Market .Impact of A Proposed Tyre, New York Casino On Turning Stone - Final.10.27.2014

________________________________________________________________________
THE REGIONAL MARKET IMPACT OF A

PROPOSED TYRE, NEW YORK CASINO:

ESTIMATED DISPLACEMENT OF EXISTING GAMING REVENUES &
EMPLOYMENT AT TURNING STONE CASINO, ONEIDA & ONONDAGA
COUNTIES

Prepared

by

Clyde W. Barrow, Ph.D.
Chair, Department of Political Science
University of Texas Pan American

d/b/a

PYRAMID ASSOCIATES, LCC

for

MOHAWK VALLEY ECONOMIC DEVELOPMENT
GROWTH ENTERPRISES CORPORATION

OCTOBER 2014

________________________________________________________________________

EXECUTI VE SUMMARY

The purpose of this report is to estimate the potential impact of regional gaming expansion
in New Yorks Eastern Southern Tier on Turning Stone Resort Casino, Oneida County,
and Onondaga County. The State of New York currently has nine (9) race track casinos
that operate approximately 29,000 video lottery terminals (VLTs) and five (5) Class III
Indian casinos with approximately 10,000 slot machines and 325 table games (New York
State Gaming Commission 2014; Meister 2014, 17). On November 5, 2013, the Empire
States voters approved an amendment to the state constitution that authorized Las Vegas
style commercial casino gaming in New York for the first time. The Upstate New York
Gaming and Economic Development Act (Chapters 174 and 175 of the Laws of 2013)
outlines the procedure and process for siting destination gaming resorts in New York State.
The Act authorizes up to four destination gaming resorts in Upstate New York with at least
one facility in each of three regions: Capital, Catskills/Hudson Valley, and Eastern
Southern Tier

The stated purposes of the Upstate New York Gaming and Economic Development Act is
to increase total employment in the leisure and hospitality sector, generate net new
revenues for state and local governments, and to recapture New York gaming dollars that
are currently leaving the state for Connecticut, Pennsylvania, and New J ersey (New York
State Gaming Commission 2014).
1
However, the facilities siting process and the evaluation
criteria employed for selecting casino licensees raise three additional considerations for the
Resort Gaming Facility Location Board.

First, it is possible that some proposals for new gaming facilities could
potentially destabilize the states gaming market by displacing
(cannibalizing) existing gaming revenues and, thereby, adversely affect
existing gaming facilities, employment, and state revenues. In this case, the
economic benefits of new facilities may be overstated by developers if the
displacement of existing jobs and revenues is not factored into the economic
and fiscal impact analysis.

Second, the location of facilities near state borders will be an important
factor in the ability of new gaming facilities to intercept gaming dollars that
are currently leaving the state and to attract new gaming and tourism dollars
from out-of-state regional residents.

Third, gaming officials will need to consider whether it is best to locate
gaming facilities in areas with high levels of economic distress, where there
is a tangible need for additional employment and revenue, or whether to
1
The Consultant conducted a study in 2012, which found that New York residents spend approximately $3.8
billion at out-of-state casinos in Connecticut, New J ersey, Pennsylvania, and Nevada. New York residents
account for 22% of all visits to Atlantic City casinos, 12% of all visits to Connecticut casinos, and 17% of
visits to the four Pennsylvania casinos on New Yorks border. New York is also one of the top ten feeder
markets to Las Vegas (Harrahs 2006).
i

locate the facilities in areas that bring additional benefits to generally
healthy economies.

These considerations are especially pertinent in considering the proposal by Wilmorite, a
commercial real estate company that operates Eastview Mall and other shopping centers in
the Rochester area. Wilmorite unveiled a proposal on December 12, 2013 to construct the
Wilmot Casino and Resort in Tyre, New York (Eastern Southern Tier) near Exit 41 off the
New York State Thruway. The proposed $300 to $350 million casino and resort would
include a casino with 2,000 slot machines and 100 table games, a 200 room hotel and
convention center, as well as four restaurants, two entertainment venues, and a spa and
fitness center. The proposed casinos developers claim that the new gaming venue will
attract 3.3 million visitors annually an average of 9,000 daily -- and employ up to 1,800
permanent casino and resort workers at full build out with an annual payroll of $50 million
(Harding 2013; Shaw 2014; Wilmorite 2014). The proposed casinos developer also claims
that the Tyre facility will draw visitors from well beyond the local markets of Syracuse
and Rochester metro areas by working jointly with the already robust regional tourist
attractions to further establish Seneca County as a premier upstate destination.

The proposed casino in Tyre, New York will be a direct competitor with Finger Lakes
Gaming and Racetrack, Tioga Downs Casino, Vernon Downs Casino, and Turning Stone
Resort Casino in their primary and secondary market areas. The proposed Wilmot Casino
and Resort will be competing for destination travelers (Vernon Downs and Turning Stone),
as well as regional convenience gamblers (Tioga and Finger Lakes) residing in the
proposed facilitys primary and secondary market areas, who are already served by a
diverse array of gaming facilities.
2

Methodology

The Consultant built a Master Database consisting of 3,591 communities in New York and
Pennsylvania to analyze the gaming market for the proposed Wilmot Casino and Resort
and its existing competitors (i.e., Tioga Downs, Vernon Downs, Finger Lakes, and Turning
Stone). The Master Database includes data by town and city on total population, the adult
population (age 21+), per capita income, total income, disposable personal income (DPI),
and drive-times to the nine race track casinos in New York, the five Class III Indian casinos
in New York, and two casinos in Pennsylvania (i.e., Mohegan Sun at Pocono Downs and
Mt. Airy), with the drive-times based on geo-codes for the actual addresses of each facility.
The Master Database contains 156,684 discrete data points that form the basis for the
gravity model.

