APPENDIX H
BELOIT MARKET AND IMPACT ASSESSMENT
Market and Impact Assessment for Retail, Gaming, and Waterpark Hotel Development: Beloit, Wisconsin
Prepared for:
Analytical Environmental Services
June 2018
Prepared by:
The Innovation Group 400 North Peters Street Suite 206 New Orleans, LA 70130 504.523.0888 www.theinnovationgroup.com
Draft
Beloit Market and Impact Assessment
Table of Contents
INTRODUCTION...... 1 SITE ANALYSIS ...... 2 ECONOMIC AND DEMOGRAPHIC ANALYSIS ...... 3 POPULATION ...... 3 Total Population ...... 6 Gamer Population ...... 6 2017 Population by Race and Ethnicity...... 7 INCOME ...... 8 National and Regional Trends ...... 8 Local Ring Income ...... 9 EMPLOYMENT ...... 11 National Trends ...... 11 Regional Labor Force ...... 12 Major Employers ...... 15 TOURISM ...... 16 Activities and Local Attractions ...... 16 Impact ...... 16 Weather ...... 16 TRAFFIC ...... 17 GAMING LOCAL MARKET SUPPLY ...... 19 BELOIT COMPETITIVE MARKET ...... 19 LEGISLATIVE BACKGROUND OF NATIVE AMERICAN GAMING ...... 19 Native American Casinos ...... 19 Commercial Casinos ...... 20 CHICAGOLAND ...... 21 MISSISSIPPI VALLEY (IOWA AND ILLINOIS) ...... 22 GAMING MARKET ANALYSIS (ALTERNATIVES A & B) ...... 24 METHODOLOGY ...... 24 MARKET CARVE-OUT ...... 26 MODEL CALIBRATION ...... 28 FORECAST RESULTS ...... 30 Alternative A ...... 30 Alternative B ...... 31 HOTEL & INDOOR WATERPARK ASSESSMENT (ALTERNATIVE A ONLY) ...... 33 REGIONAL MARKET RESEARCH ...... 33
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Indoor Waterpark Hotels ...... 33 Existing Non-Waterpark Lodging Market ...... 36 COMPARABLE WATER PARK HOTEL PERFORMANCE ...... 38 Target Market Statistical Analysis ...... 38 ESTIMATED HOTEL DEMAND ...... 38 RETAIL ASSESSMENT (ALTERNATIVES A & C) ...... 39 EXISTING CONDITIONS ...... 39 MARKET RESEARCH...... 41 Big Box Development Overview ...... 41 Outlet Development Overview ...... 45 Sales Estimate Alternative A ...... 47 Sales Estimate Alternative C ...... 47 ECONOMIC IMPACT ASSESSMENT ...... 49 METHODOLOGY ...... 49 ONGOING ECONOMIC IMPACTS ...... 51 ONGOING OPERATION INPUTS ...... 51 Casino Operations ...... 51 Retail Development Operations ...... 52 ECONOMIC IMPACTS FROM OPERATIONS ...... 52 Alternative A ...... 52 Alternative B ...... 55 Alternative C ...... 57 CONSTRUCTION IMPACTS ...... 59 ESTIMATED CONSTRUCTION COSTS ...... 59 ECONOMIC IMPACTS FROM CONSTRUCTION ...... 60 Alternative A ...... 60 Alternative B ...... 62 Alternative C ...... 64 COMPETITIVE EFFECTS ANALYSIS ...... 67 IMPACTS ON REGIONAL CASINOS (ALTERNATIVES A & B) ...... 67 IMPACT ON LOCAL BUSINESS ...... 67 Secondary Research ...... 67 Waterpark Hotel (Alternative A only) ...... 71 Retail Development (Alternatives A & C) ...... 71 SOCIAL AND COMMUNITY IMPACT ANALYSIS ...... 72 SECTION ONE: POPULATION AND EMPLOYMENT RELATED IMPACTS ...... 73 EMPLOYMENT IMPACT ...... 73 HOUSEHOLD AND POPULATION IMPACT ...... 76 SCHOOL IMPACT ...... 77 HOUSING IMPACT ...... 79 CONCLUSION ...... 81
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SECTION TWO: MUNICIPAL SERVICES IMPACT ...... 82 Police ...... 82 Fire ...... 83 Emergency Medical Services (EMS) ...... 83 COMPARATIVE ANALYSIS ...... 83 Criminal Incident Rates ...... 83 Average Service Call Rates ...... 87 Fire Incident Rates ...... 88 Average Fire/EMS Incident Rates ...... 91 CONCLUSION AND LOCAL IMPLICATIONS ...... 91 Fiscal Impacts and Municipal Services ...... 92 CONCLUSION ...... 97 APPENDIX A: PROBLEM GAMBLING RESEARCH...... 98 DEFINITION AND PREVALENCE ...... 98 IMPLICATIONS ...... 99 APPENDIX B: CASINOS AND CRIME ...... 101 SECONDARY RESEARCH ...... 101 TESTIMONIALS FROM SELECT CASINO JURISDICTIONS ...... 104 APPENDIX C: INNOVATION GROUP QUALIFICATIONS ...... 107 Recent Social, Community & Economic Impact Experience ...... 107 Additional Public Sector Related Experience ...... 110 The Innovation Group Project Team ...... 113
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INTRODUCTION This report is a market assessment and economic and community impact analysis for a proposed Ho-Chunk Nation casino resort and major retail development in Beloit, Wisconsin. Three alternative development scenarios are analyzed:
Alternative A (Preferred): x Casino: 2,200 slot machines and 50 table games. x Hotel—300 rooms, indoor waterpark, and conference facilities. x Food & Beverage—Buffet 350 seats, Café 200 seats, Specialty Tenant 130 seats, Food Court Tenant 150 seats, Sports Bar 200 seats, Internet Bar/Lounge 2,000 square-feet, and Green Lounge 4,000 square-feet. x Retail center—175,000 square feet.
Alternative B (Reduced Intensity): x Casino: 1,600 slot machines and 30 table games. x Food & Beverage—Buffet 350 seats, Café 200 seats, Sports Bar 200 seats, Internet Bar/Lounge 2,000 square-feet, and Green Lounge 4,000 square-feet.
Alternative C (Non-Gaming): x Retail center—175,000 square feet.
The report assesses the demand potential for gaming, hotel, waterpark, and retail. The Gaming Market Assessment for the proposed project forecasts the patronage and revenues generated by the market area, and the capture of visitation expected for the facility based on the demographics of the surrounding population and tourists visiting the region. The report contains a Competitive Effects section assessing the projected impacts of the casino on existing casinos in the market and the impacts of the development on local businesses.
The impact study is comprised of the construction and ongoing operations of the proposed facilities. This includes roughly 137,000 square-feet for the casino, 98,800 square-feet for food and beverage space, and. Additionally, the impact study covers the 300-room hotel, 40,000 square- feet waterpark, 25,500 square-feet of meeting/entertainment space, and parking facilities to accommodate 5,000 vehicles.
For the purpose of the analysis we have assumed first full year of operations in all scenarios to be 2021. Operating impacts are expressed in Year Two operations, and construction impacts in Year Zero or 2020. We understand that the actual development timeline could be significantly later, with construction occurring as late as 2025 and first full year of operation 2026. These delays would not materially alter the results of the forecasts or impacts contained in the report, in the
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Site Analysis The proposed casino location is in Rock County, Wisconsin in the city of Beloit. The location is north of the Wisconsin-Illinois border and south of the Wisconsin city of Janesville. The city is home to the Beloit International Film Festival (BIFF) which includes over 100 features, documentaries, and shorts. Beloit also attracts visitors to its Angel Museum, which holds the Guinness World Record for most angel figurines.
Two interstate highways directly serve Beloit. I-39/90 runs north-south through the eastern half of the incorporated city and immediately adjacent to the proposed casino site. Interstate 43, which runs east-west between Beloit and Milwaukee, terminates at I-39/90 in the northeast quarter of the city.
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ECONOMIC AND DEMOGRAPHIC ANALYSIS This section assesses specific economic and demographic characteristics within the Beloit area that have the ability to affect future demand for gaming and hospitality. The analysis will evaluate the area’s potential to draw new sources of leisure demand as well as continuing its support of existing facilities in the area.
Some of the factors we analyzed, including population, income, and employment trends, have implications for the participation rates and growth forecasts utilized in the gaming market analysis. Wisconsin, Illinois and National statistics were used as benchmarks to provide context for local trends.
Population For the purposes of the economic/demographic analysis, we assessed the population within a two- hour driving distance of Beloit, Wisconsin in four time bands: 0-30 minutes, 30-60 minutes, 60- 90 minutes, and 90-120 minutes. Drive times were used as opposed to simple concentric rings because the Beloit site’s adjacency to Interstate 39/90 will create market areas that extend beyond those of a regular ring pattern.
The following maps show these drive-time bands and the adult population density for the Beloit market area. Adult is defined as 21 years of age and over. HCG-Madison is an 18-and-up facility but all other casinos in the market area have 21 as the minimum gaming age.
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Beloit Adult Population Density
Within the 120-minute market, the largest population concentration is in the Chicago area. Potawatomi, on the outskirts of the 90-120 minute ring also has a relatively high population concentration. Within an hour drive of the site, Madison has the largest population, followed by
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Rockford in the 0-30 minute market. The map below provides a finer grain presentation of population density in 0-60 minute market.
Beloit Adult Population Density 0-60 Minutes
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Total Population The 0-30 minute drive ring for Beloit is relatively rural, while the 30-60, 60-90 and 90-120 minute drive rings include the cities of Madison, Chicago, and Milwaukee. In terms of population, the 0- 30 minute drive ring has a negative Compound Annual Growth rate (CAGR) over the next five years. However, the 30-60 minute drive range has a growth rate greater than the Wisconsin state average. The Wisconsin and Illinois statewide growth rate averages are smaller than the national average. The national growth rate has been largely driven by Hispanic immigration, a trend from which Wisconsin and Illinois remain relatively insulated.
Total Population CAGR CAGR Ring 2010 2017 2022 2010-2017 2017-2022 0-30 min 492,174 483,714 480,839 -0.25% -0.12% 30-60 min 1,428,579 1,473,258 1,502,428 0.44% 0.39% 60-90 min 5,832,247 5,903,577 5,956,069 0.17% 0.18% 90-120 min 4,800,193 4,842,918 4,873,008 0.13% 0.12% Area Total 12,476,119 12,627,991 12,737,163 0.17% 0.17% Illinois 12,830,632 12,850,799 12,875,864 0.02% 0.04% Wisconsin 5,686,986 5,793,918 5,881,734 0.27% 0.30% National 308,745,538 325,139,271 337,393,057 0.74% 0.74% Source: IXPRESS/Nielsen Claritas; The Innovation Group
Gamer Population The adult population (over 21 years old, or those legally allowed to play at Class III facilities in Wisconsin) within a two-hour drive of Beloit accounts for 73.1% of the population in 2017. Adult population is highly consistent throughout the study area; within each ring, adults represent approximately 73% of the population. This percentage is close to that of Illinois, Wisconsin, and the nation as a whole.
The adult population within two hours of the Beloit site is expected to increase slightly from 2017- 2022. On average, the study area’s adult population will grow at a rate about half that of the national average and slightly greater than that of Illinois statewide averages and slightly below Wisconsin statewide averages. Notably, the adult population in the innermost ring is expected to remain relatively stagnant, despite the anticipated decline in total population.
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Population Over 21 Yrs. % of Total % of Total CAGR Ring 2017 Population 2022 Population 2017-2022 0-30 min 351,533 72.67% 353,543 73.53% 0.11% 30-60 min 1,076,456 73.07% 1,115,179 74.23% 0.71% 60-90 min 4,284,650 72.58% 4,361,420 73.23% 0.36% 90-120 min 3,539,540 73.09% 3,602,402 73.93% 0.35% Area Total 9,199,315 72.85% 9,379,599 73.64% 0.39% Illinois 9,379,840 72.99% 9,495,441 73.75% 0.25% Wisconsin 4,254,263 73.43% 4,355,419 74.05% 0.47% National 234,564,071 251,100,083 262,507,238 0.98% 0.89% Source: IXPRESS/Nielsen Claritas; The Innovation Group
2017 Population by Race and Ethnicity The population of the total Beloit area described by race and ethnicity is in line with the national averages. However, the statewide averages of Wisconsin and Illinois vary. While Illinois has population averages that are similar to the national averages, Wisconsin has a large White population at 85%, and therefore much smaller minority populations.
The 0-30 and 30-60 minute drive rings have the largest white populations comprising of 80.5% and 84.23% of the population, respectfully, while the national average is 70.3%. The 60-90 minute drive ring has the largest Hispanic or Latino and Asian populations of the study area. 20.45% of the population identifies as Hispanic or Latino while 6.93% identify as Asian. This can be compared to the national averages of 18% and 5.6%, respectively.
The 90-120 minute drive ring also has a large Hispanic or Latino population at 19.78%. This drive ring also has the largest Black or African American population at 22.3%, well above the national average of 12.8%.
2017 Single Population by Single Race Classification or Ethnicity American Native Indian Hawaiian Black or and & Other Some African Alaska Pacific Other Two or White American Native Asian Islander Race More Hispanic Ring Total Pop Alone Alone Alone Alone Alone Alone Races or Latino 0-30 min 483,714 389,399 40,250 1,637 10,291 176 27,559 14,402 60,559 30-60 min 1,473,258 1,240,927 62,699 6,379 61,280 585 65,869 35,519 173,307 60-90 min 5,903,577 4,167,559 615,739 28,156 409,156 2,351 511,592 169,024 1,207,416 90-120 min 4,842,918 2,958,019 1,079,927 17,997 258,190 1,470 406,782 120,533 957,894 Area Total 12,627,991 8,706,864 1,784,659 53,802 738,014 4,558 1,003,576 336,518 2,383,176 Illinois 12,850,799 8,985,319 1,832,047 46,125 707,715 4,772 941,420 333,401 2,226,868 Wisconsin 5,793,918 4,908,845 375,311 58,819 161,677 2,284 159,705 127,277 398,751 National 325,139,271 70.3% 12.8% 1.0% 5.6% 0.2% 6.8% 3.4% 18.0% Source: IXPRESS/Nielsen Claritas; The Innovation Group
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Income Income is an important indicator of a region’s economic well-being and the discretionary spending power of its residents. The following section analyzes national, regional, and local trends in income and discusses their potential impact on HCG Beloit’s development options.
National and Regional Trends During the past decade household income lagged far behind gains in productivity. The widening gap in the following chart illustrates that American households effectively have not been earning enough to purchase the goods and services they have been producing. Even before the recession hit in 2008, real median income was lower than it had been in 1999 and 2000, as incomes declined in 2001 through 2004. Consumer expenditures on gaming and other leisure activities remained strong into 2007 largely on the basis of rising home values; however, gaming revenues started a steady and pronounced decline once the housing bubble burst and the financial sector collapsed. Following the Great Recession, not until 2013 did the country see a slight uptick in real income, the first since 2007, and not until 2016 did income reach pre-recession peaks. In summary, real income has risen by less than 10% since 1989 while GDP per capita has risen by 45%.
Real Growth in GDP and HH Income (Indexed to 1989) 1.5
1.4
1.3
1.2
1.1
1
0.9
0.8 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Med HH Income GDP per Cap
Median income in Illinois and Wisconsin had been considerably higher than the national median income during the 1990s. However, since the Great Recession the gap has narrowed, with Illinois just slightly higher than the national average and Wisconsin essentially tied with the national average.
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Real Median Income (1990-2016) 2016 Dollars $70,000
$65,000 $61,386
$60,000
$55,000
$50,000
$45,000
Recession United States Wisconsin Illinois
Source: U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements.
Local Ring Income
Average Household Income Average household income (A.H.I) in the Beloit region is generally below Wisconsin, Illinois and national averages. Of all the drive-time rings surrounding the Beloit facility, the 0-30 minute ring had the lowest growth rate from 2000-2017, but that trend is expected to invert over the next five years. The 0-30 minute drive ring growth rate in the next five years will be the largest of the drive- time rings and is expected to be greater than Illinois and Wisconsin, as well as on par with the national average.
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Average Annual Household Income CAGR CAGR Ring 2000 2017 2022 2000-2017 2017-2022 0-30 min 55,111 68,067 73,617 1.25% 1.58% 30-60 min 62,237 83,865 90,405 1.77% 1.51% 60-90 min 67,262 90,433 97,118 1.76% 1.44% 90-120 min 62,578 85,176 91,679 1.83% 1.48% Area Total 64,486 86,896 93,484 1.77% 1.47% Illinois 61,629 84,285 90,333 1.86% 1.40% Wisconsin 54,039 73,249 79,168 1.81% 1.57% National $56,644 $80,853 $87,464 2.12% 1.58% Source: IXPRESS/Nielsen Claritas; The Innovation Group
2016 Median Income by Race and Ethnicity The following table shows median household income by race and ethnicity, as it compares to total median incomes in the area. Median income is typically lower than average income, but is often a better indicator because it is less vulnerable to statistical outliers, such as extremely high incomes in a small number of households.
Nationally, Asian households have the highest median income at 36.4% higher than the national median income of $57,462. White households have incomes 7.2% higher than the national median income, while African American, American Indian, and Hispanic households have considerably lower household income than other groups.
Large discrepancies exist in the median household income trends in the Beloit area for certain ethnicities compared to the national averages. Black or African American households have incomes 56% of the average vs. 66% nationally, while Asian households have incomes just 26.7% higher than the average, compared to 34.6% nationally. Hispanic or Latino households fare slightly worse than national averages, while American Indian households fare slightly better.
2017 Median Household Income by Single Race Classification or Ethnicity (Indexed) Native American Hawaiian Black or Indian and and Other Some African Alaska Pacific Other Two or Not White American Native Asian Islander Race More Hispanic Hispanic Ring Total Alone Alone Alone Alone Alone Alone Races or Latino or Latino 0-30 min $52,267 106.5% 49.8% 87.9% 138.1% 117.9% 77.5% 82.5% 84.2% 101.8% 30-60 min $66,064 103.7% 48.1% 72.1% 108.1% 60.4% 72.7% 75.7% 76.0% 102.3% 60-90 min $65,421 107.8% 52.3% 68.9% 133.9% 102.6% 71.8% 86.0% 75.4% 104.9% 90-120 min $59,813 116.6% 61.0% 78.8% 116.0% 141.5% 76.5% 85.4% 80.1% 104.0% Area Total $62,946 110.1% 56.0% 73.3% 126.7% 106.3% 73.8% 84.6% 77.5% 104.0% Illinois $60,950 108.5% 59.1% 73.3% 130.8% 128.7% 78.6% 86.9% 81.5% 102.9% Wisconsin $56,576 105.4% 50.6% 71.5% 101.6% 72.4% 66.2% 77.8% 71.4% 101.7% National $57,462 107.20% 66.60% 71.10% 136.40% 98.70% 75.90% 89.70% 79.30% 103.70% Source: IXPRESS/Nielsen Claritas; The Innovation Group
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Employment In a white paper assessment of the impact that the Great Recession has had on the gaming industry nationwide, the Innovation Group concluded that employment decline is the single greatest factor impacting gaming revenues. Therefore, it is critical to evaluate the employment and income trends in the regional market to assess the prospects for gaming spending in the market area.
National Trends The unemployment rate is useful in comparing a state with the national average. However, a declining unemployment rate can result from workers dropping out of the labor force altogether, so it does not necessarily equal economic recovery.
In terms of employment the Great Recession began at the national level in February 2008, with employment peaking in January 2008. Since then, the U.S. suffered 24 months of declining employment; during the five-month period of November 2008-March 2009 the average monthly decline was 604,000. Employment bottomed out in February 2010 at a low of 129.3 million. Since then it has steadily grown, and now stands at 141,183, slightly above (2.04%) its pre-recession peak. However, the working age population has grown by 4% over the same period.
Total Nonfarm Employment Seasonally adjusted, in thousands. January 2007 - August 2017 148,000
146,000
144,000
142,000
140,000
138,000
136,000
134,000 July & August 2017 Preliminary Levels: 146,574 & 146,730 132,000
130,000
128,000 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
Recession US Employment
Source: Bureau of Labor Statistics, CES series; most recent 2 months data are preliminary
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Regional Labor Force The recession hit distinct geographic areas at different times, and recovery has not been consistent in terms of scope or timing. In Wisconsin, the recession began in September 2008, nine months after it began at the national level. The chart below illustrates that although Wisconsin began to recover in November 2009, the recovery has been long and tumultuous. March 2015 marked the first month that employment reached the pre-recession levels that existed in Wisconsin. The climb has remained steady since then with Wisconsin having 68,000 more jobs as recently as August of 2017 than it did during the pre-recession peak of February 2008.
Wisconsin Employment Seasonally adjusted, in thousands. January 2007 - August 2017 3000.0
2950.0
2900.0
2850.0
2800.0
2750.0
2700.0
2650.0 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17
The recession in the Beloit MSA occurred and ended slightly earlier than that of the nation, with employment peaking in December of 2007 at 16,176 before entering a steady decline. The recession continued to its lowest point in December of 2009 before the recovery started in the Beloit MSA. The chart below indicates seasonal peaks for employment in the Beloit MSA with a consistent increase year to year.
Beloit MSA Total Employment Not Seasonally Adjusted, in thousands. January 2007-August 2017 17.50
17.00
16.50
16.00
15.50
15.00
14.50
14.00 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17
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The table below compares employment trends at the national, state, and regional level. Indeed, the recession hit the Beloit MSA harder than Wisconsin and the nation, as indicated by the 11.7% decline in employment that occurred from the start of the recession until its trough. Since the recession hit its trough, however, the Beloit MSA has seen employment grow by 19.49% while employment has only grown by 9.17% statewide. Beloit’s trend is even greater than growth at the national level, outpacing the national level by 6.39%.
Impact of Recession: Regional vs. National Employment (000s) National Beloit MSA Wisconsin Pre-recession 138,430 16.18 2,881.80 Trough 129,733 14.28 2,710.00 % decline -6.28% -11.70% -5.96% Current* 146,730 17.07 2,958.40 % change over pre-recession 6.00% 5.51% 2.66% % growth since trough 13.10% 19.49% 9.17% Source: Bureau of Labor Statistics, CES series, Seasonally Adjusted; The Innovation Group; *Current Data is for August 2017 preliminary
The following tables present historical employment data, including unemployment rates, for Rock County, Winnebago County, and the States of Wisconsin and Illinois.
Regional and State Labor Force Data, Wisconsin Unemployment Year Civilian labor force Employment Unemployment rate (%) Wisconsin 2009 3,100,348 2,834,335 266,013 8.6 2010 3,081,512 2,814,393 267,119 8.7 2011 3,079,759 2,840,996 238,763 7.8 2012 3,073,981 2,857,418 216,563 7.0 2013 3,082,627 2,874,999 207,628 6.7 2014 3,085,089 2,917,799 167,290 5.4 2015 3,094,857 2,953,580 141,277 4.6 2016 3,120,229 2,991,033 129,196 4.1 Rock County, WI 2009 82,403 72,056 10,347 12.6 2010 82,698 73,383 9,315 11.3 2011 81,185 73,447 7,738 9.5 2012 81,434 74,651 6,783 8.3 2013 82,268 75,922 6,346 7.7 2014 82,373 77,314 5,059 6.1 2015 83,415 79,075 4,340 5.2 2016 84,378 80,538 3,840 4.6
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As noted before, the recession hit Beloit harder than the statewide average of Wisconsin, and the same was true for Rock County. As recent as 2009, Rock County’s unemployment rate was 4.0% higher than that of Wisconsin. However, a strong recovery over the last seven years has Rock County’s unemployment rate just 0.5% higher than Wisconsin’s statewide average. These unemployment trends mirror that of the Beloit Metropolitan Statistical Area (“MSA”) with an earlier recession recovery than that of the state of Wisconsin.
The table below shows the employment data of Winnebago County and Illinois. From 2009-2016, Winnebago County has had consistently higher unemployment rate than the statewide average of Illinois. The post-recession has been more drastic in the county compared to the state of Illinois, though. The unemployment rate has gone from 4.8% higher than the state average in 2009 to just 0.7% higher in 2016.
Regional and State Labor Force Data, Illinois
Unemployment Year Civilian labor force Employment Unemployment rate (%) Illinois 2009 6,618,658 5,943,229 675,429 10.2 2010 6,625,321 5,937,047 688,274 10.4 2011 6,586,893 5,948,366 638,527 9.7 2012 6,581,867 5,990,644 591,223 9.0 2013 6,555,053 5,958,978 596,075 9.1 2014 6,507,190 6,046,057 461,133 7.1 2015 6,507,312 6,120,860 386,452 5.9 2016 6,539,008 6,154,867 384,141 5.9 Winnebago County, IL 2009 144,984 123,174 21,810 15.0 2010 150,090 129,010 21,080 14.0 2011 147,422 129,943 17,479 11.9 2012 146,211 130,845 15,366 10.5 2013 143,857 128,733 15,124 10.5 2014 142,389 130,695 11,694 8.2 2015 142,340 132,472 9,868 6.9 2016 141,635 132,235 9,400 6.6
Pertinent to this gaming analysis is the fact that employment at the county and MSA level remains on a positive trend in the Beloit region. The recoveries of Rock and Winnebago counties have been stronger in the last 3-4 years, and the trends at the state level are encouraging as the employment numbers continue to increase in both Illinois and Wisconsin. Furthermore, the hardest hit county in the Beloit area—Winnebago County—made real job gains as evidenced by the increasing size of its employment figures. Employment is no longer a far cry from pre-recession levels, as the study area has certainly stabilized and made a strong recovery as of recently.
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Major Employers Firms in Manufacturing employ the largest percentage of the two-county workforce, although Education and Health Care is a very close second. Retail trade is the third largest industry in both counties. Overall, the industry structure in the Beloit area, while specialized towards manufacturing, is relatively diversified, with manufacturing being the one industry accounting for over 25% of employment.
Beloit, WI Region Private Industry Structure: Number of Employees, 2016 Winnebago % of % of County, IL Total Rock County, WI Total Estimate Estimate Total, all Industries 131,794 78,698 Agriculture, forestry, fishing and hunting, and mining: 579 0.44% 1,588 2.02% Construction 7,467 5.67% 4,884 6.21% Manufacturing 29,430 22.33% 19,952 25.35% Wholesale trade 3,233 2.45% 2,602 3.31% Retail trade 14,889 11.30% 9,080 11.54% Transportation and warehousing, and utilities: 7,741 5.87% 3,010 3.82% Information 2,236 1.70% 2,073 2.63% Finance and Real Estate 5,952 4.52% 3,280 4.17% Professional, Science and Management 12,480 9.47% 5,197 6.60% Education and Health Care 28,069 21.30% 16,685 21.20% Hospitality and Leisure 10,005 7.59% 5,643 7.17% Other services, except public administration 5,986 4.54% 2,410 3.06% Public administration 3,727 2.83% 2,294 2.91% Source: 2016 American Community Survey 1-year Estimates. American Fact Finder: Industry by Occupation for the Civilian Employed 16 Years and Over. Accessed October 27, 2017.
