate sufficient revenue to make the casinos profitable

In response to Harris and the failed April 1994 constitushytional amendment an initiative petition effort was mounted to allow voters to again decide whether riverboat casinos in Missouri should be allowed to ofler ganles of chance The effOlt was sucshycessful and on June 6 1994 the Secretary of State certified the following proposed constitutional amendment for the November 8 1994 ballot

Shall the General Assembly be authorized to pennit only upon the Mississippi River and the Missouri River lotteries gift enterprises and games ofchance to be conducted on excursion gambling boats and floating facilities This proposal would increase state

--

revenues from existing gaIning boats approximately $30000000 per year Impact on local governments unknown

The First Boat in a Basin While the licensees offering only games of skill were not

operating profitably in the summer of 1994 it did not deter the company constructing the first boat in a basin from completing its elaborate gambling complex containing the states first landshybased entertainment amenities On September 22 1994 the Commission issued a license for games of skill to Harrahs for its $89 million facility in North Kansas City

The Harrahs North Kansas City project consisted of a 60000 square foot land-based pavilion containing three restaurants and a permanently moored excursion gambling boat located in a protected coffer cell basin The facility offered 1800 parking spaces on its 60 acre site

It is important to note that when Missouri voters approved constitutional amendment authorizing games of chance on riverboat casinos with 943652 in favor and 807707 opposed a boat in a basin was licensed and operating at the Harrahs North Kansas City project Pursuant to voter approval the Commission amended the licenses ofArgosy-Riverside Harrahs-North Kansas City President Riverboat Casino-St Louis St Charles Riverfront Station and S1 Joseph Riverboat Partners to allow games ofchance on December 91994

The Dramatic Impact of Games of Chance The advent of games of chance would dramatically impact

the casino gambling industry in Missouri The most significant game of chance the slot machine now accounts for over 60 of total casino revenue As depicted in the chart on page 22 casino

revenue would more than double for the first quarter offiscal year 1996 when casinos offered games ofchance as opposed to the first quarter of fiscal year 1995 when riverboats were limited to games of skill

The addition ofgames of chance would also lead to the construction of bigger more elaborate projects through the addition of new facilities as well as the expansion of existing properties For example shortly after games of chance were introduced Station Casinos opened a second riverboat at its property in St Charles The new facility is larger and more lavish than its predeshycessor and would provide the necessary revenue base for the expansion of its non-gaming land-based amenities

Similarly armed with games of chance Harrahs North Kansas City quickly moved to expand its facility On April 12 1995 Harrahs advised the Commission of its request for approval ofa $70 million expansion The expansion proposal included a 200 room hotel 10000 square feet ofmeeting space a covered parking garage with 765 spaces a swimming pool exercise facilishyties video arcade gift shop expanded restaurant seating a full service car wash and a second gaming vessel with 40000 square feet ofgaming space to be located in a protected artificial basin The proposal was given tinal approval by the Commission on May 15 1996

Boat in Basin Controversy Emerges Although the fust boat in a basin had been operating since

September 22 1994 the first objection to allowing a riverboat to be located in a basin arose during Hiltons request for continuous docking status for its project in Kansas City On March 16 1995 attorneys representing Roy Fischer appeared at the Hilton dockside hearing to protest Hiltons proposal to locate its excursion gamshybling boat in a protected coffer celL Mr Fischer owned land in the

St Louis area that was under contract to a gaming company wishshying to build a project near a competing proposal for a boat in a basin in Maryland Heights

Mr Fischer argued that the Hilton proposal did not comply with the Missouri Constitution or the gaming statute He claimed that the voters approved cruising riverboats and while the legislashyture had provided for nalTOW exceptions to the cruising requireshyment it did not include artificial basins The Commission ruled that because the legislature defined the Missouri river as including artificial basins located within 1000 feet of the main channel that the Hilton boat was for purposes ofthe statute in the river Since the Commission did not have the authority to strike down the statute but was under an obligation to presume that it was constitushytional it followed the statute found that the Hilton boat met the criteria for continuous docking and granted it a license Although

this decision could have been appealed to the Westem District Court ofAppeals where the constitutionality ofthe statute could have been challenged Mr Fischer chose not to do so and the Commissions decision stood

On August 29 1996 over 17 months after the Conunission issued its ruling in the Hilton dockside case W Todd Akin filed a declaratory judgement action in Cole County Circuit Court seeking a determination that the statutes defming the Missouri and Mississippi rivers in the gaming act were unconstitutional The Cole COlll1ty Circuit Court would rule in favor of the Commission by issuing a fmding similar to the Commissions ruling in the Hilton dockside case However on November 251997 the Missouri Supreme Court would reverse the lower court decision and declare the gaming statute unconstitutional to the extent that it allows games of chance on riverboat casinos that are not contiguous to the surface stream of

Before and After Games of Chance September thru November

$40

en ti $30m u (])

a en 1994en ce g $20 1995ltl~

-0 2 en ~

0 $10 ltC

$0 Argosy Harrahs NKC President Stations St Charles St Joseph

the river As noted in the

section entitled Undershystanding Boats in Basins beginning on page 13 the Commission is currently seeking to revoke licenses for games of chance for facilities not in compliance with Akin The industry successfully submitted a ballot proposal that would reverse the impact ofAkin and it awaits consideration by the voters on November 3 1998

---

Number of Bingo Operators Continue to Decline The number of charitable bingo operators in Missouri declined in FY

98 for the third consecutive year As the chart at right depicts all classificashytions ofcharity bingo licenses have decreased The reason for the reduction is varied Some organizations were significantly weakened by the 120 tax increase dedicated to veterans homes that was imposed for approximately 10 months from 1993 to 1994 111e tax was repealed by SB 427 in 1994 however the legislation also included strict new standards that prevented convicted felons from being involved with bingo and gave the Gaming Conunission new tools to drive criminal elements out ofbingo and el1S~lle that taxes were properly paid loese new provisions led to some organizations being forced out of bingo and other vohllltarily surrendered their attributed to the increase in the number of licensed riverboat casinos in Missouri and adjoining states as wcll as the addition ofIndian casinos in Kansas Furthermore high stakes Indian bingo in Oklahoma as well as tour bus trips to high stakes Indian bingo halls in Iowa Ohio Oklahoma and as far away as Wisconsin continue to draw Missouri patrons away from resident charity bingo games that are faced with a myriad ofconstitutional restrictions

The introduction of progressive games and the availability ofpull tab games ofiering larger prizes have helped the charities to compete Nevertheshyless when faced with direct competition flom a riverboat or Indian casino or high stake1 Indian bingo hall the Missouri charitable operator is at a severe di sad vantage

900 Court Strikes Down Ban on Bingo 800

700Advertising 600

One of the most important events efiecting 500charitable bingo in Missouri occurred when United 400States District Court Judge Howard F Sachs has

issued a ruling in Association aCharitable Games 0 300 Missouri v Missouri Gaming Commission which 200 strikes down Missouris constitutional ban on the 100 advcltising of charity bingo games The twenty-one

0page opinion strikes down Article III Scction Regular

39(a)(7) of the Missouri Constitution ruling that it infringes on the charities First and Fourteenth

Amendment rights in violation ofthe United States Constitution Judge Sachs order also permanently enjoins the Gaming Commission from enforcing the provisions ofArticle III Section 39(a)(7)

The decision clears the way for charitable bingo operators suppliers and hall providers to begin advertising campaigns The new authority should allow charitable bingo operators to better compete with state lotteries Indian bingo halls and riverboat casino operations in Missouri and adjoining states

Seminars Help Charities Understand Rules The Gaming Commissions Bingo Division conducted a series of

three training seminars for charitable bingo operators in FY 98 loe training seminars which will be offered again in FY 99 are designed to help charity game operators understand the rules regulating bingo and to more effectively and efficiently process financial information required for proper oversight In addition the seminars offer state regulators the opportunity to interact with bingo workers and consider suggestions for changes in the regulatory process

During the seminars surveys are taken regarding specific changes charities would like to make to bingo rules or statutes As a result of input from seminar participants the Commission recently revised its regulation regarding bingo game starting times

bull FY96 BFY97

FY98

Manufacturer Hall Provider

Type of License

Special Pull-Tab Only Supplier

Type of License

Gaming Commission Fund Balance Report

Fiscal Year 1998

AMOUNT SUBTOTAL TOTAL

BEGINNING BALANCE 711191 $3184394214

REVENUE

Fees

A amp B Applicalion

Levell Occup AppflCation

Levell Occup Application

Supplier Application

Levell Occup Annual Fee

Levell Occup Annual Fee

Suppijer Annual Fee

Penalties

Level II Suppfier ApprlCation

tevelll Supplier Annual Fee

Admissions

LIcenses

A amp BAnnual

Liquor License

other

Administrative Income

Enforcement Reimbursemenls

Inlarest

TOTAL REVENUE

$39868096

$5111271

$55730000

$7044649

$1462534

$75852667

$15625005

$1000000

$566789

$755207

$3950971689

$85000000

$850000

$51738266

$4153987907

$85850000

$899797869

$5139635776

EXPENDITUREmiddot GAMING

Personal Servlee

Gaming Salaries

MSH P Salaries

MSHP Fringe Benefit

Gaming Fringe Benefit

$187943115

$528428065

$231211872

$86794952 $1034378004

AMOUNT SUBTOTAL TOTAL

Expense amp Equipement

Travel amp Vehicle Exp $23829354

Ob Expense $6405728

Ollice amp Comm Equip Purchase $4518882

Communicalions Expense $14404186

Inst amp Phys Plant Expense $11235062

Inst amp Phys Plant Equip Purchase $1546929

Data Processin~ Exp amp Equip $57427802

Professional Services $88852560

Ott19 r Ex pense $12078261

Refunds $53925585

Lease Payment $27348085 $301572434

Total Gaming Expenditures $1335950436

EXPENDITUREmiddot OTHER

Personal Services

DOR Salaries $2391600

Marney General Salaries $5832900

Audi1Drs Office Salaries $1062390 $9266890

Expense amp Equipment

OT for AukJ Tschnician $1619798

OT lor Radio Inslaller $1511316

MSHP Gasoline $14805461

MSHP Auk) Maintenance amp Repair $7042260

MSHP Vehicle Purchase $76505300

AuditorS Olice Expenses $1175403

Altorney General Expenses $1146543

Div ofYouUl Services $48004117

Dellerred Compensationmiddot Transler $4262061

Miscellaneous Translers $3065630774 $3221703033

Total Other Expenditures $3230969923

FUND BALANCE $3757089629

PROJECT SUMMAltY

UCENSE FY1998

UCENSEE DATE ADMISSIONS

PRESIDENT RIVERBOAT CASINO 27-MaY-94 3015066

MISSOURI INC I~------

ST CHARLES RIVERFRONT 27-May-94 I 5113507

STAllONINC 28middotDcc-94

MlSSOUFlI GAMING COMPANY 22-Jun-94 3356555

ST JOSEPH RIVERBOAT 24-JJnmiddot94 763663

PARTNERS ------shy

HARRAHS NOfmI 22middotSepmiddot94 6597496

KANSAS cm COOP 15-May-OO

AlTAR MISSOURI COOP 27middotprmiddot95 695910

BOYD KANSAS cm COOP (1) 13-Sep-95 1547667

I HILTON KANSAS cm CORP 11l-0I-96 26amp1567

__--shy

KANSAS cmSTAllON COOP 16-Janmiddot97 7257251

PLAYERS MARYLAND 11middotMarmiddot97 4435341

HElGHlS CORP

HARRAHS MARYLAND 11middotMar-97 4131872

HElGHlS CORP

GRAND TOTALS 39547895--shy --------shy

ADMISSION FEES FV 1998 GAMING TAX

STATE I ADJUSTED LOCAl

TOTAL LOCAL PORllON GROSS RECEIPTS TOTAL PORllON

6030132 3015006 57589734 11518154 1151815

-----shy

10227014 5113507 111750192 22350038 223i004

-shy

6713110 3356555 67185278 13437058 1343706

1527326 763663 17657758 3531551 353155

13194992 6597496 155261028 31052206 3105221

1391820 695910 22233407 4446681 444666

3095334 1547667 36149283 7239955 723995

5267134 2633567 50160689 10025829 1002563

---shy

14514502 7257251 129557501 25911500 2591150

-----shy rshy ------shy

8870682 4435341 76791268 15370264 1537026

8263744 4131872 78337484 15667497 1566750

79095790 39547895 802673621 160550732 16055073

ESTlMAlED GMlNG STATE CAPITAl TABLE SLOT GAMING SPACE

PORTION INVESlMENl EMPLOYEES GAMES MACHINe POSIllONS (SQFl)

10366338 62400000 868 60 1240 1441 58000

- -shy

20115034 172000000 1335 85 1853 2138 47000

12093350 104833803 848 45 1061 1205 30000

3178396 31718000 40B 21 450 520 18000

2]946985 171600000 1927 77 2076 2303 61600

4002013 56350000 438 24 454 544 10400

bull

6515959 147117343 652 45 1117 1255 28000

9023246 119600000 619 48 1023 1181 30000

-------shy

23320350 303000000 2205 178 3094 3755 140000

- -

I 13833238 140416374 1031 80 1330 1637

_

14100747 229852000 1502 47 1292 1428 52000

144495659 1539089520 12033 110 14990 17407 527000

bullbull Formulas used by the Licensees to arrive at total The ligures published in this report are subject to

Boyd Gaming closed casino operations on

ADMISSIONS SUMMARY

Fiscal Year Ended June 30 1998 STAlE

MQfUIJ ~tGQ~Y AZIAB 60YD IIAIlI1A1SNKC tlAllllAHS Mfj tll19fi lCsIARQIJ JgtLAVeas MESIDENI sroCHARI-sect SLlQ IQIAL

- JuI-97 46445800 12062600 27223800 121113000 63468600 37366000 132031400 75297000 55445600 88156200 12257000 670867000-shyAug-97 49935Q00 13694800 30333400 123247000 70461200 40902400 131404200 79956200 60164800 85255600 13070200 698444800

Sep-97 44201200 10771000 25757200 109841000 64971200 37801000 113801200 74779000 52686800 77543600 11699000 623852200 CJc97 52785200 10897000 29040600 108844400 66751600 40190400 114598000 68037000 51116800 64938200 11884400 639083800

Nov-97 55723800 11271000 2103000 108798400 67689600 40793200 120821200 69977400 51733000 82454200 11765200 645330000 shy -D00-97 56960800 11124600 25778200 104257600 62190000 37978400 1~402600 64596400 51869800 85468200 10890200 632516800

JaIl-98 64211000 11954000 28123800 114445200 63632200 43555000 124575600 73506200 53506400 90047600 11520600 679077600

Feb-98 64523600 12245800_0--24843400 10887120~ 70162000 48301800 1163~4~_ 70188200 54224400 84469000 12282000 666447800---

Mar-98 64875600 12208800 I 28861200 116534200 76134400 50417200_ ~84840oo 75423800 55031400 95485400 12753800 7162098001--shy ------shy shy

Apr-OOf-shy

58958400 10829000_--22917800 105066800 76801200 49537~ ~796oo 79932000 8347600 f-85233800 11415200 621418600

May-~ ~78378oo 11458800 22379400 103214800 74607800 50931400 120335800 84449000 56803800 82317200 15844000 680179800

Jun-98 54852800 10064600 19971600 95265600 1-- 69504600 48939400 115280200 70926000 52062800 81332400 17351000 636151000__shy-shy

- ----- --__ - shy c-- lQI~L 671311000 139182000 309533400 13194992~ 826374400 526713400 1451450200 ~87068200 603013200 1022701400 152732600 7909579000

- shy ---shy

Fiscal Year Ended June 30 1997 STAlE

IMQNItI ABGQS( AZJAS flOD tLABBAIIS flKC IIAHBAtlSMtI HlIJQN KcsIAIlQ~ P_lAYERS PmsJDEffl S1ampHABkES SJLw Ti)IAI J

-JuI-96 63344400 14062200 64923600 132012800 56577200 114893600 13478200 459292000

Aug-96 r- 82960400 14911800 57511000 140582400 62129000 115239400 14014600 467348600 f----~ - ----shy

Sep-96 ~3074oo 12481200 53636000 129795400 _82891400 104058200 13249400 433419000 -shy

CJc96 54064000 11817000 49327800 127195800 30645800 60144400 105243800 13507400 451946000---shyNov-96 56037800 12406600 40123200 122425000 51018600 58063400 107115600 12285400 459475600

Dec-96 56723800 1206i800 37402600 128369000 45836000 55978400 107557400 12391800 456324800--- Jan-97 50268000 11022000 33215000 112072800 38359600 107237600 46535800 1028114~_ 12020400 513542600-shy - shy

Febmiddot97 52407800 12732200 28803600 103874600 31086400 167718000 54495600 120388000 13762400 585288800---shyMar-97 54110000 13196200 31000400 117072800 53035600 33843000 158291600 54728000 55521600 112627200 14504600 6~7931 000--- -shy --- Apr-97 51779000 10787800 27776200 120231200 55161800 32425000 110967200 63366200 53039000 90637400 1250020~_ 628691000-----shyMaymiddot97 48976800 11002600 29489800 118187000 65059800 32043000 128140600 64866400 55814800 95478400 13075000 662134200

Jun-97 44705200 10785600 24509600 112941600 57206400 27780000 126707800 61610400 53544000 80392400 11581800 611764800

~

TQJA~ 652684600 147271000--- 477718800 1464760400 230483600 323037400 799062800 244571000 674734800 1256442800 156371200 6427138400

