Special House Commission to Study Gaming State of Rhode Island January 23, 2003

1. Special House Commission to Study GamingState of Rhode IslandJanuary 23, 2003

3. Representative Clients Ameristar Argosy Aztar Binion/Horseshoe Blue Chip Caesars Harrah�s Hyatt Pinnacle Trump

4. Indiana? Yes! Ranks Third in FY 2001 Tax Revenue from Gaming

5. Fastest Growing Gaming Markets: 2000-2001

6. As the commercial gaming industry has expanded throughout the United States, the gross annual revenue has steadily increased to over $140B in 2001. Gaming revenues are generated from pari-mutuel wagering, lotteries, casinos, legal bookmaking, bingo and Indian reservations. Over the past decade, spending on casino gaming has increased significantly, from 11.5B in 1990 to an estimated $47B in 2001 ($28.1B excluding unreported Native American gaming activity). Industry Overview

7. Nearly every state in the US offers some form of gambling: Lotteries Resorts like Las Vegas, Atlantic City, Biloxi Riverboats in Illinois, Indiana, Louisiana, Missouri, Iowa, and throughout the nation�s heartland Over 150 Indian reservations Industry Overview

8. States with Lotteries

9. States with Casinos (Riverboat or Land-based)

10. States with Native American Casinos

11. States with Lotteries, Casinos (Commercial or Native American) or Pari-mutuel

12. Riverboat gaming was first established in the Midwest with the State of Iowa in 4/91; Illinois followed in 11/91 and Indiana in 12/95. Riverboat gaming revenue for the year ended December 31, 2001 in Illinois and Indiana neared $2B: YE 12/31/01 (in 000s) Illinois $1,783,958 Indiana $1,841,841 TOTAL $3,625,799 Industry Overview � Beyond Nevada and New Jersey

13. Admission and wagering taxes levied by the states of Illinois and Indiana in 2001 amounted to $1.1 billion (not including the state income taxes on the profits). Other states in the Midwest which conduct riverboat gaming and their related 2001 gaming revenues are noted below: YE 12/31/01 (in 000�s) Iowa $886,996 Missouri $1,049,216 Michigan has three commercial casinos operating in Detroit. These opened between 1999 and 2000 in temporary facilities. Combined casino revenues in 2001 were slightly over $1B. Industry Overview � Beyond Nevada and New Jersey

14. Throughout the US there are approximately 290 tribal gaming operations which generated $12.7B in revenues in 2001 (less than 10% of the total industry*). Native American Casinos

15. States With Greatest Gaming Tax Revenues

17. Typical Casino Patron = �Typical American� Patrons compared to U.S. Population: Caucasian (76% vs. 76% of total population) Married or engaged (61% vs. 59%) Male (45% vs. 48%) Median age over 21 (45 vs. 46) At least some college (55% vs. 52%) Median household income ($50k vs. $41k) White collar (46% vs. 41%) Homeowner (73% vs. 68%) Demographics

18. Methodology: Demand-driven/Market-driven Bottom-up approach Don�t subscribe to �IYBITWC� philosophy Back-testing shows we�re conservative Example (from our 2000 forecast of Indiana�s 2001 market): How to Get There - Our Market Study of West Warwick

19. How to Get There - Our Market Study of West Warwick

22. Overview: Enabling Legislation Regulatory Body Regulatory Standards Enforcement and Penalties

23. Enabling Legislation Local Developer Agreements Provide for direct, local �compacts� with developer: Local taxes/fees Local hiring/purchasing requirements Infrastructure funding Community involvement Charitable activities Licensing requirements Owner/operator Suppliers Occupations

24. Enabling Legislation (cont.) Create regulatory body Number of commissioners/directors Powers and duties of the body Address political contributions by licensees Set operating parameters Minimum legal age Permissible games/wager amounts Cash or cashless wagering? Operating hours/calendar

25. Regulatory Body Commission appointments Commissioner criteria Geographic representation Professional skills � accounting/finance, law, government, social services Political party affiliation balance Appointment power Governor, Legislature, combination Commission staff

28. Regulatory Standards/Duties Conduct licensing/renewal process Investigate applicants/licensees for suitability Investigate alleged rule violations Administer enforcement/disciplinary actions Collect reimbursement by licensee of all administrative or enforcement costs Report Illinois offers an example of good monthly reporting (Appendix)

29. Enforcement and Penalties Cash business = need for tight controls Regulatory agents on-site during all operating hours Continual audit/testing of security and reporting controls Need for swift, effective investigations and penalties Fines must be properly scaled to have force Example: $95k fine for failure to disclose a contract (Illinois) Example: $8k fine for granting access to a minor (Indiana) Example: 3-day quasi-shutdown for improper advertising (Indiana) Casino operator was required to �make good� to employees and its host community so the shutdown was revenue-neutral to them

30. Appendices A: Illinois Gaming Board Monthly Riverboat Casino Report (December, 2002) B: Useful References

31. Appendix A: Illinois Gaming Board Monthly Riverboat Casino Report December 2002

32. Appendix B: Useful References Indiana Riverboat Gaming Laws (IC �4-33) http://www.ai.org/legislative/ic/code/title4/ar33/index.html Illinois Riverboat Gaming Laws (230 ILCS 10) http://www.legis.state.il.us/ilcs/ch230/ch230act10.htm Indiana Gaming Commission http://www.state.in.us/gaming/ Illinois Gaming Board http://www.igb.state.il.us/