The following table delineates the county’s top 10 employers and their respective industry type. While the two top employers are in the healthcare industry, not listed are additional food manufacturing companies, such as Birds Eye and Hormel Foods, that add to the manufacturing industry’s larger percentage of the Beloit workforce.
Rock County’s Top 10 Employers by Number of Employees, 2016 Employer Name Industry Type Employees Mercy Health System Medical Services 3,877 Beloit Health System Medical Services 1,550 Rock County Government 1,161 Wal-Mart / Sam's Club Retail Department Store 804 Janesville School District Public K-12 Education 788 Beloit School District Public K-12 Education 775 Blackhawk Technical College Technical College 762 Kerry Americas Dehydrated Food Products 690 Grainger (Lab Safety) Catalog Distributor - Safety Supplies 689 Frito-Lay Snack Foods 685 Source: Wisconsin Department of Workforce Development
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Tourism
Activities and Local Attractions Beloit draws around 6,000 visitors each year from around the world for its Beloit International Film Festival (BIFF) which includes over 100 features, documentaries, and shorts. Beloit also attracts visitors to its Angel Museum, which holds the Guinness World Record for most angel figurines. The Riverfront area has been revamped over the past 10 years and now offers a landscape for outdoor activities and events. The Harry C. Moore Pavilion holds live music and dancing throughout the summer. Beloit is also home to a Historic Automobile Museum, the Wright Museum of Fine Art, and the Beloit Snappers minor league baseball team.
Beloit’s open-air farmers markets attract an average of 5,500 people each week during the months of May through October. Numerous festivals are held throughout the year, including Festival on the Rock, a free music and food festival held in Preservation Park, and the Folk ‘n’ Blues Festival, which is held on the Beloit College Campus.
The local area has several options for meeting planners, but its largest meeting center lies within the Eclipse Center. The center opened in January 2007 and has a capacity of 1,000 seats. Smaller venues are abundant and offer capacities ranging from 10 to 600 persons. Additionally, Rock County has 13 golf courses as well as more than 700 hotel rooms available in Beloit.
Impact Rock County employed 4,053 people in the tourism industry in 2016, an increase of 4.16% compared to 2015. The tourism industry in Rock County generated $384.3 million in sales linked to tourism spending. Rock County’s visitor spending increased by 6.64% (the second highest mark among Wisconsin counties) since 2015, outpacing the state average of 4.5% since 2011.
Rock County Direct Tourism Impact Direct Visitor Spending Direct Tourism Employment State and Local Tax Revenue FY2013 $193,000,000 3,757 $24,400,000 FY2014 $206,700,000 3,798 $25,600,000 FY2015 $220,500,000 3,891 $27,000,000 FY2016 $235,200,000 4,053 $28,400,000 Source: Wisconsin Department of Tourism
Weather Beloit has an average high temperature of 81 ̊ in the summer and an average low temperature of 16 ̊ in the winter. Beloit usually has more than 30 inches of snow each year. The local weather in Beloit is shown in the table below.
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Weather In Beloit, WI Season High Low Spring 57 ̊ 37 ̊ Summer 81 ̊ 60 ̊ Fall 61 ̊ 40 ̊ Winter 31 ̊ 16 ̊ Avg. Annual Snowfall 32.5" Source: The Greater Beloit Economic Development Corporation
Traffic Two interstate highways directly serve Beloit. I-39/90 runs north-south through the eastern half of the incorporated city and immediately adjacent to the proposed casino site. Interstate 43, which runs east-west between Beloit and Milwaukee, terminates at I-39/90 in the northeast quarter of the city.
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Traffic counts conducted by the Wisconsin Department of Transportation (WisDOT) record average annual daily traffic (AADT) at I-39 North and South of the site, and at I-43, Northeast of the site. In 2016 I-39 South of Beloit and I-39 North of Beloit had AADTs of 51,200 and 47,500, respectively. Many vehicles heading North on I-39 likely get off onto I-43, which had an AADT of 16,800. The count on I-39/90 at the southern point was up 3.9% from its 2013 level, while the count at the northern point was up 8.7%. On I-43 east of the junction with I-39/90 within the city limits, the count from 2016 recorded a 2.9% decrease in vehicles.
Interstate Average Annual Daily Traffic Counts, Beloit Area Interstate Traffic Count Location 2016 2013 2010 I-39 South of Beloit 51,200 49,300 50,100 I-39 North of Beloit 47,500 43,717 40,800 I-43 Northeast Beloit 16,800 17,300 15,700
Source: WisDOT Rock County Traffic Count
With the steady upward trend year to year, the total traffic count at these points has risen to approximately 38,500 vehicles on average. Notably, the rest area immediately across I-39/90 from the proposed casino site (Rest Area 22) is the most heavily visited rest area in the state, with an estimated 25,000 annual visitors.
Source: Wisconsin Rest Area Maintenance Program, WisDOT.
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GAMING LOCAL MARKET SUPPLY
Beloit Competitive Market In total there are 23 casinos within Beloit’s competitive market, including seven Native American casinos located in Wisconsin. The remaining competition is comprised of commercial casinos located in Illinois, Iowa, and Indiana. The competitive area was then split into three regional groups: Wisconsin, Chicagoland, and the Mississippi Valley. The casinos in these groups share a host of similarities and thus are compared to one another and as a unit. Legislative Background of Native American Gaming Native American gaming in the United States commenced as a result of the National Indian Gaming Regulatory Act (IGRA), which was passed by the U.S. Congress in 1988. The IGRA provides for a system of joint regulation of Class II gaming on Indian lands by tribes and the Federal Government, and establishes a system for compacts between tribes and states concerning the regulation of Class III gaming. By law, Class II gaming is defined as (1) bingo or lotto, whether or not electronic, computer or other technological aids are used; (2) pull-tabs, punch-boards, tip jars, instant bingo, and other similar games if played in the same location as bingo or lotto; (3) non-banking card games that a) state law explicitly authorizes, or does not explicitly prohibit, and are played legally anywhere in the state, and b) players play in conformity with state laws and regulations concerning hours, periods of operation, and limitations on wagers and pot sizes; (4) or other Class II gaming facilities in operation prior to 1988. By default, Class III gaming is defined as gaming activities that are not Class I or II, or those generally referred to as house-banked, which include Vegas-style games such as blackjack, roulette, craps and video lottery terminals, or slot machines.
IGRA established a process of compact negotiation between federally recognized tribes and state governments, which precedes casino development. States have the right to place limitations on the number and type of games as well as the location of casinos (off or on reservation land) and the selling and consumption of alcohol. Class II operations do not require a compact for negotiation and usually consist of bingo halls and bingo-platform gaming devices. The legal age to gamble in Wisconsin Class III native facilities is 21.
Class III tribal gaming can vary by state, depending upon the results of compact negotiation between federally recognized tribes and individual governors. Some states execute compacts that restrict the games casinos can offer, number or size, as well as tax payment agreements and compact expiration dates. In Wisconsin, regulations may vary somewhat compact-to-compact. A new compact went into effect in early 2003 permitting craps, roulette and poker whereas only slot machines and blackjack tables were permitted previously. Blackjack was also permitted to operate 24 hours a day, which had formerly been restricted to 18 hours a day.
Native American Casinos The seven Native American casinos are all located in Wisconsin. The majority of the seven are owned and operated by Ho-Chunk Nation, who in total owns and operates six casinos throughout Wisconsin. One of the six locations fell outside of our competitive market area and were therefore
The Innovation Group Project #033-18 June 2018 Page 19 Draft not included in our analysis. The Forest County Potawatomi tribe owns the Potawatomi Casino in Milwaukee. This facility has recently undergone expansion and has grown considerably making it the largest casino in Wisconsin in terms of total positions (3,100), convention space (60,000 sq. feet), and hotel rooms available (381). Finally, the Oneida tribe operates five casinos located in northeastern Wisconsin. Their primary facility is in Green Bay, and was used for the competitive analysis. This facility is similar in size to the HCG-Dells location, with roughly the same amount of total positions, convention space, and hotel rooms available. The following table shows facility statistics for Wisconsin’s casinos.
Native American Casinos Gaming Table Total Convention Hotel City Machines Games Positions Sq. Ft. Rooms F&B HCG - Madison 1,200 0 1,200 0 0 1 HCG - Dells 1,900 56 2,236 30,000 302 4 Potawatomi 2,500 100 3,100 60,000 381 7 Oneida 2,000 Not Avail 2,000 30,000 353 8 HCG - Black River Falls 631 10 691 0 54 3 HCG - Nekoosa 660 12 732 4,000 0 3 HCG - Tomah 98 0 98 0 0 0 TOTAL 8,989 178 10,057 124,000 1,090 26 Sources: Ho-Chunk Nation, Forest County Potawatomi Tribe, Oneida Nation
Commercial Casinos The remaining 16 casinos in our market comprise both the Chicagoland and Mississippi Valley regions, hailing from Illinois, Indiana and Iowa. These facilities average 1,480 gaming positions, at least four food and beverage options, and around 161 hotel rooms available. These casinos and their corresponding regions will be discussed in greater detail below.
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Commercial Casinos Gaming Table Gaming Convention Hotel City State Machines Games Positions Sq. Ft. Rooms F&B Des Plaines Illinois 1,000 55 1,330 3,700 0 7 Elgin Illinois 1,088 45 1,358 5,000 0 4 Aurora Illinois 1,080 35 1,290 0 0 4 Joliet Harrah's Illinois 1,100 39 1,334 6,000 200 4 Joliet Hollywood Illinois 1,100 17 1,202 4,000 100 4 Hammond Indiana 2,444 153 3,362 100,000 0 4 E. Chicago Indiana 1,722 72 2,154 5,400 288 6 Gary Indiana 1,716 77 2,178 6,000 300 6 Michigan City Indiana 1,692 50 1,992 25,000 486 4 Davenport Iowa 783 32 975 16,000 106 4 Bettendorf Iowa 974 20 1,094 40,000 514 3 Rock Island Illinois 992 28 1,160 7,400 205 5 Clinton Iowa 547 11 613 10,000 60 2 Dubuque (2) Iowa 1,733 43 1,991 6,500 116 7 Marquette Iowa 516 8 564 2,100 0 3 Peoria Illinois 917 30 1,097 20,000 202 5 TOTAL 19,404 715 23,694 253,400 2,577 72 Source: Indiana Gaming Commission; Illinois Gaming Board, Iowa Racing and Gaming Commission Chicagoland The Chicagoland casino market currently consists of nine casino locations; five in Illinois and four in Indiana. Each Illinois license is valid for one or two boats, with a cap set effectively at 1,325 gaming positions. Indiana does not have a cap on gaming positions.
In 1999, Illinois enacted legislation to allow dockside gaming. Shortly thereafter, in August 2002, dockside gaming was introduced in Indiana. The passing of this legislation coupled with the larger vessels in Indiana was the impetus for Indiana overtaking Illinois in the Chicagoland market. Prior to the recession (pre-2008), the Chicagoland market grew at a steady rate. However, since the recession the Illinois market has seen some recovery in both 2011 and 2012, but the Indiana area has continued to be depressed. The year, 2013, again saw decreasing revenues from the Chicagoland market, but this time the culprit was both Illinois and Indiana. However, please note that 2013 was the first full year of operational Video Gaming Terminals in Illinois, which has likely played a major role in the decline in the Illinois market.
The following table breaks down the Chicagoland market by property and their respective revenues over the last five years. Many of these properties have seen year-over-year losses evident through their negative Compound Annual Growth Rate (2013-2017). Casinos in Hammond, Elgin, and Aurora were hit the hardest, with an average decline of 3.83% in compound annual grown rate (CAGR). The facilities in Des Plaines and Michigan City have defied this norm and recorded modest growth.
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Revenue by Property (in millions) Des Joliet Joliet East Michigan Plaines Elgin Aurora Harrah's Hollywood Hammond Chicago Gary City 2013 $418.7 $194.3 $141.7 $202.4 $131.2 $477.9 $210.0 $163.8 $149.7 2014 $425.1 $171.6 $126.9 $197.8 $122.6 $430.5 $216.3 $152.5 $151.0 2015 $424.9 $171.4 $121.1 $186.0 $125.3 $421.3 $221.7 $144.3 $152.6 2016 $427.9 $163.5 $120.4 $183.7 $121.2 $399.5 $215.4 $142.8 $153.0 2017 $433.5 $168.8 $120.8 $182.9 $123.2 $403.7 $201.7 $139.6 $151.5 CAGR (‘13-‘17) 0.87% -3.46% -3.91% -2.49% -1.55% -4.13% -1.00% -3.92% 0.30% Source: Indiana Gaming Commission; Illinois Gaming Board
Over the past five years in the Chicagoland market total revenue has declined by 2.01%. This decline is being led by an overall loss in slot revenue. Slot revenue in this market has continued to see losses with the most significant declines coming between 2012-2014. However, during the last five years table revenue has increased, mitigating the overall total revenue loss. The table below shows the year over year change in revenue for the entire market.
Chicagoland Market - Slot vs. Table Revenue Slot Rev YOY Change Table Rev YOY Change Total Rev 2013 $1,715,188,531 -6.47% $419,106,977 2.15% $2,134,295,508 2014 $1,604,295,760 -6.09% $412,927,761 -1.47% $2,017,223,521 2015 $1,570,560,591 -1.89% $430,707,586 4.31% $2,001,268,177 2016 $1,525,198,890 -2.79% $437,914,261 1.67% $1,963,113,151 2017 $1,519,898,239 -1.02% $447,822,383 -0.46% $1,967,720,622 CAGR (’13-’17) -2.98% 1.67% -2.01% Source: Indiana Gaming Commission; Illinois Gaming Board
Mississippi Valley (Iowa and Illinois) There are a number of casinos in Iowa and Illinois that compete with Wisconsin facilities. The largest market is the Quad Cities’ market, which consists of casinos in Davenport, Marquette, and Bettendorf, Iowa, and Rock Island, Illinois. The casinos located in this area have seen significant differences in their revenues over the course of the last five years. Rock Island and Marquette have both seen CAGR losses of 3.58% and 3.68% respectively. Bettendorf and Davenport on the other hand have grown by .03% and 9.40% annually. The casino in Peoria has been hit the hardest with a significant loss of 7.45% CAGR. The following table shows the revenue by property for the Mississippi Valley casinos.
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Revenue by Property (in millions) Davenport Bettendorf Rock Island Clinton Dubuque (2) Marquette Peoria 2013 $45.6 $72.7 $81.5 $35.1 $121.6 $28.8 $107.4 2014 $43.2 $69.6 $76.7 $32.0 $113.5 $27.1 $94.0 2015 $43.4 $69.2 $76.7 $33.6 $115.7 $28.0 $89.9 2016 $52.2 $73.9 $75.6 $31.9 $114.4 $26.7 $82.4 2017 $65.3 $72.8 $70.5 $30.8 $115.9 $24.8 $78.8 CAGR (’13-’17) 9.40% 0.03% -3.58% -3.24% -1.19% -3.68% -7.45% Source: Illinois Gaming Board; Iowa Racing and Gaming Commission
The Mississippi Valley gaming market has, in general, seen a decline in revenue over the past five years. The loss in slot revenue was most severe between 2012 and 2014 with a total decline of 13.9%, and since has become far less extreme. Fortunately for the market area, table revenue experienced only a slight decline in revenue of 4.17% during that time period. The combination of these elements lead to an overall CAGR decline of 1.77% during the past five years. The table below shows the year over year change in revenue for all properties over the past 5 years.
Mississippi Valley - Slot vs. Table Slot Rev YOY Change Table Rev YOY Change Total Rev 2013 $452,913,911 -6.87% $39,915,216 2.15% $492,829,127 2014 $418,631,713 -7.57% $37,442,883 -6.19% $456,074,596 2015 $418,753,801 0.03% $37,783,418 0.91% $456,537,219 2016 $418,319,190 -0.10% $38,939,900 3.06% $457,259,090 2017 $417,296,119 -0.24% $41,641,013 6.94% $458,937,132 CAGR (’13-’17) -2.03% 1.06% -1.77% Source: Illinois Gaming Board; Iowa Racing and Gaming Commission
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GAMING MARKET ANALYSIS (ALTERNATIVES A & B)
Methodology In developing this analysis a gravity model was employed. Gravity models are commonly used in location studies for commercial developments, public facilities and residential developments. First formulated in 1929 and later refined in the 1940s, the gravity model is an analytical tool that defines the behavior of a population based on travel distance and the availability of goods or services at various locations. The general form of the equation is that attraction is directly related to a measure of availability such as square feet and inversely related to the square of the travel distance. Thus the gravity model quantifies the effect of distance on the behavior of a potential patron, and considers the impact of competing venues.
The basic formulation is that the interaction between two or more gaming venues is based on Newton's Law of Universal Gravitation: two bodies in the universe attract each other in proportion to the product of their masses and inversely as the square distance between them. Thus, expected interaction between gaming venue i and market area j is shown as:
where Pi = the gaming positions in gaming venue i, Pj = the population in market area j, dij = the distance between them, and k = an attraction factor relating to the quality and amenities to be found at each gaming venue in comparison to the competing set of venues. When this formulation is applied to each gaming venue gaming trips generated from any given zip code are then distributed among all the competing venues.
The gravity model included the identification of 12 discrete market areas based on drive times and other geographic features and the competitive environment. Using our GIS software and CLARITAS database1, the adult population (21 and over), latitude and longitude, and average household income is collected for each zip code.
Each of these market areas is assigned a unique set of propensity and frequency factors. Gamer visits are then generated from zip codes within each of the areas based on these factors. The gamer
1The GIS software used was MapInfo. This software allows for custom data generally in a tabular format with a geographic identification code (census tract, zip code, latitude and longitude, or similar identifier) to be mapped or displayed and integrated with other geographic census based information such as location of specific population or roadways. MapInfo is one of the most widely used programs in the geographic information systems industry. Nielsen Claritas is a vendor of demographic information located in the United States. Nielsen Claritas provides census demographic and psychographic data on a variety of geographic levels of detail ranging from census block groups and counties to postal zip codes. Their information is updated every six months and includes a current year estimate and provides a five-year forecast for the future. The Innovation Group has utilized this data for inputs to its models for the last six years and has purchased full access to their demographic database for the entire United States.
The Innovation Group Project #033-18 June 2018 Page 24 Draft visits thus generated are then distributed among the competitors based upon the size of each facility, its attractiveness and the relative distance from the zip code in question. The gravity model then calculates the probabilistic distribution of gamer visits from each market area to each of the gaming locations in the market.
Each travel distance/time is evaluated to determine the likely alternative gaming choices for residents of the region. The model is constructed to include only those alternative venues that are considered to be within a reasonable travel time. These include competing casinos that have the potential to attract patrons, or siphon off visits from the market. Travel distances and time have been developed through use of our GIS system.
The following section provides a description and definition of the various components of the model.
Gamer Visits This measure is used to specify the number of patron trips to a gaming market, where an individual can make any number of separate visits in the course of a year. In order to estimate the gamer visits, market penetration rates, made up of the separate measures of propensity and frequency, are applied to the adult population in each zip code. A gamer visit can include more than one visit to a casino.
Propensity Propensity measures the percentage of adults who will participate in casino gaming within the zip code. This varies based upon a number of factors, which includes the number of gaming venues, their type (i.e. landbased versus cruising riverboat versus dockside riverboat), games permitted, availability of other entertainment and leisure options, and most importantly distance from a gaming venue. Propensity in the inner market areas from 0-50 miles can vary between the high thirty per cent range in a single cruising riverboat market to the fifty percent range, or more, for multiple land based casinos with a well-developed array of amenities.
Frequency This measures the average number of visits that an adult will make annually to casinos in the subject market. Frequency is a function of annual gaming budget as indicated by income variations, the number of venues in the market, the type of gaming facility and most importantly distance from a gaming venue.
MPI (Market Potential Index) Propensity also varies as a function of each market’s average market potential index (MPI) score. MPI scores are generated by Simmons Survey, a respected consumer research firm that conducts a nationwide survey of consumer behavior, including propensity to gamble at a casino. This score is an indication of the degree of likelihood that a person will participate in gaming based upon their lifestyle type. The MPI score inflates or discounts the participation rate of each zip code. For example, if a market area has an overall participation rate of 4.0 (propensity of 40% times frequency of 10), an MPI score of 120 for a particular zip code would effectively inflate the participation rate of that zip code to 4.8 (4.0 times 120%). The overall MPI score for the market area is a weighted average of all the zip codes within the area.
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Win per Visit Win per visit varies not only by gaming jurisdiction, but also in some cases by individual facilities. Normatively, win per visit is a function of distance and income. Gamers traveling greater distances tend to spend more per visit, typically making fewer gamer visits on average.
Attraction Factors Attraction factors measure the relative attraction of one gaming venue in relation to others in the market. Attraction factors are applied to the size of the gaming venue as measured by the number of positions it has in the market. Positions are defined as the number of gaming machines plus the number of seats at gaming tables. A normative attraction factor would be one. When this is applied to the number of positions in a gaming venue there is no change in the size of the gaming venue as calculated by the model and hence its attraction to potential patrons. A value of less than one adjusts the size of the gaming venue downwards and conversely a value greater than one indicates that the gaming venue has characteristics that make it more attractive. Attraction factors can be based on a number of components including branding, the level and effectiveness of marketing efforts, and the level of quality and amenities of a facility. Attraction factors are also adjusted to model the presence of natural and man-made boundaries which impact ease of access and convenience of travel in the market area.
The sensitivity of the model to changes in these factors is not in the nature of a direct multiplication. For example, a doubling of the attraction factor will not lead to a doubling of the gamer visits attracted to the site. It will however cause a doubling of the attractive power of the gaming venue, which is then translated via non-linear equations into an increase in the number of gamer visits attracted to the gaming venue. This is based upon the location, size and number of competing gaming venues and their relationship to the market area to which the equation is applied. The variation of these factors is based upon The Innovation Group’s experience in developing and applying these models, and consideration of the existing visitation and revenues. The latter represents the calibration of the model and has been accomplished by adjusting attraction factors to force the model to recreate the existing revenues and patron counts. In this case attraction factors have been adjusted for each casino for each market area. This is based upon known visitation patterns. Market Carve-out The Beloit market has been carved into 12 distinct market areas, from which it could be expected that different participation rates may be expected depending on the level and location of competition that is present in the market currently and in the future. The following map and table show the market areas and their respective adult population (21 and over) and average household income.
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Beloit Gaming Markets
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Market Area Demographics Adult Pop Adult Pop CAGR Average Average HHI CAGR 2017 2022 2017-2022 HHI 2017 2022 2017-2022 Beloit 428,987 432,477 0.16% $68,501 $73,936 1.54% Madison 434,094 458,247 1.09% $85,348 $92,373 1.59% Milwaukee 1,154,460 1,175,603 0.36% $76,340 $81,623 1.35% Kenosha 770,018 794,651 0.63% $93,605 $101,741 1.68% Elgin 603,557 622,224 0.61% $121,020 $130,227 1.48% Chicago 4,986,325 5,068,607 0.33% $88,512 $95,501 1.53% Tertiary South 232,239 232,997 0.07% $68,468 $71,678 0.92% Outer South 91,725 91,174 -0.12% $70,346 $72,734 0.67% West Beloit 91,312 91,020 -0.06% $65,782 $68,660 0.86% Tertiary West 137,734 139,142 0.20% $65,346 $68,538 0.96% Ho-Chunk 97,474 99,431 0.40% $68,770 $72,455 1.05% Secondary East 382,241 389,687 0.39% $74,252 $80,657 1.67% Total 9,410,166 9,595,260 0.39% $86,447 $93,166 1.51% Illinois 9,379,840 9,495,441 0.25% 84,285 90,333 1.40% Wisconsin 4,254,263 4,355,419 0.47% 73,249 79,168 1.57% National 237,338,185 248,320,865 0.91% $80,853 $87,464 1.58% Source: iXPRESS, Nielsen Claritas, Inc.; MapInfo: The Innovation Group; CAGR=Compound Annual Growth Rate
Population growth rates vary among the market areas, with the lowest average growth anticipated for Beloit Primary, Tertiary South, Outer South, West Beloit, and Tertiary West. Outer South and West Beloit are expected to decline in population. The highest growth rates are projected to occur in Madison. Nationally, the adult population is projected to grow 0.91% annually over the next five years.
Because of high incomes in the populous markets of Chicago, Elgin, Kenosha and Madison, household income in the area is higher than the national average of $80,853.
The local Beloit market area has an adult population of 428,987, which is projected to grow by 0.16% a year, significantly lower than the national average. The local Beloit market area has an average household income of $68,501 and is projected to grow at 1.54% per year, just slightly below the national average.
Model Calibration The gravity model was first calibrated to match actual performance at casinos in Wisconsin, Illinois, Indiana, and Iowa. Reported revenues from state-regulated riverboat casinos in Illinois, Indiana, and Iowa were used in conjunction with financial information provided by the Ho-Chunk Nation. This calibration was essential in marking the accuracy of the model. The market areas for HCG-Wisconsin Dells (Ho-Chunk Casino or HCG-WD) and HCG-Madison (DeJope or HCG- M) were defined with the aid of player tracking data provided by the Nation.
The gravity model distributes gaming visits and revenues among the existing casinos based on distance and size and quality of facility. In calibrating the gravity model to existing conditions,
The Innovation Group Project #033-18 June 2018 Page 28 Draft the player database was overlaid onto the market areas as shown on the Beloit Gaming Market Area map above.
The following table shows the rates for propensity, frequency, and win per visit (WPV) by market area that were used to re-create the actual conditions in the Base 2017 model. Win has been varied based on differences between market areas in average household income and travel time.
Participation Rates Base 2017 Propensity Frequency WPV Beloit 28.6% 9.74 $81.06 Madison 30.4% 12.97 $82.09 Milwaukee 32.9% 12.67 $77.74 Kenosha 28.8% 10.26 $90.06 Elgin 27.0% 11.04 $100.57 Chicago 25.9% 9.10 $91.00 Tertiary South 27.6% 9.47 $81.79 Outer South 27.4% 9.39 $82.71 West Beloit 23.8% 7.66 $84.21 Tertiary West 27.6% 9.45 $80.60 Ho-Chunk 39.5% 14.19 $75.46 Secondary East 27.8% 9.38 $84.12 Source: The Innovation Group
The following table shows gravity model gaming visits and revenues for the base calibration. These gaming visits and revenues were generated using 2017 population and household income estimates. These revenues reflect the total potential gaming revenue from the defined market area in the last 12 months.
Gravity Model Calibration Base 2017- Total Market Revenues Gaming Visits WPV (MMs) Beloit 1,159,190 $81.06 $93.97 Madison 1,701,035 $82.09 $139.63 Milwaukee 5,202,602 $77.74 $404.46 Kenosha 2,312,853 $90.06 $208.30 Elgin 1,877,455 $100.57 $188.81 Chicago 12,928,023 $91.00 $1,176.40 Tertiary South 568,722 $81.79 $46.51 Outer South 208,411 $82.71 $17.24 West Beloit 146,560 $84.21 $12.34 Tertiary West 329,001 $80.60 $26.52 Ho-Chunk 475,400 $75.46 $35.87 Secondary East 937,816 $84.12 $78.88 Total 27,847,069 $87.22 $2,428.94 Source: The Innovation Group
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The next step in the analysis is to create a base model for the future base year using projected population growth. The following table shows future baseline gaming visits in the Beloit market assuming no expansion to existing facilities.