L- -

TAX SUMMARY

Fiscal Year Ended June 30 1998

1shy - shyMONTH MlGQ~Y AllAR ao-YQ

~97_ 103885840 35969785 618(8102

Aug-97 107598495 39994006 70420696

5ep-97 93838926 37041965 59354817

0097 106844786 33528915 67151835

Nov-97 f-- 100345336 33623570 58500240

Decmiddot97 104740514 36137836 58728169

Janmiddot98 127790608 37892423 65713905

Febmiddot98 124029550 40823756 57394319

Marmiddot98 125564705 40432198 67142793

Aprmiddot98 119129939 37104277 56326758

~98 113473237 37472225 5335699

Junmiddot98 116463624 34647176 48058144

f--------

IOJAL 13437O~560 444668132 723995477

tlAB1iA~~ ~AaBAIIS M~ HIJJON K~tlmiddot

275047819 107790267 74670455 219668049

266344318 118898181 75493081 225775682

253948121 114029974 70451785 198988638

247670005 123283217 72682254 198890462

257248749 125951518 75511594 208498696

235034489 113446034 75455313 203275080

266530468 125825940 84927032 220816197

252238300 13138998 93033175 206200892

283262667 150736030 95667042 228265226

262232833 150825517 92068167 219332592

259591421 163657514 99088349 235839216

246065390 140566494 93534693 225599298

3105220580 1566749684 1002582940 2591150028

il $TAlE PLAY~BS PR~ [t~ABLES _ c~I~L I()I~~

121771589 102643300 198456581 26374693 1328156480 128384864 114230170 182732252 29727109 1359598854 111539616 101079699 170582875 27453926 1238310342 116681218 97456134 186900408 29250163 1280353397 118567531 98658072 176872332 28700316 1282477954

116726921 98512809 188033506 27026966 1257117637 ~-

130098238 105313044 196194061 27768988 1388870904

124603269 106390146 178564026 28715751 1343732182

132127359 107038674 206536133 29894685 1466669512

148286693 16573734 188844283 28222781 1316947574 155256067 107607461 178280391 33743570 1437335150 134983080 96312133 182996984 36276177 1355503193

-- 1537026445 1151815376 2235003832 353155125 16055073179

Fiscal Year Ended June 30 1997

Mlltilll A~ AZIAH ItOYD ~H~NKtl liABBMsMl middot~ILIO~middot KCSJ~mN NAy~

I II i(

ELECTRONIC GAMING DEVICE STATISTICS

SLOT SLOT SLOT SLOT SLOT SLOT SLOT SLOT ACTUAL ACTUAL ACTUAL ACTUAL I HANDLE HANDLE HANDLE HANDLE WIN WIN WIN WIN PAYOUT 00 PAYOUT PAYOUT PAYOUT 00

FY98 FY 97 FY96 FY95 FYOO FY 97 FY 96 FY95 FY98 FY97 FY96 FY95 i 1

BOAT 7m -6199 7196 - 697 7195 bull 6196 794 bull 6195 7197 shy 6100 796 bull 6117 795 - 6196 7194 - 6195 71l1 - 6198 700 - 6117 7196 - 6100 794 bull 695

ARGOSY 106244975380 92418880490 9382091354) 45007837075 5245353725 5054992404 5942816233 3495045434 95OOIk 94530 93666 92235

WAR 20253220450 1963957125 19227927825 2630226700 1661451900 1579369500 1593438135 213569075 91797 91958( 91713 9188Ok

BOYD 53798844770 78200197200 62310037200 2869033586 3672975897 3867941946 94007 95303k 93793

~ARRAHS MH 117780402120 24888294985 5853322268 1279453269 95030 94959)

HARRAHSNKC 225014108285 231611410000 lm263846Jl3 85064064875 11724475616 11425500771 9321993358 4669010328 94769 95007 94755 94511

IHILTON 636414911830 36192047535 3705606Il64 1896935492 94177 94753

~CSTATION 162377455786 75747171824 9191699342 3984731000 94339 94739k

PLAYERS 101460073410 240roJ56775 5393384624 13OIl284662 94694 94582

i

PRESIDENT 73588683920 78567721900 79074762100 41647920200 4690709652 4830099303 4947361639 2691737644 93626 93852 93743 93057

IsTATION-ST CHAS 161922747110 189376051956 146662198670 61912001305 9083225512 10329557455 9243915720 4527476595 94390 94545 93706 926871

~T JO FRONTIER 19576383825 22056308406 22823200890 10085003450 1334616538 1354112447 1576400799 1070967293 93181 93861 93093 93342

STATE TOTALS 1105658393886 872717726700 601853504908 252348053605 60743081885 46715942360 36493947830 16867806369 94506 94648 93936 93316

ARGOSY - RIVERSIDE

Fiscal Year Ended June 30 1998 TOTAL TABLE TABLEOF TABLE SLOT SLOTOF SLOT WIN PER DAILY WIN DAILY WIN DAILY WIN DAJLYWIN

- MONTH AGR AGR TOTAL AGR WIN AGA TOTALAGR PAYOUT ADMISSIONS ADMISSION PER TABLE PEA SLOT PERPOSmON PER SQ FOOT

Julmiddot97

Aug-97

Sep-97

Oc~97

Nov-97

Decmiddot97

Janmiddot98

Feb-98

Mar-98

Apr-98

May-98

Junmiddot98

5194292

5379925

4691946

5351741

5007765

5237026

6389530

6201477

6278235

5956497

5673662

5823181

1250539

1404517

1157264

1333638

lv30105

1249075

1482965

1240486

1107522

1210306

1137267

i128057

I 2408

2611

2466

2492

2057

2385

2321

2000

1764

2032

2004

1937

2408

2556

2310

2438

1943

2304

2612

2225

1934

2278

2423

2371

3943753

3975407

3534682

4018103

39n660

3987950

4906566

4960992

5170713

4746191

4536394

4695124

7592

7389

7534

7508

7943

7615

7679

8000

8236

7968

7996

8Q6310

9412

9452

9487

9406

9543

9535

9496

9502

9520

9525

9547

9506

232229

249675

221006

263926

278619

284804

321055

322618

324378

294792

289189

274264

2237

2155

2123

2028

1797

1839

1990

1922

1935

2021

1962

2123 1--shy

80163

900_33

74184

85490

66032

80069

95062

79518

70995

n5B4

72902

72311 _

13428

13536

12035

13681

13543

13578

16706

16891

17605

16160

15446

15986

14811

15341

13379

15260

14279

14933

18219

17683

17902

16985

16178

16604

I sn

598

521

595

556

582

710

689

698

662

630

647

_____

TOTALS 67185278 14731741 2193 2315 52453537 7807 9506 33565~ 2002 78695 14~_ 15965 622

Fiscal Year Ended June 30 1997 TOTAL

MONTH AGR

Jul-96 7242647

Aug-96 7073796

Sep-96 6247587

Oct-96 5654429

Nov-96 6050324

Dec-96 5987073

Jan-97 5355953

Feb-97 5460117

TABLE

AGR

2299519

2265205

1642527

1558573

1748389

1736423

1456656

1572456

5497775 I 1308018Marmiddot97

TABLEOF

TOTALAGR

3175

3202

2629

2756

2890

2900

2720

2880

2379

5455728 1261102 f 2312Apr-97

5266768 1368628 I 2599Maymiddot97

4609823 1134599 I 2461Jun-97

69902019 19352095 I 2768TOTALS

TABLE

WIN

2681

2660

2345

2322

25_83

2580

2461

2430

2190

2212

2491

2268

2454

SLOT

AGR

4943128

4808591

4605060

4095856

4301935

4250650

3899296

3887662

4189757

4194626

3898140

3475225

50549924

SLOT OF

TOTALAGR

6825

6798

7371

7244

7110

7100

7280

7120

7621

7688

7401

75_39

7232k

SLOT

PAYOUT

9431

9448

9428

9478

9460

9479

9454

9450

9452

9428

9464

9471

9453

ADMISSIONS

316722

314802

286537

270320

280189

283619

251340

262039

270550

258895

244884

223526

3263423

WIN PER

ADMISSION

2287

22-47

2180

2092

2159

2111

2131

2084

2032

2107

2151

2062

2142

DAILY WIN

PER TABLE

132156

130184

94398

89573

100482

99794

83716

90371

75173

72477

78657

65207

92682

DAILY WIN

PER SLOT

17308

16837

16124

14341

15063

14883

13653

13612

14670

14687

13649

12168

14750

DAILY WIN DAlLY WIN

PER SQFOOTPER POSITION

20564 805

20085 786

In39 694

16055 628

67217179

16999 665 I 15207 595

60715503

15610 611

15490 606

14954 585

13089 512

16539 shy 647

orders by obtaining an Order of Prohibition from tIle Cole County Circuit Court The operators lawsuit alleged that the Commissions hearing process did not provide sufficient due process in violation of the US and Missouri Constitutions The Commission appealed the lower cOUl1 ruling and on May 28 1998 the Missouri Supreme Court ruled in favor of the Commisshysion by holding that the Commissions procedure complies with constitutional due process and has the appropriate remedies for judicial review to avoid ineparable hann to any of the parties State ex rei Riverside Joint Venture et at vs Missouri Gaming Commission

On June 23 J998 the Commission issued preliminary disciplinary orders to Boyd Kansas City Inc Hilton Kansas City Corporation Han-ahs North Kansas City Corporation Kansas City Station Corporation Riverside Joint Venture and Han-ahs Maryland Heights LLC Riverside Joint Venture and Players MH LP and St Joseph Riverboat Partners However the riverboats are entitled to a hearing to prove that they comply with the Akin ruling The process is as follows

At the hearing the riverboat licensee is given the opportunity to prove that it complies with the Akin ruling An independent hearing officer who will make a recommendation to the Commisshy

sion will conduct the hearing The five members of the Commisshysion will ultimately be responsible for deciding the matter The Commission may accept modify or reject the fmdings of the hearing officer If the ruling is adverse to the licensee it can appeal to the Western District Court ofAppeals and then to the Supreme Court

Should a license come up for renewal while a hearing or appeal is pending the licensee will be eligible for renewal continshygent upon the outcome of the disciplinary hearing This proceshydure is consistent with the way the Commission has handled disciplinary actions over the past several years The process is not new and was not created specifically to deal with the boats in basins situation

Jhe Myth of the Cruising Riverboat Requirement

One of the most common myths that has perpetuated throughshyout Missouris experience with riverboat gaming is the claim that the original referendum promised cruising riverboats The assertion is simply not true The law has never required that all boats cruise that any boat cruise all the time or that any boat cruise when it is unsafe to do so

The original law adopted by the people granted a specific exemption from cruising for the Admiral and five other sites along the downtown St Louis riverfront In addition the legislashytion exempted all boats from cruising from the beginning of

November until the end of March

_ Furthermore the Tourism Commission had the authority to set the minimum number of cruises from April until October Therefore the boats could be docked for substantial periods during these months Moreover the original referendum allowed the boat operator to operate while remaining docked for mechanical problems adshyverse weather or other condishytions adversely affecting safe navigation

Upon receiving inforshymation from the United States Coast Guard and the US Army Corps of Engineers that rivers in Missouri present certain safety hazards that must be accounted for the legislature adopted a procedure for evaluating safety risks The riverboat gaming statute provides that all boats shall cruise unless the Commisshysion finds that the best interest ofMissouri and the safety of the public indicate the need for continuous docking Section 313805 (15) RSMo The statute also provides that in order for a boat to remain dockside the applicant must demonstrate that the project would benefit land-based development and permashynent job creation Therefore the law clearly instructs the Comshymission to consider projects that have significant investments in land-based development

The statute requires the Commission to hold hearings to

determine whether it is safe for each riverboat to cruise The result of each of these hearings has been that it is unsafe for vessels of this size carrying thousands of passengers to cruise The Gaming Commission has received uncontroverted testimony from dozens of experts including the United States Coast Guard who have attested to the perils of large passenger vessels cruising in high traffic areas on the Missouri River

The testimony by these experts regarding the perils of placing large passenger vessels in the navigable portions of these rivers was alanningly evidenced by three recent accidents involvshying Missouri riverboat gaming operations The first at the Aztar riverboat in Caruthersville involved a 30 by 70 barge half loaded with gravel that broke loose and struck the boarding ramp of the Aztar casino The second accident was the well-publicized incident where a grain barge broke loose and struck the entrance ramp to the Admiral in St Louis The collision broke the power lines COIDlected to the boat requiring the use of emergency generators Several months later another barge would strike the Admiral as further evidence of the dangers involved in being situated near the path of commercial river traffic

Fortunately in each instance tragedy was avoided and no one was injured The avoidance of injury is largely because of Gaming Commission policies regarding safety inspections and pennits and the fact that the vessels remain dockside thus minishymizing the risk ofcollision and maximizing the utilization of rescue facilities However the incidents demonstrate that the safest location for these facilities is in a protected basin off the navigable waterway The Coast Guard has consistently informed the Commission that protected basins represent the safest mode of operation for riverboat casinos

Introduction November 3 1998 marks the 6th amriversary of the Misshy

souri voters approval of riverboat gambling in Missouri Howshyever policy debates and legal wrangling delayed the opening of the states ftrst riverboat gambling operation until May 27 1994 The industry now holds 16 licenses at 10 casino properties and employs approximately 12000 people with an rumual payroll of approxishymately $269 million

Nevertheless rec~nt litigation has result in great uncertainty for many Missourians eIl1ployed in the riverboat gambling industry On November 23 1997 the Missouri Supreme Court issued its ruling in Alan y Missouri Gaming Commission The court held that to the extent that the legislatures deftnition of the Missomi and Mississippi Rivers authorized games of chance in basins that are not contiguous with the surface stream of those rivers the definition is unconstitutional

The Supreme Courts final decision in Akin was issued on December 23 1997 and on January 9 1998 the Commission issued Preliminary Orders for Disciplinary Action to all licensees operating riverboats in basins that are not contiguous to the surface stream ofthe Missouri or Mississippi River The discishyplinary actions propose that the companies authority to conduct games of chance be revoked The proposed orders are currently being appealed and affect 5 of the states 9 riverboat casino propshyerties

In light of the substantial policy issues now facing the General Assembly regarding riverboat gambling in Missouri the Commission thought it would be beneftcial to recount the history of the industrys creation its evolution and its prospects for the future

The 1992 Referendum In 1991 the Missouri General Assembly adopted House

Bill 149 ordering that the issue as to whether Missouri should allow riverboat gambling be referred to the voters On November 3 1992 Missouri voters approved the referendum by a 63 majority The ballot language for this measure read as follows

Authorizes riverboat gambling excursions on the Mississippi and Missouri Rivers regulated by the State Tourism Commission Excursions may originate where locally approved by the voters Five hundred dollar maximum loss limit per person per excursion The proposal is intended to produce increased General Revshyenue

While the original ballot language certainly implies that all gambling would occur during an excursion and thus that the boat would be cruising the rivers the text of the amendment plainly states otherwise The proposal passed by the people defined a gambling excursion as the time during which gambling games may be operated on an excursion gambling boat whether docked or during a cruise Gambling games may be continuously operated on an excursion gambling boat which is continuously docked (Missouri Session Laws 1991 HB 149149 sect A(sect 1) adopted by referendum eff Nov 3 1992) (emphasis added)

In fact the original referendum passed by the people specifically exempted boats on the S1 Louis riverfront from ever cruising the river Furthermore no boat would ever have to cruise from November to March Moreover the referendum allowed

exceptions from the cruising requirement in the case ofmechan ishycal problems adverse weather or other conditions adversely affecting safe navigation during the duration of the problem or condition or as authorized by the Commission during the off season

Therefore it is clear that the original referendwn did not promise cruising riverboats Not all boats were required to cruise none of the boats were required to cruise five months of the year and all boats could be exen1]Jted from cruising if it would pose safety problems

The Original Referendum Gets a Makeover Prior to the election 10 decide riverboat gambling in 1992

critics of some provisions of the referendum language began to emerge On October 23 1992 the Kansas City Star reported that the law did not bar convicted felons from holding a license to

i ~ ~

I ~

operate a gambling boat In addition some public officials began to question whether the tourism Commission was the proper agency to regulate the gambling industry whieh was predicted to be a significant tourist attraction (KC Star October 26 1992)

As a result after the referendum had been approved by the voters legislation wao introduced supported by then Governorshyelect Carnahan to place more stringent requirements on riverboat gamb ling licclLoces and to create a strong Gaming Commission to regulate the new industry

Senate Bills 10 amp 11 On April 29 1993 Governor Carnahan signed into law SBs

10 amp 11 creating the five member gaming Commission The bill carried an emergency clause and the Governor immediately apshypointed the first members

The Commission was given much more authority over the gaming industry than had previously been given to the Tourism Commission The COImnission could prioritize applications issue liquor licenses assess a wide array ofadministrative penalties inspect the licensees premises at any time decide the number type and location of gambling boats determine the times during which gambling may occur have access to all closed records relating applicants for licenses conduct hearings and be a trier of fact with regard to alleged violations of the gaming act and require licensees to release all information on its finances

In addition the industry was held to a higher standard having to prove its suitability for licensure by clear and convincing evidence rather than a preponderance of the evidence as had been the case under the provisions ofthe original referendum Felons are prohibited fi-om holding gaming licenses under the new act and the Commission is empowered to reopen licensing hearings at any time These requirements made it clear that a riverboat gambling

license was a privilege granted at the sole discretion of the State of Missouri and that the license carried no property rights

The Commission was vested with a strict code ofethics that prohibited members and staff from being employed by or having any financial interest in an applicant or licensee during their tenure with the Commission or for a two year period thereafter

Continuous Docking Language Clarified Senate Bills 10 amp 11 also added new language clarifYing

the original referendums vague provisions relating to cruising riverboats While SBs 10 amp 11 were being debated the legislature was made aware that the US Coast Guard had serious concerns about the safety of large passenger vessels on the Missouri River In a letter to the Missouri Port Authority Association dated Februshyary 5 1993 US Coast Guard Commander SP Cooper stated that I am concerned about the safety issues attendant to the operation of these [riverboat gambling] vessels Cooper went on to say that The large numbers ofpassengers on these vessels pose special problems for public safety organizations The Coast Guard willllot have a pennanent presence in these communities but will assist if resources are available

In response to the safety concerns raised by Captain Cooshyper local public officials in Kansas City and other safety experts SBs 10 amp 11 adopted a procedure for allowing the Commission to order riverboats to remain continuously docked if the safety of the public indicates the need for continuous docking (SBs 10 amp 11 Section 3 (15)

However some legislators and local public officials beshylieved dockside gaming was important for reasons other than safety Some public officials were concerned that riverboat compashynies might not honor commitments to home dock communities if the operation did not have immediate success In 1993 several

riverboat operators in Iowa had pulled anchor and sailed south in hopes oftaking advantage of the more favorable regulatory envishyronment in Mississippi

In order to address this issue language was added that would require the Commission to consider economic feasibility or impact that would benefit land based development and permanent job creation when making its decision whether dockside gaming was in the best interest ofMissouri However officials from the St Louis area did not want the issue of continuously docked boats tied to additional infrastructure requirements They believed that S1 Louis already had sufficiently developed its riverfront and therefore added language to the bill exempting the City of S1 Louis from the aforementioned requirement

Gaming Commission Begins Work

Supreme Court Intervention - Round One Troy Harris v Missouri Gaming Commission

On February 22 1994 the Misshysouri Supreme Court issued its opinion in Troy Harris v Missouri Garning Commis- sioll wherein it ruled that the legislature did not have the authority to allow games of chance 011 riverboats The Commisshysion argued that it was the voters who authorized games of chance by adopting the referendum language in November 1992 The Court agreed that the people lawfully authorized games of chance in the 1992 referendmn However it ruled that because the General Assembly

repealed the sections ofthe referendum authorizing games of chance and reenacted congruous language in SBs 10 amp 11 that the new law was an act of the General Assembly not the people and therefore subject to the limitations ofArticle III sect 39(9) ofthe Missouri Constitution prohibiting the General Assembly from authorizing games ofchance

The Court in Harris also found the language exempting the Admiral and the lease sites along the St Louis riverfront from cruising to be a facially special law Because special laws are presumed unconstitutional ill1leSS the party defending the law can demonstrate a substantial justification for the special treatment the Court remanded the issue back to circuit court for an evidenshytiary hearing

The Legislative Response to Harris The legislature responded quicldy to the Supreme Courts

decision in Harris by filing HJR 43 a constitutional amendment that would authorize the General Assembly to pennit games of chance on the Missouri and Mississippi Rivers The joint resolushytion was drafted to address the very nan-ow question raised by the court as to whether or not the General Assembly has the authority to authorize games of chance on riverboats (Transcript of Senate Ways amp Means Committee hearing February 2 1994 page 1)

The language adopted by the House Ways amp Means Comshymittee read in pertinent pmi as follows

Article III Section 39(e) Notwithstanding any prohibitions contained in this constitution includshying but not limited to the prohibition contained in subdivision (9) of section 39 of tlus article the General Assembly is authorized to pennit lotteries gift enterprises and games of skill or chance upon

the Mississippi and Missouri rivers as may be defined by the General Assembly

It appears that this language would have avoided the result in Akin whereby the Court ruled that the General Assembly did not have the authority to define the tenn river

This language concerned some members of the Senate because of the fear that by allowing the General Assembly to define the Missouri and Mississippi River it may allow for a broad definition that could be expanded to other areas of the state such as the Lake ortlle Ozarks (Transcript pages 8-9) Nevertheless the language that emerged from the Senate while more specific would be sinIilar to the House language

Section 39(e) The General Assembly may authoshyrize the issuance of licenses to pennit lotteries gift enterprises and games of skill or chance to be conducted on floating facilities upon the Missouri River and the Mississippi River in such numbers locations and manner all as or may be provided by law and regulations adopted pursuant to law and subject to such taxes as provided by law arId fees as provided by law or regulation adopted pursuant to law

However as the legislation moved through the process to a conference committee concern over the breadth of the language granting the General Assembly authority to pennit games of chance continued to grow The House rejected the Senates language and passed the House version The Senate refused to adopt the House version and both side appeared deadlocked Finally the following compromise language was adopted as a conference committee substitute

The general assembly is authorized to pennit only upon the Missouri and Mississippi Rivers lotteries gift enterprises and games of skill or chance to be conducted on excursion gambling boats and floating facilities

The conference committee substitute was adopted by both houses with bi-partisan support The Senate vote was 23-10 and the House vote was 107-48

While HJR 43 was truly agreed to and [mally passed in time to put the question before the voters in the April 5 1994 election the measure was defeated with 527011 in favor and 528278 opposed

The General Assembly was now faced with implementing the referendum adopted by 63 of the voters in 1992 without the games of chance that Harris declared to require constitutional authority In addition it was becoming increasingly clear that serious safety problems on the Missouri and Mississippi Rivers may preclude riverboat casinos from being able to cruise (Transhyscript page

Therefore the General Assembly adopted SB 740 which defined games of skill specifically authorized boats to be located in artificial basins and made minor revisions to the process for determining the conditions under which a boat may operate while continuously docked In addition the bill added new ethical standards and conflict of interest rules for the Gaming Commisshysion General Assembly Attorney Generals office Missouri State Highway Patrol peace officers and other public officials SB 740 was truly agreed to and finally passed with an emergency clause (EC) on May 12 1994 1be bill had bi-partisan support was adopted by a vote of 21-11 in the Senate (EC 24-8) and 93-63 in the House (EC 110-50)

On May 22 1994 the Commission implemented the provisions of the riverboat gambling act as amended by SB 740 and granted the first excursion gambling boat licenses to President Riverboat Casino on the Admiral and S1 Charles Riverfront Stashytion The licenses permitted the operators to offer only games of skill The inability to provide games of chance most importantly slot machines left the Missouri operators at a distinct disadvantage from their competitors in Illinois While Missourians initially flocked to the newer more elaborate Missouri riverboats the attraction soon dissipated In the first six months ofoperation the Missouri boatgt attracted fewer customers and generated less revshyenue than their Illinois competitors in East St Louis and Alton

The markets on the west side of the state presented a different situation Without competition from casinos in the same market with competitive advantages the riverboats licensed in Riverside and St Joseph on June 22 1994 fared better than their S1 Louis market counterparts Nevertheless the games of skill offered by the riverboats did not generate sufficient revenue to make the casinos profitable

In response to Harris and the failed April 1994 constitushytional amendment an initiative petition effort was mounted to allow voters to again decide whether riverboat casinos in Missouri should be allowed to ofler ganles of chance The effOlt was sucshycessful and on June 6 1994 the Secretary of State certified the following proposed constitutional amendment for the November 8 1994 ballot

Shall the General Assembly be authorized to pennit only upon the Mississippi River and the Missouri River lotteries gift enterprises and games ofchance to be conducted on excursion gambling boats and floating facilities This proposal would increase state

--

revenues from existing gaIning boats approximately $30000000 per year Impact on local governments unknown

The First Boat in a Basin While the licensees offering only games of skill were not

operating profitably in the summer of 1994 it did not deter the company constructing the first boat in a basin from completing its elaborate gambling complex containing the states first landshybased entertainment amenities On September 22 1994 the Commission issued a license for games of skill to Harrahs for its $89 million facility in North Kansas City

The Harrahs North Kansas City project consisted of a 60000 square foot land-based pavilion containing three restaurants and a permanently moored excursion gambling boat located in a protected coffer cell basin The facility offered 1800 parking spaces on its 60 acre site

It is important to note that when Missouri voters approved constitutional amendment authorizing games of chance on riverboat casinos with 943652 in favor and 807707 opposed a boat in a basin was licensed and operating at the Harrahs North Kansas City project Pursuant to voter approval the Commission amended the licenses ofArgosy-Riverside Harrahs-North Kansas City President Riverboat Casino-St Louis St Charles Riverfront Station and S1 Joseph Riverboat Partners to allow games ofchance on December 91994

The Dramatic Impact of Games of Chance The advent of games of chance would dramatically impact

the casino gambling industry in Missouri The most significant game of chance the slot machine now accounts for over 60 of total casino revenue As depicted in the chart on page 22 casino

revenue would more than double for the first quarter offiscal year 1996 when casinos offered games ofchance as opposed to the first quarter of fiscal year 1995 when riverboats were limited to games of skill

The addition ofgames of chance would also lead to the construction of bigger more elaborate projects through the addition of new facilities as well as the expansion of existing properties For example shortly after games of chance were introduced Station Casinos opened a second riverboat at its property in St Charles The new facility is larger and more lavish than its predeshycessor and would provide the necessary revenue base for the expansion of its non-gaming land-based amenities

Similarly armed with games of chance Harrahs North Kansas City quickly moved to expand its facility On April 12 1995 Harrahs advised the Commission of its request for approval ofa $70 million expansion The expansion proposal included a 200 room hotel 10000 square feet ofmeeting space a covered parking garage with 765 spaces a swimming pool exercise facilishyties video arcade gift shop expanded restaurant seating a full service car wash and a second gaming vessel with 40000 square feet ofgaming space to be located in a protected artificial basin The proposal was given tinal approval by the Commission on May 15 1996

Boat in Basin Controversy Emerges Although the fust boat in a basin had been operating since

September 22 1994 the first objection to allowing a riverboat to be located in a basin arose during Hiltons request for continuous docking status for its project in Kansas City On March 16 1995 attorneys representing Roy Fischer appeared at the Hilton dockside hearing to protest Hiltons proposal to locate its excursion gamshybling boat in a protected coffer celL Mr Fischer owned land in the

St Louis area that was under contract to a gaming company wishshying to build a project near a competing proposal for a boat in a basin in Maryland Heights

Mr Fischer argued that the Hilton proposal did not comply with the Missouri Constitution or the gaming statute He claimed that the voters approved cruising riverboats and while the legislashyture had provided for nalTOW exceptions to the cruising requireshyment it did not include artificial basins The Commission ruled that because the legislature defined the Missouri river as including artificial basins located within 1000 feet of the main channel that the Hilton boat was for purposes ofthe statute in the river Since the Commission did not have the authority to strike down the statute but was under an obligation to presume that it was constitushytional it followed the statute found that the Hilton boat met the criteria for continuous docking and granted it a license Although

this decision could have been appealed to the Westem District Court ofAppeals where the constitutionality ofthe statute could have been challenged Mr Fischer chose not to do so and the Commissions decision stood

On August 29 1996 over 17 months after the Conunission issued its ruling in the Hilton dockside case W Todd Akin filed a declaratory judgement action in Cole County Circuit Court seeking a determination that the statutes defming the Missouri and Mississippi rivers in the gaming act were unconstitutional The Cole COlll1ty Circuit Court would rule in favor of the Commission by issuing a fmding similar to the Commissions ruling in the Hilton dockside case However on November 251997 the Missouri Supreme Court would reverse the lower court decision and declare the gaming statute unconstitutional to the extent that it allows games of chance on riverboat casinos that are not contiguous to the surface stream of

Before and After Games of Chance September thru November

$40

en ti $30m u (])

a en 1994en ce g $20 1995ltl~

-0 2 en ~

0 $10 ltC

$0 Argosy Harrahs NKC President Stations St Charles St Joseph

the river As noted in the

section entitled Undershystanding Boats in Basins beginning on page 13 the Commission is currently seeking to revoke licenses for games of chance for facilities not in compliance with Akin The industry successfully submitted a ballot proposal that would reverse the impact ofAkin and it awaits consideration by the voters on November 3 1998

---

Number of Bingo Operators Continue to Decline The number of charitable bingo operators in Missouri declined in FY

98 for the third consecutive year As the chart at right depicts all classificashytions ofcharity bingo licenses have decreased The reason for the reduction is varied Some organizations were significantly weakened by the 120 tax increase dedicated to veterans homes that was imposed for approximately 10 months from 1993 to 1994 111e tax was repealed by SB 427 in 1994 however the legislation also included strict new standards that prevented convicted felons from being involved with bingo and gave the Gaming Conunission new tools to drive criminal elements out ofbingo and el1S~lle that taxes were properly paid loese new provisions led to some organizations being forced out of bingo and other vohllltarily surrendered their attributed to the increase in the number of licensed riverboat casinos in Missouri and adjoining states as wcll as the addition ofIndian casinos in Kansas Furthermore high stakes Indian bingo in Oklahoma as well as tour bus trips to high stakes Indian bingo halls in Iowa Ohio Oklahoma and as far away as Wisconsin continue to draw Missouri patrons away from resident charity bingo games that are faced with a myriad ofconstitutional restrictions

The introduction of progressive games and the availability ofpull tab games ofiering larger prizes have helped the charities to compete Nevertheshyless when faced with direct competition flom a riverboat or Indian casino or high stake1 Indian bingo hall the Missouri charitable operator is at a severe di sad vantage

900 Court Strikes Down Ban on Bingo 800

700Advertising 600

One of the most important events efiecting 500charitable bingo in Missouri occurred when United 400States District Court Judge Howard F Sachs has

issued a ruling in Association aCharitable Games 0 300 Missouri v Missouri Gaming Commission which 200 strikes down Missouris constitutional ban on the 100 advcltising of charity bingo games The twenty-one

0page opinion strikes down Article III Scction Regular

39(a)(7) of the Missouri Constitution ruling that it infringes on the charities First and Fourteenth

Amendment rights in violation ofthe United States Constitution Judge Sachs order also permanently enjoins the Gaming Commission from enforcing the provisions ofArticle III Section 39(a)(7)

The decision clears the way for charitable bingo operators suppliers and hall providers to begin advertising campaigns The new authority should allow charitable bingo operators to better compete with state lotteries Indian bingo halls and riverboat casino operations in Missouri and adjoining states

Seminars Help Charities Understand Rules The Gaming Commissions Bingo Division conducted a series of

three training seminars for charitable bingo operators in FY 98 loe training seminars which will be offered again in FY 99 are designed to help charity game operators understand the rules regulating bingo and to more effectively and efficiently process financial information required for proper oversight In addition the seminars offer state regulators the opportunity to interact with bingo workers and consider suggestions for changes in the regulatory process

During the seminars surveys are taken regarding specific changes charities would like to make to bingo rules or statutes As a result of input from seminar participants the Commission recently revised its regulation regarding bingo game starting times

bull FY96 BFY97

FY98

Manufacturer Hall Provider

Type of License

Special Pull-Tab Only Supplier

Type of License

Gaming Commission Fund Balance Report

Fiscal Year 1998

AMOUNT SUBTOTAL TOTAL

BEGINNING BALANCE 711191 $3184394214

REVENUE

Fees

A amp B Applicalion

Levell Occup AppflCation

Levell Occup Application

Supplier Application

Levell Occup Annual Fee

Levell Occup Annual Fee

Suppijer Annual Fee

Penalties

Level II Suppfier ApprlCation

tevelll Supplier Annual Fee

Admissions

LIcenses

A amp BAnnual

Liquor License

other

Administrative Income

Enforcement Reimbursemenls

Inlarest

TOTAL REVENUE

$39868096

$5111271

$55730000

$7044649

$1462534

$75852667

$15625005

$1000000

$566789

$755207

$3950971689

$85000000

$850000

$51738266

$4153987907

$85850000

$899797869

$5139635776

EXPENDITUREmiddot GAMING

Personal Servlee

Gaming Salaries

MSH P Salaries

MSHP Fringe Benefit

Gaming Fringe Benefit

$187943115

$528428065

$231211872

$86794952 $1034378004

AMOUNT SUBTOTAL TOTAL

Expense amp Equipement

Travel amp Vehicle Exp $23829354

Ob Expense $6405728

Ollice amp Comm Equip Purchase $4518882

Communicalions Expense $14404186

Inst amp Phys Plant Expense $11235062

Inst amp Phys Plant Equip Purchase $1546929

Data Processin~ Exp amp Equip $57427802

Professional Services $88852560

Ott19 r Ex pense $12078261

Refunds $53925585

Lease Payment $27348085 $301572434

Total Gaming Expenditures $1335950436

EXPENDITUREmiddot OTHER

Personal Services

DOR Salaries $2391600

Marney General Salaries $5832900

Audi1Drs Office Salaries $1062390 $9266890

Expense amp Equipment

OT for AukJ Tschnician $1619798

OT lor Radio Inslaller $1511316

MSHP Gasoline $14805461

MSHP Auk) Maintenance amp Repair $7042260

MSHP Vehicle Purchase $76505300

AuditorS Olice Expenses $1175403

Altorney General Expenses $1146543

Div ofYouUl Services $48004117

Dellerred Compensationmiddot Transler $4262061

Miscellaneous Translers $3065630774 $3221703033

Total Other Expenditures $3230969923

FUND BALANCE $3757089629

PROJECT SUMMAltY

UCENSE FY1998

UCENSEE DATE ADMISSIONS

PRESIDENT RIVERBOAT CASINO 27-MaY-94 3015066

MISSOURI INC I~------

ST CHARLES RIVERFRONT 27-May-94 I 5113507

STAllONINC 28middotDcc-94

MlSSOUFlI GAMING COMPANY 22-Jun-94 3356555

ST JOSEPH RIVERBOAT 24-JJnmiddot94 763663

PARTNERS ------shy

HARRAHS NOfmI 22middotSepmiddot94 6597496

KANSAS cm COOP 15-May-OO

AlTAR MISSOURI COOP 27middotprmiddot95 695910

BOYD KANSAS cm COOP (1) 13-Sep-95 1547667

I HILTON KANSAS cm CORP 11l-0I-96 26amp1567

__--shy

KANSAS cmSTAllON COOP 16-Janmiddot97 7257251

PLAYERS MARYLAND 11middotMarmiddot97 4435341

HElGHlS CORP

HARRAHS MARYLAND 11middotMar-97 4131872

HElGHlS CORP

GRAND TOTALS 39547895--shy --------shy

ADMISSION FEES FV 1998 GAMING TAX

STATE I ADJUSTED LOCAl

TOTAL LOCAL PORllON GROSS RECEIPTS TOTAL PORllON

6030132 3015006 57589734 11518154 1151815

-----shy

10227014 5113507 111750192 22350038 223i004

-shy

6713110 3356555 67185278 13437058 1343706

1527326 763663 17657758 3531551 353155

13194992 6597496 155261028 31052206 3105221

1391820 695910 22233407 4446681 444666

3095334 1547667 36149283 7239955 723995

5267134 2633567 50160689 10025829 1002563

---shy

14514502 7257251 129557501 25911500 2591150

-----shy rshy ------shy

8870682 4435341 76791268 15370264 1537026

8263744 4131872 78337484 15667497 1566750

79095790 39547895 802673621 160550732 16055073

ESTlMAlED GMlNG STATE CAPITAl TABLE SLOT GAMING SPACE

PORTION INVESlMENl EMPLOYEES GAMES MACHINe POSIllONS (SQFl)