Gravity Model Future Base - Total Market Gaming Visits Beloit 1,165,960 Madison 1,776,342 Milwaukee 5,273,563 Kenosha 2,371,539 Elgin 1,923,082 Chicago 13,091,380 Tertiary South 570,450 Outer South 207,501 West Beloit 146,150 Tertiary West 331,641 Ho-Chunk 483,228 Secondary East 952,470 Total 28,293,306 Source: The Innovation Group Forecast Results
Alternative A As discussed, we developed a comprehensive drive-time gravity model which forecasts local market gamer visits. The gravity model weighs the impact of the Beloit casino based on its size in terms of gaming positions combined with an attraction factor which measures quality and scope. The additional gaming location would enhance the convenience of gaming for residents in the Primary Beloit, Kenosha, West Beloit and Secondary East market areas, and thus increase their propensity and frequency. The following table shows the participation rates used in the forecasted scenario Alternative A.
Participation Rates Forecast Alternative A Propensity Frequency Beloit 34.8% 13.15 Madison 30.4% 12.97 Milwaukee 32.9% 12.67 Kenosha 30.3% 10.80 Elgin 27.0% 11.04 Chicago 25.9% 9.10 Tertiary South 27.6% 9.47 Outer South 27.4% 9.39 West Beloit 26.8% 9.03 Tertiary West 27.6% 9.45 Ho-Chunk 39.5% 14.19 Secondary East 28.1% 9.57
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The gravity model apportions gamer visits based on the travel time between the market segments and the gaming facilities, while considering the size (gaming positions), quality, and scope of each competitor. The model gauges the quality and scope of the competitive set using an attraction factor. Beloit is estimated to capture the majority of its gamer visits from the primary Beloit market area.
Gravity Model Forecast Alternative A Market Segments Total Market Subject Subject Gamer Visits Capture Gamer Visits Beloit 1,919,966 77.1% 1,480,003 Madison 1,776,342 15.1% 268,686 Milwaukee 5,273,563 4.0% 213,235 Kenosha 2,627,744 9.7% 255,093 Elgin 1,923,082 2.9% 55,102 Chicago 13,091,380 1.0% 131,667 Tertiary South 570,450 12.4% 70,825 Outer South 207,501 4.9% 10,214 West Beloit 194,245 29.8% 57,808 Tertiary West 331,641 2.3% 7,702 Ho-Chunk 483,228 2.0% 9,464 Secondary East 981,235 9.9% 96,753 Total 29,380,376 9.0% 2,656,551
Including capture of traffic and tourism, and gaming visits induced by the waterpark hotel, total visits are estimated at nearly 3 million in Alternative A.
Total Gaming Visits Forecast Alternative A Local Market 2,656,551 Out-of-market, Traffic & Tourism 225,807 Induced by Waterpark Hotel 77,141 Total 2,959,499
Alternative B The following table shows the participation rates used in the forecasted scenario Alternative B. With fewer gaming positions and no hotel, the increases in rates in the Primary Beloit, Kenosha, West Beloit and Secondary East market areas would be lower than in Alternative A.
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Participation Rates Forecast Alternative B Propensity Frequency Beloit 34.5% 13.02 Madison 30.4% 12.97 Milwaukee 32.9% 12.67 Kenosha 29.5% 10.53 Elgin 27.0% 11.04 Chicago 25.9% 9.10 Tertiary South 27.6% 9.47 Outer South 27.4% 9.39 West Beloit 26.5% 8.94 Tertiary West 27.6% 9.45 Ho-Chunk 39.5% 14.19 Secondary East 27.8% 9.38
The gravity model apportions gamer visits based on the travel time between the market segments and the gaming facilities, while considering the size (gaming positions), quality, and scope of each competitor. With fewer gaming positions and no hotel, the attraction factor for Beloit would be lower. The primary Beloit market area would still account for the majority of gamer visits.
Gravity Model Forecast Alternative B Market Segments Total Market Subject Subject Gamer Visits Capture Gamer Visits Beloit 1,881,758 73.8% 1,388,785 Madison 1,776,342 11.4% 201,889 Milwaukee 5,273,563 2.9% 155,141 Kenosha 2,497,999 7.2% 180,290 Elgin 1,923,082 2.1% 39,819 Chicago 13,091,380 0.7% 94,468 Tertiary South 570,450 9.3% 53,097 Outer South 207,501 3.6% 7,428 West Beloit 190,380 26.9% 51,170 Tertiary West 331,641 1.7% 5,586 Ho-Chunk 483,228 1.4% 6,833 Secondary East 952,470 7.3% 69,401 Total 29,179,794 7.7% 2,253,907
Including capture of traffic and tourism, total visits are estimated at nearly 2.5 million in Alternative B.
Total Gaming Visits Forecast Alternative B Local Market 2,253,907 Out-of-market, Traffic & Tourism 191,582 Induced by Waterpark Hotel 0 Total 2,445,489
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HOTEL & INDOOR WATERPARK ASSESSMENT (ALTERNATIVE A ONLY) The hotel and water park assessment examines the potential room nights of demand (RND) and revenues at the subject property operating as an indoor water park hotel with meeting facility. The demand assessment is based on capture of a portion of the existing lodging demand in the area as well as demand induced by the indoor water park hotel. In addition, it is suggested that the water park be open to local-residents on an evening’s-only, day-pass or season-pass basis. Many indoor water parks are only open to hotel guests out of concern over capacity, but in the event that it does mitigation measures can be implemented such as restrictions on local passes during peak periods of utilization.
The water park resort is a lodging facility that is paired with an indoor water park. Indoor water parks are considerably smaller than large outdoor parks which can cover 15 or 20 acres. Typically, indoor water parks are significantly more compact, with net building area (exclusive of filters, pumps and storage) of 10,000 to 100,000 square feet. The typical mix of entertainment components are at least one water slide, one or more pools, including a “lazy river”, a children’s play area and one or more spas. As contrasted to the outdoor water park, which has extensive layout areas, most indoor water parks devote no more than 30 percent of their “foot print” to passive space. Vertical space is also important. Some indoor water parks have a ceiling height of 40 to 50 feet in order to accommodate water slides.
Regional Market Research
Indoor Waterpark Hotels The competitive supply of indoor water parks is quite extensive. Of the 26 indoor waterparks in the market five are within a two-hour drive and the Wisconsin Dells, “The Waterpark Capital of the World! ®,” is just over two hours away. The local market varies in size with Crawdaddy Cove on the smaller end, and Timber Ridge and Country Springs on the larger end. The Wisconsin Dells offers seven different indoor waterparks all located in one central location. On average, the indoor waterparks in the local market are roughly 76,500 square feet, and they offer just over 40,000 square feet of convention space. The largest parks are in the Wisconsin Dells. There is one location within the local market, Key Lime Cove in Gurnee, Illinois, which reopened in Spring 2018 as a member of the Great Wolf Lodge Resorts. Overall, the majority of the competitors are located in Wisconsin, while there are two in Iowa, three in Illinois, and four in Southeastern Minnesota. These waterparks vary in size from 2,500 to 240,000 square feet. The chart on the next page breaks down the competitive market and shows the available amenities associated with each facility.
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Indoor Water Park Competitive Market sq. feet of Hotel sq. feet of Name City & State waterpark Rooms convention Features F&B Water Park of America* Bloomington, MN 75,000 NA NA 9 8 Grand Harbor Resort and Water Park Dubuque, IA 25,000 193 86,000 9 2 Chaos Water Park Eau Claire, WI 35,000 107 10,000 7 4 Wild Woods Water Park Elk River, MN 30,000 125 5,000 8 2 Tundra Lodge Resort & Conference Center Green Bay, WI 30,000 162 20,000 7 3 Key Lime Cove Indoor Water Park Resort* Gurnee, IL NA NA NA NA NA Timber Ridge Lodge and Water Park Lake Geneva, WI 50,000** 223 3,500 6 8 Crawdaddy Cove Indoor Water Park Madison, WI 2,500 157 6,800 5 1 The Waters of Minocqua Minocqua, WI 4,800 106 5 2 Honey Creek Resort Moravia, IA 10,000 133 6,900 7 2 The Great Serengeti Indoor Water Park Owatonna, MN 35,000 130 3,300 5 1 Country Springs Hotel Pewaukee, WI 45,500 187 40,000 11 4 Bear Foot Bay Indoor Water Park Prairie du Chien, WI NA 64 < 1,000 6 1 Kahler Apache Hotel and Water Park Rochester, MN NA 149 8,766 5 0 Loggers Landing Indoor Water Park Rothschild, WI 50,000 139 4,500 9 1 Blue Harbor Resort Sheboygan, WI 54,000 244 16,800 12 5 Pirates Cay Sheridan, IL 31,000 0 0 6 3 Grizzly Jack's Grand Bear Resort Utica, IL 24,000 280 11,000 7 5 Three Bears Resort Warrens, WI 50,000 153 16,000 9 4 Wintergreen Resort & Conference Center Wisconsin Dells, WI NA 109 12,970 6 1 Kalahari Resorts Dells Wisconsin Dells, WI 125,000 756 105,000 17 11 Great Wolf Lodge Wisconsin Dells, WI 80,000 436 8,000 16 7 Wilderness Hotel and Golf Resort Wisconsin Dells, WI 240,000 1,151 56,000 24 19 Polynesian Water Park Hotel Wisconsin Dells, WI 200,000** NA NA 8 0 Mt. Olympus Water and Theme Park Resort Wisconsin Dells, WI 35,000 1,600 0 9 4 Chula Vista Resort Wisconsin Dells, WI 80,000 624 200,000 7 8 * proposed water park; ** measurements include indoor and outdoor waterparks Source: The Innovation Group, Inc.
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Water Park Competition
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Existing Non-Waterpark Lodging Market The regional competitive supply includes 22 hotels within 15 miles of the proposed location, with a total of 1,501 rooms as provided by Smith Travel Research (STR). The market has a large selection of economy and midscale hotels; however, they are not considered competition as their clientele will vary from what the quality the expanded casino hotel will attract. The chart below gives more detailed information about the local hotel supply offered within a 15-mile radius of the proposed Beloit location.
Local Hotel Supply Name of Establishment City & State Class Rooms Ike's Motel Beloit, WI Economy Class 16 Super 8 Beloit Beloit, WI Economy Class 73 Rodeway Inn Beloit Beloit, WI Economy Class 77 Lannon Stone Motel Janesville, WI Economy Class 27 Microtel Inn & Suites by Wyndham Janesville Janesville, WI Economy Class 61 Closed Edgewater Motel Loves Park, IL Economy Class 0 Clayton House Motel Loves Park, IL Economy Class 57 Parks Motel Loves Park, IL Economy Class 30 Village Inn Motel Machesney Park, IL Economy Class 20 Tollway Inn South Beloit, IL Economy Class 37 Garden Hotel & Conference Center South Beloit, IL Economy Class 164 Quality Inn Beloit Beloit, WI Midscale Class 54 Baymont Inn & Suites Beloit Beloit, WI Midscale Class 59 Baymont Inn & Suites Janesville Janesville, WI Midscale Class 105 Quality Inn & Suites Loves Park Loves Park, IL Midscale Class 55 Best Western Legacy Inn & Suites Beloit South Beloit South Beloit, IL Midscale Class 67 Hampton Inn Beloit Beloit, WI Upper Midscale Class 96 Fairfield Inn & Suites Beloit Beloit, WI Upper Midscale Class 94 Holiday Inn Express Janesville I 90 & Highway 14 Janesville, WI Upper Midscale Class 142 Holiday Inn Express & Suites Rockford Loves Park Loves Park, IL Upper Midscale Class 119 Cliffbreakers Riverside Resort Rockford, IL Upper Midscale Class 94 Ironworks Hotel Beloit, WI Upper Upscale Class 54 TOTAL 1,501 Source: Smith Travel Research, The Innovation Group
Target Market In this case, the target market consists only of hotels classified as upper midscale, upscale and upper-upscale. Therefore, our target market contains 21 hotels from within 25 miles of the proposed location. All of the hotels listed below provide occupancy, segmentation and revenue data to STR. As a result, the following hotels were selected as a competitive set for the proposed hotel. The following table lists the 21 hotels for which historical average daily room rates and occupancy rates were available for the region. These properties account for 2,643 hotel rooms and should be considered as a representative sample of how the market is performing for properties attracting a mix of regional highway travelers, business travelers, and vacationers.
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Target Market Supply Name of Establishment City & State Class Rooms Comfort Suites Delavan Lake Geneva Area Delavan, WI Upper Midscale Class 80 Hampton Inn Beloit Beloit, WI Upper Midscale Class 96 Fairfield Inn & Suites Beloit Beloit, WI Upper Midscale Class 94 Comfort Inn Edgerton Edgerton, WI Upper Midscale Class 50 Holiday Inn Express Janesville I 90 & Highway 14 Janesville, WI Upper Midscale Class 142 Hampton Inn Janesville Janesville, WI Upper Midscale Class 98 Cliffbreakers Riverside Resort Rockford, IL Upper Midscale Class 94 Hampton Inn Rockford Rockford, IL Upper Midscale Class 121 Comfort Inn Rockford Rockford, IL Upper Midscale Class 64 Fairfield Inn & Suites Rockford Rockford, IL Upper Midscale Class 106 Holiday Inn Rockford I 90 & Route 20 State Street Rockford, IL Upper Midscale Class 202 Holiday Inn Express & Suites Rockford Loves Park Loves Park, IL Upper Midscale Class 119 Lake Lawn Resort Delavan, WI Upper Upscale Class 267 The Abbey Resort & Spa Fontana, WI Upper Upscale Class 334 The Ridge Hotel Lake Geneva, WI Upper Upscale Class 146 Ironworks Hotel Beloit, WI Upper Upscale Class 54 Staybridge Suites Rockford Rockford, IL Upscale Class 86 Residence Inn Rockford Rockford, IL Upscale Class 94 Hilton Garden Inn Rockford Rockford, IL Upscale Class 135 Radisson Hotel & Conference Center Rockford Rockford, IL Upscale Class 114 Courtyard Rockford Rockford, IL Upscale Class 147 TOTAL 2,643 Source: Smith Travel Research, The Innovation Group
Target Market Statistical Analysis The regional hotel market has fully recovered from the economic recession back in 2008. The market experienced average annual occupancies around 60% from 2011 through 2016, with a peak of 63.4% in 2016. Occupancy in the last 9 months of 2017 averaged 71.6%, a 10.75% increase over the same period in 2016. Average daily rates (“ADR”) have increased year-over-year since 2011 to peak at $113 in 2016. Revenue per available room (“RevPAR”) also increased since 2011, indicating a healthy regional market with increasing demand potential.
Target Market Statistics % % % % % Year RNA Change RND Change Occupancy Change ADR Change RevPAR Change 2011 876,882 513,119 58.5% $95.19 $55.70 2012 936,021 6.7% 557,047 8.6% 59.5% 1.7% $100.85 6.0% $60.02 7.8% 2013 966,106 3.2% 549,869 -1.3% 56.9% -4.4% $103.84 3.0% $59.10 -1.5% 2014 967,250 0.1% 566,911 3.1% 58.6% 3.0% $106.45 2.5% $62.39 5.6% 2015 966,214 -0.1% 584,333 3.1% 60.5% 3.2% $110.60 3.9% $66.89 7.2% 2016 964,027 -0.2% 611,003 4.6% 63.4% 4.8% $113.18 2.3% $71.74 7.2% YTD 2017 721,539 0.1% 516,400 10.7% 71.6% 10.7% $122.04 5.7% $87.34 17.0% Source: Smith Travel Research; The Innovation Group
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Comparable Water Park Hotel Performance In order to help determine the performance of a water park hotel at the proposed Beloit location, The Innovation Group selected several water park hotels with meeting space in similar settings around the country which report to Smith Travel Research. The following table describes the size of the five properties and their water park and meeting space accommodations. The selected properties have water parks that range from 20,000 – 80,000 square feet and room inventories from 187 rooms to 500 rooms. However, they do not offer casino gaming and thereby benefit from that demand segment.
Water Park Hotel Comparables Conference Water Name of Establishment City & State Class Rooms Space Park Size Great Wolf Lodge Williamsburg Williamsburg, VA Upscale Class 405 10,000 79,000 Great Wolf Lodge Concord Concord, NC Upscale Class 402 20,000 80,000 Timber Ridge Lodge Resort Lake Geneva, WI Luxury Class 223 62,000 50,000 Country Springs Hotel Waukesha, WI Upper Upscale Class 187 40,000 45,000 Tan Tar A Resort Golf Club Osage Beach, MO Upscale Class 500 90,000 20,000 Total/Average 5 1,717 44,400 54,800 Source: Smith Travel Research, The Innovation Group
Target Market Statistical Analysis The water park hotel market has experienced relatively high occupancies over the past three years, exceeding 60% in 2016. The monthly ADR in 2016 fluctuated from $165 to $230 for this market, although annual ADR declined 3% over the previous year. However, RevPAR has continues to increase for these waterpark hotels.
Target Market Statistics Year Occupancy % Change ADR % Change RevPAR % Change 2014 59.1% $196 $116 2015 60.0% 1.6% $204 3.7% $122 5.4% 2016 63.2% 5.3% $198 -2.9% $125 2.3% Source: Smith Travel Research; The Innovation Group
Estimated Hotel Demand The waterpark hotel is to offer 300 rooms and a 40,000 square-foot waterpark. Combining waterpark and casino room night demand, the property is estimated to garner approximately 84,000 room nights of demand in Year 2, representing the second full year of operations for the hotel. Together with day visits from local residents, approximately 180,000 visitors are projected, some of whom represent casino visitors. The majority of hotel demand is estimated to be induced waterpark and group demand from distant markets like Chicago, and therefore the facility is not expected to materially impact existing hotels in Rock and Winnebago Counties.
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RETAIL ASSESSMENT (ALTERNATIVES A & C) The Retail Assessment that follows begins by providing market research conducted by The Innovation Group to determine the most feasible retail development on the proposed site. We tested the feasibility of two retail options that could fit in the scope’s proposed 150,000 - 175,000 square foot (sf) retail development. The two retail options that were analyzed were: Big Box Retail and Outlet Malls.
“Retail” includes a wide variety of stores and development types, from neighborhood-serving to super-regional centers, which depend upon traffic and disposable income from a variety of geographic scales, to “Destination Retail Stores’ that act as catalysts to lure people from outside the region (i.e. Outlet Mall). Existing Conditions Similar to the broader domestic retail environment, the Beloit area retail market has evolved over the past several years. This is evidenced by the 2016 closure of one big box retailer in Beloit, Staples, as consumer purchasing patterns continue to shift. Despite this closure, there are still several Big Box Retailers serving the 3-6 mile trade area within the Beloit market. The maps below outline the major big box retailers within a 3 and 6 mile ring around the proposed site along with the other major big box retailers in the region. As can be seen below, there is a cluster of stores to the north east of the proposed site. These stores range from grocers (Aldi) to hardware stores (Menards) to general merchandise retailers (Wal-Mart). Additionally, there is another general merchandise retailer (Wal-Mart) and grocer (Aldi) to the south as well as a department store (Elder-Beerman) to the west.
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Source: MapInfo
As part of our analysis for the viability of retail around the proposed Beloit site, we consulted a database of consumer-expenditure and retail-sales data that supports a summary of the under-or over-supply of different kinds of retail in Beloit, WI.
The following table presents the results of this “GAP Analysis” for all retail sectors and sub- sectors. The largest unmet opportunity, in terms of dollars, is in “General Merchandise Stores,” “Motor Vehicle and Parts Dealers,” and “Foodservice and Drinking Places.” With a total retail opportunity of over $146 million, the Beloit area appears to offer potential for a variety of retail developments.
City of Beloit Retail Gap Analysis, 2017 Estimate (thousands) Store Type Demand Supply Opportunity Total Retail Sales Incl. Eating and Drinking Places $580,225 $434,068 $146,157 General Merchandise Stores $67,900 $27,662 $40,238 Motor Vehicle and Parts Dealers $116,723 $79,940 $36,783 Foodservice and Drinking Places $59,233 $29,396 $29,837 Clothing and Clothing Accessories Stores $25,347 $5,040 $20,307 Building Material, Garden Equip Stores $58,447 $38,222 $20,225 Food and Beverage Stores $77,491 $65,929 $11,562 Furniture and Home Furnishings Stores $10,657 $3,623 $7,033 Sporting Goods, Hobby, Book, Music Stores $11,477 $5,393 $6,084 Non-Store Retailers $54,480 $50,492 $3,988 Electronics and Appliance Stores $9,176 $6,682 $2,493 Health and Personal Care Stores $36,275 $49,477 ($13,202) Gasoline Stations $36,446 $54,814 ($18,368) Source: Nielsen Claritas; The Innovation Group.
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Of course, not all of the retail types included above would be appropriate as part of a development strategy under consideration here. We would, for example, not include “Non-Store Retailers,” which includes internet retail, traveling salesmen, kiosks, and other miscellaneous forms of retail trade. In other words, there is the largest opportunity for the following retail categories: “General Merchandise Stores,” “Motor Vehicle and Parts Dealers,” “Foodservice and Drinking Places,” “Clothing and Clothing Accessories Stores,” and “Building Material, Garden Equipment Stores.” All of these retail categories have market opportunities in excess of $20 million annually.
From this gap analysis, we see the biggest market opportunity for a destination retail development as it could draw from the local market as well as pull patrons in other geographic regions. As the casino will include potential destination F&B options we chose to focus upon retail developments that touch multiple retail categories as defined by Nielsen Claritas, in particular we focused on Big Box Retailers and Outlet Malls.
Market Research The Innovation Group conducted in-depth market research to determine the most feasible retail development on the proposed site in Beloit. Using the International Council of Shopping Center’s (ICSC) US Shopping-Center Classification and Characteristics we determined two viable retail options given the proposed facility size of between 150,000 and 175,000: 1) Big Box Retail; and 2) Outlet Malls. We conducted market research as well as an operational and lease revenue analysis for both of these development options. Our market research analysis of each retail option is detailed below. This section is followed by our operational and lease revenue analysis for both options.
Big Box Development Overview Big Box Retailers are large general merchandise stores with products you would often find at department stores often at a much lower cost. Big Box retailers include stores like Target, Wal- Mart, and Costco. As a part of the analysis, we also looked into supermarkets. Unless otherwise stated, the trade area for big box retailers was used at 6 miles, the industry standard according to the ICSC. Our checklist for researching the feasibility of various big-box retailers proceeded as follows:
x Scanning the trade area (6 miles according to the ICSC) to ensure there is no identical or saturated retail environment. x Ensuring their sales could sustain 175,000 sqft of space when taking the area’s retail GAP (explained below) into account.
The table below shows the population base and income levels within the 6-mile trade area of the proposed Beloit site both for the current year (2017) and forecasts for five years from now (2022):
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Beloit 6 Mile Trade Area Demographic Snapshot Category 0-3 miles 0-6 miles 2017 Adult Population 8,242 24,696 Median Household Income $62,291 $76,489 Number of Household 4,097 11,498 Adults per Household 2.0 2.1 2022 Adult Population 8,379 25,520 Median Household Income $67,678 $80,242 Number of Household 4,068 11,508 Adults per Household 2.1 2.2 CAGR Adult Population 0.3% 0.7% Median Household Income 1.7% 1.0% Number of Household -0.1% 0.0% Adults per Household 0.5% 0.6% Source: iXPRESS; The Innovation Group
An analysis of the feasibility of various forms of big box retailers at the proposed site can be found below:
Wal-Mart There is a Super Wal-Mart less than two miles away the proposed site. Given this proximity we concluded that the existence of another Wal-Mart at the proposed site would not be viable.
Target There are several Target stores within the greater Beloit region, however they are all outside of the 6-mile trade area. On top of this, in other trade areas within the region, such as Janesville, both a Wal-Mart and Target are operating.
Recognizing there were no location issues for a potential Target store, our next step was to determine if the average sales per square foot (psf) at a Target could be sustained at a 150,000 to 175,000 square foot facility, the estimated size for the proposed retail venue. According to the company’s most recent annual report, Target stores had an average sales psf of $277 in 2016. A summary of our key findings from the company’s annual report is displayed in the table below. While we recognize that the most recent average size of Target stores is slightly less than the proposed retail development size, it is important to note that many existing Target stores are above 150,000 square feet in size.
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Target 2016 Operating Statistics Total Brick & Mortar Sales ($M) $66,437 Total Store SQFT (000) 239,502 Sales PSF $277.40 Total # of Stores 1,802 Sales per Store ($M) $36.87 SQFT per Store 132,909 Source: Target Financial Filings
Next, we assessed this figure against data provided from the Retail Market Power (RMP) GAP analysis from Nielsen Claritas in order to understand if the region could sustain that sales psf at a facility that is approximately 150,000 - 175,000 sq. ft. in size. Specifically, the GAP analysis provides data on local market consumer expenditure as well as local market retail sales broken out by industry classification. The GAP analysis then shows the opportunity/GAP in the market for each particular industry. If it is positive it shows there is room for growth; however if it is negative it means the market is already saturated with that business type. Therefore, the GAP analysis allows The Innovation Group to quantify if there is enough demand to sustain a facility based upon demand in a given market. For Big Box Retailers, such as Target, we focused our GAP analysis on the “General Merchandise” category.
Using data from the GAP analysis for Beloit, displayed previously, we were able to calculate the maximum retail area available to build. We found that there is an opportunity for Big Box Retailers in excess of $40.2 million. Applying this to Target’s average sales psf at approximately $277, we determined that the maximum size Target that could be sustained in the local market would be slightly above 145,000 square feet. This is in-line with both the average Target store size and the proposed retail development size. Based on this analysis, we believe a new Target store presents a feasible option for the proposed retail development.
Potential SQFT: Target
GAP Analysis: General Merchandise Sales PSF Maximum Potential SQFT Average Target SQFT $40,237,973 $277.40 145,055 132,909 Source: Target Financial Filings, The Innovation Group; Nielsen Claritas
Warehouse Club A Warehouse Club store, like Costco or Sam’s Club is a form of Big Box retail where patrons must buy products in bulk, but at a lower per unit cost. For our market research we used Costco and Sam’s Club as our model Warehouse club stores.
The closest Sam’s Club is approximately 18 minutes away from the proposed site while the closest Costco is close to one hour away. This is well outside the 12-minute trade area of a warehouse club store as given by Costco’s real estate development team. Our next step was to use the GAP analysis in order to determine the feasibility of a Costco in the local trade area. Using the subject companies’ most recent annual reports, we found that sales psf average approximately $1,123
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Costco stores while Sam’s Club sales psf average roughly $606. The following tables summarize both Costco and Sam’s Club most recent annual operating statistics.
Costco 2016 Operating Statistics Total Brick & Mortar Sales ($M) $116,073 Total Store SQFT (000) 103,318 Sales PSF $1,123 Total # of Stores 715 Sales per Store ($M) $162.34 SQFT per Store 144,500 Source: Costco Financial Filings
Sam's Club 2016 Operating Statistics Total Brick & Mortar Sales ($M) $53,289 Total Store SQFT (000) 88,000 Sales PSF $606 Total # of Stores 660 Sales per Store ($M) $80.74 SQFT per Store 133,333 Source: Costco Financial Filings
Using the same GAP figure for Big Box Retailers of approximately $40.2 million, we determined that the maximum size of a Costco would be approximately 36,000 square feet while a Sam’s Club would be roughly 66,500 square feet. Both estimated store sizes are significantly smaller than the average respective store for both Costco and Sam’s Club. Based on this lack of retail opportunity, a Warehouse Club store on the proposed site is not deemed feasible.
Potential SQFT: Warehouse Stores GAP Analysis: General Merchandise Sales Maximum Average Store PSF Potential SQFT SQFT Costco $40,237,973 $1,123 35,816 144,500 Sam's Club $40,237,973 $606 66,448 133,333 Source: Target Financial Filings, The Innovation Group; Nielsen Claritas
Supermarket Supermarkets have an average trade area of approximately three miles and upon evaluating the trade area; it is home to two discount grocers: Aldi and Save-A-Lot. Additionally, the three-mile trade area is also home to several local and specialty markets.
Despite the favorable income characteristics of the three-mile trade area—the median household income of the three-mile trade area is $62,291, above both the Wisconsin ($56,576) and national
The Innovation Group Project #033-18 June 2018 Page 44 Draft median incomes ($57,462)—due to the relative saturation of grocers in the area, a supermarket and/or specialty supermarket was not deemed viable at the proposed location.
Outlet Development Overview According to the ICSC, Outlet Centers range between 50,000-400,000 square feet depending upon location and facility ownership. Within the US, there are 202 outlets with over 50% of outlets being owned by one of two companies: Tanger Outlets and Simon Property Group. These two companies build new outlet centers in locations based upon very specific formulas. Tanger publishes their site location criteria for a new development. Below highlights the major criteria they require for an ideal location for an outlet mall:
x Access to 1 million people residing within a 30-40 mile radius of the site x Average household income of at least $65,000 per year; and x Frontage on a major interstate or roadway that has excellent visibility and a traffic count of at least 55,000 cars per day. In terms of leasing the property, Tanger has stated that they prefer that at least 50% of space in each center is pre-leased prior to acquiring the site and beginning construction. This is done through communication with their existing partnerships with major retail brands. These conversations with retail brands also influence how and if Tanger will enter a market. Construction, once approved, typically takes between nine to twelve months from groundbreaking to the opening of the first store.
The current market conditions for a proposed outlet center in Beloit cover some of the criteria outline above. The Innovation Group’s research has shown that within 40 miles of the proposed site there are, as of 2017, approximately 1.2 million people. Average annual household income is reported to be approximately $76,500, above the $65,000 target set by Tanger. For traffic count, AADT figures from the Wisconsin Department of Transportation (WDT) show that on I-90 just north of I-43, 2014 AADT figures were 45,927, below Tanger’s target of 55,000. We would note that although the traffic figures do not match the targets set by Tanger, the above average income for the market area and favorable population statistics warrant further analysis in the opportunity for an outlet development. Moreover, we believe the proposed casino will generate an increased amount of traffic to the area.
In order to refine our analysis, we used a GAP analysis, similar to the analysis utilized for Big Box Retailers. First, we looked at existing outlets within the greater market area. As shown in the table below, the closest outlet mall, Johnson Creek Premium Outlets, is approximately 60 minutes, or 49 miles, from the proposed site location. This is the only existing outlet mall within the trade area for the proposed site.
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Source: MapInfo
Recognizing there was only one competing outlet mall on the very edge of the trade area, our next step was to determine if the average sales per square foot (psf) at an outlet mall could be sustained at a 150,000 to 175,000 square foot development. According to the most recent annual reports for Tanger Outlets and Simon Property Group, the two companies’ outlets had an average sales psf of $387 and $614 in 2016, respectively. A summary of our key findings from each company’s annual report is displayed in the table below.
Outlet Store Statistics Total Square Average Square Outlet Square Footage Sales Footage Footage/Outlet Range PSF* Tanger Outlets 12,704,526 352,904 82,161 - 749,074 $387 Simon Property Group 29,774,370 444,394 147,416 - 893,066 $614 Total/Average 42,478,896 398,649 82,161 - 893,066 $501 Source: Tanger Outlets Financial Filings, Simon Property Group Financial Filings; *Simon Property Group Sales PSF includes properties other than outlets
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Sales Estimate Alternative A Given the high sales psf at Simon Property Group’s outlet malls, we chose to use Tanger Outlet’s most recent sales psf average of $387 for our development sizing analysis. Using data from the GAP analysis for Beloit, displayed previously, we were able to calculate the maximum retail area available to build. We found that there is an opportunity for outlet malls in excess of $60.5 million. We determined this figure by taking the retail GAP for the following categories: General Merchandise Store and Clothing and Clothing Accessories Stores. We chose these two categories to focus our GAP analysis as we believe both will be served by an outlet mall development. Applying this GAP figure of $60.5 million to Tanger’s average sales psf, we determined that the maximum size outlet mall that could be sustained by the trade area would be approximately 156,000 square feet. This is in-line with both the square footage range of existing Tanger Outlets and the proposed retail development size. Based on this analysis, we believe a new Outlet Mall presents a feasible option for the proposed retail development.
Potential Sales and SQFT: Alternative A GAP Analysis: General Merchandise, Clothing Sales PSF Maximum Outlet Store & Clothing Accessories Potential SQFT Range - SQFT $60,544,847 $387 156,447 82,161 - 749,074 Source: The Innovation Group; Nielsen Claritas
Sales Estimate Alternative C For Alternative C, the contribution of the casino resort will have to be subtracted from the sales forecast above. We estimate that the resort elements in Alternative A would represent retail spending of $3.7 million, or 6.1% of the sales forecast above, based on a capture of day-trip gaming visitation from beyond a 90-minute retail trade area and a capture of waterpark hotel guests.
First, we utilized the number of visits that the proposed site is expected to receive from the non- overnight gaming market from beyond 90 minutes, which is estimated at approximately 250,000 gaming visits. Given an average frequency of 4 gaming trips per year among the outer market population, we are able to assume that there will be approximately 62,000 unique visitors per annum. Induced visitation from gaming is based upon “unique” visitors rather than total gaming visits. Applying a shopping visitation factor of 2.1 (derived from ICSC research) to these unique visitors, 29,535 shopping visits annually are forecast from the local gaming market segment.
Retail Visits from Day-trip Casino Patrons Local Gaming Visits to Subject 248,098 Average Trip Frequency 4 Unique Visitors 62,025 Shopping Visitation Factor 2.1 Shopping Visits 29,535
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The Innovation Group then calculated the induced visitation to the retail facility from the overnight population visiting the casino. An independent survey conducted by The Innovation Group and Yesawich, Pepperdine, Brown and Russell, of approximately 2,200 U.S. gamers found that the shopping visitation factor of overnight on-site overnight gamers is 1.76.
Retail Visits from Induced Overnight Casino Patrons Induced Overnight Visitation 77,141 Shopping Visitation Factor 1.76 Shopping Visits 43,830
In total, more than 73,000 shopping visits are estimated to be induced by the casino resort development in Alternative A. Subtracting these visits from the sales forecast in Alternative A results in a sales forecast in Alternative C of $56,876,568.
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ECONOMIC IMPACT ASSESSMENT This report assesses the ongoing economic impact for the proposed alternative developments in Beloit, Wisconsin. This analysis will also address the one-time impacts of construction.
The economic impact analysis is based on results in The Innovation Group’s Gaming and Retail Market Assessments from 2017. The Innovation Group’s internal models were utilized, as well as supplemental information provided by the Nation.
Methodology This economic impact assessment evaluates the benefits to Rock and Winnebago Counties that could be expected during the ongoing operational stage as well as the construction phase of the proposed development. It is standard practice to evaluate local impacts at the county level since that is the geographic level at which Census data is organized and economic impact multipliers are available. However, although by necessity the results are presented for Rock and Winnebago Counties, it is estimated that the majority of economic impacts will accrue to Beloit and its residents.
The economic effects that accrue from the annual operations of the casino are termed ongoing impacts, as they are revenues, jobs, earnings, and tax dollars that can be expected to accrue annually as a result of gaming operations and the attraction of gaming patrons. The construction phase of the project is considered a one-time benefit to the area. This refers to the fact that these dollars will be introduced into the economy only during the construction phase of the project.
Direct, indirect, and induced impacts are assessed for both ongoing operations and the construction of the facility.
Direct impacts result from the economic activity that occurs on the property itself. In the case of ongoing operations, these expenditures ultimately derive from patron spending. The direct impact effectively represents the expenditures made by the facility in the form of employee compensation, purchases of goods and services, and patron spending on the food, beverage, hospitality, and retail sectors of the complex. Patron spending on the casino floor has been discounted to exclude promotional allowances as well as payments to local governments, since those payments represent direct transfers to government coffers and are accounted for in the fiscal impact analysis.
Indirect impacts reflect the economic spin-off that is made possible by the direct purchases of the facility. Local firms providing goods and services to the proposed facility will have incomes partially attributable to these gaming operations. These dollars contribute to the vendors’ spending power, and therefore the incremental increase in their spending attributable to this income is considered an indirect impact.
Induced impacts result from the direct impacts on labor income. As household incomes are affected by direct employment and spending, this money is re-circulated through the household spending patterns causing further local economic activity.
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The economic impact analysis results in the following outputs:
1. Employment—or number of total jobs supported.
2. Labor Income (Earnings/Salaries) in IMPLAN consists of two parts. First is the total payroll cost of the employee paid by the employer: wage and salary, all benefits, and employer-paid payroll taxes (e.g. employer side of social security, unemployment taxes, etc). Second, proprietor income consists of payments received by self-employed individuals and unincorporated business owners.
3. Value Added is comprised of Labor Income, Indirect Business Taxes, and Other Property Type Income. It demonstrates an industry’s value of production over the cost of its purchasing the good and services required to make its products. Value Added is often referred to as Gross Regional Product (GRP). Value Added = Labor Income + Indirect Business Taxes + Other Property Type Income.
4. Output (Total Spending) represents the value of industry production. In IMPLAN these are annual production estimates for the year of the data set and are in producer prices. For manufacturers, this will be sales plus/minus change in inventory. For service sectors production = sales. For retail and wholesale trade, output = gross margin and not gross sales. Output = Intermediate Inputs + Value Added.
Economic impact analyses use industry multipliers that have been developed based on U.S. Census data to determine the indirect impacts that occur from direct expenditures. The Innovation Group has utilized IMPLAN 3.0 software and data for the purpose of these calculations. IMPLAN accounts closely follow the accounting conventions used in the "Input-Output Study of the U.S. Economy" by the Bureau of Economic Analysis.
However, as noted by the Center for Policy Analysis at the University of Massachusetts Dartmouth in a study from 2004, IMPLAN multipliers are lower than those calculated by the Bureau of Economic Analysis:
The IMPLAN modeling system accounts for substitution effects by applying local and regional multipliers to disposable personal income only. The modeling system’s balanced accounts matrix insures that disposable income which is spent on one type of good or service cannot be spent simultaneously on some other good or service. The application of multipliers to disposable personal income and the imposition of a balanced account matrix results in multiplier effects that are substantially less than those recommended in the U.S. Bureau of Economic Analysis Regional Input-Output Modeling System II (RIMS II). … Thus, the indirect and induced impacts represent net new job creation and not merely a transfer of jobs from one sector to another.
Employment is headcount (or total number of jobs, full and part time) in keeping with US Census data and IMPLAN. Since it includes part-time employees, headcount is a higher number than FTE (full-time equivalent).
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ONGOING ECONOMIC IMPACTS The ongoing economic effects result from the casino resort and/or retail operations and occur annually. Stabilized Year 2 operating revenues are utilized in the analysis.
Ongoing Operation Inputs The first step is to analyze the impact generated by direct operations of the facility. This step accounts for the workers employed at the facility and the compensation they earn as well as the purchases of goods and services by the casino property. To model these impacts, we utilized industry change activities in IMPLAN for casino, restaurant, entertainment, and retail sectors. The revenue inputs were generated by the Innovation Group from the gaming and retail market assessments.
Casino Operations Staffing and employment compensation estimates were based on The Innovation Group’s operating pro forma model and input into the IMPLAN software. Our staffing model has been calibrated to actual operating data from existing casinos in Wisconsin and other jurisdictions and is on a Full-Time Equivalent (“FTE”) basis. These FTEs (estimated at approximately 1,482 in Alternative A and 963 in Alternative B in our model) were converted by sector into total number of employees (full and part time) using IMPLAN’s conversion matrix,2 which for the casino sector is 0.82136 FTEs for each employee on a headcount basis, or 1,127 - 1,734 jobs.
Gaming revenue input into the IMPLAN model is net of the Tribal Compact and related payments and promotional allowances. The following table shows the total operating parameters and the adjusted inputs utilized in the IMPLAN modeling. All ongoing impacts are for stabilized Year 2 operations.
Combined Casino Operating Inputs ($MMs) Revenue Revenue Revenue Department Alternative A Alternative B Alternative C Casino $221.3 $182.7 - Hotel and Waterpark $28.0 - - Food and Beverage $27.4 $21.7 - Entertainment $2.6 - - Casino Retail & Other $1.7 $1.4 - Total Direct $281.0 $205.8 - The Innovation Group
2 IMPLAN conversion ratios are based on national employment averages from the Bureau of Economic Analysis.
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Retail Development Operations The following section identifies the economic impacts from the proposed 175,000-square foot retail development proposed in Alternatives A and C. The market assessment performed by the Innovation Group estimated the retail sales potential for the development to be $60.5 million in Alternative A and $56.9 million in Alternative C.
The economic benefits resulting from the retail development operations will be annual benefits that could be expected from retail sales of $57- $60 million, the result of an Innovation Group retail market assessment that included a GAP analysis and examined metrics in comparable developments in the regional market such as rent per square foot and occupancy rates. The sales figure was categorized in IMPLAN under the Retail Sector 440 for General merchandise stores.
Retail Development Operating Inputs ($MMs) Revenue Revenue Revenue Industry Segment Alternative A Alternative B Alternative C
405 Retail - General merchandise stores $60.5 - $56.9 IMPLAN Group, LLC, IMPLAN System; The Innovation Group Economic Impacts from Operations
Alternative A The Casino Resort will include multi-purpose event space, dining options, and a 300-room hotel and indoor water park. The new casino is scheduled to house approximately 2,200 slot machines and 50 table games. Based on our proforma modeling for resort operations, including casino hotel, food and beverage, entertainment and related departments, The Innovation Group estimates that the resort will require staffing of nearly 1,500 FTE employees. Additionally, we have utilized industry change activities under IMPLAN for the resort operations to assess the impact on local vendors of purchases of goods and services by the property.
The direct effect of casino resort operations is labor income of $83.7 million accruing to 1,734 employees. The direct added value to the economy is estimated to be $162.8 million, which includes the labor income. In addition to these direct effects, the operation will support 700 indirect jobs and 651 induced jobs for a total of 3,085 in Rock and Winnebago Counties. Total labor income is estimated to reach $139 million annually and the value added to the economy is estimated at $270 million. The majority of these economic effects are estimated to accrue to Beloit and its residents.
Casino Operating Impacts ($MMs) Employment Labor Income Value Added Output Direct Effect 1,734 $83.7 $162.8 $279.7 Indirect Effect 700 $28.7 $59.0 $99.0 Induced Effect 651 $26.6 $47.8 $82.6 Total 3,085 $138.9 $269.6 $461.4 IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
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For Retail Operations, margins were applied in IMPLAN to properly reflect the portion of the sales that are attributable to Rock and Winnebago Counties. The Gross Retail Margin in IMPLAN is the difference between the price paid by consumers and the price paid by the retailer, with the remaining portion of the sales considered to be leakages outside of the county. The retail margin for this sector in Rock County is 27.2%; therefore, only $16.5 million of $60.5 million in industry sales is considered the direct effect of this development.
According to the IMPLAN analysis, in addition to the 251 direct jobs in Rock and Winnebago Counties, the outlet mall will support 38 indirect jobs and 48 induced jobs for a total of 336 in the county. Total labor income is estimated to exceed $10 million annually and total spending is estimated at nearly $29 million.
Retail Development Operating Impacts ($MMs) Employment Labor Income Value Added Output Direct Effect 251 $6.5 $10.5 $16.5 Indirect Effect 38 $1.7 $2.9 $5.3 Induced Effect 48 $1.9 $3.5 $6.0 Total 336 $10.1 $16.9 $27.8 IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
The following table shows the combined ongoing economic impacts from casino resort and retail outlet operations. In total, Alternative A will support 3,421 jobs earning $149 million in labor income, adding approximately $286 million in value to the economy in Rock and Winnebago Counties.
Total Combined Operating Impacts ($MMs) Employment Labor Income Value Added Output Direct Effect 1,985 $90.2 $173.3 $296.2 Indirect Effect 738 $30.4 $61.9 $104.4 Induced Effect 699 $28.5 $51.3 $88.7 Total 3,421 $149.1 $286.4 $489.2 IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
The following tables provide detailed results of ongoing operating impacts on employment and labor income, aggregated by industry sectors. Employment is headcount (or total number of jobs, full and part time) in keeping with US Census data and is rounded to the nearest whole number. Labor income consists of all forms of employment income, including Employee Compensation (wages and benefits) and Proprietor Income (earnings by self-employed individuals).
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Detailed Operating Impact on Employment: Aggregated by Industry Sector Industry Sectors (2-Digit NAICS) Direct Indirect Induced Total 11 Ag, Forestry, Fish & Hunting - - 1 1 21 Mining - 1 - 1 22 Utilities - 3 2 5 23 Construction - 12 6 18 31-33 Manufacturing - 6 2 9 42 Wholesale Trade - 12 20 32 44-45 Retail trade 254 11 134 399 48-49 Transportation & Warehousing - 46 25 71 51 Information - 28 10 38 52 Finance & insurance - 51 38 89 53 Real estate & rental - 139 28 168 54 Professional- scientific & tech svcs - 171 21 193 55 Management of companies - 10 2 13 56 Administrative & waste services - 126 39 165 61 Educational svcs - 1 21 22 62 Health & social services - - 162 162 71 Arts- entertainment & recreation 1,044 54 19 1,117 72 Accommodation & food services 687 34 96 816 81 Other services - 30 71 101 92 Government - 1 1 2 93 Non NAICs - - - - Total 1,985 738 699 3,421 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
Detailed Operating Impact on Labor Income: Aggregated by Industry Sector Industry Sectors (2-Digit NAICS) Direct Indirect Induced Total 11 Ag, Forestry, Fish & Hunting - 4,031 13,734 17,765 21 Mining - 21,481 13,941 35,421 22 Utilities - 524,174 300,291 824,465 23 Construction - 629,259 346,659 975,918 31-33 Manufacturing - 410,304 159,044 569,348 42 Wholesale Trade - 837,591 1,394,030 2,231,621 44-45 Retail trade 6,643,959 317,553 3,906,867 10,868,379 48-49 Transportation & Warehousing - 2,287,822 1,279,528 3,567,351 51 Information - 1,561,527 568,862 2,130,390 52 Finance & insurance - 3,540,973 2,247,063 5,788,036 53 Real estate & rental - 1,828,341 404,338 2,232,679 54 Professional- scientific & tech svcs - 10,651,935 1,108,414 11,760,349 55 Management of companies - 1,362,356 299,252 1,661,607 56 Administrative & waste services - 3,760,783 1,190,296 4,951,079 61 Educational svcs - 17,535 603,995 621,530 62 Health & social services - 1,640 9,801,699 9,803,340 71 Arts- entertainment & recreation 62,081,224 451,305 289,095 62,821,624 72 Accommodation & food services 21,482,272 721,590 1,856,311 24,060,174 81 Other services - 1,364,859 2,649,355 4,014,213 92 Government - 74,917 71,312 146,229 93 Non NAICs - - - - Total 90,207,455 30,369,977 28,504,087 149,081,520 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
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Alternative B The reduced intensity development under Alternative B consists of a casino floor with approximately 1,600 slot machines and 30 table games in addition to multiple food and beverage outlets. Based on our proforma modeling for property operations, including casino, food and beverage, retail and related departments, The Innovation Group estimates that the resort will require staffing of 963 FTE employees. Additionally, we have utilized industry change activities under IMPLAN for the resort operations to assess the impact on local vendors of purchases of goods and services by the property.
The direct effect of resort operations is labor income of $60 million accruing to 1,127 employees. The direct added value to the economy is estimated to be $113 million, which includes the labor income.
In addition to these direct effects, the operation will support 516 indirect jobs and 446 induced jobs for a total of 2,088 in Rock and Winnebago Counties. Total labor income is estimated to exceed $95 million annually and the value added to the economy is estimated at $190.5 million. The majority of these economic effects are estimated to accrue to Beloit and its residents.
Casino Operating Impacts ($MMs) Employment Labor Income Value Added Output Direct Effect 1,127 $55.9 $113.1 $204.8 Indirect Effect 516 $21.1 $44.7 $74.0 Induced Effect 446 $18.2 $32.8 $56.6 Total 2,088 $95.2 $190.5 $335.4 IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
The following tables provide detailed results of ongoing operating impacts on employment and labor income, aggregated by industry sectors. Employment is headcount (or total number of jobs, full and part time) in keeping with US Census data and is rounded to the nearest whole number. Labor income consists of all forms of employment income, including Employee Compensation (wages and benefits) and Proprietor Income (earnings by self-employed individuals).
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Detailed Operating Impact on Employment: Aggregated by Industry Sector Industry Sectors (2-Digit NAICS) Direct Indirect Induced Total 11 Ag, Forestry, Fish & Hunting - - - 1 21 Mining - - - 1 22 Utilities - 2 1 3 23 Construction - 7 4 11 31-33 Manufacturing - 4 1 6 42 Wholesale Trade - 8 13 21 44-45 Retail trade 2 4 86 92 48-49 Transportation & Warehousing - 17 16 34 51 Information - 19 6 25 52 Finance & insurance - 38 24 62 53 Real estate & rental - 108 18 126 54 Professional- scientific & tech svcs - 134 14 148 55 Management of companies - 5 1 7 56 Administrative & waste services - 88 25 113 61 Educational svcs - - 13 14 62 Health & social services - - 104 104 71 Arts- entertainment & recreation 751 39 12 803 72 Accommodation & food services 373 19 61 453 81 Other services - 21 45 66 92 Government - 1 1 1 93 Non NAICs - - - - Total 1,127 516 446 2,088 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
Detailed Operating Impact on Labor Income: Aggregated by Industry Sector Industry Sectors (2-Digit NAICS) Direct Indirect Induced Total 11 Ag, Forestry, Fish & Hunting - $2,835 $8,771 $11,606 21 Mining - $12,769 $8,904 $21,673 22 Utilities - $283,124 $191,754 $474,878 23 Construction - $367,728 $221,415 $589,143 31-33 Manufacturing - $269,872 $101,572 $371,445 42 Wholesale Trade - $554,365 $890,303 $1,444,668 44-45 Retail trade $125,718 $126,436 $2,495,245 $2,747,399 48-49 Transportation & Warehousing - $958,523 $817,268 $1,775,792 51 Information - $1,037,926 $363,280 $1,401,206 52 Finance & insurance - $2,625,951 $1,434,971 $4,060,921 53 Real estate & rental - $1,409,401 $258,194 $1,667,594 54 Professional- scientific & tech svcs - $8,432,571 $707,983 $9,140,554 55 Management of companies - $686,768 $191,119 $877,886 56 Administrative & waste services - $2,597,608 $760,231 $3,357,839 61 Educational svcs - $3,823 $386,001 $389,823 62 Health & social services - $404 $6,259,500 $6,259,904 71 Arts- entertainment & recreation $44,865,863 $314,196 $184,692 $45,364,751 72 Accommodation & food services $10,925,763 $405,233 $1,185,600 $12,516,596 81 Other services - $953,632 $1,691,966 $2,645,598 92 Government - $50,963 $45,537 $96,501 93 Non NAICs - - - - Total $55,917,343 $21,094,126 $18,204,308 $95,215,777 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
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Alternative C The proposed non-gaming development in Alternative C consists of a 175,000 square foot retail center. For Retail Operations, margins were applied in IMPLAN to properly reflect the portion of the sales that are attributable to Rock and Winnebago Counties. The Gross Retail Margin in IMPLAN is the difference between the price paid by consumers and the price paid by the retailer, with the remaining portion of the sales considered to be leakages outside of the county. The retail margin for this sector in Rock County is 27.2%; therefore, only $15.5 million of $56.9 million in industry sales is considered the direct effect of this development.
According to the IMPLAN analysis, in addition to the 236 direct jobs in Rock and Winnebago Counties, the outlet mall will support 36 indirect jobs and 45 induced jobs for a total of 316 in the county. Total labor income is estimated to exceed $9.5 million annually and total spending is estimated at $26.1 million.
Retail Development Operating Impacts ($MMs) Employment Labor Income Value Added Output Direct Effect 236 $6.1 $9.8 $15.5 Indirect Effect 36 $1.6 $2.7 $5.0 Induced Effect 45 $1.8 $3.3 $5.7 Total 316 $9.5 $15.8 $26.1 IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
The following tables provide detailed results of ongoing operating impacts on employment and labor income, aggregated by industry sectors. Employment is headcount (or total number of jobs, full and part time) in keeping with US Census data and is rounded to the nearest whole number. Labor income consists of all forms of employment income, including Employee Compensation (wages and benefits) and Proprietor Income (earnings by self-employed individuals).