10366338 62400000 868 60 1240 1441 58000

- -shy

20115034 172000000 1335 85 1853 2138 47000

12093350 104833803 848 45 1061 1205 30000

3178396 31718000 40B 21 450 520 18000

2]946985 171600000 1927 77 2076 2303 61600

4002013 56350000 438 24 454 544 10400

bull

6515959 147117343 652 45 1117 1255 28000

9023246 119600000 619 48 1023 1181 30000

-------shy

23320350 303000000 2205 178 3094 3755 140000

- -

I 13833238 140416374 1031 80 1330 1637

_

14100747 229852000 1502 47 1292 1428 52000

144495659 1539089520 12033 110 14990 17407 527000

bullbull Formulas used by the Licensees to arrive at total The ligures published in this report are subject to

Boyd Gaming closed casino operations on

ADMISSIONS SUMMARY

Fiscal Year Ended June 30 1998 STAlE

MQfUIJ ~tGQ~Y AZIAB 60YD IIAIlI1A1SNKC tlAllllAHS Mfj tll19fi lCsIARQIJ JgtLAVeas MESIDENI sroCHARI-sect SLlQ IQIAL

- JuI-97 46445800 12062600 27223800 121113000 63468600 37366000 132031400 75297000 55445600 88156200 12257000 670867000-shyAug-97 49935Q00 13694800 30333400 123247000 70461200 40902400 131404200 79956200 60164800 85255600 13070200 698444800

Sep-97 44201200 10771000 25757200 109841000 64971200 37801000 113801200 74779000 52686800 77543600 11699000 623852200 CJc97 52785200 10897000 29040600 108844400 66751600 40190400 114598000 68037000 51116800 64938200 11884400 639083800

Nov-97 55723800 11271000 2103000 108798400 67689600 40793200 120821200 69977400 51733000 82454200 11765200 645330000 shy -D00-97 56960800 11124600 25778200 104257600 62190000 37978400 1~402600 64596400 51869800 85468200 10890200 632516800

JaIl-98 64211000 11954000 28123800 114445200 63632200 43555000 124575600 73506200 53506400 90047600 11520600 679077600

Feb-98 64523600 12245800_0--24843400 10887120~ 70162000 48301800 1163~4~_ 70188200 54224400 84469000 12282000 666447800---

Mar-98 64875600 12208800 I 28861200 116534200 76134400 50417200_ ~84840oo 75423800 55031400 95485400 12753800 7162098001--shy ------shy shy

Apr-OOf-shy

58958400 10829000_--22917800 105066800 76801200 49537~ ~796oo 79932000 8347600 f-85233800 11415200 621418600

May-~ ~78378oo 11458800 22379400 103214800 74607800 50931400 120335800 84449000 56803800 82317200 15844000 680179800

Jun-98 54852800 10064600 19971600 95265600 1-- 69504600 48939400 115280200 70926000 52062800 81332400 17351000 636151000__shy-shy

- ----- --__ - shy c-- lQI~L 671311000 139182000 309533400 13194992~ 826374400 526713400 1451450200 ~87068200 603013200 1022701400 152732600 7909579000

- shy ---shy

Fiscal Year Ended June 30 1997 STAlE

IMQNItI ABGQS( AZJAS flOD tLABBAIIS flKC IIAHBAtlSMtI HlIJQN KcsIAIlQ~ P_lAYERS PmsJDEffl S1ampHABkES SJLw Ti)IAI J

-JuI-96 63344400 14062200 64923600 132012800 56577200 114893600 13478200 459292000

Aug-96 r- 82960400 14911800 57511000 140582400 62129000 115239400 14014600 467348600 f----~ - ----shy

Sep-96 ~3074oo 12481200 53636000 129795400 _82891400 104058200 13249400 433419000 -shy

CJc96 54064000 11817000 49327800 127195800 30645800 60144400 105243800 13507400 451946000---shyNov-96 56037800 12406600 40123200 122425000 51018600 58063400 107115600 12285400 459475600

Dec-96 56723800 1206i800 37402600 128369000 45836000 55978400 107557400 12391800 456324800--- Jan-97 50268000 11022000 33215000 112072800 38359600 107237600 46535800 1028114~_ 12020400 513542600-shy - shy

Febmiddot97 52407800 12732200 28803600 103874600 31086400 167718000 54495600 120388000 13762400 585288800---shyMar-97 54110000 13196200 31000400 117072800 53035600 33843000 158291600 54728000 55521600 112627200 14504600 6~7931 000--- -shy --- Apr-97 51779000 10787800 27776200 120231200 55161800 32425000 110967200 63366200 53039000 90637400 1250020~_ 628691000-----shyMaymiddot97 48976800 11002600 29489800 118187000 65059800 32043000 128140600 64866400 55814800 95478400 13075000 662134200

Jun-97 44705200 10785600 24509600 112941600 57206400 27780000 126707800 61610400 53544000 80392400 11581800 611764800

~

TQJA~ 652684600 147271000--- 477718800 1464760400 230483600 323037400 799062800 244571000 674734800 1256442800 156371200 6427138400

L- -

TAX SUMMARY

Fiscal Year Ended June 30 1998

1shy - shyMONTH MlGQ~Y AllAR ao-YQ

~97_ 103885840 35969785 618(8102

Aug-97 107598495 39994006 70420696

5ep-97 93838926 37041965 59354817

0097 106844786 33528915 67151835

Nov-97 f-- 100345336 33623570 58500240

Decmiddot97 104740514 36137836 58728169

Janmiddot98 127790608 37892423 65713905

Febmiddot98 124029550 40823756 57394319

Marmiddot98 125564705 40432198 67142793

Aprmiddot98 119129939 37104277 56326758

~98 113473237 37472225 5335699

Junmiddot98 116463624 34647176 48058144

f--------

IOJAL 13437O~560 444668132 723995477

tlAB1iA~~ ~AaBAIIS M~ HIJJON K~tlmiddot

275047819 107790267 74670455 219668049

266344318 118898181 75493081 225775682

253948121 114029974 70451785 198988638

247670005 123283217 72682254 198890462

257248749 125951518 75511594 208498696

235034489 113446034 75455313 203275080

266530468 125825940 84927032 220816197

252238300 13138998 93033175 206200892

283262667 150736030 95667042 228265226

262232833 150825517 92068167 219332592

259591421 163657514 99088349 235839216

246065390 140566494 93534693 225599298

3105220580 1566749684 1002582940 2591150028

il $TAlE PLAY~BS PR~ [t~ABLES _ c~I~L I()I~~

121771589 102643300 198456581 26374693 1328156480 128384864 114230170 182732252 29727109 1359598854 111539616 101079699 170582875 27453926 1238310342 116681218 97456134 186900408 29250163 1280353397 118567531 98658072 176872332 28700316 1282477954

116726921 98512809 188033506 27026966 1257117637 ~-

130098238 105313044 196194061 27768988 1388870904

124603269 106390146 178564026 28715751 1343732182

132127359 107038674 206536133 29894685 1466669512

148286693 16573734 188844283 28222781 1316947574 155256067 107607461 178280391 33743570 1437335150 134983080 96312133 182996984 36276177 1355503193

-- 1537026445 1151815376 2235003832 353155125 16055073179

Fiscal Year Ended June 30 1997

Mlltilll A~ AZIAH ItOYD ~H~NKtl liABBMsMl middot~ILIO~middot KCSJ~mN NAy~

I II i(

ELECTRONIC GAMING DEVICE STATISTICS

SLOT SLOT SLOT SLOT SLOT SLOT SLOT SLOT ACTUAL ACTUAL ACTUAL ACTUAL I HANDLE HANDLE HANDLE HANDLE WIN WIN WIN WIN PAYOUT 00 PAYOUT PAYOUT PAYOUT 00

FY98 FY 97 FY96 FY95 FYOO FY 97 FY 96 FY95 FY98 FY97 FY96 FY95 i 1

BOAT 7m -6199 7196 - 697 7195 bull 6196 794 bull 6195 7197 shy 6100 796 bull 6117 795 - 6196 7194 - 6195 71l1 - 6198 700 - 6117 7196 - 6100 794 bull 695

ARGOSY 106244975380 92418880490 9382091354) 45007837075 5245353725 5054992404 5942816233 3495045434 95OOIk 94530 93666 92235

WAR 20253220450 1963957125 19227927825 2630226700 1661451900 1579369500 1593438135 213569075 91797 91958( 91713 9188Ok

BOYD 53798844770 78200197200 62310037200 2869033586 3672975897 3867941946 94007 95303k 93793

~ARRAHS MH 117780402120 24888294985 5853322268 1279453269 95030 94959)

HARRAHSNKC 225014108285 231611410000 lm263846Jl3 85064064875 11724475616 11425500771 9321993358 4669010328 94769 95007 94755 94511

IHILTON 636414911830 36192047535 3705606Il64 1896935492 94177 94753

~CSTATION 162377455786 75747171824 9191699342 3984731000 94339 94739k

PLAYERS 101460073410 240roJ56775 5393384624 13OIl284662 94694 94582

i

PRESIDENT 73588683920 78567721900 79074762100 41647920200 4690709652 4830099303 4947361639 2691737644 93626 93852 93743 93057

IsTATION-ST CHAS 161922747110 189376051956 146662198670 61912001305 9083225512 10329557455 9243915720 4527476595 94390 94545 93706 926871

~T JO FRONTIER 19576383825 22056308406 22823200890 10085003450 1334616538 1354112447 1576400799 1070967293 93181 93861 93093 93342

STATE TOTALS 1105658393886 872717726700 601853504908 252348053605 60743081885 46715942360 36493947830 16867806369 94506 94648 93936 93316

ARGOSY - RIVERSIDE

Fiscal Year Ended June 30 1998 TOTAL TABLE TABLEOF TABLE SLOT SLOTOF SLOT WIN PER DAILY WIN DAILY WIN DAILY WIN DAJLYWIN

- MONTH AGR AGR TOTAL AGR WIN AGA TOTALAGR PAYOUT ADMISSIONS ADMISSION PER TABLE PEA SLOT PERPOSmON PER SQ FOOT

Julmiddot97

Aug-97

Sep-97

Oc~97

Nov-97

Decmiddot97

Janmiddot98

Feb-98

Mar-98

Apr-98

May-98

Junmiddot98

5194292

5379925

4691946

5351741

5007765

5237026

6389530

6201477

6278235

5956497

5673662

5823181

1250539

1404517

1157264

1333638

lv30105

1249075

1482965

1240486

1107522

1210306

1137267

i128057

I 2408

2611

2466

2492

2057

2385

2321

2000

1764

2032

2004

1937

2408

2556

2310

2438

1943

2304

2612

2225

1934

2278

2423

2371

3943753

3975407

3534682

4018103

39n660

3987950

4906566

4960992

5170713

4746191

4536394

4695124

7592

7389

7534

7508

7943

7615

7679

8000

8236

7968

7996

8Q6310

9412

9452

9487

9406

9543

9535

9496

9502

9520

9525

9547

9506

232229

249675

221006

263926

278619

284804

321055

322618

324378

294792

289189

274264

2237

2155

2123

2028

1797

1839

1990

1922

1935

2021

1962

2123 1--shy

80163

900_33

74184

85490

66032

80069

95062

79518

70995

n5B4

72902

72311 _

13428

13536

12035

13681

13543

13578

16706

16891

17605

16160

15446

15986

14811

15341

13379

15260

14279

14933

18219

17683

17902

16985

16178

16604

I sn

598

521

595

556

582

710

689

698

662

630

647

_____

TOTALS 67185278 14731741 2193 2315 52453537 7807 9506 33565~ 2002 78695 14~_ 15965 622

Fiscal Year Ended June 30 1997 TOTAL

MONTH AGR

Jul-96 7242647

Aug-96 7073796

Sep-96 6247587

Oct-96 5654429

Nov-96 6050324

Dec-96 5987073

Jan-97 5355953

Feb-97 5460117

TABLE

AGR

2299519

2265205

1642527

1558573

1748389

1736423

1456656

1572456

5497775 I 1308018Marmiddot97

TABLEOF

TOTALAGR

3175

3202

2629

2756

2890

2900

2720

2880

2379

5455728 1261102 f 2312Apr-97

5266768 1368628 I 2599Maymiddot97

4609823 1134599 I 2461Jun-97

69902019 19352095 I 2768TOTALS

TABLE

WIN

2681

2660

2345

2322

25_83

2580

2461

2430

2190

2212

2491

2268

2454

SLOT

AGR

4943128

4808591

4605060

4095856

4301935

4250650

3899296

3887662

4189757

4194626

3898140

3475225

50549924

SLOT OF

TOTALAGR

6825

6798

7371

7244

7110

7100

7280

7120

7621

7688

7401

75_39

7232k

SLOT

PAYOUT

9431

9448

9428

9478

9460

9479

9454

9450

9452

9428

9464

9471

9453

ADMISSIONS

316722

314802

286537

270320

280189

283619

251340

262039

270550

258895

244884

223526

3263423

WIN PER

ADMISSION

2287

22-47

2180

2092

2159

2111

2131

2084

2032

2107

2151

2062

2142

DAILY WIN

PER TABLE

132156

130184

94398

89573

100482

99794

83716

90371

75173

72477

78657

65207

92682

DAILY WIN

PER SLOT

17308

16837

16124

14341

15063

14883

13653

13612

14670

14687

13649

12168

14750

DAILY WIN DAlLY WIN

PER SQFOOTPER POSITION

20564 805

20085 786

In39 694

16055 628

67217179

16999 665 I 15207 595

60715503

15610 611

15490 606

14954 585

13089 512

16539 shy 647

November until the end of March

_ Furthermore the Tourism Commission had the authority to set the minimum number of cruises from April until October Therefore the boats could be docked for substantial periods during these months Moreover the original referendum allowed the boat operator to operate while remaining docked for mechanical problems adshyverse weather or other condishytions adversely affecting safe navigation

Upon receiving inforshymation from the United States Coast Guard and the US Army Corps of Engineers that rivers in Missouri present certain safety hazards that must be accounted for the legislature adopted a procedure for evaluating safety risks The riverboat gaming statute provides that all boats shall cruise unless the Commisshysion finds that the best interest ofMissouri and the safety of the public indicate the need for continuous docking Section 313805 (15) RSMo The statute also provides that in order for a boat to remain dockside the applicant must demonstrate that the project would benefit land-based development and permashynent job creation Therefore the law clearly instructs the Comshymission to consider projects that have significant investments in land-based development

The statute requires the Commission to hold hearings to

determine whether it is safe for each riverboat to cruise The result of each of these hearings has been that it is unsafe for vessels of this size carrying thousands of passengers to cruise The Gaming Commission has received uncontroverted testimony from dozens of experts including the United States Coast Guard who have attested to the perils of large passenger vessels cruising in high traffic areas on the Missouri River

The testimony by these experts regarding the perils of placing large passenger vessels in the navigable portions of these rivers was alanningly evidenced by three recent accidents involvshying Missouri riverboat gaming operations The first at the Aztar riverboat in Caruthersville involved a 30 by 70 barge half loaded with gravel that broke loose and struck the boarding ramp of the Aztar casino The second accident was the well-publicized incident where a grain barge broke loose and struck the entrance ramp to the Admiral in St Louis The collision broke the power lines COIDlected to the boat requiring the use of emergency generators Several months later another barge would strike the Admiral as further evidence of the dangers involved in being situated near the path of commercial river traffic

Fortunately in each instance tragedy was avoided and no one was injured The avoidance of injury is largely because of Gaming Commission policies regarding safety inspections and pennits and the fact that the vessels remain dockside thus minishymizing the risk ofcollision and maximizing the utilization of rescue facilities However the incidents demonstrate that the safest location for these facilities is in a protected basin off the navigable waterway The Coast Guard has consistently informed the Commission that protected basins represent the safest mode of operation for riverboat casinos

Introduction November 3 1998 marks the 6th amriversary of the Misshy

souri voters approval of riverboat gambling in Missouri Howshyever policy debates and legal wrangling delayed the opening of the states ftrst riverboat gambling operation until May 27 1994 The industry now holds 16 licenses at 10 casino properties and employs approximately 12000 people with an rumual payroll of approxishymately $269 million

Nevertheless rec~nt litigation has result in great uncertainty for many Missourians eIl1ployed in the riverboat gambling industry On November 23 1997 the Missouri Supreme Court issued its ruling in Alan y Missouri Gaming Commission The court held that to the extent that the legislatures deftnition of the Missomi and Mississippi Rivers authorized games of chance in basins that are not contiguous with the surface stream of those rivers the definition is unconstitutional

The Supreme Courts final decision in Akin was issued on December 23 1997 and on January 9 1998 the Commission issued Preliminary Orders for Disciplinary Action to all licensees operating riverboats in basins that are not contiguous to the surface stream ofthe Missouri or Mississippi River The discishyplinary actions propose that the companies authority to conduct games of chance be revoked The proposed orders are currently being appealed and affect 5 of the states 9 riverboat casino propshyerties

In light of the substantial policy issues now facing the General Assembly regarding riverboat gambling in Missouri the Commission thought it would be beneftcial to recount the history of the industrys creation its evolution and its prospects for the future

The 1992 Referendum In 1991 the Missouri General Assembly adopted House

Bill 149 ordering that the issue as to whether Missouri should allow riverboat gambling be referred to the voters On November 3 1992 Missouri voters approved the referendum by a 63 majority The ballot language for this measure read as follows

Authorizes riverboat gambling excursions on the Mississippi and Missouri Rivers regulated by the State Tourism Commission Excursions may originate where locally approved by the voters Five hundred dollar maximum loss limit per person per excursion The proposal is intended to produce increased General Revshyenue

While the original ballot language certainly implies that all gambling would occur during an excursion and thus that the boat would be cruising the rivers the text of the amendment plainly states otherwise The proposal passed by the people defined a gambling excursion as the time during which gambling games may be operated on an excursion gambling boat whether docked or during a cruise Gambling games may be continuously operated on an excursion gambling boat which is continuously docked (Missouri Session Laws 1991 HB 149149 sect A(sect 1) adopted by referendum eff Nov 3 1992) (emphasis added)