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Detailed Operating Impact on Employment: Aggregated by Industry Sector Industry Sectors (2-Digit NAICS) Direct Indirect Induced Total 11 Ag, Forestry, Fish & Hunting - - - - 21 Mining - - - - 22 Utilities - - - - 23 Construction - 1 - 1 31-33 Manufacturing - - - - 42 Wholesale Trade - 1 1 2 44-45 Retail trade 236 1 9 245 48-49 Transportation & Warehousing - 16 2 18 51 Information - 2 1 2 52 Finance & insurance - 1 2 3 53 Real estate & rental - 5 2 6 54 Professional- scientific & tech svcs - 2 1 4 55 Management of companies - 2 - 2 56 Administrative & waste services - 4 2 7 61 Educational svcs - - 1 1 62 Health & social services - - 10 10 71 Arts- entertainment & recreation - - 1 2 72 Accommodation & food services - 1 6 7 81 Other services - 1 5 5 92 Government - - - - 93 Non NAICs - - - - Total 236 35 45 316 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
Detailed Operating Impact on Labor Income: Aggregated by Industry Sector Industry Sectors (2-Digit NAICS) Direct Indirect Induced Total 11 Ag, Forestry, Fish & Hunting - $29 $877 $906 21 Mining - $1,641 $890 $2,532 22 Utilities - $45,049 $19,187 $64,235 23 Construction - $27,763 $22,139 $49,902 31-33 Manufacturing - $18,703 $10,159 $28,862 42 Wholesale Trade - $41,059 $89,043 $130,102 44-45 Retail trade $6,098,492 $18,515 $249,528 $6,366,535 48-49 Transportation & Warehousing - $650,401 $81,711 $732,112 51 Information - $83,417 $36,341 $119,758 52 Finance & insurance - $51,261 $143,554 $194,816 53 Real estate & rental - $60,455 $25,834 $86,289 54 Professional- scientific & tech svcs - $106,058 $70,782 $176,840 55 Management of companies - $300,267 $19,114 $319,381 56 Administrative & waste services - $133,246 $76,021 $209,267 61 Educational svcs - $92 $38,530 $38,621 62 Health & social services - $15 $626,155 $626,170 71 Arts- entertainment & recreation - $3,392 $18,454 $21,846 72 Accommodation & food services - $10,045 $118,559 $128,604 81 Other services - $47,958 $169,237 $217,195 92 Government - $3,130 $4,556 $7,686 93 Non NAICs - - - - Total $6,098,492 $1,602,497 $1,820,670 $9,521,659 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
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CONSTRUCTION IMPACTS The construction of the casino resort will inject capital into the region, supporting the local construction industry and suppliers. The following section presents the one-time construction impacts associated with the development of the property.
Estimated Construction Costs The Innovation Group estimates total development costs between $60.5 - $405.5 million. Hard costs are inclusive of FF&E (fixtures, furnishings, and equipment). Site work is estimated at an additional 5% and design and studies at 7.5%.
Construction Cost Estimate Total Costs Total Costs Total Costs Alternative A Alternative B Alternative C Casino FoH $54,000,000 $38,448,000 - Casino BoH $9,360,000 $9,612,000 - Slots for purchase $30,360,000 $22,080,000 - F&B FoH $32,754,000 $23,850,000 - F&B BoH $17,716,000 $12,900,000 - Hotel $75,000,000 $0 - Waterpark $20,000,000 $0 - Meeting/Entertainment $33,000,000 $0 - Retail $43,750,000 $600,000 $43,750,000 Parking Garage $27,000,000 $0 - Parking Surface $17,500,000 $8,900,000 $10,000,000 Subtotal Hard Costs $360,440,000 $116,390,000 $53,750,000 Design & Studies $27,033,000 $8,729,250 $4,031,250 Site Work & Permits $18,022,000 $5,819,500 $2,687,500 Total $405,495,000 $130,938,750 $60,468,750 Source: The Innovation Group
The next step was to break out the FF&E from the total construction budget. Additional soft costs, such as Site Work and Design & Studies, are included as part of the spending pattern for the construction sector in the IMPLAN software. Therefore, we have combined those estimates with the hard costs, as shown below.
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Construction/FF&E Breakdown Total Costs Total Costs Total Costs Alternative A Alternative B Alternative C Construction $305,683,500 $79,801,250 $55,593,750 FF&E $69,451,500 $29,057,500 $4,875,000 Slots $30,360,000 $22,080,000 - Total $405,495,000 $130,938,750 $60,468,750 The Innovation Group
The following table outlines the final inputs used to calculate the economic impact by sector. The cost of slot machines was excluded from the FF&E as it is a very specialized product and is not expected to be available within the county. IMPLAN estimates what percentage of the purchase, will originate from within the study area based on its Social Accounting Matrix (SAM).
Construction Inputs ($MMs) Alternative A Alternative B Alternative C Industry Segment 57 Construction of New Commercial Structures, including farm structures $305.7 $79.8 $55.6
Commodity Sector 3395 Wholesale trade distribution services $69.5 $29.1 $4.9 3394 All other miscellaneous manufactured products $30.4 $22.1 $0.0 Total Construction $405.5 $130.9 $60.5 IMPLAN Group, LLC, IMPLAN System; The Innovation Group
Economic Impacts from Construction The following section presents the one-time construction impacts associated with the proposed developments in Beloit on Rock and Winnebago Counties. The impacts are expressed on a single- year basis. Therefore, the employment figures, for example, represent person-year equivalents.
Alternative A The proposed casino resort in Alternative A is to house approximately 2,200 slot machines and 50 table games in addition to a 300-room hotel, multiple food and beverage outlets, 25,500 square feet of meeting and entertainment space, and a standalone 175,000 square foot retail development. A surface parking lot will accommodate up to 3,500 vehicles in addition to a parking garage that can accommodate 1,500 vehicles. Current plans for this alternative have a development budget of $405.5 million dollars.
Based on the construction budget, the IMPLAN model estimates that construction of the facilities will directly support 2,595 workers in Rock and Winnebago Counties, with labor income nearing $151 million. The direct spending for construction is estimated to generate a further $67.5 million in indirect purchases or spending through supply chains in the counties. These purchases are estimated to support 419 jobs in both counties with labor income equaling $22.3 million. Household spending by the workers employed through construction (either directly or indirectly
The Innovation Group Project #033-18 June 2018 Page 60 Draft through the local supply chain) is estimated to support induced employment of 1,015 workers with labor income of $40.9 million.
In total, Rock and Winnebago Counties are estimated to see a one-time employment impact of 4,029 workers, providing $214 million in labor income, and $560.3 million in total spending, as shown in the following table.
Construction Impacts ($MMs): Alternative A Employment Labor Income Value Added Output Direct Effect 2,595 $150.8 $209.1 $365.3 Indirect Effect 419 $22.3 $35.8 $67.5 Induced Effect 1,015 $40.9 $73.6 $127.5 Total 4,029 $214.0 $318.5 $560.3 IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
The following tables provide detailed results of one-time construction impacts on employment and labor income, aggregated by industry sectors. Employment is headcount (or total number of jobs, full and part time) in keeping with US Census data and is rounded to the nearest whole number. Labor income consists of all forms of employment income, including Employee Compensation (wages and benefits) and Proprietor Income (earnings by self-employed individuals).
Detailed Construction Impact on Employment: Aggregated by Industry Sectors Industry Sectors (2-Digit NAICS) Direct Indirect Induced Total 11 Ag, Forestry, Fish & Hunting - - 1 1 21 Mining - 1 - 1 22 Utilities - 1 3 4 23 Construction 2,321 4 9 2,334 31-33 Manufacturing 5 39 3 47 42 Wholesale Trade 269 70 29 368 44-45 Retail trade - 16 195 210 48-49 Transportation & Warehousing - 72 37 109 51 Information - 12 14 26 52 Finance & insurance - 18 56 74 53 Real estate & rental - 24 41 65 54 Professional- scientific & tech svcs - 54 31 85 55 Management of companies - 7 3 11 56 Administrative & waste services - 61 56 117 61 Educational svcs - - 30 31 62 Health & social services - - 236 236 71 Arts- entertainment & recreation - 6 28 34 72 Accommodation & food services - 17 139 155 81 Other services - 16 102 119 92 Government - - 1 2 93 Non NAICs - - - - Total 2,595 419 1,015 4,029 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
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Detailed Construction Impact on Labor Income: Aggregated by Industry Sectors Industry Sectors (2-Digit NAICS) Direct Indirect Induced Total 11 Ag, Forestry, Fish & Hunting - $5,907 $19,702 $25,609 21 Mining - $56,019 $20,012 $76,031 22 Utilities - $242,267 $430,551 $672,817 23 Construction $131,685,389 $214,239 $497,742 $132,397,371 31-33 Manufacturing $373,048 $2,796,839 $228,209 $3,398,097 42 Wholesale Trade $18,743,062 $4,875,920 $2,000,517 $25,619,499 44-45 Retail trade - $453,264 $5,608,056 $6,061,320 48-49 Transportation & Warehousing - $3,778,715 $1,837,446 $5,616,161 51 Information - $670,407 $816,001 $1,486,408 52 Finance & insurance - $1,392,402 $3,222,985 $4,615,386 53 Real estate & rental - $380,915 $579,733 $960,648 54 Professional- scientific & tech svcs - $3,264,845 $1,591,859 $4,856,704 55 Management of companies - $946,262 $429,451 $1,375,712 56 Administrative & waste services - $1,948,222 $1,708,744 $3,656,966 61 Educational svcs - $6,541 $870,231 $876,772 62 Health & social services - $240 $14,060,712 $14,060,952 71 Arts- entertainment & recreation - $59,195 $415,691 $474,886 72 Accommodation & food services - $318,679 $2,664,724 $2,983,403 81 Other services - $856,173 $3,801,248 $4,657,421 92 Government - $23,838 $102,253 $126,091 93 Non NAICs - - - - Total $150,801,500 $22,290,888 $40,905,866 $213,998,254 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
Alternative B The reduced intensity development under Alternative B consists of a casino floor with approximately 1,600 slot machines and 30 table games in addition to multiple food and beverage outlets. A surface parking lot will accommodate up to 1,780 vehicles. Current plans for this alternative have a development budget of $130.9 million dollars.
Based on the construction budget, the IMPLAN model estimates that construction of the facilities will directly support 722 workers in Rock and Winnebago Counties, with labor income equaling $42.5 million. The direct spending for construction is estimated to generate a further $20.3 million in indirect purchases or spending through supply chains in the counties. These purchases are estimated to support 129 jobs in both counties with labor income equaling $6.7 million. Household spending by the workers employed through construction (either directly or indirectly through the local supply chain) is estimated to support induced employment of 289 workers with labor income of $11.6 million.
In total, Rock and Winnebago Counties are estimated to see a one-time employment impact of 1,140 workers, providing $60.9 million in labor income, and $161.6 million in total spending, as shown in the following table.
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Construction Impacts ($MMs): Alternative B Employment Labor Income Value Added Output Direct Effect 722 $42.5 $60.6 $105.0 Indirect Effect 129 $6.7 $10.8 $20.3 Induced Effect 289 $11.6 $20.9 $36.3 Total 1,140 $60.9 $92.4 $161.6 IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
The following tables provide detailed results of one-time construction impacts on employment and labor income, aggregated by industry sectors. Employment is headcount (or total number of jobs, full and part time) in keeping with US Census data and is rounded to the nearest whole number. Labor income consists of all forms of employment income, including Employee Compensation (wages and benefits) and Proprietor Income (earnings by self-employed individuals).
Detailed Construction Impact on Employment: Aggregated by Industry Sectors Industry Sectors (2-Digit NAICS) Direct Indirect Induced Total 11 Ag, Forestry, Fish & Hunting - - - - 21 Mining - - - - 22 Utilities - - 1 1 23 Construction 606 1 3 610 31-33 Manufacturing 3 11 1 15 42 Wholesale Trade 113 19 8 140 44-45 Retail trade - 4 55 60 48-49 Transportation & Warehousing - 23 10 34 51 Information - 4 4 8 52 Finance & insurance - 6 16 22 53 Real estate & rental - 8 12 20 54 Professional- scientific & tech svcs - 16 9 25 55 Management of companies - 3 1 4 56 Administrative & waste services - 21 16 37 61 Educational svcs - 0 9 9 62 Health & social services - 0 67 67 71 Arts- entertainment & recreation - 2 8 10 72 Accommodation & food services - 5 40 45 81 Other services - 5 29 35 92 Government - - - - 93 Non NAICs - - - - Total 722 129 289 1,140 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
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Detailed Construction Impact on Labor Income: Aggregated by Industry Sectors Industry Sectors (2-Digit NAICS) Direct Indirect Induced Total 11 Ag, Forestry, Fish & Hunting - $1,833 $5,604 $7,437 21 Mining - $15,803 $5,692 $21,495 22 Utilities - $75,173 $122,460 $197,633 23 Construction $34,377,579 $70,029 $141,565 $34,589,172 31-33 Manufacturing $271,308 $744,600 $64,907 $1,080,815 42 Wholesale Trade $7,841,825 $1,353,491 $568,983 $9,764,300 44-45 Retail trade - $122,566 $1,595,020 $1,717,586 48-49 Transportation & Warehousing - $1,200,164 $522,592 $1,722,757 51 Information - $228,666 $232,088 $460,754 52 Finance & insurance - $433,294 $916,690 $1,349,984 53 Real estate & rental - $121,839 $164,891 $286,730 54 Professional- scientific & tech svcs - $962,352 $452,743 $1,415,095 55 Management of companies - $336,050 $122,143 $458,194 56 Administrative & waste services - $663,905 $485,993 $1,149,898 61 Educational svcs - $2,441 $247,480 $249,920 62 Health & social services - $85 $3,999,167 $3,999,251 71 Arts- entertainment & recreation - $19,349 $118,223 $137,573 72 Accommodation & food services - $98,239 $757,889 $856,127 81 Other services - $281,580 $1,081,150 $1,362,730 92 Government - $7,958 $29,083 $37,041 93 Non NAICs - - - - Total $42,490,712 $6,739,416 $11,634,362 $60,864,490 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
Alternative C The proposed non-gaming development in Alternative C consists of a 175,000 square foot retail center and a surface parking lot that can accommodate up to 2,500 vehicles. Current plans for this alternative have a development budget of $60.5 million dollars.
Based on the construction budget, the IMPLAN model estimates that construction of the facilities will directly support 441 workers in Rock and Winnebago Counties, with labor income equaling $25.3 million. The direct spending for construction is estimated to generate a further $10.4 million in indirect purchases or spending through supply chains in the counties. These purchases are estimated to support 62 jobs in the county with labor income equaling $3.4 million. Household spending by the workers employed through construction (either directly or indirectly through the local supply chain) is estimated to support induced employment of 168 workers with labor income of $6.8 million.
In total, Rock and Winnebago Counties are estimated to see a one-time employment impact of 671 workers, providing $35.5 million in labor income, and $91.3 million in total spending, as shown in the following table.
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Construction Impacts ($MMs): Alternative C Employment Labor Income Value Added Output Direct Effect 441 $25.3 $33.8 $59.7 Indirect Effect 62 $3.4 $5.5 $10.4 Induced Effect 168 $6.8 $12.2 $21.1 Total 671 $35.5 $51.5 $91.3 IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
The following tables provide detailed results of one-time construction impacts on employment and labor income, aggregated by industry sectors. Employment is headcount (or total number of jobs, full and part time) in keeping with US Census data and is rounded to the nearest whole number. Labor income consists of all forms of employment income, including Employee Compensation (wages and benefits) and Proprietor Income (earnings by self-employed individuals).
Detailed Construction Impact on Employment: Aggregated by Industry Sectors Industry Sectors (2-Digit NAICS) Direct Indirect Induced Total 11 Ag, Forestry, Fish & Hunting - - - - 21 Mining - - - - 22 Utilities - - - 1 23 Construction 422 1 2 424 31-33 Manufacturing - 7 1 8 42 Wholesale Trade 19 12 5 36 44-45 Retail trade - 3 32 35 48-49 Transportation & Warehousing - 10 6 16 51 Information - 2 2 4 52 Finance & insurance - 3 9 12 53 Real estate & rental - 3 7 10 54 Professional- scientific & tech svcs - 8 5 13 55 Management of companies - 1 1 1 56 Administrative & waste services - 8 9 17 61 Educational svcs - - 5 5 62 Health & social services - - 39 39 71 Arts- entertainment & recreation - 1 5 5 72 Accommodation & food services - 2 23 25 81 Other services - 2 17 19 92 Government - - - - 93 Non NAICs - - - - Total 441 62 168 671 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
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Detailed Construction Impact on Labor Income: Aggregated by Industry Sectors Industry Sectors (2-Digit NAICS) Direct Indirect Induced Total 11 Ag, Forestry, Fish & Hunting - $947 $3,264 $4,211 21 Mining - $9,358 $3,315 $12,674 22 Utilities - $35,754 $71,323 $107,077 23 Construction $23,949,231 $29,087 $82,459 $24,060,777 31-33 Manufacturing - $498,881 $37,805 $536,686 42 Wholesale Trade $1,315,629 $831,575 $331,410 $2,478,615 44-45 Retail trade - $79,483 $929,055 $1,008,539 48-49 Transportation & Warehousing - $536,161 $304,405 $840,566 51 Information - $84,465 $135,178 $219,642 52 Finance & insurance - $204,607 $533,914 $738,521 53 Real estate & rental - $53,447 $96,036 $149,482 54 Professional- scientific & tech svcs - $517,131 $263,721 $780,852 55 Management of companies - $110,684 $71,144 $181,828 56 Administrative & waste services - $244,824 $283,079 $527,903 61 Educational svcs - $670 $144,192 $144,862 62 Health & social services - $28 $2,329,289 $2,329,317 71 Arts- entertainment & recreation - $8,034 $68,871 $76,905 72 Accommodation & food services - $47,480 $441,451 $488,931 81 Other services - $114,745 $629,718 $744,463 92 Government - $3,117 $16,939 $20,056 93 Non NAICs - - - - Total $25,264,860 $3,410,477 $6,776,569 $35,451,905 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
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COMPETITIVE EFFECTS ANALYSIS
Impacts on Regional Casinos (Alternatives A & B) The gravity model was also utilized to assess the impact that the Beloit casino would have on competing casinos within the 120-minute market area, by comparing the Beloit forecast models to the future baseline. The table below depicts the impact that Beloit is projected to have on gaming revenues at Ho-Chunk’s two existing properties within a 120-minute radius.
Substitution Effect on Ho-Chunk Nation
HCG - Madison HCG - Dells Alternative A -22% -10% Alternative B -19% -9%
The Potawatomi Bingo Casino (PBC) in Milwaukee is the only Native American casino within the 120-minute market area other than HCG-WD and HCG-M, which are previously discussed. There are commercial casinos in Illinois and Iowa. The table below summarizes the anticipated decline in revenues at competitive facilities within the local market:
Substitution Effect on Regional Competitors Des Joliet Joliet Dubuque Potawatomi Plaines Elgin Aurora Harrah's Hollywood Hammond Clinton (2) Alternative A -7% -2% -5% -4% -2% -3% -3% -7% -3% Alternative B -6% -2% -5% -3% -2% -2% -2% -6% -2%
It should be noted that these substitution effects are “but-for” effects, not year-over-year effects. In other words, they are future revenue forecasts measured against a future baseline year assuming Beloit does not open. On a year-over-year basis, the declines would be less.
Impact on Local Business
Secondary Research Casino development sometimes elicits concern, which research has dispelled, that substitution of consumer spending (the substitution effect) will impact local businesses, especially smaller “mom and pop” retail, restaurant and entertainment businesses. This argument has its origins in long- ago controversies regarding Atlantic City. Clyde Barrow, Director for the Center of Policy Analysis at the University of Massachusetts Dartmouth, traces the Atlantic City “myth” to a
The Innovation Group Project #033-18 June 2018 Page 67 Draft misinformation campaign by the Atlantic City Restaurant and Tavern Association “to win more concessions for its members from the city’s casino hotels.”3
Research by Kathryn Hashimoto and George Fenich found that contrary to a negative impact, casinos in Atlantic City actually reversed a downward trend:
The number of eating and drinking establishments in Atlantic County was actually declining in the years prior to the opening of the first casinos. However, this decline was actually reversed after the first casinos opened, when the number of non-casino eating and drinking places increased from 415 in 1978 to 569 in 1994 (37 percent). Moreover, in the 11 years since the Hashimoto and Fenich study, the number of non-casino eating and drinking places in Atlantic County has continued to increase to 625 (9.8 percent) in 2004 with 9,020 employees (36 percent).4
There is a substantial body of research and case studies demonstrating the impacts that casinos have on surrounding local businesses. There are several important reasons that local businesses benefit from the development of a casino:
x Casino visitors stopping at local retail outlets and restaurants.
x Long-distance patrons staying at area hotels; even in markets with casino hotels, non- casino hotels enjoy boosts in occupancy.
x Casino expenditures on local goods and services put more money into the local economy.
A review of studies of casino impacts on local business shows that casinos can stimulate local economies, resulting in communitywide growth, including in the local food and beverage business and retail businesses. There is little evidence of significant economic substitution after the introduction of new casinos, particularly for casinos in urban areas.
Casino development increases room demand at non-casino hotels even when casino hotels are built. For example, in Shreveport-Bossier City, Louisiana, hotel occupancy rates averaged about 60% before casinos but rose to 74% by 2005.5 Such a boost to non-casino hotel demand results from the overall increased visitation to the area and the overflow from peak periods when casino hotels are fully booked. On the Mississippi Gulf Coast occupancy rates in non-casino hotels remained steady at 55% despite a 143% increase in total rooms, including a 60% increase in non- casino hotel rooms.6
3 Barrow, Clyde and Mathew Hirshy. “The Persistence of Pseudo-Facts in the U.S. Casino Debate: The Case of Massachusetts” Gaming Law Review and Economics Volume 12, Number 4, 2008. 4 Ibid. 5 Shreveport-Bossier Convention and Tourism Bureau 2011 Lodging Report. 6 Source: Mississippi Gaming Commission.
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Within the City of San Diego, the Transient Occupancy Tax (TOT) has grown substantially since recovering from the 2009-10 recession effects, despite the opening of several large hotels at casinos on the outskirts of the market (and not within the City), including an 1,100-room hotel at Harrah’s Rincon. Furthermore, HVS reports that hotel occupancy in the San Diego market posted its third straight record occupancy in 2016 at 77%. RevPAR (revenue per available room, a measure of hotel performance) has also seen steady increases since the recession.7
City of San Diego, CA Transient Occupancy Tax Collections (MMs) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $160.24 $136.32 $128.11 $139.77 $150.82 $157.03 $170.17 $186.24 $202.80 $221.10 Source: San Diego Tourism Authority
The research division of the Federal Reserve Bank of St. Louis concluded in a 2003 report that the results are “mixed” regarding the impacts of casinos on other local businesses. The report references one study that “found that the growth in retail sales tax collections from various industries slowed after the introduction of casino gambling.” However, another referenced study from Indiana showed that casino development retained spending by patrons “who would have, without the casino, spent their money outside of the local area.”8
Furthermore, there is substantial economic research from throughout the country contradicting the substitution effect. Hashimoto and Fenich’s 1997 research shows that “in jurisdictions from the seashore to the riverfront to rural areas, north and south, east and west, local restaurants tended to thrive after a casino opened nearby.” Furthermore, Hashimoto and Fenich conclude: "When casinos are developed, all aspects of the local food and beverage business increase: the number of establishments increases, the number of people employed increases and payroll increases at an even greater rate than the first two."9
Research conducted in 1996 by Nancy Reeves and Associates for the Mille Lacs Band of Ojibwe, entitled “The Economic Impact of Grand Casino Mille Lacs and Grand Casino Hinckley on Their Surrounding Areas” concluded that:
At least 15 businesses have either opened, expanded, or re-opened since the opening of Grand Casino Mille Lacs. Included are 4 hotels/motels and resorts, 8 restaurants and fast food establishments, 2 gas stations and a go-kart track. Together, these businesses have added an estimated 142 jobs in the area.
With the opening of Grand Casino Hinckley in 1992, the hospitality business in Hinckley was transformed from a rest stop for travelers to a tourist destination. In addition to the
7 http://hvi.hvs.com/market/united-states/San_Diego 8 Thomas A. Garrett, Senior Economist, Federal Reserve Bank of St. Louis, Casino Gambling in America and Its Economic Impacts, August 2003. 9 George Fenich and Kathryn Hashimoto, “The Effects of Casinos on Local Restaurant Business,” paper presented at the International Conference on Gambling and Risk-Taking, Montreal, 1997.
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casino complex, with its 1,275 jobs, Hinckley has added 11 new businesses and expanded 4 more since 1992, adding 87 new jobs. As is the case in the Mille Lacs area, Hinckley is now a year round destination because of the casino. Also similar to the Mille Lacs situation, the main street businesses in Hinckley have seen increases in customer spending attributed primarily to casino employees living in the area.
The Center for Policy Analysis University of Massachusetts Dartmouth came to similar conclusions analyzing a number of gaming jurisdictions throughout the country. The number of restaurants and retail sales excluding those from casinos increased in Bossier City, Louisiana; Biloxi/Gulfport, Mississippi; Connecticut; Gilpin County, Colorado, and; Tunica County, Mississippi.
There was a net increase of eight restaurants in Bossier City, Louisiana following the introduction of riverboat casinos. The city’s taxable restaurant sales, excluding restaurants in the hotels and casinos, increased by 5 percent in 1994 and by 7 percent in 1995 after the introduction of riverboat casinos. In Biloxi/Gulfport, Mississippi, the rate of non-casino retail sales growth increased from an average of 3 percent annually (1990-1992) in the years prior to riverboat gambling to 12 percent annually in the years after riverboat gaming began in the locality.
…the number of restaurants in the area surrounding Foxwoods and Mohegan Sun increased from 472 to 506 following the casino’s opening, while restaurant employment increased from 5,911 to 6,628 during the same period.… In Gilpin County Colorado, the number of restaurants increased from 31 to 40 after the introduction of casino gaming. In Tunica County, Mississippi, the number of restaurants increased by 13 percent and restaurant employment grew by 9 percent after the introduction of casino gaming in the county.10
Similar conclusions have been reached in other studies: x Even after accounting for substitution effect, economists at the University of Missouri and Washington University concluded that casino gambling in Missouri had a net positive annual impact on Missouri output of $759 million, corresponding to a continuing higher level of employment of 17,932 jobs generating $508 million more in personal income.11
x A multijurisdictional analysis of retail spending found that in Biloxi/Gulfport, Miss., annual retail sales growth rates increased an average of 3 percent per year from 1990 to 1992, the year when casinos were introduced. Between 1993 and 1995, retail sales jumped 13 percent. In Will County, Ill., retail sales growth trailed statewide trends until 1992, when riverboat casinos were introduced in the local economy. But each year between 1992 and 1995, retail sales growth in Will County exceeded the state rate. In Shreveport/Bossier
10 Ibid. 11 Charles Leven et al., “Casino Gambling and State Economic Development,” paper presented at the Regional Science Association, 37th European Congress, Rome, Aug. 26-29, 1997.
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City, La., retail sales increased by more than 10 percent during 1994, the year that riverboat casinos opened, as the region enjoyed the highest retail sales increase in more than a decade.12
In summary, there is a wealth of evidence contradicting the proposition that gaming substitutes for other expenditures. The positive spillover effect on local hotels for one is unequivocally demonstrated in numerous jurisdictions, even in markets where casinos operate hotels for their gaming customers.
Local businesses in Beloit are expected to benefit from casino development. Local hotels in particular would benefit from the introduction of a new market segment: casino-related room demand. As shown in numerous casino jurisdictions across the country, non-casino hotels benefit even when casinos operate their own hotel.
Waterpark Hotel (Alternative A only) As discussed in the Hotel and Indoor Waterpark Assessment, the 300-room waterpark hotel is estimated to garner approximately 84,000 room nights of demand in stabilized Year 2 of operations. The majority of hotel demand is estimated to be induced waterpark and group demand from distant markets like Chicago, and therefore the facility is not expected to materially impact existing hotels in Rock and Winnebago Counties. Moveover, the presence of the casino is expected to benefit other local hotels. First, is expected that the hotel will experience capacity constraints on weekends, with the overflow going to other local hotels. Second, many non-rated gamers who do not get free hotel rooms at the casino hotel prefer staying off-site at local budget hotels.
Retail Development (Alternatives A & C) As discussed in the Retail Assessment, there is an estimated $60 million in spending in the categories “General Merchandise Store” and “Clothing and Clothing Accessories Stores” that flows out of Beloit (see discussion of the Nielsen Claritas “GAP” analysis). Based on that opportunity, we have recommended an Outlet Mall development. As shown in the Retail Assessment, there are no outlet malls within 60 minutes of the site, and outlet malls are sited and designed to capture interstate highway traffic, which would mitigate potential impacts on local consumer spending. In consideration of these factors—different retail offering than currently available locally, capture of highway traffic, and re-capture of current outflow spending—the development is not expected to have material impact on existing retail establishments in the Beloit area.
12 Arthur Andersen, Economic Impacts of Casino Gaming in the United States, Volume 2: Micro Study (Washington, D.C.: American Gaming Association, May 1997).
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SOCIAL AND COMMUNITY IMPACT ANALYSIS This section assesses the social and community impacts of the proposed alternatives in Beloit, Wisconsin. The proposed project, fully built, would consist of a casino resort with approximately 2,200 slot machines and 50 table games, a 300-room indoor waterpark hotel, conference facilities and multiple food and beverage options. A mixed-use development consisting of 175,000-square feet of leasable space is also planned. The complete development fully-built, is projected to employ 1,985 people. A non-gaming alternative development plan will consist of 175,000-square feet of leasable space and employ 236 people. Increased local services and costs as a result of casino gaming operations generally fall into three categories: those arising from population and development growth, those arising from the impacts of increased visitation and traffic, and social impacts resulting from problem gambling.
The analysis draws upon social science research as well as data analysis conducted by the Innovation Group. Although casinos are perceived to be different in kind from other commercial developments of comparable size and visitor base, inordinate negative impacts from casino development have not materialized, even in small communities with limited infrastructure and resources. In fact, experience over the past two decades has demonstrated that mitigation payments designed in anticipation of drastic impacts have often exceeded the actual need of the communities.
The perception that casinos breed crime is not supported by the evidence. While the number of reported crimes can increase, as with any commercial development that attracts visitors, casino gaming has not been shown to lead to an increase in crime rates.
Host communities should expect impacts similar in kind to other commercial development of similar scope and visitor potential. The projected increase in visitor population should be expected to lead to increases in public safety services and judicial system caseload. The one significant difference in kind relates to the association between problem gambling and other social pathologies as discussed in this report. Given the current availability of gaming in the region, the addition of gaming in Beloit is not expected to lead to a material increase in prevalence rates in the local area. See Appendix A for more information regarding the research studies.
In summary, evidence suggests that on-going impacts to local communities are highly manageable, typically requiring only a small fraction of gaming revenues to address fully. The Ho-Chunk Nation has agreed to make payments from gaming revenue to address impacts on municipal services in an Intergovernmental Agreement (IGA) between the Ho-Chunk Nation and the City of Beloit and Rock County.
Infrastructure impacts are highly site-dependent. The Beloit site was previously undeveloped, but its location immediately off Interstate I-90 is well suited to handle visitor and traffic volume with minimal local impact. Specific local road and infrastructure improvements have been identified and agreed to in Sections 2.2 and 3.6 of the IGA.
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SECTION ONE: POPULATION AND EMPLOYMENT RELATED IMPACTS The Ho-Chunk Nation has purchased property in the town of Beloit for the development of a casino resort. The proposed casino is expected to draw over 3 million annual visits13 to the area in stabilized Year 2 of operations and directly employ 1,734 people in Alternative A, while the proposed casino in Alternative B is expected to draw 2.5 million annual visits and directly employ 1,127 people. The mixed-use retail space is estimated to employ between 251-236 people depending on the development scenario, as detailed in the economic impact assessment.
For the purposes of this section, the combined counties of Rock and Winnebago will be used as the primary study area of impacts as it pertains to employment and increased population. However, estimated impacts on the City of Beloit are also addressed.
Employment Impact As noted, the proposed development is projected to require 1,985 jobs14 in stabilized Year 2 of operations, 1,127 jobs under the reduced intensity building program or 236 jobs in the non-gaming alternative.15 These jobs are expected to be filled by a combination of local unemployed workers, local out-bound commuters, residents of neighboring counties, and new residents. City of Beloit’s unemployment currently stands at over 800 workers. Local trends have shown consistent declines in levels of unemployment; therefore, for the future baseline conditions, we have forecasted 724 unemployed residents in the future forecast year.
City of Beloit Average Annual Employment Statistics Civilian Unemployment Year labor force Employment Unemployment rate (%) 2008 17,053 15,587 1,466 8.6 2009 17,590 14,517 3,073 17.5 2010 17,923 14,988 2,935 16.4 2011 17,183 14,982 2,201 12.8 2012 17,082 15,205 1,877 11.0 2013 17,263 15,414 1,849 10.7 2014 16,919 15,656 1,263 7.5 2015 17,117 16,003 1,114 6.5 2016 17,193 16,259 934 5.4 2017 17,449 16,622 827 4.7 Source: Bureau of Labor Statistics, LAUS series, Non-seasonally adjusted; The Innovation Group
13 Visits, not individual patrons. Casino customers typically make more than one visit per year. 14 Headcount, including full and part-time workers. 15 Only direct jobs are included in these employment impacts. Jobs supported by indirect and induced effects are diffuse and not expected to have the same migratory impact as direct jobs.
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According to the most recent LEHD Origin-Destination Employment Statistics (LODES)16 data from the US Census (2015), only 29.7% of workers living in Beloit work there, meaning more than 70% commute out to other areas or work remotely for businesses located elsewhere. Of those commuter residents, 60% work in other areas of Rock and Winnebago Counties. Similarly, 70% of the 15,671 jobs in the City of Beloit are occupied by workers that live outside of the city limits, nearly two-thirds of which live in other areas of Rock and Winnebago Counties.
Beloit Commuting Patterns Workers residing in Beloit 15,862 Number of Jobs in Beloit 15,671 Live & work in Beloit 4,713 % who live & work in Beloit 29.7% % who commute OUT 70.3% % who commute IN 69.9% Source: US Census. (2015) LEHD Origin-Destination Employment Statistics (2002-2015)
As the following table shows, it is estimated that the existing area workforce in the study area will account for the majority of employment under all three development scenarios. Only 14.8% - 17.8% of workers are estimated to represent new residents moving into the area.
Beloit Project Source of Workforce Source of Employment Proposed Reduced Non- Metric Applied Source Project Intensity Gaming IMPLAN, Innovation A. Number of New Employees 1,985 1,127 236 Total Jobs Group revenue projections 70%, based on Beloit B. Number of Commuters from outside Beloit 821 428 81 US Census Workforce Commuting Patterns 5%-35% of a future estimate of C. Beloit Unemployed back to work 253 181 36 US Census 724 Unemployed Workers 0.75%-5.0% of 11,149 Beloit D. Commuters Staying within Beloit 557 334 84 workers who currently US Census commute outside the area E. Total from Existing Area Workforce 1,632 943 201 B+C+D F. Estimated Total New Workers Needed 353 184 35 A - E % of New Employees 17.8% 16.3% 14.8% F / A
16 More information about the data source can be found here: https://lehd.ces.census.gov/doc/help/onthemap/OnTheMapDataOverview.pdf
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These estimates were based on previous Innovation Group research and results from a recent analysis of Plainridge casino in Plainville, Massachusetts, a town of approximately 8,000 people. The survey of Plainridge employees demonstrates that casino employment is comprised mainly of workers already residing within commuting distance: a mixture of previously employed local residents looking for a better opportunity or the ability to work closer to home, along with previously unemployed local residents. The percentage of workers who moved to take the position with Plainridge was a small percentage of the staff. Furthermore, most casino workers had no prior casino work experience.
Plainridge Casino Source of Workforce # of Responses Percentage Prior Employment status: Unemployed 162 15.5% Employed Part-time 363 34.7% Underemployed 189 18.1% Employed Full-time 522 49.9% Total 1,047 100.0%
Reason for taking the position Job closer to home 305 29.1% Other results No prior casino experience 902 86.2% Moved to take the position 75 7.2% New Employee Survey at Plainridge Park Casino: Analysis of First Two Years of Data Collection University of Massachusetts Donahue Institute, Economic and Public Policy Research Group, May 10, 2017
Other studies also show impacts on employment. The Rappaport Institute for Greater Boston and the John F. Kennedy School of Economics at Harvard University (Baxandall and Sacerdote 2005) in a national, county-level study of Native American casinos found a slight decrease in unemployment rates after casinos opened. The analysis included all California casinos in existence in the 1990s. From their total sample of 156 casino counties, the Rappaport study isolated out 57 counties with large casinos and relatively low population and nine counties with both large casinos and large populations to see if there were statistical differences in terms of community impacts. The authors compared the county unemployment rate averaged for the year before and after a casino opens in a county, and then subtracted that number from the average state change in unemployment to isolate the county-specific effect. The following table shows their results:
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Rappaport Study Employment Results All Casino- Counties with Large- Populous Casino Counties1 Capacity Casinos2 Counties3 Population Growth (%) +5* 8.6 +8.1* Total Employment (%) +6.7* +14.9* 5.7 Unemployment (%) -0.3 -1.2* 0.5 *Statistically significant results at 99% confidence interval. 1. Reports how adjusted outcomes in 156 counties that introduced Indian-run casinos during the 1990s differed from the other 2,959 that did not. 2. The effect for 21 counties in the top 10th percentile in terms of number of slot machines (over 1,760). 3. The effect for the 57 casino counties in the top population quartile (over 55,000 residents).
Household and Population Impact Total population in the study area is estimated at 0.4 million in 2018. The City of Beloit is currently home to more than 37,000 people, nearly one-quarter of the total population within Rock County or 8% of the total population within the study area. The Beloit population is not expected to grow significantly over the next five years, with current estimates of only 43 new residents per year. Rock County has a slightly higher expected growth rate than Beloit, at 0.22% or roughly 350 people per year whereas Winnebago County is expected to lose residents, approximately 5,000 over the next five years.
Study Area Demographics City of Beloit, Rock County, Winnebago Study Area Category WI WI County, IL Total 2018 Total Population 37,356 162,053 283,630 445,683 Number of Household 14,110 64,208 111,218 175,426 Average Household Income $55,690 $72,140 $70,796 $71,288 2023 Total Population 37,572 163,866 278,940 442,806 Number of Household 14,271 65,170 109,448 174,618 Average Household Income $60,475 $79,160 $78,835 $78,956 CAGR Total Population 0.12% 0.22% -0.33% -0.13% Number of Household 0.23% 0.30% -0.32% -0.09% Average Household Income 1.66% 1.87% 2.17% 2.06% Source: iXPRESS, Nielsen Claritas, Inc., The Innovation Group
Assuming approximately 1.1 workers per household, the total number of new households to the study area is estimated between 32-321 depending on the development scenario. On average, households in the study area comprise 2.5 persons, bringing the total population increase to between 79-802 people. This represents less than 0.18% of the projected 2022 population in the study area. Based on current commuting patterns, an estimated 30% of the new study area population will choose to live in the City of Beloit. The additional 24-241 residents will represent an increase of less than 0.64% of the 2022 projected population in Beloit.
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Beloit Project Impact on Households and Population Proposed Reduced Non- Project Intensity Gaming New employees moving to Study Area* 353 184 35 # of jobs per household 1.1 1.1 1.1 Number of New Households 321 167 32 Study Area Avg. Household Size 2.5 2.5 2.5 New Study Area Population 802 418 79 % Increase of 2022 Total Study Area Pop 0.18% 0.09% 0.02%
% of new population moving to Beloit** 30% 30% 30% Number of New Beloit Households 96 50 9 New Beloit Population 241 125 24 % Increase of 2022 Total Beloit Pop 0.64% 0.33% 0.06% Source: iXPRESS, Nielsen Claritas, Inc., The Innovation Group *Study Area is Combined Counties of Rock and Winnebago **Based on current commuting patterns School Impact Based on the estimated number of new households and household metrics, the increase to school enrollment in the study area is approximately 16-163 children depending on the development scenario. The new school age children will likely enroll at one of the 157 public schools located throughout 20 districts in the study area.
Beloit Project Impact on Local School Enrollment Metric Proposed Reduced Non- Project Intensity Gaming Number of New Households 321 167 32
Number of Households That Will Have Children* 33% 107 56 11 Number of Children per Household** 1.91 Total Number of Children 204 106 20 Total New School Age Children 80% 163 85 16 New Enrollment in Beloit Districts 30% 49 26 5 New Enrollment in Remaining Districts 70% 114 60 11 Source: iXPRESS, Nielsen Claritas, Inc., US Census Bureau: Table ST-F1-2000.; *Combined Counties 2018 estimated percent of households with presence of children under age of 18 **Wisconsin’s average number of children per family with children
As previously stated, it is estimated that 30% of the new population will move to the City of Beloit, bringing with them approximately 5-49 new school age children. All public schools in the City of Beloit fall into one of three districts: School District of Beloit, Beloit Turner School District, and Clinton Community School District. Given the suburban area, students could attend any one of three school districts in the city; however, the primary impact will fall on School District of Beloit as employees are more likely to find housing near the development. Recent enrollment statistics for the district show an average loss of 100 students per year, indicating that there is capacity for additional students.
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School District of Beloit: Annual School Enrollment 13/14 14/15 15/16 16/17 17/18
Grades K-5 3,142 3,124 3,047 2,968 2,870 Grades 6-8 1,470 1,480 1,466 1,484 1,484 Grades 9-12 1,997 2,018 2,002 1,967 1,980 Total 6,609 6,622 6,515 6,419 6,334 YOY Change 0.2% -1.6% -1.5% -1.3% Source: Wisconsin Information Systems for Education, Data Dashboard (WISEdash)
The following tables show the enrollment trends for the other affected school districts in Beloit.
Beloit Turner School District: Annual School Enrollment 13/14 14/15 15/16 16/17 17/18 Grades K-5 577 612 628 618 637 Grades 6-8 351 352 353 352 365 Grades 9-12 456 457 464 462 452 Total 1,384 1,421 1,445 1,432 1,454 YOY Change 2.7% 1.7% -0.9% 1.5% Source: Wisconsin Information Systems for Education, Data Dashboard (WISEdash)
Clinton Community School District: Annual School Enrollment 13/14 14/15 15/16 16/17 17/18 Grades K-5 486 472 450 446 427 Grades 6-8 260 260 271 275 279 Grades 9-12 378 377 382 365 344 Total 1,124 1,109 1,103 1,086 1,050 YOY Change -1.3% -0.5% -1.5% -3.3% Source: Wisconsin Information Systems for Education, Data Dashboard (WISEdash)
Given the current supply of school districts across the study area, impacts on any individual district is estimated at less than 0.55% increase over current enrollment.
Beloit Project Impact on Enrollment Summary by Districts Proposed Project Reduced Intensity Non-Gaming Total New School Age Children 163 85 16 New Enrollment in Beloit Districts 49 26 5 Current 2018 Enrollment in Beloit's Districts* 8,838 8,838 8,838 % increase over current enrollment 0.55% 0.29% 0.06% New Enrollment in Remaining Districts 114 60 11 Current 2018 Enrollment in Remaining Districts** 81,184 81,184 81,184 % increase over current enrollment 0.14% 0.07% 0.01% Source: Wisconsin Information Systems for Education, Data Dashboard (WISEdash); Illinois State Board of Education *Beloit Districts include Clinton, Beloit and Beloit Turner **Remaining Districts include all those located in Rock and Winnebago Counties minus the three Beloit Districts
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Housing Impact The additional households that are projected to locate in the study area will have small, but positive impact on the housing market. These new households will support the current and future development of housing in the area.
The study area was hit hard by the Great Recession in 2008, in large part due to the closing of General Motors plant in nearby Janesville, Wisconsin. Rock County has since experienced a significant recovery, with room for further growth. According to Janesville’s The Gazette, Rock County is showing significant growth in terms of home buying, and new home building17. Therefore, over the past few years home values and ownership rates have experienced a much- needed increase. However, Winnebago County, Illinois is facing challenges in their post-recession recovery. The county is seeing negative population growth rates, in large due to a weak local economy, and budgetary issues heavily affecting jobs in the public safety departments.18 Despite these factors, the local realtor’s association has indications that the Rockford housing market is recovering, with 2017 showing its largest volume of sales in 11 years and the highest average sale price in a decade.19
Currently, the number of housing units is 11.2% greater than the number of households in the study area, denoting a surplus of housing, a surplus which is expected to grow. Five-year projections estimate that the number of families and households will decline in the area while housing units will continue to grow. According to the Nielsen/Claritas data, Rock and Winnebago Counties are projected to add 666 housing units by 2023, which will be sufficient to house the 32-321 households estimated to relocate to the study area due to the proposed development alternatives.
Study Area Population and Housing Trends 2010 2018 2023 Census Estimated Projection Population 455,597 445,683 442,806 Percent Change -2.18% -0.65% Households 178,406 175,426 174,618 Percent Change -1.67% -0.46% Families 119,270 117,400 116,921 Percent Change -1.57% -0.41% Housing Units 194,387 195,058 195,724 Percent Change 0.35% 0.34%
17 http://www.gazettextra.com/news/business/janesville-area-builders-say-new-housing-starts-to-heat- up/article_4c9556b8-7489-5712-bbf9-66e0e4be10ad.html 18 http://www.wifr.com/content/news/Winnebago-County-leaders-seek-budget-solution-443148213.html 19 http://www.rrstar.com/news/20180123/rockford-housing-market-has-best-year-in-2017-since-great-recession
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As previously stated, it is estimated that 30% of all new households will move to Beloit. Currently, the number of housing units in Beloit is 10.3% greater than the number of households, denoting a surplus of housing, a surplus which is expected to grow. Five-year projections estimate that the growth of families and households will occur at a slightly slower rate than housing units. However, the housing supply to number of household’s ratio will remain virtually the same. According to the Nielsen/Claritas data, the number of housing units is projected to grow by 187 units by 2023 in Beloit, which will be sufficient to house the 9-96 households estimated to Beloit due to the proposed development alternatives.
City of Beloit Population and Housing Trends 2010 2018 2023 Census Estimated Projection Population 36,966 37,356 37,572 Percent Change 1.06% 0.58% Households 13,757 14,110 14,271 Percent Change 2.57% 1.14% Families 8,933 9,146 9,244 Percent Change 2.38% 1.07% Housing Units 15,116 15,561 15,748 Percent Change 2.94% 1.20% Source: Nielson/Claritas, The Innovation Group
Home Ownership Rates Stabilized operations are slated to create anywhere between 1,985 new jobs under peak project intensity to 1,127 new jobs under the reduced intensity building program, and 236 jobs in the non- gaming alternative. This provides stable employment for new and existing residents, increasing homeownership figures throughout the local area.
The City of Beloit currently has higher than average rates of renter-occupied housing than either county in the study area or both Illinois and Wisconsin at 39%. The addition of new families has the potential to support current and planned housing development throughout the city without overwhelming existing infrastructure.
2018 Occupied Housing Units by Tenure City of Rock Winnebago Study United Beloit, WI County, WI County, IL Area Total Wisconsin Illinois States Owner-Occupied 61% 71% 69% 70% 68% 67% 65% Renter-Occupied 39% 29% 31% 30% 32% 33% 35% Source: Nielson/Claritas, The Innovation Group
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Conclusion Overall, the Beloit casino and retail developments are projected to bring up to an additional 241 people to Beloit. This is a small increase in local population and will not have a substantial impact on local services, including the School District of Beloit.
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SECTION TWO: MUNICIPAL SERVICES IMPACT Host communities should expect impacts similar in kind to other commercial development of similar scope and visitor potential. The projected increase in visitor population should be expected to lead to increases in public safety services and judicial system caseload. The one significant difference in kind relates to the association between problem gambling and other social pathologies as discussed in Appendix A. Given the current availability of gaming in the region, the addition of gaming in Beloit is not expected to lead to a material increase in prevalence rates in the local area.
Evidence suggests that on-going impacts to local communities are highly manageable, typically requiring only a small fraction of gaming revenues to address fully. Payments to address local impacts are described in Sections 2 & 3 of the Intergovernmental Agreement (IGA) between the Ho-Chunk Nation and the City of Beloit and Rock County. These payments are estimated to exceed $5 million in Alternative A and $4 million in Alternative B, as discussed later in this section under heading “Fiscal Impacts and Municipal Services.”
Of most direct consequence to casino development are police, fire, and EMS, which will largely fall into the purview of the Beloit Police Department and Beloit Fire Department.
Police There is a total of 72 sworn personnel, and 21 non-sworn personnel in the Beloit Police Department (BPD). This staff includes, Police Administration, Patrol Officers, Special Operations, Police Support Services, Fleet and Facility, and Records personnel. As of June 1, 2018, there are two vacancies in the department for a Patrol Officer, and the Police Captain for the Patrol Division. The officers respond to emergency calls for assistance and reports of impending crimes or crimes in progress. The patrol officers also serve warrants, make arrests and assist other divisions. In addition to the Patrol Division, there are multiple special services including: Drug and Gang Unit, Detectives, Child Maltreatment Officers, SWAT, Evidence Technicians, Field Training Officers, School Resource Officers, Mobile Field Force, Crisis Intervention Team, the Mobile Command Post and Rescue Vehicle20.
The Police Headquarters are located at 100 State Street, 1st Floor, Beloit, WI, in the southcentral part of the city.
According to the City’s FY2018 budget, the Police Department’s budget will exceed $11.5 million in order to cover future service needs, with $10.6 million (92%) allocated to the department’s Personnel Services21.
20 https://www.facebook.com/pg/BeloitPolice1/about/?ref=page_internal 21 http://gouda.beloitwi.gov/weblink/0/edoc/65763/2018%20Proposed%20Operating%20Budget%20Book.pdf
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Fire Fire protection will be provided by the City of Beloit Fire Department (BFD). The Fire Department provides emergency medical services (EMS) and tactical emergency medical service and operate in conjunction with the other local ambulance services. The department employs 60 sworn personnel, and five part-time fire inspectors within the administration, fire and rescue, EMS, and fire prevention divisions. In addition to daily fire suppression and EMS services, the BFD also provides services for Swift Water Rescue, Tactical Emergency Medical Service, Technical Rescue, and support the Rock County Level B Hazardous Materials Team and Fire Investigations.
There are three fire stations serving Beloit, the Fire Department headquarters are located at 1111 Church Street. Beloit Fire Station #2 is in the northeastern part of the City at 2111 Cranston Rd. The third Fire Station is on the western side of the city, at 1048 McKinley Ave. Combined, the stations provide service to approximately 37,000 people.
The Fire Department budget is projected at $9.1 million for FY2018. The City of Beloit’s estimated contribution to the BFD is $7.6 million for the upcoming fiscal year. Payment of this budget comes from the General Fund, Enterprise Funds ($1.2 million), and Special Revenue Funds, i.e. SAFER Fire Grant ($215,000).
Emergency Medical Services (EMS) The Beloit Fire Department provides EMS services to the City of Beloit. In addition to the City EMS services, private EMS groups are also available locally. Paratech Ambulance Service, and Ryan Brothers Ambulance Service are located out of Janesville, just north of Beloit. Brodhead Area EMS is also nearby to the northwest.
Comparative Analysis The introduction of a casino can lead to an increase in traffic patrol requirements and in the number of calls for police service. Arrests or citations related to increased visitation to the local area will create increased caseloads for the local judiciary. Even calls not resulting in arrest or citation can result in a need for increased police staffing.
A large, well-equipped fire department, such as Beloit’s Fire Department usually does not have to increase fire personnel in order to respond to incidents at a new casino. However, rural communities which do not have the types of equipment needed to respond to incidents at buildings beyond a certain height (e.g. ladder truck) often invest in new equipment. In general, rural municipalities have more limited service-infrastructure to handle large-scale developments and increased visitation than large cities, where impacts are marginal relative to resources.
Criminal Incident Rates The following section provides data for the number of calls police respond to and the numbers of arrests made at a sampling of casinos throughout the country. The analysis includes three individual properties, SugarHouse in Philadelphia, Pennsylvania, Rivers Casino in Pittsburgh, Pennsylvania and Rivers Casino in Des Plaines, Illinois.
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SugarHouse Casino – Philadelphia, Pennsylvania SugarHouse Casino is located along the Delaware River, outside of downtown Philadelphia in an urban neighborhood. The following statistics provide an overview of the number of calls and arrests the police department has made near the casino. It should be noted that the following data overstates the number of calls to the casino as the Philadelphia Police Department collects data based on address, which in this case also includes adjacent commercial properties. The Pennsylvania State Police respond to incidents within the casino. The number of calls to the area near the casino declined from 2012 to 2014 by over 50% and offenses declined by 75%. This is due to a steep decline in the all “all other offenses” category, indicating change in police procedure or local ordinances.
SugarHouse Casino Service Calls and Criminal Offenses Crime Category 2012 2013 2014 Average Total Service Calls 1,023 708 499 743 Part One Offenses 30 22 19 24 Rape 0 1 0 0 Robbery 1 3 2 2 Aggravated Assault 5 1 0 2 Theft 21 16 16 18 Stolen Vehicle 3 1 1 2 Part Two Offenses 122 137 21 93 Simple Assault 12 19 5 12 Fraud 3 1 2 2 Prostitution 14 8 5 9 Narcotic 3 2 0 2 Offenses Against Family 1 0 0 0 Driving Under the Influence 3 0 1 1 Liquor Law Violations 0 0 0 0 Public Drunkenness 1 2 0 1 Disorderly Conduct 11 13 5 10 All Other Offenses 74 92 3 56 Total Offenses 152 159 40 117 Source: Philadelphia Police Department, The Innovation Group
Rivers Casino – Pittsburgh, Pennsylvania Rivers Casino is located near Heinz Field, along the Ohio River in Pittsburgh, Pennsylvania. Police protection is provided by two entities, the Pennsylvania State Police and the Pittsburgh Police. The Pennsylvania State Police address incidents within the casino, while the local Pittsburgh Police respond to incidents outside of the casino. The following provides an overview of the calls made to the state and local police.