In fact the original referendum passed by the people specifically exempted boats on the S1 Louis riverfront from ever cruising the river Furthermore no boat would ever have to cruise from November to March Moreover the referendum allowed

exceptions from the cruising requirement in the case ofmechan ishycal problems adverse weather or other conditions adversely affecting safe navigation during the duration of the problem or condition or as authorized by the Commission during the off season

Therefore it is clear that the original referendwn did not promise cruising riverboats Not all boats were required to cruise none of the boats were required to cruise five months of the year and all boats could be exen1]Jted from cruising if it would pose safety problems

The Original Referendum Gets a Makeover Prior to the election 10 decide riverboat gambling in 1992

critics of some provisions of the referendum language began to emerge On October 23 1992 the Kansas City Star reported that the law did not bar convicted felons from holding a license to

i ~ ~

I ~

operate a gambling boat In addition some public officials began to question whether the tourism Commission was the proper agency to regulate the gambling industry whieh was predicted to be a significant tourist attraction (KC Star October 26 1992)

As a result after the referendum had been approved by the voters legislation wao introduced supported by then Governorshyelect Carnahan to place more stringent requirements on riverboat gamb ling licclLoces and to create a strong Gaming Commission to regulate the new industry

Senate Bills 10 amp 11 On April 29 1993 Governor Carnahan signed into law SBs

10 amp 11 creating the five member gaming Commission The bill carried an emergency clause and the Governor immediately apshypointed the first members

The Commission was given much more authority over the gaming industry than had previously been given to the Tourism Commission The COImnission could prioritize applications issue liquor licenses assess a wide array ofadministrative penalties inspect the licensees premises at any time decide the number type and location of gambling boats determine the times during which gambling may occur have access to all closed records relating applicants for licenses conduct hearings and be a trier of fact with regard to alleged violations of the gaming act and require licensees to release all information on its finances

In addition the industry was held to a higher standard having to prove its suitability for licensure by clear and convincing evidence rather than a preponderance of the evidence as had been the case under the provisions ofthe original referendum Felons are prohibited fi-om holding gaming licenses under the new act and the Commission is empowered to reopen licensing hearings at any time These requirements made it clear that a riverboat gambling

license was a privilege granted at the sole discretion of the State of Missouri and that the license carried no property rights

The Commission was vested with a strict code ofethics that prohibited members and staff from being employed by or having any financial interest in an applicant or licensee during their tenure with the Commission or for a two year period thereafter

Continuous Docking Language Clarified Senate Bills 10 amp 11 also added new language clarifYing

the original referendums vague provisions relating to cruising riverboats While SBs 10 amp 11 were being debated the legislature was made aware that the US Coast Guard had serious concerns about the safety of large passenger vessels on the Missouri River In a letter to the Missouri Port Authority Association dated Februshyary 5 1993 US Coast Guard Commander SP Cooper stated that I am concerned about the safety issues attendant to the operation of these [riverboat gambling] vessels Cooper went on to say that The large numbers ofpassengers on these vessels pose special problems for public safety organizations The Coast Guard willllot have a pennanent presence in these communities but will assist if resources are available

In response to the safety concerns raised by Captain Cooshyper local public officials in Kansas City and other safety experts SBs 10 amp 11 adopted a procedure for allowing the Commission to order riverboats to remain continuously docked if the safety of the public indicates the need for continuous docking (SBs 10 amp 11 Section 3 (15)

However some legislators and local public officials beshylieved dockside gaming was important for reasons other than safety Some public officials were concerned that riverboat compashynies might not honor commitments to home dock communities if the operation did not have immediate success In 1993 several

riverboat operators in Iowa had pulled anchor and sailed south in hopes oftaking advantage of the more favorable regulatory envishyronment in Mississippi

In order to address this issue language was added that would require the Commission to consider economic feasibility or impact that would benefit land based development and permanent job creation when making its decision whether dockside gaming was in the best interest ofMissouri However officials from the St Louis area did not want the issue of continuously docked boats tied to additional infrastructure requirements They believed that S1 Louis already had sufficiently developed its riverfront and therefore added language to the bill exempting the City of S1 Louis from the aforementioned requirement

Gaming Commission Begins Work

Supreme Court Intervention - Round One Troy Harris v Missouri Gaming Commission

On February 22 1994 the Misshysouri Supreme Court issued its opinion in Troy Harris v Missouri Garning Commis- sioll wherein it ruled that the legislature did not have the authority to allow games of chance 011 riverboats The Commisshysion argued that it was the voters who authorized games of chance by adopting the referendum language in November 1992 The Court agreed that the people lawfully authorized games of chance in the 1992 referendmn However it ruled that because the General Assembly

repealed the sections ofthe referendum authorizing games of chance and reenacted congruous language in SBs 10 amp 11 that the new law was an act of the General Assembly not the people and therefore subject to the limitations ofArticle III sect 39(9) ofthe Missouri Constitution prohibiting the General Assembly from authorizing games ofchance

The Court in Harris also found the language exempting the Admiral and the lease sites along the St Louis riverfront from cruising to be a facially special law Because special laws are presumed unconstitutional ill1leSS the party defending the law can demonstrate a substantial justification for the special treatment the Court remanded the issue back to circuit court for an evidenshytiary hearing

The Legislative Response to Harris The legislature responded quicldy to the Supreme Courts

decision in Harris by filing HJR 43 a constitutional amendment that would authorize the General Assembly to pennit games of chance on the Missouri and Mississippi Rivers The joint resolushytion was drafted to address the very nan-ow question raised by the court as to whether or not the General Assembly has the authority to authorize games of chance on riverboats (Transcript of Senate Ways amp Means Committee hearing February 2 1994 page 1)

The language adopted by the House Ways amp Means Comshymittee read in pertinent pmi as follows

Article III Section 39(e) Notwithstanding any prohibitions contained in this constitution includshying but not limited to the prohibition contained in subdivision (9) of section 39 of tlus article the General Assembly is authorized to pennit lotteries gift enterprises and games of skill or chance upon

the Mississippi and Missouri rivers as may be defined by the General Assembly

It appears that this language would have avoided the result in Akin whereby the Court ruled that the General Assembly did not have the authority to define the tenn river

This language concerned some members of the Senate because of the fear that by allowing the General Assembly to define the Missouri and Mississippi River it may allow for a broad definition that could be expanded to other areas of the state such as the Lake ortlle Ozarks (Transcript pages 8-9) Nevertheless the language that emerged from the Senate while more specific would be sinIilar to the House language

Section 39(e) The General Assembly may authoshyrize the issuance of licenses to pennit lotteries gift enterprises and games of skill or chance to be conducted on floating facilities upon the Missouri River and the Mississippi River in such numbers locations and manner all as or may be provided by law and regulations adopted pursuant to law and subject to such taxes as provided by law arId fees as provided by law or regulation adopted pursuant to law

However as the legislation moved through the process to a conference committee concern over the breadth of the language granting the General Assembly authority to pennit games of chance continued to grow The House rejected the Senates language and passed the House version The Senate refused to adopt the House version and both side appeared deadlocked Finally the following compromise language was adopted as a conference committee substitute

The general assembly is authorized to pennit only upon the Missouri and Mississippi Rivers lotteries gift enterprises and games of skill or chance to be conducted on excursion gambling boats and floating facilities

The conference committee substitute was adopted by both houses with bi-partisan support The Senate vote was 23-10 and the House vote was 107-48

While HJR 43 was truly agreed to and [mally passed in time to put the question before the voters in the April 5 1994 election the measure was defeated with 527011 in favor and 528278 opposed

The General Assembly was now faced with implementing the referendum adopted by 63 of the voters in 1992 without the games of chance that Harris declared to require constitutional authority In addition it was becoming increasingly clear that serious safety problems on the Missouri and Mississippi Rivers may preclude riverboat casinos from being able to cruise (Transhyscript page

Therefore the General Assembly adopted SB 740 which defined games of skill specifically authorized boats to be located in artificial basins and made minor revisions to the process for determining the conditions under which a boat may operate while continuously docked In addition the bill added new ethical standards and conflict of interest rules for the Gaming Commisshysion General Assembly Attorney Generals office Missouri State Highway Patrol peace officers and other public officials SB 740 was truly agreed to and finally passed with an emergency clause (EC) on May 12 1994 1be bill had bi-partisan support was adopted by a vote of 21-11 in the Senate (EC 24-8) and 93-63 in the House (EC 110-50)

On May 22 1994 the Commission implemented the provisions of the riverboat gambling act as amended by SB 740 and granted the first excursion gambling boat licenses to President Riverboat Casino on the Admiral and S1 Charles Riverfront Stashytion The licenses permitted the operators to offer only games of skill The inability to provide games of chance most importantly slot machines left the Missouri operators at a distinct disadvantage from their competitors in Illinois While Missourians initially flocked to the newer more elaborate Missouri riverboats the attraction soon dissipated In the first six months ofoperation the Missouri boatgt attracted fewer customers and generated less revshyenue than their Illinois competitors in East St Louis and Alton

The markets on the west side of the state presented a different situation Without competition from casinos in the same market with competitive advantages the riverboats licensed in Riverside and St Joseph on June 22 1994 fared better than their S1 Louis market counterparts Nevertheless the games of skill offered by the riverboats did not generate sufficient revenue to make the casinos profitable

In response to Harris and the failed April 1994 constitushytional amendment an initiative petition effort was mounted to allow voters to again decide whether riverboat casinos in Missouri should be allowed to ofler ganles of chance The effOlt was sucshycessful and on June 6 1994 the Secretary of State certified the following proposed constitutional amendment for the November 8 1994 ballot

Shall the General Assembly be authorized to pennit only upon the Mississippi River and the Missouri River lotteries gift enterprises and games ofchance to be conducted on excursion gambling boats and floating facilities This proposal would increase state

--

revenues from existing gaIning boats approximately $30000000 per year Impact on local governments unknown

The First Boat in a Basin While the licensees offering only games of skill were not

operating profitably in the summer of 1994 it did not deter the company constructing the first boat in a basin from completing its elaborate gambling complex containing the states first landshybased entertainment amenities On September 22 1994 the Commission issued a license for games of skill to Harrahs for its $89 million facility in North Kansas City

The Harrahs North Kansas City project consisted of a 60000 square foot land-based pavilion containing three restaurants and a permanently moored excursion gambling boat located in a protected coffer cell basin The facility offered 1800 parking spaces on its 60 acre site

It is important to note that when Missouri voters approved constitutional amendment authorizing games of chance on riverboat casinos with 943652 in favor and 807707 opposed a boat in a basin was licensed and operating at the Harrahs North Kansas City project Pursuant to voter approval the Commission amended the licenses ofArgosy-Riverside Harrahs-North Kansas City President Riverboat Casino-St Louis St Charles Riverfront Station and S1 Joseph Riverboat Partners to allow games ofchance on December 91994

The Dramatic Impact of Games of Chance The advent of games of chance would dramatically impact

the casino gambling industry in Missouri The most significant game of chance the slot machine now accounts for over 60 of total casino revenue As depicted in the chart on page 22 casino

revenue would more than double for the first quarter offiscal year 1996 when casinos offered games ofchance as opposed to the first quarter of fiscal year 1995 when riverboats were limited to games of skill

The addition ofgames of chance would also lead to the construction of bigger more elaborate projects through the addition of new facilities as well as the expansion of existing properties For example shortly after games of chance were introduced Station Casinos opened a second riverboat at its property in St Charles The new facility is larger and more lavish than its predeshycessor and would provide the necessary revenue base for the expansion of its non-gaming land-based amenities

Similarly armed with games of chance Harrahs North Kansas City quickly moved to expand its facility On April 12 1995 Harrahs advised the Commission of its request for approval ofa $70 million expansion The expansion proposal included a 200 room hotel 10000 square feet ofmeeting space a covered parking garage with 765 spaces a swimming pool exercise facilishyties video arcade gift shop expanded restaurant seating a full service car wash and a second gaming vessel with 40000 square feet ofgaming space to be located in a protected artificial basin The proposal was given tinal approval by the Commission on May 15 1996

Boat in Basin Controversy Emerges Although the fust boat in a basin had been operating since

September 22 1994 the first objection to allowing a riverboat to be located in a basin arose during Hiltons request for continuous docking status for its project in Kansas City On March 16 1995 attorneys representing Roy Fischer appeared at the Hilton dockside hearing to protest Hiltons proposal to locate its excursion gamshybling boat in a protected coffer celL Mr Fischer owned land in the

St Louis area that was under contract to a gaming company wishshying to build a project near a competing proposal for a boat in a basin in Maryland Heights

Mr Fischer argued that the Hilton proposal did not comply with the Missouri Constitution or the gaming statute He claimed that the voters approved cruising riverboats and while the legislashyture had provided for nalTOW exceptions to the cruising requireshyment it did not include artificial basins The Commission ruled that because the legislature defined the Missouri river as including artificial basins located within 1000 feet of the main channel that the Hilton boat was for purposes ofthe statute in the river Since the Commission did not have the authority to strike down the statute but was under an obligation to presume that it was constitushytional it followed the statute found that the Hilton boat met the criteria for continuous docking and granted it a license Although

this decision could have been appealed to the Westem District Court ofAppeals where the constitutionality ofthe statute could have been challenged Mr Fischer chose not to do so and the Commissions decision stood

On August 29 1996 over 17 months after the Conunission issued its ruling in the Hilton dockside case W Todd Akin filed a declaratory judgement action in Cole County Circuit Court seeking a determination that the statutes defming the Missouri and Mississippi rivers in the gaming act were unconstitutional The Cole COlll1ty Circuit Court would rule in favor of the Commission by issuing a fmding similar to the Commissions ruling in the Hilton dockside case However on November 251997 the Missouri Supreme Court would reverse the lower court decision and declare the gaming statute unconstitutional to the extent that it allows games of chance on riverboat casinos that are not contiguous to the surface stream of

Before and After Games of Chance September thru November

$40

en ti $30m u (])

a en 1994en ce g $20 1995ltl~

-0 2 en ~

0 $10 ltC

$0 Argosy Harrahs NKC President Stations St Charles St Joseph

the river As noted in the

section entitled Undershystanding Boats in Basins beginning on page 13 the Commission is currently seeking to revoke licenses for games of chance for facilities not in compliance with Akin The industry successfully submitted a ballot proposal that would reverse the impact ofAkin and it awaits consideration by the voters on November 3 1998

---

Number of Bingo Operators Continue to Decline The number of charitable bingo operators in Missouri declined in FY

98 for the third consecutive year As the chart at right depicts all classificashytions ofcharity bingo licenses have decreased The reason for the reduction is varied Some organizations were significantly weakened by the 120 tax increase dedicated to veterans homes that was imposed for approximately 10 months from 1993 to 1994 111e tax was repealed by SB 427 in 1994 however the legislation also included strict new standards that prevented convicted felons from being involved with bingo and gave the Gaming Conunission new tools to drive criminal elements out ofbingo and el1S~lle that taxes were properly paid loese new provisions led to some organizations being forced out of bingo and other vohllltarily surrendered their attributed to the increase in the number of licensed riverboat casinos in Missouri and adjoining states as wcll as the addition ofIndian casinos in Kansas Furthermore high stakes Indian bingo in Oklahoma as well as tour bus trips to high stakes Indian bingo halls in Iowa Ohio Oklahoma and as far away as Wisconsin continue to draw Missouri patrons away from resident charity bingo games that are faced with a myriad ofconstitutional restrictions

The introduction of progressive games and the availability ofpull tab games ofiering larger prizes have helped the charities to compete Nevertheshyless when faced with direct competition flom a riverboat or Indian casino or high stake1 Indian bingo hall the Missouri charitable operator is at a severe di sad vantage

900 Court Strikes Down Ban on Bingo 800

700Advertising 600

One of the most important events efiecting 500charitable bingo in Missouri occurred when United 400States District Court Judge Howard F Sachs has

issued a ruling in Association aCharitable Games 0 300 Missouri v Missouri Gaming Commission which 200 strikes down Missouris constitutional ban on the 100 advcltising of charity bingo games The twenty-one

0page opinion strikes down Article III Scction Regular

39(a)(7) of the Missouri Constitution ruling that it infringes on the charities First and Fourteenth

Amendment rights in violation ofthe United States Constitution Judge Sachs order also permanently enjoins the Gaming Commission from enforcing the provisions ofArticle III Section 39(a)(7)

The decision clears the way for charitable bingo operators suppliers and hall providers to begin advertising campaigns The new authority should allow charitable bingo operators to better compete with state lotteries Indian bingo halls and riverboat casino operations in Missouri and adjoining states

Seminars Help Charities Understand Rules The Gaming Commissions Bingo Division conducted a series of

three training seminars for charitable bingo operators in FY 98 loe training seminars which will be offered again in FY 99 are designed to help charity game operators understand the rules regulating bingo and to more effectively and efficiently process financial information required for proper oversight In addition the seminars offer state regulators the opportunity to interact with bingo workers and consider suggestions for changes in the regulatory process

During the seminars surveys are taken regarding specific changes charities would like to make to bingo rules or statutes As a result of input from seminar participants the Commission recently revised its regulation regarding bingo game starting times

bull FY96 BFY97

FY98

Manufacturer Hall Provider

Type of License

Special Pull-Tab Only Supplier

Type of License

Gaming Commission Fund Balance Report

Fiscal Year 1998

AMOUNT SUBTOTAL TOTAL

BEGINNING BALANCE 711191 $3184394214

REVENUE

Fees

A amp B Applicalion

Levell Occup AppflCation

Levell Occup Application

Supplier Application

Levell Occup Annual Fee

Levell Occup Annual Fee

Suppijer Annual Fee

Penalties

Level II Suppfier ApprlCation

tevelll Supplier Annual Fee

Admissions

LIcenses

A amp BAnnual

Liquor License

other

Administrative Income

Enforcement Reimbursemenls

Inlarest

TOTAL REVENUE

$39868096

$5111271

$55730000

$7044649

$1462534

$75852667

$15625005

$1000000

$566789

$755207

$3950971689

$85000000

$850000

$51738266

$4153987907

$85850000

$899797869

$5139635776

EXPENDITUREmiddot GAMING

Personal Servlee

Gaming Salaries

MSH P Salaries

MSHP Fringe Benefit

Gaming Fringe Benefit

$187943115

$528428065

$231211872

$86794952 $1034378004

AMOUNT SUBTOTAL TOTAL

Expense amp Equipement

Travel amp Vehicle Exp $23829354

Ob Expense $6405728

Ollice amp Comm Equip Purchase $4518882

Communicalions Expense $14404186

Inst amp Phys Plant Expense $11235062

Inst amp Phys Plant Equip Purchase $1546929

Data Processin~ Exp amp Equip $57427802

Professional Services $88852560

Ott19 r Ex pense $12078261

Refunds $53925585

Lease Payment $27348085 $301572434

Total Gaming Expenditures $1335950436

EXPENDITUREmiddot OTHER

Personal Services

DOR Salaries $2391600

Marney General Salaries $5832900

Audi1Drs Office Salaries $1062390 $9266890

Expense amp Equipment

OT for AukJ Tschnician $1619798

OT lor Radio Inslaller $1511316

MSHP Gasoline $14805461

MSHP Auk) Maintenance amp Repair $7042260

MSHP Vehicle Purchase $76505300

AuditorS Olice Expenses $1175403

Altorney General Expenses $1146543

Div ofYouUl Services $48004117

Dellerred Compensationmiddot Transler $4262061

Miscellaneous Translers $3065630774 $3221703033

Total Other Expenditures $3230969923

FUND BALANCE $3757089629

PROJECT SUMMAltY

UCENSE FY1998

UCENSEE DATE ADMISSIONS

PRESIDENT RIVERBOAT CASINO 27-MaY-94 3015066

MISSOURI INC I~------

ST CHARLES RIVERFRONT 27-May-94 I 5113507

STAllONINC 28middotDcc-94

MlSSOUFlI GAMING COMPANY 22-Jun-94 3356555

ST JOSEPH RIVERBOAT 24-JJnmiddot94 763663

PARTNERS ------shy

HARRAHS NOfmI 22middotSepmiddot94 6597496

KANSAS cm COOP 15-May-OO

AlTAR MISSOURI COOP 27middotprmiddot95 695910

BOYD KANSAS cm COOP (1) 13-Sep-95 1547667

I HILTON KANSAS cm CORP 11l-0I-96 26amp1567

__--shy

KANSAS cmSTAllON COOP 16-Janmiddot97 7257251

PLAYERS MARYLAND 11middotMarmiddot97 4435341

HElGHlS CORP

HARRAHS MARYLAND 11middotMar-97 4131872

HElGHlS CORP

GRAND TOTALS 39547895--shy --------shy

ADMISSION FEES FV 1998 GAMING TAX

STATE I ADJUSTED LOCAl

TOTAL LOCAL PORllON GROSS RECEIPTS TOTAL PORllON

6030132 3015006 57589734 11518154 1151815

-----shy

10227014 5113507 111750192 22350038 223i004

-shy

6713110 3356555 67185278 13437058 1343706

1527326 763663 17657758 3531551 353155

13194992 6597496 155261028 31052206 3105221

1391820 695910 22233407 4446681 444666

3095334 1547667 36149283 7239955 723995

5267134 2633567 50160689 10025829 1002563

---shy

14514502 7257251 129557501 25911500 2591150

-----shy rshy ------shy

8870682 4435341 76791268 15370264 1537026

8263744 4131872 78337484 15667497 1566750

79095790 39547895 802673621 160550732 16055073

ESTlMAlED GMlNG STATE CAPITAl TABLE SLOT GAMING SPACE

PORTION INVESlMENl EMPLOYEES GAMES MACHINe POSIllONS (SQFl)

10366338 62400000 868 60 1240 1441 58000

- -shy

20115034 172000000 1335 85 1853 2138 47000

12093350 104833803 848 45 1061 1205 30000

3178396 31718000 40B 21 450 520 18000

2]946985 171600000 1927 77 2076 2303 61600

4002013 56350000 438 24 454 544 10400

bull

6515959 147117343 652 45 1117 1255 28000

9023246 119600000 619 48 1023 1181 30000

-------shy

23320350 303000000 2205 178 3094 3755 140000

- -

I 13833238 140416374 1031 80 1330 1637

_

14100747 229852000 1502 47 1292 1428 52000

144495659 1539089520 12033 110 14990 17407 527000

bullbull Formulas used by the Licensees to arrive at total The ligures published in this report are subject to

Boyd Gaming closed casino operations on

ADMISSIONS SUMMARY

Fiscal Year Ended June 30 1998 STAlE

MQfUIJ ~tGQ~Y AZIAB 60YD IIAIlI1A1SNKC tlAllllAHS Mfj tll19fi lCsIARQIJ JgtLAVeas MESIDENI sroCHARI-sect SLlQ IQIAL

- JuI-97 46445800 12062600 27223800 121113000 63468600 37366000 132031400 75297000 55445600 88156200 12257000 670867000-shyAug-97 49935Q00 13694800 30333400 123247000 70461200 40902400 131404200 79956200 60164800 85255600 13070200 698444800

Sep-97 44201200 10771000 25757200 109841000 64971200 37801000 113801200 74779000 52686800 77543600 11699000 623852200 CJc97 52785200 10897000 29040600 108844400 66751600 40190400 114598000 68037000 51116800 64938200 11884400 639083800

Nov-97 55723800 11271000 2103000 108798400 67689600 40793200 120821200 69977400 51733000 82454200 11765200 645330000 shy -D00-97 56960800 11124600 25778200 104257600 62190000 37978400 1~402600 64596400 51869800 85468200 10890200 632516800

JaIl-98 64211000 11954000 28123800 114445200 63632200 43555000 124575600 73506200 53506400 90047600 11520600 679077600

Feb-98 64523600 12245800_0--24843400 10887120~ 70162000 48301800 1163~4~_ 70188200 54224400 84469000 12282000 666447800---

Mar-98 64875600 12208800 I 28861200 116534200 76134400 50417200_ ~84840oo 75423800 55031400 95485400 12753800 7162098001--shy ------shy shy

Apr-OOf-shy

58958400 10829000_--22917800 105066800 76801200 49537~ ~796oo 79932000 8347600 f-85233800 11415200 621418600

May-~ ~78378oo 11458800 22379400 103214800 74607800 50931400 120335800 84449000 56803800 82317200 15844000 680179800

Jun-98 54852800 10064600 19971600 95265600 1-- 69504600 48939400 115280200 70926000 52062800 81332400 17351000 636151000__shy-shy

- ----- --__ - shy c-- lQI~L 671311000 139182000 309533400 13194992~ 826374400 526713400 1451450200 ~87068200 603013200 1022701400 152732600 7909579000

- shy ---shy

Fiscal Year Ended June 30 1997 STAlE

IMQNItI ABGQS( AZJAS flOD tLABBAIIS flKC IIAHBAtlSMtI HlIJQN KcsIAIlQ~ P_lAYERS PmsJDEffl S1ampHABkES SJLw Ti)IAI J

-JuI-96 63344400 14062200 64923600 132012800 56577200 114893600 13478200 459292000

Aug-96 r- 82960400 14911800 57511000 140582400 62129000 115239400 14014600 467348600 f----~ - ----shy

Sep-96 ~3074oo 12481200 53636000 129795400 _82891400 104058200 13249400 433419000 -shy

CJc96 54064000 11817000 49327800 127195800 30645800 60144400 105243800 13507400 451946000---shyNov-96 56037800 12406600 40123200 122425000 51018600 58063400 107115600 12285400 459475600

Dec-96 56723800 1206i800 37402600 128369000 45836000 55978400 107557400 12391800 456324800--- Jan-97 50268000 11022000 33215000 112072800 38359600 107237600 46535800 1028114~_ 12020400 513542600-shy - shy

Febmiddot97 52407800 12732200 28803600 103874600 31086400 167718000 54495600 120388000 13762400 585288800---shyMar-97 54110000 13196200 31000400 117072800 53035600 33843000 158291600 54728000 55521600 112627200 14504600 6~7931 000--- -shy --- Apr-97 51779000 10787800 27776200 120231200 55161800 32425000 110967200 63366200 53039000 90637400 1250020~_ 628691000-----shyMaymiddot97 48976800 11002600 29489800 118187000 65059800 32043000 128140600 64866400 55814800 95478400 13075000 662134200

Jun-97 44705200 10785600 24509600 112941600 57206400 27780000 126707800 61610400 53544000 80392400 11581800 611764800

~

TQJA~ 652684600 147271000--- 477718800 1464760400 230483600 323037400 799062800 244571000 674734800 1256442800 156371200 6427138400

L- -

TAX SUMMARY

Fiscal Year Ended June 30 1998

1shy - shyMONTH MlGQ~Y AllAR ao-YQ

~97_ 103885840 35969785 618(8102

Aug-97 107598495 39994006 70420696

5ep-97 93838926 37041965 59354817

0097 106844786 33528915 67151835

Nov-97 f-- 100345336 33623570 58500240

Decmiddot97 104740514 36137836 58728169

Janmiddot98 127790608 37892423 65713905

Febmiddot98 124029550 40823756 57394319

Marmiddot98 125564705 40432198 67142793

Aprmiddot98 119129939 37104277 56326758

~98 113473237 37472225 5335699

Junmiddot98 116463624 34647176 48058144

f--------

IOJAL 13437O~560 444668132 723995477

tlAB1iA~~ ~AaBAIIS M~ HIJJON K~tlmiddot

275047819 107790267 74670455 219668049

266344318 118898181 75493081 225775682

253948121 114029974 70451785 198988638

247670005 123283217 72682254 198890462

257248749 125951518 75511594 208498696

235034489 113446034 75455313 203275080

266530468 125825940 84927032 220816197

252238300 13138998 93033175 206200892

283262667 150736030 95667042 228265226

262232833 150825517 92068167 219332592

259591421 163657514 99088349 235839216

246065390 140566494 93534693 225599298

3105220580 1566749684 1002582940 2591150028

il $TAlE PLAY~BS PR~ [t~ABLES _ c~I~L I()I~~

121771589 102643300 198456581 26374693 1328156480 128384864 114230170 182732252 29727109 1359598854 111539616 101079699 170582875 27453926 1238310342 116681218 97456134 186900408 29250163 1280353397 118567531 98658072 176872332 28700316 1282477954

116726921 98512809 188033506 27026966 1257117637 ~-

130098238 105313044 196194061 27768988 1388870904

124603269 106390146 178564026 28715751 1343732182

132127359 107038674 206536133 29894685 1466669512

148286693 16573734 188844283 28222781 1316947574 155256067 107607461 178280391 33743570 1437335150 134983080 96312133 182996984 36276177 1355503193

-- 1537026445 1151815376 2235003832 353155125 16055073179

Fiscal Year Ended June 30 1997

Mlltilll A~ AZIAH ItOYD ~H~NKtl liABBMsMl middot~ILIO~middot KCSJ~mN NAy~

I II i(

ELECTRONIC GAMING DEVICE STATISTICS

SLOT SLOT SLOT SLOT SLOT SLOT SLOT SLOT ACTUAL ACTUAL ACTUAL ACTUAL I HANDLE HANDLE HANDLE HANDLE WIN WIN WIN WIN PAYOUT 00 PAYOUT PAYOUT PAYOUT 00

FY98 FY 97 FY96 FY95 FYOO FY 97 FY 96 FY95 FY98 FY97 FY96 FY95 i 1

BOAT 7m -6199 7196 - 697 7195 bull 6196 794 bull 6195 7197 shy 6100 796 bull 6117 795 - 6196 7194 - 6195 71l1 - 6198 700 - 6117 7196 - 6100 794 bull 695

ARGOSY 106244975380 92418880490 9382091354) 45007837075 5245353725 5054992404 5942816233 3495045434 95OOIk 94530 93666 92235

WAR 20253220450 1963957125 19227927825 2630226700 1661451900 1579369500 1593438135 213569075 91797 91958( 91713 9188Ok

BOYD 53798844770 78200197200 62310037200 2869033586 3672975897 3867941946 94007 95303k 93793

~ARRAHS MH 117780402120 24888294985 5853322268 1279453269 95030 94959)

HARRAHSNKC 225014108285 231611410000 lm263846Jl3 85064064875 11724475616 11425500771 9321993358 4669010328 94769 95007 94755 94511

IHILTON 636414911830 36192047535 3705606Il64 1896935492 94177 94753

~CSTATION 162377455786 75747171824 9191699342 3984731000 94339 94739k

PLAYERS 101460073410 240roJ56775 5393384624 13OIl284662 94694 94582

i

PRESIDENT 73588683920 78567721900 79074762100 41647920200 4690709652 4830099303 4947361639 2691737644 93626 93852 93743 93057

IsTATION-ST CHAS 161922747110 189376051956 146662198670 61912001305 9083225512 10329557455 9243915720 4527476595 94390 94545 93706 926871

~T JO FRONTIER 19576383825 22056308406 22823200890 10085003450 1334616538 1354112447 1576400799 1070967293 93181 93861 93093 93342

STATE TOTALS 1105658393886 872717726700 601853504908 252348053605 60743081885 46715942360 36493947830 16867806369 94506 94648 93936 93316

ARGOSY - RIVERSIDE

Fiscal Year Ended June 30 1998 TOTAL TABLE TABLEOF TABLE SLOT SLOTOF SLOT WIN PER DAILY WIN DAILY WIN DAILY WIN DAJLYWIN

- MONTH AGR AGR TOTAL AGR WIN AGA TOTALAGR PAYOUT ADMISSIONS ADMISSION PER TABLE PEA SLOT PERPOSmON PER SQ FOOT

Julmiddot97

Aug-97

Sep-97

Oc~97

Nov-97

Decmiddot97

Janmiddot98

Feb-98

Mar-98

Apr-98

May-98

Junmiddot98

5194292

5379925

4691946

5351741

5007765

5237026

6389530

6201477

6278235

5956497

5673662

5823181

1250539

1404517

1157264

1333638

lv30105

1249075

1482965

1240486

1107522

1210306

1137267

i128057

I 2408

2611

2466

2492

2057

2385

2321

2000

1764

2032

2004

1937

2408

2556

2310

2438

1943

2304

2612

2225

1934

2278

2423

2371

3943753

3975407

3534682

4018103

39n660

3987950

4906566

4960992

5170713

4746191

4536394

4695124

7592

7389

7534

7508

7943

7615

7679

8000

8236

7968

7996

8Q6310

9412

9452

9487

9406

9543

9535

9496

9502

9520

9525

9547

9506

232229

249675

221006

263926

278619

284804

321055

322618

324378

294792

289189

274264

2237

2155

2123

2028

1797

1839

1990

1922

1935

2021

1962

2123 1--shy

80163

900_33

74184

85490

66032

80069

95062

79518

70995

n5B4

72902

72311 _

13428

13536

12035

13681

13543

13578

16706

16891

17605

16160

15446

15986

14811

15341

13379

15260

14279

14933

18219

17683

17902

16985

16178

16604

I sn

598

521

595

556

582

710

689

698

662

630

647

_____

TOTALS 67185278 14731741 2193 2315 52453537 7807 9506 33565~ 2002 78695 14~_ 15965 622

Fiscal Year Ended June 30 1997 TOTAL

MONTH AGR

Jul-96 7242647

Aug-96 7073796

Sep-96 6247587

Oct-96 5654429

Nov-96 6050324

Dec-96 5987073

Jan-97 5355953

Feb-97 5460117

TABLE

AGR

2299519

2265205

1642527

1558573

1748389

1736423

1456656

1572456

5497775 I 1308018Marmiddot97

TABLEOF

TOTALAGR

3175

3202

2629

2756

2890

2900

2720

2880

2379

5455728 1261102 f 2312Apr-97

5266768 1368628 I 2599Maymiddot97

4609823 1134599 I 2461Jun-97

69902019 19352095 I 2768TOTALS

TABLE

WIN

2681

2660

2345

2322

25_83

2580

2461

2430

2190

2212

2491

2268

2454

SLOT

AGR

4943128

4808591

4605060

4095856

4301935

4250650

3899296

3887662

4189757

4194626

3898140

3475225

50549924

SLOT OF

TOTALAGR

6825

6798

7371

7244

7110

7100

7280

7120

7621

7688

7401

75_39

7232k

SLOT

PAYOUT

9431

9448

9428

9478

9460

9479

9454

9450

9452

9428

9464

9471

9453

ADMISSIONS

316722

314802

286537

270320

280189

283619

251340

262039

270550

258895

244884

223526

3263423

WIN PER

ADMISSION

2287

22-47

2180

2092

2159

2111

2131

2084

2032

2107

2151

2062

2142

DAILY WIN

PER TABLE

132156

130184

94398

89573

100482

99794

83716

90371

75173

72477

78657

65207

92682

DAILY WIN

PER SLOT

17308

16837

16124

14341

15063

14883

13653

13612

14670

14687

13649

12168

14750

DAILY WIN DAlLY WIN

PER SQFOOTPER POSITION

20564 805

20085 786

In39 694

16055 628

67217179

16999 665 I 15207 595

60715503

15610 611

15490 606

14954 585

13089 512

16539 shy 647

Introduction November 3 1998 marks the 6th amriversary of the Misshy

souri voters approval of riverboat gambling in Missouri Howshyever policy debates and legal wrangling delayed the opening of the states ftrst riverboat gambling operation until May 27 1994 The industry now holds 16 licenses at 10 casino properties and employs approximately 12000 people with an rumual payroll of approxishymately $269 million

Nevertheless rec~nt litigation has result in great uncertainty for many Missourians eIl1ployed in the riverboat gambling industry On November 23 1997 the Missouri Supreme Court issued its ruling in Alan y Missouri Gaming Commission The court held that to the extent that the legislatures deftnition of the Missomi and Mississippi Rivers authorized games of chance in basins that are not contiguous with the surface stream of those rivers the definition is unconstitutional

The Supreme Courts final decision in Akin was issued on December 23 1997 and on January 9 1998 the Commission issued Preliminary Orders for Disciplinary Action to all licensees operating riverboats in basins that are not contiguous to the surface stream ofthe Missouri or Mississippi River The discishyplinary actions propose that the companies authority to conduct games of chance be revoked The proposed orders are currently being appealed and affect 5 of the states 9 riverboat casino propshyerties