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Rivers Casino Pittsburgh Police Service Calls Call Type 2012 2013 2014 Average 911 18 17 18 18 Accident 19 16 17 17 Animal 0 0 0 0 Auto Theft 6 3 4 4 Assault 3 13 10 9 Child 3 2 2 2 Crim Mischief 7 8 4 6 Disorderly Person 23 19 20 21 Dispute 6 2 6 5 Disturbance 2 0 1 1 DV 7 3 6 5 Drugs 1 0 0 0 Fight 0 5 6 4 Fire 0 1 1 1 Fraud 0 0 1 0 Gun/Weapon 6 2 1 3 Harassment 2 3 2 2 Hit & Run 28 27 26 27 Ind Exposure/Sex Asslt 2 0 0 1 Intox (Person/Driver) 43 38 44 42 Medical 13 14 19 15 Overdose 2 1 3 2 Parking 3 3 2 3 Police 36 33 71 47 Psych 5 5 5 5 Resist Arr 0 0 0 0 Robbery 0 1 3 1 Retail Theft 0 0 0 0 Shots Fired 1 0 0 0 Soliciting 18 12 6 12 Suspicious Act/Pe/Veh 7 4 7 6 Theft 4 13 14 10 Theft fr Auto 14 5 12 10 Traffic 14 16 20 17 Trespass 1 0 2 1 Unknown 5 1 5 4 Warrant 8 1 1 3 Misc 21 22 19 21 Total 328 290 358 325 Source: Pittsburgh Police Department, The Innovation Group
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Rivers Casino Pennsylvania State Police Service Calls Call Type 2013 2014 Average Criminal Homicide 0 0 0 Sex Offenses 0 2 1 Robbery 0 0 0 Assaults 32 26 29 Property Offenses 535 368 452 Arson 0 0 0 Drug Violations 18 27 23 Alcohol Crimes 14 25 20 Total 599 448 524 Source: Pennsylvania State Police, The Innovation Group
The Rivers Casino in Pittsburgh receives an average of 849 calls to the casino and areas directly adjacent to the casino. The incident rate was calculated based on the estimated attendance at the facility and the total number of service calls.
Rivers Casino Service Call Rates
Revenue 2014 $346,297,439 Avg. Spend $75 Est. Attendance 4,617,299
Average Pittsburgh Police Calls 325 Incident Rate Pittsburgh Police Calls 0.007% Average Pennsylvania Police Calls 524 Incident Rate Pennsylvania State Police Calls 0.011% Incident Rate All Police Calls 0.018% Source: Pittsburgh Police Department, Pennsylvania State Police, Pennsylvania Gaming Control Board, The Innovation Group
Rivers Casino – Des Plaines, Illinois The Rivers Casino in Des Plaines is located on the west side of Chicago within close proximity to O’Hare Airport. The following provides an overview of the number and type of calls that the Des Plaines Police Department at the casino.
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Rivers Casino Des Plaines Police Service Calls 2012 2013 2014 Average Assault & Battery 61 73 68 67 Administrative & Investigative 275 204 336 272 Animal/Pet Related 10 5 5 7 Community Relations Related 128 29 24 60 Controlled Substance 5 30 79 38 Disorderly Conduct 12 9 16 12 Fire/LEO Assist 180 48 62 97 Fraudulent Activity 43 70 88 67 Gambling Related 3 0 0 1 Medical Related 7 6 6 6 Minors with Alcohol 2 0 1 1 Motor Vehicle Offense (DUI, DL) 44 44 42 43 Property Damage 12 13 14 13 Theft Related 35 44 70 50 Traffic Accident 60 59 46 55 Traffic Enforcement 26 40 49 38 Trespassing 431 354 341 375 Welfare/Missing Persons Related 1 4 6 4 Total 1,335 1,032 1,253 1,207 Source: Des Plaines Police Department, The Innovation Group
Attendance figures from the Illinois Gaming Board were utilized in order to calculate the incident rates for calls made to local police.
Des Plaines Service Call Rates
Casino Attendance 2014 3,519,071 Average Casino Service Calls 1,207 Incident Rate for Service Calls 0.034% Source: Des Planes Police Department, Illinois Gaming Board, The Innovation Group
Average Service Call Rates Incident rates from the data above was utilized in order to establish an incident rate that will be applied to the Beloit facility in order to project the number of calls and charges that can be expected with the addition of a casino to the community. Data from Philadelphia was excluded from the average because it doesn’t include incidents on the casino floor.
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Average Criminal Incident Rate Estimated Calls Rivers Casino - Pittsburgh, PA 0.018% Rivers Casino - Des Plaines, IL 0.034% Average 0.026%
It is estimated that the Beloit Casino and retail development will have approximately 1,122 annual calls in Alternative A, 663 in Alternative B and 300 in Alternative C. These impacts are expected to be more than covered by the payments under the IGA.
City of Beloit Police Service Call Estimate Alternatives A Alternative B Alternative C
Projected Casino Attendance 3,048,284 2,518,854 - Projected Retail Visitation 1,210,897 - 1,137,531
Total Visitation* 4,259,181 2,518,854 1,137,531 Average service call rate 0.026% 0.026% 0.026% Projected Police Service Calls 1,122 663 300 *Likely to be over-estimated as we did not assume crossover of patrons visiting both retail and casino.
For additional information on criminal incidents and qualitative data from other jurisdictions, see Appendix B.
Fire Incident Rates The following section provides data for the number of calls the local fire department responds to of the three casino properties, SugarHouse in Philadelphia, Pennsylvania, Rivers Casino in Pittsburgh, Pennsylvania and Rivers Casino in Des Plaines, Illinois. Additionally, data from the Grand Victoria Casino in Elgin, Illinois was used. The majority of calls made to the area around the casino are calls for EMS service or traffic accidents. There are a very small number of calls that are labeled as fire and usually involve a false alarm.
SugarHouse Casino – Philadelphia, Pennsylvania The Philadelphia Fire Department responded to an average of 28 calls from 2012 to 2014. Of those calls, the majority were in connection with EMS or traffic accidents.
Philadelphia Fire Department Calls 2012 2013 2014 Average EMS and Traffic Accident 27 18 19 21 Fire 9 8 3 7 Total 36 26 22 28 Source: Philadelphia Fire Department, The Innovation Group
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The following utilizes the estimated attendance figures from the previous section in order to calculate the fire call rate for SugarHouse Casino in Philadelphia.
Philadelphia Fire Department Call Rate
Estimated Casino Attendance 3,534,995 Average Fire Incidents 28 Fire Dept. Call Rate 0.001% Source: Philadelphia Fire Department, The Innovation Group
Rivers Casino – Pittsburgh, Pennsylvania The Pittsburgh Fire Department responded to an average of 17 calls from 2012 to 2014. Of those calls, the majority were in connection with EMS or traffic accidents.
Pittsburgh Fire Department Calls 2012 2013 2014 Average EMS and Traffic Accident 10 9 15 11 Fire 9 5 3 6 Total 19 14 18 17 Source: Pittsburgh Fire Department, The Innovation Group
The following utilizes the estimated attendance figures from the previous section to calculate the fire call rate for Rivers Casino Pittsburgh.
Pittsburgh Fire Department Call Rate
Estimated Casino Attendance 4,617,299 Average Fire Incidents 17 Fire Dept. Call Rate 0.000% Source: Pittsburgh Fire Department, The Innovation Group
Rivers Casino – Des Plaines, Illinois The Philadelphia Fire Department responded to an average of 168 calls from 2012 to 2014. Of those calls, the majority were in connection with EMS or traffic accidents.
Des Plaines Fire Department Calls 2012 2013 2014 Average EMS 185 138 167 163 Fire 3 4 6 4 Total 188 142 173 168 Source: Des Plaines Fire Department, The Innovation Group
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The following utilizes the estimated attendance figures from the previous section in order to calculate the fire call rate for Rivers Casino in Des Plaines.
Des Plaines Fire Department Call Rate
Attendance 3,519,071 Average Calls 168 Fire Dept. Call Rate 0.005% Source: Des Plaines Fire Department, The Innovation Group
Grand Victoria - Elgin The City of Elgin, Illinois is located near a major metropolitan area. The Grand Victoria Casino is also located within an hour of downtown Chicago and draws from that market. The following table provides an overview of incidents reported by the Elgin Fire Department for the Grand Victoria Casino.
Grand Victoria Elgin Fire Response 2014 Call Type 2012 2013 2014 Average EMS 65 72 67 68 Fire 0 0 0 0 Good Int. 2 2 3 2 Public Assistance 0 2 1 1 False 4 2 5 4 Total 71 78 76 75 Source: Elgin Fire Department, The Innovation Group
Attendance was taken from the Illinois Gaming Board. Based on these figures, the rate of incidents compared to number of guests was extremely small.
Grand Victoria Elgin Fire Call Rate Des Plaines Fire Incidents Attendance 1,372,095 Average Calls 75 Fire Dept. Call Rate 0.005% Source: Elgin Fire Department, Illinois Gaming Board, The Innovation Group
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Average Fire/EMS Incident Rates Incident rates from the data above was utilized in order to establish an incident rate that will be applied to the facility in Beloit in order to project the number of calls the Fire Department can expect.
Average Fire Department/EMS Call Rate Estimate Estimated Fire Incident Rate SugarHouse Casino - Philadelphia, PA 0.001% Rivers Casino - Pittsburgh, PA 0.0004% Rivers Casino - Des Plaines, IL 0.005% Grand Victoria Casino - Elgin, IL 0.006% Average 0.003%
It is estimated that the Beloit development will have approximately 122 annual calls in Alternative A, 72 in Alternative B and 33 in Alternative C. These are minimal impacts that are expected to be more than covered by the payments under the IGA.
City of Beloit Fire Department/EMS Service Call Estimate Alternative A Alternative B Alternative C
Projected Casino Attendance 3,048,284 2,518,854 - Projected Retail Visitation 1,210,897 - 1,137,531
Total Visitation 4,259,181 2,518,854 1,137,531 Average service call rate 0.003% 0.003% 0.003% Projected Fire Service/EMS Calls 122 72 33 *Likely to be over-estimated as we did not assume crossover of patrons visiting both retail and casino.
Again, some communities have seen a smaller impact on services. The Kenner Department reported a small number of fire incidents at the Treasure Chest Casino in Louisiana, averaging approximately seven medical calls and only one fire call in the last five years.
Conclusion and Local Implications Impacts to local communities are highly manageable, typically requiring only a small fraction of gaming revenues to address fully. Based on casino evaluations performed by Purdue University and other research institutions on behalf of the Indiana Gaming Commission, statewide average actual costs borne by host communities are approximately 0.3% of gaming revenues. A study of the fiscal impact of Belterra on Switzerland County in 2005 concluded, “…the added property, wagering and admissions taxes, and the incentive payments, exceeded the costs imposed by the
The Innovation Group Project #033-18 June 2018 Page 91 Draft riverboat. This allowed the county to increase appropriations—to cover added riverboat costs and to provide more public services—while charging Switzerland taxpayers less”.22
As noted, the Ho-Chunk Nation has entered into an Intergovernmental Agreement (IGA) with the City of Beloit and Rock County to compensate for providing municipal services that would typically be covered by property taxes in non-tribal commercial developments.
As will be detailed in the following analysis, the payments that the Ho-Chunk Nation has agreed to are more than adequate to cover the cost of mitigation regarding community impacts. As a host community, Beloit should expect impacts similar in kind to other commercial development of similar scope and visitor potential, such as a shopping mall.
An increase in Police and Fire calls will place added pressure on departments that are currently dependent on City’s General Fund. The additional funds Beloit will receive under the IGA are more than sufficient to defray the cost of any additional personnel that may be required.
Increases in building and health inspection and general administrative costs should also be expected. The one significant difference in kind relates to the association between problem gambling and other social pathologies as discussed in Appendix A. Therefore, the potential for increased social service caseloads should be planned for, although it is possible that Rock and Winnebago Counties could see a reduction in social service caseload given the employment and economic benefits of gaming development. Further, it should be noted that casino gaming is already widely available in Wisconsin and Illinois; therefore, any increase in problem gambling incidence is expected to be minimal.
Fiscal Impacts and Municipal Services This section assesses the overall fiscal impact on Beloit and Rock and Winnebago Counties from the development. Negative impacts from placing land into sovereign trust can include loss of property taxes and sales taxes. Positive impacts can include intergovernmental agreements and increases in tax payments from increased economic development.
Property Taxes The loss of property tax revenue is minimal in this case. The proposed site for the Tribe’s alternative development plans is comprised of four land parcels; 23271000, 23271100, 23120500, and 23131200, as shown in the map below.
22 Five-Year License Renewal: Belterra Resort Indiana, LLC, performed by Indiana University-Purdue University Indianapolis on behalf of the Indiana Gaming Commission, October 2005, page 36.
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City of Beloit Parcel Map
Source: City of Beloit, WI: GIS Online Maps; Sidwell Company
The Rock County Assessor’s Office is responsible for assessing value and collecting property taxes for the City of Beloit. The County has classified all four parcels as class 4 or ‘agricultural’ for property use, which are only assessed based on their value in an agricultural use. According to public records, the county assessed value to only one of the four parcels in 2017, for a total land value of $9,700. Therefore, the fiscal impact to Rock County would total approximately $281 less in property taxes per year.
2017 Property Tax Value Parcel No. Land Value Improvements Total Value Total Taxes Due 23271000 $9,700.00 $0.00 $9,700.00 $280.88 Source: Rock County Tax Database
Retail Sales Tax The proposed major retail development in Alternatives A and C is NOT to be exempt from retail sales taxes, with the exception of sales to Ho-Chunk Nation members. Therefore, Wisconsin and Rock County will collect sales taxes at established rates, which are 5% by the State and 0.5% by the County. There is no additional sales tax applied by the City of Beloit; therefore, the retail sales tax will total 5.5%. Sales taxes are to be collected from all shoppers who are not tribal members.
At these rates, sales tax attributed to the retail development is estimated to be approximately $3.3 million for Alternative A and $3.1 million for Alternative C in Year Two of operations.
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Fiscal Impacts Retail Sales (MMs) Alternative Alternative Alternative Sales Tax A B C State (5%) $3.0 - $2.8 County (0.5%) $0.3 - $0.3 Total $3.3 - $3.1 Source: Wisconsin Department of Revenue: The Innovation Group
This does not include additional spending by casino and retail patrons outside of the property, which would also generate tax revenue for the State and localities.
Payments to State and Local Governments Based on the terms of the compact and the gaming revenue forecast, State revenue sharing payments of $14.2 million are projected for Alternative A and $11.7 million for Alternative B in stabilized Year 2 of operations. Based on the terms of the Intergovernmental Agreement, local area impact payments of $5.2 million and $4.3, respectively, are estimated. The City of Beloit is to receive 70% of the local payments, with Rock County receiving 30%.
Revenue Sharing (MMs) Alternative Alternative Alternative A B C State Revenue Sharing $14.232 $11.695 - Local Impact Payment $5.175 $4.253 - Room PILOT $1.500 - - TOTAL $20.908 $15.947 -
Additionally, a hotel room tax PILOT (payment in lieu of taxes) of $1.5 million is projected based on the room revenue forecast in the hotel assessment (Alternative A only). This payment is to go to the City and the Beloit Convention and Visitors Bureau.
Taxes from “Production” In addition to the direct fiscal impacts as outlined above, IMPLAN calculates the taxes that go into the “production” of goods and services such as business taxes (including sales taxes from the property’s purchase of goods and services), payroll taxes, and state income tax from employee wages.
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Excluding property and sales taxes,23 ongoing operations from the alternative developments would directly contribute between $2.6 million to $35.6 million to the local and state governments, according to IMPLAN results.
Rock and Winnebago County State and Local Tax Impact: Direct Effect Alternative A Alternative B Alternative C Dividends $31,261 $22,416 $677 Social Ins Tax- Employee Contribution $1,880 $1,166 $125 Social Ins Tax- Employer Contribution $3,937 $2,443 $263 TOPI: Sales Tax $0 $0 $0 TOPI: Property Tax $0 $0 $0 TOPI: Motor Vehicle Lic $357,963 $233,330 $26,818 TOPI: Severance Tax $6,156 $4,013 $461 TOPI: Other Taxes $1,080,111 $704,048 $80,921 TOPI: S/L NonTaxes $50,904 $33,180 $3,814 Corporate Profits Tax $582,863 $417,936 $12,618 Personal Tax: Income Tax $1,683,126 $1,043,240 $113,912 Personal Tax: NonTaxes (Fines- Fees) $305,746 $189,508 $20,692 Personal Tax: Motor Vehicle License $112,924 $69,993 $7,643 Personal Tax: Property Taxes $50,275 $31,162 $3,403 Personal Tax: Other Tax (Fish/Hunt) $47,705 $29,568 $3,229 Total State and Local Tax $35,621,713 $23,188,721 $2,620,058 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
However, the impacts from indirect and induced effects of ongoing operations would not be subject to the property and sales tax exemptions. IMPLAN estimates that indirect and induced effects from ongoing operations would generate between $0.6 million and $11.9 million in tax revenue to local and state government depending on the proposed alternative. Winnebago County and the municipalities within it would benefit from these indirect and induced impacts.
23 As a trust property, it has been assumed the subject development would be exempt from property taxes, and retail sales taxes are previously accounted for.
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Rock and Winnebago County State and Local Tax Impact: Indirect Effect Alternative A Alternative B Alternative C Dividends $17,593 $13,260 $619 Social Ins Tax- Employee Contribution $544 $374 $31 Social Ins Tax- Employer Contribution $1,140 $784 $65 TOPI: Sales Tax $2,219,501 $1,602,857 $82,548 TOPI: Property Tax $2,359,979 $1,704,306 $87,773 TOPI: Motor Vehicle Lic $52,362 $37,814 $1,947 TOPI: Severance Tax $900 $650 $33 TOPI: Other Taxes $157,996 $114,100 $5,876 TOPI: S/L NonTaxes $7,446 $5,377 $277 Corporate Profits Tax $328,022 $247,221 $11,533 Personal Tax: Income Tax $573,341 $398,519 $30,090 Personal Tax: NonTaxes (Fines- Fees) $104,149 $72,392 $5,466 Personal Tax: Motor Vehicle License $38,467 $26,737 $2,019 Personal Tax: Property Taxes $17,126 $11,904 $899 Personal Tax: Other Tax (Fish/Hunt) $16,250 $11,295 $853 Total State and Local Tax $5,894,817 $4,247,591 $230,029 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
Rock and Winnebago County State and Local Tax Impact: Induced Effect Alternative A Alternative B Alternative C Dividends $11,551 $7,378 $738 Social Ins Tax- Employee Contribution $538 $344 $34 Social Ins Tax- Employer Contribution $1,128 $720 $72 TOPI: Sales Tax $2,334,575 $1,491,066 $149,104 TOPI: Property Tax $2,482,337 $1,585,440 $158,541 TOPI: Motor Vehicle Lic $55,077 $35,177 $3,518 TOPI: Severance Tax $947 $605 $60 TOPI: Other Taxes $166,187 $106,142 $10,614 TOPI: S/L NonTaxes $7,832 $5,002 $500 Corporate Profits Tax $215,372 $137,557 $13,755 Personal Tax: Income Tax $536,040 $342,345 $34,239 Personal Tax: NonTaxes (Fines- Fees) $97,374 $62,188 $6,220 Personal Tax: Motor Vehicle License $35,964 $22,969 $2,297 Personal Tax: Property Taxes $16,012 $10,226 $1,023 Personal Tax: Other Tax (Fish/Hunt) $15,193 $9,703 $970 Total State and Local Tax $5,976,125 $3,816,862 $381,685 Source: IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group
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CONCLUSION Impacts arising from population and development growth would be effectively diluted by the size of the area’s existing labor force, housing stock, and school capacity. Impacts arising from increased visitation are sufficiently mitigated by the payments under the IGA. Moreover, the gains in tax revenues that will accrue to local municipalities as a result of increased economic activity generated by the casino and its employees will further assist local governments in the provision of municipal services. In sum, the casino and hotel development will have a significant positive impact on local governmental services within Rock and Winnebago Counties.
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APPENDIX A: PROBLEM GAMBLING RESEARCH
Definition and Prevalence A majority of Americans, about 86%, report having gambled at least once in their lifetime24. Most people gamble for recreational purposes without the behavior becoming a problem. Studies, however, estimate that 0.4%-1.6% of the United States population can be classified as pathological gamblers.25,26 Pathological gambling has been commonly associated with relationship problems, employment issues, and significant financial difficulties.
The American Psychiatric Association (2004) defines a pathological gambler as a person who features a continuous loss of control over gambling. Furthermore this gambler illustrates a progression, in gambling frequency and amounts wagered, in the preoccupation with gambling and in obtaining monies with which to gamble. However, problem gambling is a more loosely defined term and is commonly associated with gaming-related difficulties that are considered less serious than those of a pathological gambler. For the sake of this report we will utilize the definition by noted researchers Cox, Rosenthal and Volberg which defines problem gambling as a pattern of gambling behavior that compromise, disrupt or damage personal, family or vocational pursuits.27
The National Research Council28 utilizes a three-level metric. Level 1 gambling is considered social and or recreational gambling with no appreciable harmful effects. Level 2 gambling is synonymous with problem gambling. Level 3 gambling is synonymous with pathological gambling. Problem gambling is an urge to gamble despite harmful negative consequences or a desire to stop. It is often defined by whether harm is experienced by the gambler or others, such as the gamblers family, significant other, spouse, friends, or coworkers. A problem gambler may or may not be a pathological gambler. Pathological or compulsive gambling is defined as a mental disorder characterized by a continuous or periodic loss of control over gambling, a preoccupation with gambling and with obtaining money with which to gamble, irrational thinking, and a continuation of the behavior despite adverse consequences.
Prevalence rates to determine adult problem gambling rates are measured by administering a survey (often a variation of the South Oaks Gambling Screen or a modified DSM-IV questionnaire) to a statistically valid sample of the adult population of the jurisdiction being
24 James KC, Bible WA, Dobson JC, Lanni JT, Leone RC, Loescher RW, et al. National gambling impact study commission final report. National Gambling Impact Study Commission. 1999. 25 Shaffer HJ, Hall MN, Vander Bilt J. “Estimating the prevalence of disordered gambling behavior in America and Canada: a research synthesis.” Am J Public Health. 1999 26 Petry NM, Stinson FS, Grant BF. “Comorbidity of DSM-IV pathological gambling and other psychiatric disorders: results from the national epidemiologic survey on alcohol and related conditions.” J Clin Psychiatry. 2005 27 Cox, S., H. R. Lesieur, R. J. Rosenthal & R. A. Volberg. 1997. Problem and Pathological Gambling in America: The National Picture. Columbia, MD: National Council on Problem Gambling. 28 National Research Council, pp. 20-21.
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Jurisdictions in several countries have conducted studies to estimate the percentage of the population that could be classified as having some level of problem gambling behavior. These studies, commonly referred to as prevalence studies, are designed to reflect the scope and severity of problem gambling behavior.29
One of the most frequently cited studies on prevalence rates is Estimating the Prevalence of Disordered Gambling Behavior in the United States and Canada: A Meta-analysis by the Harvard Medical School Division on Addictions. The meta-analysis method of estimating prevalence rates has been used in related addiction fields of drug prevention and patterns of alcohol use and alcohol treatment and is considered a more cost-effective method than a national study since it makes use of existing research already conducted in a field.
The Harvard Medical School study, believed to be the first to use meta-analysis measurements for problem gambling prevalence rates, analyzed 152 distinct previous prevalence studies available for review by June 15, 1997. The study determined that 2.0 percent of the adult population could be considered as Level 2 of disordered gambling (often referred to as problem gambling) and 0.9 percent of Level 3 or disordered gambling (also referred to as pathological gambling) during the past year. The vast majority of adults in the general population, then, do not experience gambling- related problems of any clinical significance.
The meta-analysis raw data was given to the Committee on the Social and Economic Impact of Pathological Gambling of the National Research Council (NRC) in its analysis for the National Gaming Impact Study Commission. After an extensive review, the NRC agreed with the above rates of problem gambling and used the numbers in its own analysis of problem gambling in its final report.
It should be noted that problem gambling is not limited to states with casinos, since most states have other forms of gambling and since casino options are available in other states.
Implications The introduction of casino gambling can lead to negative social impacts that can be controlled and minimized through proper planning, awareness campaigns, and prevention and treatment programs applied in a coordinated manner by all relevant stakeholders. Utilizing the many proven prevention and treatment programs and the requirements relating to problem/responsible gaming, the potential social impact of the advent of gaming can be minimized.
29 Estimating the Prevalence of Disordered Gambling Behavior in the United States and Canada: A Meta-analysis, Harvard Medical School Division on Addictions, 1997.
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By devoting more resources to prevention and treatment, Connecticut was able to cut prevalence rates despite further gaming development. In 1996, Connecticut had only a single clinic, but by the time of an updated study in 2008, the state had 17 clinics.30 Prevalence rates declined substantially during that period, despite the opening of Mohegan Sun late in 1996 and further expansion at Foxwoods, including the opening of Grand Pequot Tower hotel in 1997.
Connecticut Prevalence Rates 2008 Survey 1997 Study Problem Gamblers 0.90% 2.20% Probable Pathological Gamblers 0.70% 0.60% Total Disordered Gamblers 1.60% 2.80% Source: Spectrum Gaming Group.
The prevalence of casino gaming in Wisconsin and Illinois complicates an assessment of any impact on prevalence rates from further casino development in the state. Whether the addition of a casino will have an impact on local prevalence rates, and the magnitude of that impact, are important questions that should be addressed empirically. In the case of the proposed Beloit facility, a salient point is that casino gambling is already widespread in the region. Given this existing availability, the addition of gaming in Beloit is not expected to lead to an increase in prevalence rates in the local area.
30 Spectrum Gaming Group, Gambling in Connecticut: Analyzing the Economic and Social Impacts, prepared for the State of Connecticut, Division of Special Revenue, June 2009.
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APPENDIX B: CASINOS AND CRIME
Secondary Research The social and community impacts of gaming development have been extensively studied. In many areas research findings have been inconclusive and thus considerable resources continue to be devoted to researching possible negative impacts given the unique nature of gaming compared to other commercial enterprises.
A number of broad studies of the social and economic impact of casinos have been conducted in the United States. In the late 1990s, prompted by the expansion of casinos throughout the United States, mainly in the form of riverboat casinos, Native American casinos, and racetrack slot parlors, Congress set up the National Gambling Impact Study Commission (NGISC). Its findings were released in 1999.
The Commission retained the National Research Council (NRC) to review the existing research on the socio-economic impacts of casino development. The NRC concluded that the existing research on the subject was inadequate:
The NRC project involved a review of all existing and relevant studies by representatives of a variety of scientific fields. In the end, NRC recommended that further study be initiated. Study of the benefits and costs of gambling “is still in its infancy.” Lamenting past studies that utilized “methods so inadequate as to invalidate their conclusions,” the absence of “systematic data,” the substitution of “assumptions for the missing data,” the lack of testing of assumptions, “haphazard” applications of estimations in one study by another, the lack of clear identification of the costs and benefits to be studied, and many other problems, NRC concluded the situation demands a “need for more objective and extensive analysis of the economic impact that gambling has on the economy.”31
The Commission then retained the National Opinion Research Center (NORC) to undertake said “objective and extensive analysis” concerning impacts. The NORC came to the following conclusion:
First, the casino effect is not statistically significant for any of the bankruptcy or crime outcome measures…….. This is not to say that there is no casino-related crime or the like; rather, these effects are either small enough as not to be noticeable in the general wash of the statistics, or whatever problems that are created along these lines when a casino is built may be countered by other effects.32
31 National Gambling Impact Study, Chapter 7. 1999. Gambling’s Impact on People and Places. 32 The National Gambling Impact Study Commission, “National Gambling Impact Study” (1999).