In light of the substantial policy issues now facing the General Assembly regarding riverboat gambling in Missouri the Commission thought it would be beneftcial to recount the history of the industrys creation its evolution and its prospects for the future

The 1992 Referendum In 1991 the Missouri General Assembly adopted House

Bill 149 ordering that the issue as to whether Missouri should allow riverboat gambling be referred to the voters On November 3 1992 Missouri voters approved the referendum by a 63 majority The ballot language for this measure read as follows

Authorizes riverboat gambling excursions on the Mississippi and Missouri Rivers regulated by the State Tourism Commission Excursions may originate where locally approved by the voters Five hundred dollar maximum loss limit per person per excursion The proposal is intended to produce increased General Revshyenue

While the original ballot language certainly implies that all gambling would occur during an excursion and thus that the boat would be cruising the rivers the text of the amendment plainly states otherwise The proposal passed by the people defined a gambling excursion as the time during which gambling games may be operated on an excursion gambling boat whether docked or during a cruise Gambling games may be continuously operated on an excursion gambling boat which is continuously docked (Missouri Session Laws 1991 HB 149149 sect A(sect 1) adopted by referendum eff Nov 3 1992) (emphasis added)

In fact the original referendum passed by the people specifically exempted boats on the S1 Louis riverfront from ever cruising the river Furthermore no boat would ever have to cruise from November to March Moreover the referendum allowed

exceptions from the cruising requirement in the case ofmechan ishycal problems adverse weather or other conditions adversely affecting safe navigation during the duration of the problem or condition or as authorized by the Commission during the off season

Therefore it is clear that the original referendwn did not promise cruising riverboats Not all boats were required to cruise none of the boats were required to cruise five months of the year and all boats could be exen1]Jted from cruising if it would pose safety problems

The Original Referendum Gets a Makeover Prior to the election 10 decide riverboat gambling in 1992

critics of some provisions of the referendum language began to emerge On October 23 1992 the Kansas City Star reported that the law did not bar convicted felons from holding a license to

i ~ ~

I ~

operate a gambling boat In addition some public officials began to question whether the tourism Commission was the proper agency to regulate the gambling industry whieh was predicted to be a significant tourist attraction (KC Star October 26 1992)

As a result after the referendum had been approved by the voters legislation wao introduced supported by then Governorshyelect Carnahan to place more stringent requirements on riverboat gamb ling licclLoces and to create a strong Gaming Commission to regulate the new industry

Senate Bills 10 amp 11 On April 29 1993 Governor Carnahan signed into law SBs

10 amp 11 creating the five member gaming Commission The bill carried an emergency clause and the Governor immediately apshypointed the first members

The Commission was given much more authority over the gaming industry than had previously been given to the Tourism Commission The COImnission could prioritize applications issue liquor licenses assess a wide array ofadministrative penalties inspect the licensees premises at any time decide the number type and location of gambling boats determine the times during which gambling may occur have access to all closed records relating applicants for licenses conduct hearings and be a trier of fact with regard to alleged violations of the gaming act and require licensees to release all information on its finances

In addition the industry was held to a higher standard having to prove its suitability for licensure by clear and convincing evidence rather than a preponderance of the evidence as had been the case under the provisions ofthe original referendum Felons are prohibited fi-om holding gaming licenses under the new act and the Commission is empowered to reopen licensing hearings at any time These requirements made it clear that a riverboat gambling

license was a privilege granted at the sole discretion of the State of Missouri and that the license carried no property rights

The Commission was vested with a strict code ofethics that prohibited members and staff from being employed by or having any financial interest in an applicant or licensee during their tenure with the Commission or for a two year period thereafter

Continuous Docking Language Clarified Senate Bills 10 amp 11 also added new language clarifYing

the original referendums vague provisions relating to cruising riverboats While SBs 10 amp 11 were being debated the legislature was made aware that the US Coast Guard had serious concerns about the safety of large passenger vessels on the Missouri River In a letter to the Missouri Port Authority Association dated Februshyary 5 1993 US Coast Guard Commander SP Cooper stated that I am concerned about the safety issues attendant to the operation of these [riverboat gambling] vessels Cooper went on to say that The large numbers ofpassengers on these vessels pose special problems for public safety organizations The Coast Guard willllot have a pennanent presence in these communities but will assist if resources are available

In response to the safety concerns raised by Captain Cooshyper local public officials in Kansas City and other safety experts SBs 10 amp 11 adopted a procedure for allowing the Commission to order riverboats to remain continuously docked if the safety of the public indicates the need for continuous docking (SBs 10 amp 11 Section 3 (15)

However some legislators and local public officials beshylieved dockside gaming was important for reasons other than safety Some public officials were concerned that riverboat compashynies might not honor commitments to home dock communities if the operation did not have immediate success In 1993 several

riverboat operators in Iowa had pulled anchor and sailed south in hopes oftaking advantage of the more favorable regulatory envishyronment in Mississippi

In order to address this issue language was added that would require the Commission to consider economic feasibility or impact that would benefit land based development and permanent job creation when making its decision whether dockside gaming was in the best interest ofMissouri However officials from the St Louis area did not want the issue of continuously docked boats tied to additional infrastructure requirements They believed that S1 Louis already had sufficiently developed its riverfront and therefore added language to the bill exempting the City of S1 Louis from the aforementioned requirement

Gaming Commission Begins Work

Supreme Court Intervention - Round One Troy Harris v Missouri Gaming Commission

On February 22 1994 the Misshysouri Supreme Court issued its opinion in Troy Harris v Missouri Garning Commis- sioll wherein it ruled that the legislature did not have the authority to allow games of chance 011 riverboats The Commisshysion argued that it was the voters who authorized games of chance by adopting the referendum language in November 1992 The Court agreed that the people lawfully authorized games of chance in the 1992 referendmn However it ruled that because the General Assembly

repealed the sections ofthe referendum authorizing games of chance and reenacted congruous language in SBs 10 amp 11 that the new law was an act of the General Assembly not the people and therefore subject to the limitations ofArticle III sect 39(9) ofthe Missouri Constitution prohibiting the General Assembly from authorizing games ofchance

The Court in Harris also found the language exempting the Admiral and the lease sites along the St Louis riverfront from cruising to be a facially special law Because special laws are presumed unconstitutional ill1leSS the party defending the law can demonstrate a substantial justification for the special treatment the Court remanded the issue back to circuit court for an evidenshytiary hearing

The Legislative Response to Harris The legislature responded quicldy to the Supreme Courts

decision in Harris by filing HJR 43 a constitutional amendment that would authorize the General Assembly to pennit games of chance on the Missouri and Mississippi Rivers The joint resolushytion was drafted to address the very nan-ow question raised by the court as to whether or not the General Assembly has the authority to authorize games of chance on riverboats (Transcript of Senate Ways amp Means Committee hearing February 2 1994 page 1)

The language adopted by the House Ways amp Means Comshymittee read in pertinent pmi as follows

Article III Section 39(e) Notwithstanding any prohibitions contained in this constitution includshying but not limited to the prohibition contained in subdivision (9) of section 39 of tlus article the General Assembly is authorized to pennit lotteries gift enterprises and games of skill or chance upon

the Mississippi and Missouri rivers as may be defined by the General Assembly

It appears that this language would have avoided the result in Akin whereby the Court ruled that the General Assembly did not have the authority to define the tenn river

This language concerned some members of the Senate because of the fear that by allowing the General Assembly to define the Missouri and Mississippi River it may allow for a broad definition that could be expanded to other areas of the state such as the Lake ortlle Ozarks (Transcript pages 8-9) Nevertheless the language that emerged from the Senate while more specific would be sinIilar to the House language

Section 39(e) The General Assembly may authoshyrize the issuance of licenses to pennit lotteries gift enterprises and games of skill or chance to be conducted on floating facilities upon the Missouri River and the Mississippi River in such numbers locations and manner all as or may be provided by law and regulations adopted pursuant to law and subject to such taxes as provided by law arId fees as provided by law or regulation adopted pursuant to law

However as the legislation moved through the process to a conference committee concern over the breadth of the language granting the General Assembly authority to pennit games of chance continued to grow The House rejected the Senates language and passed the House version The Senate refused to adopt the House version and both side appeared deadlocked Finally the following compromise language was adopted as a conference committee substitute

The general assembly is authorized to pennit only upon the Missouri and Mississippi Rivers lotteries gift enterprises and games of skill or chance to be conducted on excursion gambling boats and floating facilities

The conference committee substitute was adopted by both houses with bi-partisan support The Senate vote was 23-10 and the House vote was 107-48

While HJR 43 was truly agreed to and [mally passed in time to put the question before the voters in the April 5 1994 election the measure was defeated with 527011 in favor and 528278 opposed

The General Assembly was now faced with implementing the referendum adopted by 63 of the voters in 1992 without the games of chance that Harris declared to require constitutional authority In addition it was becoming increasingly clear that serious safety problems on the Missouri and Mississippi Rivers may preclude riverboat casinos from being able to cruise (Transhyscript page

Therefore the General Assembly adopted SB 740 which defined games of skill specifically authorized boats to be located in artificial basins and made minor revisions to the process for determining the conditions under which a boat may operate while continuously docked In addition the bill added new ethical standards and conflict of interest rules for the Gaming Commisshysion General Assembly Attorney Generals office Missouri State Highway Patrol peace officers and other public officials SB 740 was truly agreed to and finally passed with an emergency clause (EC) on May 12 1994 1be bill had bi-partisan support was adopted by a vote of 21-11 in the Senate (EC 24-8) and 93-63 in the House (EC 110-50)

On May 22 1994 the Commission implemented the provisions of the riverboat gambling act as amended by SB 740 and granted the first excursion gambling boat licenses to President Riverboat Casino on the Admiral and S1 Charles Riverfront Stashytion The licenses permitted the operators to offer only games of skill The inability to provide games of chance most importantly slot machines left the Missouri operators at a distinct disadvantage from their competitors in Illinois While Missourians initially flocked to the newer more elaborate Missouri riverboats the attraction soon dissipated In the first six months ofoperation the Missouri boatgt attracted fewer customers and generated less revshyenue than their Illinois competitors in East St Louis and Alton

The markets on the west side of the state presented a different situation Without competition from casinos in the same market with competitive advantages the riverboats licensed in Riverside and St Joseph on June 22 1994 fared better than their S1 Louis market counterparts Nevertheless the games of skill offered by the riverboats did not generate sufficient revenue to make the casinos profitable

In response to Harris and the failed April 1994 constitushytional amendment an initiative petition effort was mounted to allow voters to again decide whether riverboat casinos in Missouri should be allowed to ofler ganles of chance The effOlt was sucshycessful and on June 6 1994 the Secretary of State certified the following proposed constitutional amendment for the November 8 1994 ballot

Shall the General Assembly be authorized to pennit only upon the Mississippi River and the Missouri River lotteries gift enterprises and games ofchance to be conducted on excursion gambling boats and floating facilities This proposal would increase state

--

revenues from existing gaIning boats approximately $30000000 per year Impact on local governments unknown

The First Boat in a Basin While the licensees offering only games of skill were not

operating profitably in the summer of 1994 it did not deter the company constructing the first boat in a basin from completing its elaborate gambling complex containing the states first landshybased entertainment amenities On September 22 1994 the Commission issued a license for games of skill to Harrahs for its $89 million facility in North Kansas City

The Harrahs North Kansas City project consisted of a 60000 square foot land-based pavilion containing three restaurants and a permanently moored excursion gambling boat located in a protected coffer cell basin The facility offered 1800 parking spaces on its 60 acre site

It is important to note that when Missouri voters approved constitutional amendment authorizing games of chance on riverboat casinos with 943652 in favor and 807707 opposed a boat in a basin was licensed and operating at the Harrahs North Kansas City project Pursuant to voter approval the Commission amended the licenses ofArgosy-Riverside Harrahs-North Kansas City President Riverboat Casino-St Louis St Charles Riverfront Station and S1 Joseph Riverboat Partners to allow games ofchance on December 91994

The Dramatic Impact of Games of Chance The advent of games of chance would dramatically impact

the casino gambling industry in Missouri The most significant game of chance the slot machine now accounts for over 60 of total casino revenue As depicted in the chart on page 22 casino

revenue would more than double for the first quarter offiscal year 1996 when casinos offered games ofchance as opposed to the first quarter of fiscal year 1995 when riverboats were limited to games of skill

The addition ofgames of chance would also lead to the construction of bigger more elaborate projects through the addition of new facilities as well as the expansion of existing properties For example shortly after games of chance were introduced Station Casinos opened a second riverboat at its property in St Charles The new facility is larger and more lavish than its predeshycessor and would provide the necessary revenue base for the expansion of its non-gaming land-based amenities

Similarly armed with games of chance Harrahs North Kansas City quickly moved to expand its facility On April 12 1995 Harrahs advised the Commission of its request for approval ofa $70 million expansion The expansion proposal included a 200 room hotel 10000 square feet ofmeeting space a covered parking garage with 765 spaces a swimming pool exercise facilishyties video arcade gift shop expanded restaurant seating a full service car wash and a second gaming vessel with 40000 square feet ofgaming space to be located in a protected artificial basin The proposal was given tinal approval by the Commission on May 15 1996

Boat in Basin Controversy Emerges Although the fust boat in a basin had been operating since

September 22 1994 the first objection to allowing a riverboat to be located in a basin arose during Hiltons request for continuous docking status for its project in Kansas City On March 16 1995 attorneys representing Roy Fischer appeared at the Hilton dockside hearing to protest Hiltons proposal to locate its excursion gamshybling boat in a protected coffer celL Mr Fischer owned land in the

St Louis area that was under contract to a gaming company wishshying to build a project near a competing proposal for a boat in a basin in Maryland Heights

Mr Fischer argued that the Hilton proposal did not comply with the Missouri Constitution or the gaming statute He claimed that the voters approved cruising riverboats and while the legislashyture had provided for nalTOW exceptions to the cruising requireshyment it did not include artificial basins The Commission ruled that because the legislature defined the Missouri river as including artificial basins located within 1000 feet of the main channel that the Hilton boat was for purposes ofthe statute in the river Since the Commission did not have the authority to strike down the statute but was under an obligation to presume that it was constitushytional it followed the statute found that the Hilton boat met the criteria for continuous docking and granted it a license Although

this decision could have been appealed to the Westem District Court ofAppeals where the constitutionality ofthe statute could have been challenged Mr Fischer chose not to do so and the Commissions decision stood

On August 29 1996 over 17 months after the Conunission issued its ruling in the Hilton dockside case W Todd Akin filed a declaratory judgement action in Cole County Circuit Court seeking a determination that the statutes defming the Missouri and Mississippi rivers in the gaming act were unconstitutional The Cole COlll1ty Circuit Court would rule in favor of the Commission by issuing a fmding similar to the Commissions ruling in the Hilton dockside case However on November 251997 the Missouri Supreme Court would reverse the lower court decision and declare the gaming statute unconstitutional to the extent that it allows games of chance on riverboat casinos that are not contiguous to the surface stream of

Before and After Games of Chance September thru November

$40

en ti $30m u (])

a en 1994en ce g $20 1995ltl~

-0 2 en ~

0 $10 ltC

$0 Argosy Harrahs NKC President Stations St Charles St Joseph

the river As noted in the

section entitled Undershystanding Boats in Basins beginning on page 13 the Commission is currently seeking to revoke licenses for games of chance for facilities not in compliance with Akin The industry successfully submitted a ballot proposal that would reverse the impact ofAkin and it awaits consideration by the voters on November 3 1998

---

Number of Bingo Operators Continue to Decline The number of charitable bingo operators in Missouri declined in FY

98 for the third consecutive year As the chart at right depicts all classificashytions ofcharity bingo licenses have decreased The reason for the reduction is varied Some organizations were significantly weakened by the 120 tax increase dedicated to veterans homes that was imposed for approximately 10 months from 1993 to 1994 111e tax was repealed by SB 427 in 1994 however the legislation also included strict new standards that prevented convicted felons from being involved with bingo and gave the Gaming Conunission new tools to drive criminal elements out ofbingo and el1S~lle that taxes were properly paid loese new provisions led to some organizations being forced out of bingo and other vohllltarily surrendered their attributed to the increase in the number of licensed riverboat casinos in Missouri and adjoining states as wcll as the addition ofIndian casinos in Kansas Furthermore high stakes Indian bingo in Oklahoma as well as tour bus trips to high stakes Indian bingo halls in Iowa Ohio Oklahoma and as far away as Wisconsin continue to draw Missouri patrons away from resident charity bingo games that are faced with a myriad ofconstitutional restrictions

The introduction of progressive games and the availability ofpull tab games ofiering larger prizes have helped the charities to compete Nevertheshyless when faced with direct competition flom a riverboat or Indian casino or high stake1 Indian bingo hall the Missouri charitable operator is at a severe di sad vantage

900 Court Strikes Down Ban on Bingo 800

700Advertising 600

One of the most important events efiecting 500charitable bingo in Missouri occurred when United 400States District Court Judge Howard F Sachs has

issued a ruling in Association aCharitable Games 0 300 Missouri v Missouri Gaming Commission which 200 strikes down Missouris constitutional ban on the 100 advcltising of charity bingo games The twenty-one

0page opinion strikes down Article III Scction Regular

39(a)(7) of the Missouri Constitution ruling that it infringes on the charities First and Fourteenth

Amendment rights in violation ofthe United States Constitution Judge Sachs order also permanently enjoins the Gaming Commission from enforcing the provisions ofArticle III Section 39(a)(7)

The decision clears the way for charitable bingo operators suppliers and hall providers to begin advertising campaigns The new authority should allow charitable bingo operators to better compete with state lotteries Indian bingo halls and riverboat casino operations in Missouri and adjoining states

Seminars Help Charities Understand Rules The Gaming Commissions Bingo Division conducted a series of

three training seminars for charitable bingo operators in FY 98 loe training seminars which will be offered again in FY 99 are designed to help charity game operators understand the rules regulating bingo and to more effectively and efficiently process financial information required for proper oversight In addition the seminars offer state regulators the opportunity to interact with bingo workers and consider suggestions for changes in the regulatory process