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Despite the NGISC’s authoritative findings, some researchers continue to claim that casinos cause crime.33 However, there are three major flaws in much of this research:
1. Much of the research that attributes an increase in crime to casinos has ignored the temporary population increases brought about by casino visitation. When crime rates are calculated not accounting for the influx of visitors, there appears to be an increase in crime. While this may be true in absolute terms, it radically overestimates the increase in likelihood of residents being victims of crime. 2. Further to #1, some research applies crimes such as on-site thefts of casino visitors to the local population, leading to an invalid increase in the local crime rate. 3. The crimes rates are not studied over a sufficient period of time and therefore temporary increases or long term trends attributable to more primary causal factors are not always recognized or are misinterpreted.
One of the earliest examples of flawed research is related to Atlantic City. The number of crimes tripled after casinos opened in 1978, and some researchers applied the increase to the local resident population, which in the resulting invalid calculation resulted in a tripling of the crime rate. However, most of the increase related to thefts within the casinos, which did not impact the local population. A valid calculation of the crime rate has to include the visitation base.
In fact, there has been a decreased chance of being a victim of crime since casinos were developed in Atlantic City. Factors likely include an increase in casino employment and law enforcement resources, safer infrastructure with well-lit garages, and an increase in general tourism activity. According to more recent data supplemented to the study completed by Margolis et al, 34 this decline in crime rates per 1,000 residents continued through 2007 to a rate of 36.1 per thousand residents. The chart below illustrates the crime rate trends from 1980 to 2007.
33 See Grinols and NBER discussion below. 34 Margolis, J. & Altheimer & Gray. (December 1997). “Casinos and crime: An analysis of the evidence.” American Gaming Association. http://www.americangaming.org/assets/files/studies/Crime.pdf . The Innovation Group.
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A Study of Atlantic City Crime Rates (AC Residents versus AC residents and Visitors Combined) 200,000 450.0
180,000 400.0 383.8 381.6 160,000 350.0 140,000 309.8 300.0 120,000 274.9 250.0 100,000 200.0
Population 80,000 174.3 155.7 150.0 60,000 130.3 124.6 115.8 117.5 100.0 40,000 79.0 Crime Rate per 1,000 Persons 53.6 50.0 20,000 40.3 36.1 0 0.0 1980 1985 1990 1995 2000 2005 2007
Population Resident Population & Visitors Adjusted Crime Rate Official Crime Rate Per 1,000 Residents
The Rappaport Institute for Greater Boston and the John F. Kennedy School of Economics at Harvard University (Baxandall and Sacerdote 2005) in a national, county-level study of Native American casinos found a slight decrease in crime rates after casinos opened. The analysis included all California casinos in existence in the 1990s. From their total sample of 156 casino counties, the Rappaport study isolated out 57 counties with large casinos and relatively low population and nine counties with both large casinos and large populations to see if there were statistical differences in terms of community impacts. The following table shows their results:
Rappaport Study Results All Casino- Counties with Large- Populous Casino Counties1 Capacity Casinos2 Counties3 Population Growth (%) +5* 8.6 +8.1* Total Employment (%) +6.7* +14.9* 5.7 Unemployment (%) -0.3 -1.2* 0.5 House Prices $5,869 $8,924 $7,083 Crime (Per 1,000 People) -3 -6 -1 *Statistically significant results at 99% confidence interval. 1. Reports how adjusted outcomes in 156 counties that introduced Indian-run casinos during the 1990s differed from the other 2,959 that did not. 2. The effect for 21 counties in the top 10th percentile in terms of number of slot machines (over 1,760). 3. The effect for the 57 casino counties in the top population quartile (over 55,000 residents).
The Rappaport study concluded:
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Our analysis shows that while total crime can be expected to increase when casinos open, the increase is due to increased population, not to a casino-created crime wave. Looking at FBI indexed crimes per resident in all [156] counties; we find that introducing a casino is associated with a decrease of 3 reported crimes per 1,000 people. The introduction of a casino, however, had no statistically significant effect on per-capita crime rates in either large-population casino counties or in large-casino counties. The per-capita crime rate in the 9 large-population counties that also hosted large-capacity casinos dropped 9 crimes per 1,000 residents, however.35
It is worth noting that the study included two of the largest casinos in the world, Foxwoods and Mohegan Sun. In Ledyard, Connecticut (which hosts the Foxwoods casino), crimes outside the casino increased from 214 in 1991 to 364 in 1998, but in subsequent years, State Police data show that off-casino crimes in Ledyard fell below pre-casino levels. In Montville, Connecticut (host to Mohegan Sun), as with Ledyard, the number of crimes reported “remained relatively constant,” which the authors conclude is “surprising since the sheer increase in activity around these towns might have led to greater crime.”36
Testimonials from Select Casino Jurisdictions The figures from the casinos used in the Comparative Analysis Criminal Incidents section, provide a general picture of criminal activity at a casino. Other communities have found lower and higher levels of incidents. For example, figures from the Kenner Police Department note an average of 9 criminal incidents at the Treasure Chest Casino from 2012 to 2014. Attendance at the Treasure Chest Casino in Kenner is over one million annually.
A recent article in The Enterprise provided additional qualitative data from the casinos in this analysis. An officer from the Pittsburgh Police department compared the number of calls to games at the local baseball and football stadiums, “Nothing different than when there’s a ball game,” Luczak said. “I wouldn’t say there’s much change.”37
Des Plaines Police Deputy Chief Nick Treantafeles had similar sentiments, “It’s just like any place that serves alcohol,” he said. “You get drunk and disorderly, but their security handles 98 percent of the issues there. We might get called for a fight that gets out of hand. ... It hasn’t put a damper on the services we offer the rest of the community.”38
While specific increase in police staffing varies from community to community, many communities found no need to increase police staffing, as shown below in the examples from
35 IBID. As summarized in their 2008 report, “Betting on the Future: The Economic Impact of Legalized Gambling.” 36 Baxandall, P. & B. Sacerdote (January 2005). The Casino Gamble in Massachusetts: Full Report and Appendices. Rappaport Institute for Greater Boston, John F. Kennedy School of Economics, Harvard University. Page 14. 37 http://www.enterprisenews.com/article/20150517/NEWS/150516955/12741/NEWS/?Start=1 38 http://www.enterprisenews.com/article/20150517/NEWS/150516955/12741/NEWS/?Start=1
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Indiana. The Center for Urban Policy and the Environment at Indiana University-Purdue University has prepared 5-year evaluations of riverboat licensees for the Indiana Gaming Commission which contain sections on community impacts. The following bullet points include summaries and excerpts from these reports with respect to police and fire protection.
Casino Aztar: x The Evansville Police Department reports no increases in crime since the riverboat opening. They do report a drop in crime in 1999 when compared to the previous year. x “No new police officers or firefighters were added. Traffic control has not been a problem...”
Majestic Star: x The community purchased 12 police cars with Year 1 incentive payments. x Gary’s Chief of Police reports no additional criminal activity surrounding the riverboat.
Horseshoe Hammond (formerly Empress Casino Hammond): x The Hammond Police Department reports crime has fallen in most categories when compared to before the boat opened.
Hollywood (formerly Argosy): x According to the Lawrenceburg Police Department, casino-related arrests for public intoxication, DWI, and minor theft, as well as traffic accidents in the area have increased slightly each year from 1997 to 2000. x Lawrenceburg has added two police officers since the boat opened to deal with the increased caseload.
Ameristar (formerly Harrah’s East Chicago): x According to East Chicago’s police department, no additional criminal activity can be attributed to the riverboat’s presence. x “Crime in East Chicago has decreased substantially over this time period due to increased cooperation with federal agencies, community policing and increased staffing.“
Blue Chip Casino: x According to Michigan City’s chief of police, no additional criminal activity can be attributed to Blue Chip’s presence.
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On the issue of crime, Jeremy Margolis, who had served as Assistant U.S. Attorney in Chicago, Illinois Inspector General, and Director of the Illinois State Police, found in a 1997 study39 that the chance of being victim of a crime decreases after casino development. Factors include an increase in employment brought by casinos, increased law enforcement resources, safer infrastructure with well-lit garages, and an increase in general tourism activity.
In testimony before the Pennsylvania Gaming Control Board (PGCB) in 2006, Margolis was asked to give an update of his seminal study. Margolis concluded, based on examining updated crime data from the F.B.I. as well as interviews with the Executive Director of the Illinois Crime Commission, the Illinois State Police, and the Illinois Gaming Board, that the situation is “really unchanged except for the maturation of the industry, the maturation of the regulatory process has probably settled things down more than it had settled when I completed my study in 1997. It’s just not an issue.”40
39 Margolis, J. (December 1997). “Casinos and crime: An analysis of the evidence.” American Gaming Association. 40 PGCG hearing transcript, September 7, 2006, pages 22-23.
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APPENDIX C: INNOVATION GROUP QUALIFICATIONS The Innovation Group has extensive experience completing economic and community impact studies for gaming and hospitality development. The list of projects below represents a sample of The Innovation Group Project Team’s community impact work to date.
Recent Social, Community & Economic Impact Experience
Government of Bermuda and the Bermuda Hotel Association (BHA) The Innovation Group was engaged to provide consulting services to the Bermuda Government and the Bermuda Hotel Association regarding the potential implementation of gaming in Bermuda. This highly visible project involved working for a combined public/private Tribe (a joint effort between the Government of Bermuda and the local Hotel Association) and was of a highly comprehensive and complex nature. In order to help determine the potential and methodologies for the tourism-focused jurisdiction, we applied a series of qualitative and quantitative tools including a gaming market assessment, a legislation study, tax considerations, and economic/social impact analysis.
Advisor to City of Springfield, Massachusetts
Through the prominent legal firm Shefsky & Froelich, who had been engaged to represent City of Springfield in its negotiations with potential casino developers, The Innovation Group was engaged in 2013 as an expert advisor to assist with the review of operator bids for a proposed casino resort in Springfield. The Innovation Group helped the city develop economic impact estimates for each submission, including such services as police, fire, EMS, schools and other impacted departments. We reviewed each of the applicant’s proposals and provided a critical review of each with respect to fiscal economic impacts.
State of Massachusetts The Innovation Group was tasked by the State Senate of Massachusetts to evaluate several development scenarios based on pending legislation to enable casino gaming in the Commonwealth. The State Senate request included the preparation of a tax and regulatory discussion providing competitive intelligence into other jurisdictions, recommendations on specific legislative elements based on the Commonwealth’s goals, and their fiscal impacts. Statewide gaming revenue estimates forecasted the gross gaming revenues and job creation that could be generated under a number of development scenarios. The revenue estimates were further evaluated to answer two key policy questions: the amount of revenue that would have accrued out of state in the absence of enabling legislation and the impact that casino gaming would have on the lottery.
Based on the recommendations and conclusions in our report, the State Senate of Massachusetts drafted legislation that created three development zones for large scale casino developments in the state. The tax and regulatory discussion in our report was included in the final legislative proposal that the Governor signed into law.
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The legislation being considered was expansive and scope and included a large amount of stakeholders, including our Tribe, the Massachusetts State Senate and the potential developers and the Native American Tribes. Because of the different goals of each stakeholder, we developed a model that allowed us to evaluate multiple scenarios and iterations. The outcome of our modeling provided results that showed the full gaming potential to maximize the state’s tax revenue potential while weighing the feasibility of the casino developments across the state.
Sullivan County, New York, Community Service Mitigation Analysis In 2003, the Innovation Group was engaged by counsel for a proposed Native American casino in Sullivan County to provide a community mitigation analysis as part of a federal Environmental Impact Assessment for the Department of Interior.
Plainridge Racecourse Social/Community Impact Analysis & Strategic Research In 2012, the Innovation Group was engaged by Plainridge Racecourse to provide market analysis, financial pro forma, and socio-economic social impact in support of a gaming license application in Massachusetts, which has the most intensive application requirements of any gaming jurisdiction. Included in our analysis were a comprehensive social impact analysis and an assessment of community mitigation, with applicants being required to negotiate a Community Host Agreement.
Ohio Statewide Economic and Community Impact Assessments The Innovation Group recently completed an economic impact study for two locations being considered in Ohio for development by the Eastern Shawnee Tribe. Included was a cost-benefit analysis for local host communities relative to the proposed development. Benefits examined included employment from construction and on-going operations, earnings, spending on local goods and services, and fiscal impacts from sales, hotel room, and income taxes.
Laurel Park, Maryland, Gaming Market Assessment and Economic Impact Assessment The Innovation Group recently completed the feasibility analysis for a gaming license application at Laurel Park, Maryland. In addition to a gaming market assessment and operating pro formas, our services included an economic impact analysis as part of the application requirements.
Grand Ronde Economic and Community Impact Study The Innovation Group was asked to complete a “reverse” economic impact study to gauge the potential impact on tribal income and departments of the proposed Cascade Locks casino. The IG assessed the potential impacts on Grand Ronde’s departmental services, programs, and employment from a reduction in income from Spirit Mountain. Our involvement with this assignment provides our team with important insight into the current tribal organization and the future economic challenges facing the Grand Ronde.
State of New Hampshire Economic Impact
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The Innovation Group prepared an analysis of the potential New Hampshire gaming market for the state legislature in considering options for development. Following a preliminary review of the state, The Innovation Group developed six scenarios involving one or two casinos in three locations around the state. The scenarios were developed considering the state’s two goals of maximizing revenue to the state and providing economic development opportunities to specific regions. The analysis projected both increased gaming revenues as well as potential impacts on other industries in the state such as the pari-mutuel industry, restaurants and bars, and increased governmental costs in the areas of enforcement and regulation.
Florida Statewide Economic Impact Analysis The seven major racing operators in Florida engaged The Innovation Group to analyze the potential economic impact of the tax rate adjustment and addition of table games that are currently being discussed for the state of Florida. The goal of the assessment was to determine the aggregate construction expenditure and annual gaming revenue potential for Dade and Broward county pari-mutuel facilities assuming anticipated competitive environment and proposed legislative changes.
Economic Impact Assessment, Mile High USA, Inc., Aurora, Colorado Mile High USA retained The Innovation Group to complete an Economic Impact Assessment for the potential addition of Video Lottery Terminals (“VLT’s”) at Arapahoe Park in Aurora, CO, including an optional scenario assuming the addition of VLT’s to the South Colorado Gaming and Events Center in Pueblo, CO as well. We delivered a report including patron demand and revenue forecasts for each selected location; a sizing and supply distribution analysis looking at the appropriate number of VLT’s for each site; an estimate of substitution to existing CO casinos; and an estimate of net direct and indirect economic impacts associated with construction and operation of each development, including a community needs assessment.
Kentucky Statewide Market & Social Impact Assessments The Innovation Group was engaged to provide a statewide gaming market assessment, return on investment analysis and economic impact study for (2) two gaming scenarios in Kentucky. The first scenario assumed full-service slot and table gaming facilities at the state’s (7) existing racetracks. The second scenario included several non-racetrack gaming locations. Using a gravity model, we developed revenue estimates, sizing and local capture potential from residents currently traveling out of state to gamble. The Innovation Group also conducted a qualitative study regarding the social cost of gaming, focusing on the impact to existing businesses in the area. A strategic plan acceptable to all participants was presented to the legislature with The Innovation Group providing supporting expert witness testimony regarding the findings.
Caesars Entertainment Economic & Social Impact Assessments, Suffolk Downs, Massachusetts Caesar’s Entertainment retained the Innovation Group to complete an analysis of the potential social and cultural impacts of casino at Suffolk Downs per the State of Massachusetts’s Gaming Legislation. The report updated a feasibility study we conducted in 2009 with added analyses on the impact a casino could have on local and small
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businesses, bankruptcy, problem gambling, property values, unemployment, cultural institutions, and the Massachusetts State Lottery.
Kahnawake First Nation Economic & Social Impact Studies, Quebec, Canada In 2013, The Innovation Group completed a gaming market assessment and operational pro forma for a proposed First Nations casino in Montreal, Quebec. Accompanying that study was a complete economic impact for the First Nations community assessing the impact the casino would have on jobs, local businesses, and visitation to the area, as well as a complete socio-economic impact analysis to help the First Nation understand the various positive and negative social impacts that a casino may have on the surrounding population.
Las Vegas Sands, Bethlehem, Pennsylvania: Housing and Tourism Impact Study General Scope: The Innovation Group completed an impact analysis of a proposed casino in Bethlehem, Pennsylvania, detailing the impact to the local housing market and existing tourism market. Comparisons were made to changes in housing values of other jurisdictions where gaming has been initiated. Impacts studied included the existing tourism market as well as potential new tourism opportunities generated by the development and indirect benefits from advertising and increased visibility. The study also included analyses of historical and other cultural impacts.
Additional Public Sector Related Experience
State of Illinois The Innovation Group recently completed work for the Office of the Governor, Patrick Quinn. The project included analyzing multiple development scenarios and tax structures to determine the optimal strategy for casino expansion in the state. We worked closely with the Governor’s office staff to ensure that our analysis matched the evolving nature of the negotiations between the Governor and the state legislature. This work was completed as a continuation from a previous project for the state that included analyzing the impacts of the Lottery and ambient video lottery terminals (VLT’s) being introduced across the state.
The Governor has used The Innovation Group’s analysis to guide the actions of the office as it evaluated all of the potential legislative actions for expanded gaming in the state.
The development scenarios, sizing parameters and tax structure for the expansion to gaming in the stated were constantly evolving de nature of the discussions and negotiations between the governor and the state legislature. In order to be responsive to these changes and provide up to date results, we made our staff available and flexible to the needs of the Governor’s Office. The ever evolving development scenario required our staff to be diligent with the modeling process in order to make sure that the correct results tied to each iteration of the discussion and negotiation.
OLG: Greater Toronto Area Market Assessment
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The Innovation Group provided a market assessment for the greater Toronto Area (GTA), considering the 27 gaming facilities across Ontario (4 resort casinos, 17 racetrack slots and 6 charity casinos). To complete the scope of work, we referred to previous market studies and existing performance data, to consider opportunities within the GTA to further maximize revenue and profitability at some GTA gaming facilities. Particular consideration was offered to the long-term future of Casino Rama, as well as general substitution consideration for all OLG locations. We reviewed the supply and demand for GTA gaming facilities and developed a market assessment for the GTA that clarified which areas of unmet demand could be defined in a variety of scenarios. The key objectives of our analysis were to determine the unmet demand (gaming revenue) within the GTA, estimate gaming demand and substitution impacts, based on a variety of scenarios to be determined together by OLG and The Innovation Group, and determine the optimal scenario(s) for best capturing this unmet demand, including supply requirements and resulting gaming revenue impacts. OLG also asked us to explore various sizing options with respect specific properties.
Based on the results and recommendations in our report, The Ontario Lotteries and Gaming commission has initiated its privatization and modernization program for more than 25 casinos and slot clubs in the Greater Toronto Area.
In order to comprehensively address the gaming revenue potential for the market, The Innovation Group had to determine a solution to estimate the latent demand in the market. The latent demand is not usually addressed in projects like this because of the complexity needed in order to estimate the potential. We established a methodology that addressed the maximum potential demand in the market based on comparables from other mature operating markets in the world. In order to accomplish this we created a metric that estimated the average gaming spend per adult and benchmarked this spend against comparable mature markets to establish the maximum.
Pennsylvania Statewide Table Game Analysis In 2009, on behalf of several casino operators, The Innovation Group assessed the revenue potential that table game operations would generate in the Commonwealth of Pennsylvania. Our services included a statewide economic impact study evaluating the benefits to the Commonwealth from the introduction of table games, as well as testimony to the legislature regarding our findings. Key to allowing this program to proceed was convincing the legislature to assess a low tax rate on table games which they eventually accepted. In addition we projected increase in slot revenue as a result of companion play.
Based on the conclusions in the report and testimony, the state legislature passed a bill that allowed for table games to be introduced at casinos at a competitive tax rate. The lower tax rate bill spurred development at the casinos which included capital improvements to the casino floor and non-gaming amenities including food and beverage and hotel development.
On the outset of the report, the state legislature was seeking a tax rate and structure that would have been prohibitive to the growth of the gaming industry in the state of
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Pennsylvania. In order to realign the stance of the legislature, The Innovation Group relied on our expertise to show both the numerical explanation of the issue as well as the expository writing to relay the point.
City of Philadelphia, Philadelphia Gaming Advisory Task Force Advisory Services The Innovation Group was engaged to complete comprehensive analysis of the proposed new slot operations in the city and to make recommendations as to the city’s oversight of these facilities. The input we provided aided officials in understanding a range of issues related to the operations so that they could more proactively take part in the development of the new industry. Our work included performing site analyses for 11 sites, developing market assessments and revenue projections for 14 scenarios, developing 28 pro formas, estimating local and overnight modal splits, estimating the fiscal impacts of problem gambling and impacts of crime and providing secondary research on trends in gaming. As primary consultants, we also oversaw the work of other consultants including input into the design and analysis of surveys and focus groups, and input into traffic impact assessments. The Innovation Group won this coveted contract through an open bid process.
The city used our recommendations in the report to assign two locations for potential casino development. One of the locations is currently developed and operating as one of the state’s highest revenue generating casinos.
There were two main complications with this project: (1) the management of all the subcontractors and (2) addressing the needs of the various stakeholders on the city’s development and oversight committee. In order to manage the many sub contractors on this project, The Innovation Group utilized a comprehensive timeline and communication strategy that allowed all of the subcontractors to be able to complete their tasks in a timely manner. In order to address all of the stakeholders, The Innovation Group created a communication protocol that allowed the committee members to voice their opinions and concerns and the results were addressed and included in the reports outcome and recommendations. The committee members felt their concerns addressed based on the outcome of the report.
Pennsylvania Statewide Market Assessment, Senate Democratic Appropriations Committee In support of a bill that became the basis for subsequent gaming legislation and a state goal to generate $1 billion in revenue, The Innovation Group conducted a gaming market analysis (using a gravity model at the statewide level) to determine the number, size and location of gaming licenses for 12 proposed facilities. Multiple scenarios were addressed in order to determine the distribution which would maximize state tax revenues and ensure viable developments. The report also included a financial analysis of the break-even point for development given a proposed $50 million license fee and construction and financing costs. The recommendations of the report were eventually accepted by the state and incorporated into legislation. Following the passage of the bill, The Innovation Group also took a lead role on Philadelphia’s Gaming Advisory Task Force to recommend optimum locations for gaming facilities in the city.
Legislation was drafted and passed through the state legislature based on the outcome and recommendation from The Innovation Group Report. The report identified the proximate
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sizing and location of casinos in the state that would generate over $1 billion in gaming tax revenue. Subsequent to the development of the casinos the state has received over $1 billion in total tax revenue.
Maryland Senate Paul Girvan, a Managing Director/Partner of The Innovation Group and member of our proposed project team, testified before the Maryland Senate and provided revenue estimates in support of the legislation in 2004 and then again in 2007. The bill’s success was partially based on our projections of gaming revenues that the state could put into its school system.
Government of Jamaica, Tourism Development & Strategic Planning Advisory Services The Innovation Group has been retained and is working on an on-going basis for the Government of Jamaica’s Public-Private Joint Venture to develop leisure and tourism attraction on the Country’s north coast between Montego Bay and Ocho Rios in an area called Harmony Cove. The Innovation Group provided strategic planning, feasibility analysis, economic impact analysis, capital cost estimates and business planning support for a master plan development that will leverage landside uses drawing from a new cruise ship terminal at Falmouth and include hotels, casinos and other themed recreation all based upon a cultural fabric embedded in the country’s musical history. The Innovation Group has played a key role in sourcing management for the proposed property, and structuring the operating agreement for management.
National Government of Panama The Innovation Group assessed the potential gaming market in Panama under a number of scenarios relating to privatization, facility placement, and mixture of full casinos and slot rooms. Subsequent to our analysis, the state-run, hotel-based casinos and slot rooms were privatized and upgraded by international operators.
The Innovation Group Project Team
Thomas J. Zitt, Ph.D. – Executive Vice President Since joining The Innovation Group in 1997, Thomas Zitt has excelled at market analytics and high-level strategic planning, earning his reports a reputation for accuracy and reliability unsurpassed in the gaming industry.
Tom lives in New Orleans but directs training, modeling and quality control for all Innovation Group offices. The depth of his analysis provides tribes, developers and government bodies with the confidence that their decisions are being made on sound economic foundations, and the methodological soundness and comprehensiveness of his expert witness reports have been critical in his Tribes’ success in a number of legal proceedings.
Market sizing is a particular strength. Tom conducted the statewide gravity model analysis used by Pennsylvania legislators in structuring the state’s highly successful gaming legislation. He has
The Innovation Group Project #033-18 June 2018 Page 113 Draft also consulted for the Illinois Governor’s office and numerous developers in assessing potential revenue impacts of statewide gaming expansion. Additional statewide gravity models include Alabama, California, Florida, Georgia, Kentucky, Massachusetts, Michigan, New York, Ohio, Virginia, and West Virginia. He has also worked extensively in Atlantic City, Indiana, Iowa, Louisiana, Mississippi, Missouri, New Mexico, Oregon, Washington, and Wisconsin. His international experience extends to the United Kingdom, Isle of Man, Cambodia, Japan, Kazakhstan, Laos, Macau, Mongolia, the Philippines, Russia and Russian Far East, Spain, and South Korea.
His work for tribes extends beyond gaming as he has completed economic diversification and strategic planning studies for tribal councils in California, Michigan, and Oregon.
In addition, Tom has assessed the economic, social and fiscal impacts of gaming in numerous developing jurisdictions, including Massachusetts, New York, and Ohio. He has also conducted regional analyses for investment firms like CIBC World Markets, Deutsche Bank and Bear Stearns looking to understand the impacts of new gaming development. Tom received his doctorate in American Culture Studies from Bowling Green University.
Angela Slovachek, Senior Analyst Angela joined The Innovation Group in February 2015 while finishing her Master’s degree in Urban and Regional Planning at the University of New Orleans. Angela's previous work as a research analyst at a New Orleans consulting firm in addition to ten years of managerial experience in the restaurant industry makes her a viable asset to our team.
Based out of our New Orleans office, Angela's primary focus has been in the domestic market for both commercial and Native American projects. Since joining our team she has assisted in market analyses, financial forecasts, economic impact studies and diversification strategies for our Tribes in the Gaming and Hospitality Industries. She also collaborates on some of the company's International projects providing market research for feasibility studies and white papers. Angela contributes to our Emerging Leaders of Gaming initiative by writing for the Global Gaming Business Magazine's column on 40 Under 40 award recipients.
She is currently an active member of the American Planning Association (APA) and Louisiana Urban & Regional Information Systems Association (LAURISA), an organization dedicated to the effective and ethical use of spatial information technologies.
In addition to her MURP degree, Angela obtained a B.A. in Economics and International Development and a Certificate in Peace Studies and Conflict Resolution while attending the University of Wisconsin in Milwaukee. With a lifelong commitment to community service, Angela proudly served as a United States Peace Corps volunteer in Benin, West Africa from 2010- 12.
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