During the seminars surveys are taken regarding specific changes charities would like to make to bingo rules or statutes As a result of input from seminar participants the Commission recently revised its regulation regarding bingo game starting times

bull FY96 BFY97

FY98

Manufacturer Hall Provider

Type of License

Special Pull-Tab Only Supplier

Type of License

Gaming Commission Fund Balance Report

Fiscal Year 1998

AMOUNT SUBTOTAL TOTAL

BEGINNING BALANCE 711191 $3184394214

REVENUE

Fees

A amp B Applicalion

Levell Occup AppflCation

Levell Occup Application

Supplier Application

Levell Occup Annual Fee

Levell Occup Annual Fee

Suppijer Annual Fee

Penalties

Level II Suppfier ApprlCation

tevelll Supplier Annual Fee

Admissions

LIcenses

A amp BAnnual

Liquor License

other

Administrative Income

Enforcement Reimbursemenls

Inlarest

TOTAL REVENUE

$39868096

$5111271

$55730000

$7044649

$1462534

$75852667

$15625005

$1000000

$566789

$755207

$3950971689

$85000000

$850000

$51738266

$4153987907

$85850000

$899797869

$5139635776

EXPENDITUREmiddot GAMING

Personal Servlee

Gaming Salaries

MSH P Salaries

MSHP Fringe Benefit

Gaming Fringe Benefit

$187943115

$528428065

$231211872

$86794952 $1034378004

AMOUNT SUBTOTAL TOTAL

Expense amp Equipement

Travel amp Vehicle Exp $23829354

Ob Expense $6405728

Ollice amp Comm Equip Purchase $4518882

Communicalions Expense $14404186

Inst amp Phys Plant Expense $11235062

Inst amp Phys Plant Equip Purchase $1546929

Data Processin~ Exp amp Equip $57427802

Professional Services $88852560

Ott19 r Ex pense $12078261

Refunds $53925585

Lease Payment $27348085 $301572434

Total Gaming Expenditures $1335950436

EXPENDITUREmiddot OTHER

Personal Services

DOR Salaries $2391600

Marney General Salaries $5832900

Audi1Drs Office Salaries $1062390 $9266890

Expense amp Equipment

OT for AukJ Tschnician $1619798

OT lor Radio Inslaller $1511316

MSHP Gasoline $14805461

MSHP Auk) Maintenance amp Repair $7042260

MSHP Vehicle Purchase $76505300

AuditorS Olice Expenses $1175403

Altorney General Expenses $1146543

Div ofYouUl Services $48004117

Dellerred Compensationmiddot Transler $4262061

Miscellaneous Translers $3065630774 $3221703033

Total Other Expenditures $3230969923

FUND BALANCE $3757089629

PROJECT SUMMAltY

UCENSE FY1998

UCENSEE DATE ADMISSIONS

PRESIDENT RIVERBOAT CASINO 27-MaY-94 3015066

MISSOURI INC I~------

ST CHARLES RIVERFRONT 27-May-94 I 5113507

STAllONINC 28middotDcc-94

MlSSOUFlI GAMING COMPANY 22-Jun-94 3356555

ST JOSEPH RIVERBOAT 24-JJnmiddot94 763663

PARTNERS ------shy

HARRAHS NOfmI 22middotSepmiddot94 6597496

KANSAS cm COOP 15-May-OO

AlTAR MISSOURI COOP 27middotprmiddot95 695910

BOYD KANSAS cm COOP (1) 13-Sep-95 1547667

I HILTON KANSAS cm CORP 11l-0I-96 26amp1567

__--shy

KANSAS cmSTAllON COOP 16-Janmiddot97 7257251

PLAYERS MARYLAND 11middotMarmiddot97 4435341

HElGHlS CORP

HARRAHS MARYLAND 11middotMar-97 4131872

HElGHlS CORP

GRAND TOTALS 39547895--shy --------shy

ADMISSION FEES FV 1998 GAMING TAX

STATE I ADJUSTED LOCAl

TOTAL LOCAL PORllON GROSS RECEIPTS TOTAL PORllON

6030132 3015006 57589734 11518154 1151815

-----shy

10227014 5113507 111750192 22350038 223i004

-shy

6713110 3356555 67185278 13437058 1343706

1527326 763663 17657758 3531551 353155

13194992 6597496 155261028 31052206 3105221

1391820 695910 22233407 4446681 444666

3095334 1547667 36149283 7239955 723995

5267134 2633567 50160689 10025829 1002563

---shy

14514502 7257251 129557501 25911500 2591150

-----shy rshy ------shy

8870682 4435341 76791268 15370264 1537026

8263744 4131872 78337484 15667497 1566750

79095790 39547895 802673621 160550732 16055073

ESTlMAlED GMlNG STATE CAPITAl TABLE SLOT GAMING SPACE

PORTION INVESlMENl EMPLOYEES GAMES MACHINe POSIllONS (SQFl)

10366338 62400000 868 60 1240 1441 58000

- -shy

20115034 172000000 1335 85 1853 2138 47000

12093350 104833803 848 45 1061 1205 30000

3178396 31718000 40B 21 450 520 18000

2]946985 171600000 1927 77 2076 2303 61600

4002013 56350000 438 24 454 544 10400

bull

6515959 147117343 652 45 1117 1255 28000

9023246 119600000 619 48 1023 1181 30000

-------shy

23320350 303000000 2205 178 3094 3755 140000

- -

I 13833238 140416374 1031 80 1330 1637

_

14100747 229852000 1502 47 1292 1428 52000

144495659 1539089520 12033 110 14990 17407 527000

bullbull Formulas used by the Licensees to arrive at total The ligures published in this report are subject to

Boyd Gaming closed casino operations on

ADMISSIONS SUMMARY

Fiscal Year Ended June 30 1998 STAlE

MQfUIJ ~tGQ~Y AZIAB 60YD IIAIlI1A1SNKC tlAllllAHS Mfj tll19fi lCsIARQIJ JgtLAVeas MESIDENI sroCHARI-sect SLlQ IQIAL

- JuI-97 46445800 12062600 27223800 121113000 63468600 37366000 132031400 75297000 55445600 88156200 12257000 670867000-shyAug-97 49935Q00 13694800 30333400 123247000 70461200 40902400 131404200 79956200 60164800 85255600 13070200 698444800

Sep-97 44201200 10771000 25757200 109841000 64971200 37801000 113801200 74779000 52686800 77543600 11699000 623852200 CJc97 52785200 10897000 29040600 108844400 66751600 40190400 114598000 68037000 51116800 64938200 11884400 639083800

Nov-97 55723800 11271000 2103000 108798400 67689600 40793200 120821200 69977400 51733000 82454200 11765200 645330000 shy -D00-97 56960800 11124600 25778200 104257600 62190000 37978400 1~402600 64596400 51869800 85468200 10890200 632516800

JaIl-98 64211000 11954000 28123800 114445200 63632200 43555000 124575600 73506200 53506400 90047600 11520600 679077600

Feb-98 64523600 12245800_0--24843400 10887120~ 70162000 48301800 1163~4~_ 70188200 54224400 84469000 12282000 666447800---

Mar-98 64875600 12208800 I 28861200 116534200 76134400 50417200_ ~84840oo 75423800 55031400 95485400 12753800 7162098001--shy ------shy shy

Apr-OOf-shy

58958400 10829000_--22917800 105066800 76801200 49537~ ~796oo 79932000 8347600 f-85233800 11415200 621418600

May-~ ~78378oo 11458800 22379400 103214800 74607800 50931400 120335800 84449000 56803800 82317200 15844000 680179800

Jun-98 54852800 10064600 19971600 95265600 1-- 69504600 48939400 115280200 70926000 52062800 81332400 17351000 636151000__shy-shy

- ----- --__ - shy c-- lQI~L 671311000 139182000 309533400 13194992~ 826374400 526713400 1451450200 ~87068200 603013200 1022701400 152732600 7909579000

- shy ---shy

Fiscal Year Ended June 30 1997 STAlE

IMQNItI ABGQS( AZJAS flOD tLABBAIIS flKC IIAHBAtlSMtI HlIJQN KcsIAIlQ~ P_lAYERS PmsJDEffl S1ampHABkES SJLw Ti)IAI J

-JuI-96 63344400 14062200 64923600 132012800 56577200 114893600 13478200 459292000

Aug-96 r- 82960400 14911800 57511000 140582400 62129000 115239400 14014600 467348600 f----~ - ----shy

Sep-96 ~3074oo 12481200 53636000 129795400 _82891400 104058200 13249400 433419000 -shy

CJc96 54064000 11817000 49327800 127195800 30645800 60144400 105243800 13507400 451946000---shyNov-96 56037800 12406600 40123200 122425000 51018600 58063400 107115600 12285400 459475600

Dec-96 56723800 1206i800 37402600 128369000 45836000 55978400 107557400 12391800 456324800--- Jan-97 50268000 11022000 33215000 112072800 38359600 107237600 46535800 1028114~_ 12020400 513542600-shy - shy

Febmiddot97 52407800 12732200 28803600 103874600 31086400 167718000 54495600 120388000 13762400 585288800---shyMar-97 54110000 13196200 31000400 117072800 53035600 33843000 158291600 54728000 55521600 112627200 14504600 6~7931 000--- -shy --- Apr-97 51779000 10787800 27776200 120231200 55161800 32425000 110967200 63366200 53039000 90637400 1250020~_ 628691000-----shyMaymiddot97 48976800 11002600 29489800 118187000 65059800 32043000 128140600 64866400 55814800 95478400 13075000 662134200

Jun-97 44705200 10785600 24509600 112941600 57206400 27780000 126707800 61610400 53544000 80392400 11581800 611764800

~

TQJA~ 652684600 147271000--- 477718800 1464760400 230483600 323037400 799062800 244571000 674734800 1256442800 156371200 6427138400

L- -

TAX SUMMARY

Fiscal Year Ended June 30 1998

1shy - shyMONTH MlGQ~Y AllAR ao-YQ

~97_ 103885840 35969785 618(8102

Aug-97 107598495 39994006 70420696

5ep-97 93838926 37041965 59354817

0097 106844786 33528915 67151835

Nov-97 f-- 100345336 33623570 58500240

Decmiddot97 104740514 36137836 58728169

Janmiddot98 127790608 37892423 65713905

Febmiddot98 124029550 40823756 57394319

Marmiddot98 125564705 40432198 67142793

Aprmiddot98 119129939 37104277 56326758

~98 113473237 37472225 5335699

Junmiddot98 116463624 34647176 48058144

f--------

IOJAL 13437O~560 444668132 723995477

tlAB1iA~~ ~AaBAIIS M~ HIJJON K~tlmiddot

275047819 107790267 74670455 219668049

266344318 118898181 75493081 225775682

253948121 114029974 70451785 198988638

247670005 123283217 72682254 198890462

257248749 125951518 75511594 208498696

235034489 113446034 75455313 203275080

266530468 125825940 84927032 220816197

252238300 13138998 93033175 206200892

283262667 150736030 95667042 228265226

262232833 150825517 92068167 219332592

259591421 163657514 99088349 235839216

246065390 140566494 93534693 225599298

3105220580 1566749684 1002582940 2591150028

il $TAlE PLAY~BS PR~ [t~ABLES _ c~I~L I()I~~

121771589 102643300 198456581 26374693 1328156480 128384864 114230170 182732252 29727109 1359598854 111539616 101079699 170582875 27453926 1238310342 116681218 97456134 186900408 29250163 1280353397 118567531 98658072 176872332 28700316 1282477954

116726921 98512809 188033506 27026966 1257117637 ~-

130098238 105313044 196194061 27768988 1388870904

124603269 106390146 178564026 28715751 1343732182

132127359 107038674 206536133 29894685 1466669512

148286693 16573734 188844283 28222781 1316947574 155256067 107607461 178280391 33743570 1437335150 134983080 96312133 182996984 36276177 1355503193

-- 1537026445 1151815376 2235003832 353155125 16055073179

Fiscal Year Ended June 30 1997

Mlltilll A~ AZIAH ItOYD ~H~NKtl liABBMsMl middot~ILIO~middot KCSJ~mN NAy~

I II i(

ELECTRONIC GAMING DEVICE STATISTICS

SLOT SLOT SLOT SLOT SLOT SLOT SLOT SLOT ACTUAL ACTUAL ACTUAL ACTUAL I HANDLE HANDLE HANDLE HANDLE WIN WIN WIN WIN PAYOUT 00 PAYOUT PAYOUT PAYOUT 00

FY98 FY 97 FY96 FY95 FYOO FY 97 FY 96 FY95 FY98 FY97 FY96 FY95 i 1

BOAT 7m -6199 7196 - 697 7195 bull 6196 794 bull 6195 7197 shy 6100 796 bull 6117 795 - 6196 7194 - 6195 71l1 - 6198 700 - 6117 7196 - 6100 794 bull 695

ARGOSY 106244975380 92418880490 9382091354) 45007837075 5245353725 5054992404 5942816233 3495045434 95OOIk 94530 93666 92235

WAR 20253220450 1963957125 19227927825 2630226700 1661451900 1579369500 1593438135 213569075 91797 91958( 91713 9188Ok

BOYD 53798844770 78200197200 62310037200 2869033586 3672975897 3867941946 94007 95303k 93793

~ARRAHS MH 117780402120 24888294985 5853322268 1279453269 95030 94959)

HARRAHSNKC 225014108285 231611410000 lm263846Jl3 85064064875 11724475616 11425500771 9321993358 4669010328 94769 95007 94755 94511

IHILTON 636414911830 36192047535 3705606Il64 1896935492 94177 94753

~CSTATION 162377455786 75747171824 9191699342 3984731000 94339 94739k

PLAYERS 101460073410 240roJ56775 5393384624 13OIl284662 94694 94582

i

PRESIDENT 73588683920 78567721900 79074762100 41647920200 4690709652 4830099303 4947361639 2691737644 93626 93852 93743 93057

IsTATION-ST CHAS 161922747110 189376051956 146662198670 61912001305 9083225512 10329557455 9243915720 4527476595 94390 94545 93706 926871

~T JO FRONTIER 19576383825 22056308406 22823200890 10085003450 1334616538 1354112447 1576400799 1070967293 93181 93861 93093 93342

STATE TOTALS 1105658393886 872717726700 601853504908 252348053605 60743081885 46715942360 36493947830 16867806369 94506 94648 93936 93316

ARGOSY - RIVERSIDE

Fiscal Year Ended June 30 1998 TOTAL TABLE TABLEOF TABLE SLOT SLOTOF SLOT WIN PER DAILY WIN DAILY WIN DAILY WIN DAJLYWIN

- MONTH AGR AGR TOTAL AGR WIN AGA TOTALAGR PAYOUT ADMISSIONS ADMISSION PER TABLE PEA SLOT PERPOSmON PER SQ FOOT

Julmiddot97

Aug-97

Sep-97

Oc~97

Nov-97

Decmiddot97

Janmiddot98

Feb-98

Mar-98

Apr-98

May-98

Junmiddot98

5194292

5379925

4691946

5351741

5007765

5237026

6389530

6201477

6278235

5956497

5673662

5823181

1250539

1404517

1157264

1333638

lv30105

1249075

1482965

1240486

1107522

1210306

1137267

i128057

I 2408

2611

2466

2492

2057

2385

2321

2000

1764

2032

2004

1937

2408

2556

2310

2438

1943

2304

2612

2225

1934

2278

2423

2371

3943753

3975407

3534682

4018103

39n660

3987950

4906566

4960992

5170713

4746191

4536394

4695124

7592

7389

7534

7508

7943

7615

7679

8000

8236

7968

7996

8Q6310

9412

9452

9487

9406

9543

9535

9496

9502

9520

9525

9547

9506

232229

249675

221006

263926

278619

284804

321055

322618

324378

294792

289189

274264

2237

2155

2123

2028

1797

1839

1990

1922

1935

2021

1962

2123 1--shy

80163

900_33

74184

85490

66032

80069

95062

79518

70995

n5B4

72902

72311 _

13428

13536

12035

13681

13543

13578

16706

16891

17605

16160

15446

15986

14811

15341

13379

15260

14279

14933

18219

17683

17902

16985

16178

16604

I sn

598

521

595

556

582

710

689

698

662

630

647

_____

TOTALS 67185278 14731741 2193 2315 52453537 7807 9506 33565~ 2002 78695 14~_ 15965 622

Fiscal Year Ended June 30 1997 TOTAL

MONTH AGR

Jul-96 7242647

Aug-96 7073796

Sep-96 6247587

Oct-96 5654429

Nov-96 6050324

Dec-96 5987073

Jan-97 5355953

Feb-97 5460117

TABLE

AGR

2299519

2265205

1642527

1558573

1748389

1736423

1456656

1572456

5497775 I 1308018Marmiddot97

TABLEOF

TOTALAGR

3175

3202

2629

2756

2890

2900

2720

2880

2379

5455728 1261102 f 2312Apr-97

5266768 1368628 I 2599Maymiddot97

4609823 1134599 I 2461Jun-97

69902019 19352095 I 2768TOTALS

TABLE

WIN

2681

2660

2345

2322

25_83

2580

2461

2430

2190

2212

2491

2268

2454

SLOT

AGR

4943128

4808591

4605060

4095856

4301935

4250650

3899296

3887662

4189757

4194626

3898140

3475225

50549924

SLOT OF

TOTALAGR

6825

6798

7371

7244

7110

7100

7280

7120

7621

7688

7401

75_39

7232k

SLOT

PAYOUT

9431

9448

9428

9478

9460

9479

9454

9450

9452

9428

9464

9471

9453

ADMISSIONS

316722

314802

286537

270320

280189

283619

251340

262039

270550

258895

244884

223526

3263423

WIN PER

ADMISSION

2287

22-47

2180

2092

2159

2111

2131

2084

2032

2107

2151

2062

2142

DAILY WIN

PER TABLE

132156

130184

94398

89573

100482

99794

83716

90371

75173

72477

78657

65207

92682

DAILY WIN

PER SLOT

17308

16837

16124

14341

15063

14883

13653

13612

14670

14687

13649

12168

14750

DAILY WIN DAlLY WIN

PER SQFOOTPER POSITION

20564 805

20085 786

In39 694

16055 628

67217179

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