The initial gravity model developed from this database relies on empirically based
assumptions about the propensity to gamble at different functional distances, as well as
gaming expenditures as a ratio of DPI at different functional distances, consistent with
2
Mohawk Valley Economic Development Growth Enterprises Corporation retained Dr. Clyde W. Barrow,
d/b/a Pyramid Associates, LLC to conduct a market impact analysis of expanded gaming proposals in New
York. Dr. Clyde W. Barrow is Chair of the Department of Political Science at the University of Texas Pan
American and Project Manager of the Northeastern Gaming Research Project (see Appendix A).
ii

other facilities in New York that are within or near the proposed Wilmot Casino & Resorts
market area.

The direct, indirect, and induced employment impacts of the proposed Wilmot Casino &
Resort have been specified using IMPLAN (IMpact Analysis for PLANing). IMPLAN is
an econometric modeling system developed by applied economists at the University of
Minnesota and the U.S. Forest Service. The IMPLAN modeling system has been in use
since 1979 and it is currently used by over 500 private consulting firms, university research
centers, and government agencies. The Consultant has been a licensed and certified
IMPLAN user since 1999 and regularly employs the software for conducting economic
and fiscal impact analyses for a wide range of industries.
3

Findings

The Wilmot Casino and Resort proposed for Tyre, New York will be a direct competitor
with Turning Stone Resort Casino, Finger Lakes Gaming and Racetrack, Tioga Downs
Casino, and Vernon Downs Casino due to overlapping primary and secondary market
areas. The proposed Wilmot Casino and Resort will be competing for destination travelers
(Vernon Downs and Turning Stone), as well as regional convenience gamblers (Tioga and
Finger Lakes) residing in the proposed facilitys primary and secondary market areas, who
are already served by existing facilities. Destination resort casinos can draw customers
from as far as away as a four hour drive time, while they can also intercept business traffic
(e.g., business travelers and long-haul trucks), regional conferences, and leisure travelers,
who stop temporarily on their way to other destinations. Thus, to a certain extent, the
proposed Wilmot Casino and Resort is indirectly competing against every other gaming
facility in New York, as well as destination casinos in Connecticut and New J ersey (and
soon Massachusetts), although the distribution of facilities and their proximity to
population centers makes it likely that the most direct competition will be with gaming
facilities located within 120 minutes of Tyre, New York. Beyond that distance the
availability of comparable resort casino hotels, and the availability of multiple convenience
gaming venues, makes it unlikely that casino gamblers will travel further than that distance
solely for the purpose of visiting a casino.

Revenue Displacment

The gravity model forecasts gross gaming revenue for the proposed Wilmot Casino &
Resort of $84.4 million in CY 2016 (2013 dollars), the first year of operations, and gross
gaming revenues of $158.1 million in CY 2018 after all construction is completed and the
facility is operating at full capacity (2013 dollars).
4

3
In addition to the gaming industry, the Consultant has conducted similar market feasibility, economic, and
fiscal impact analyses for business establishments in the retail, textile and apparel, marine science and
technology, aviation, arts and crafts, tourism, and defense industries, among others.
4
For purposes of modeling the proposed Wilmot Casino & Resort, the Consultant has assumed a standard
construction schedule for similar type and size facilities, which normally begin with limited gaming
operations and then build out over a two to three year period as they add more food and beverage outlets,
retail outlets and finally, a hotel. A phased approached carries risk to the State of New York. Other states,
such as Pennsylvania and Maine, have approved facilities with a phased approach, but once gaming
iii

However, the estimates of gross gaming revenue and annual visitations at full build out
warrant two caveats:

Despite being billed as a destination resort, sixty-nine percent (69%) of its
gross gaming revenue and eighty-seven percent (87%) of its annual visits
will be generated by residents living in the local area (0-60 minutes), while
fourteen percent (14%) of gross gaming revenues and three percent (3%) of
annual visits will originate at a drive time of 91 minutes or more from the
facility.

With a maximum hotel capacity of 73,000 room nights, the facility will
simply not have the capacity to generate a significant number of destination
resort or out-of-market casino customers, who generally prefer to stay at the
facility for a full casino entertainment experience.

The proposed Wilmot Casino & Resort will capture approximately $105.4
million in gross gaming revenue from director competitors, which currently
serve its primary and secondary market areas. Thus, approximately 67.0%
of the proposed facilitys gross gaming revenues will displace existing
gaming activity and merely transfer gaming expenditures and employment
from existing gaming facilities to the proposed facility.

Negative Fiscal Impacts

The Upstate New York Gaming and Economic Development Act establishes a statutory
tax rate for Region 5 of thirty-seven percent (37%) of gross gaming revenue on slot
machines and ten percent (10%) of gross gaming revenue from all other sources. Based on
these tax rates, the proposed Wilmot Casino & Resort will nominally generate $28.4
operations commence, the more capital intensive and labor intensive phases of the original proposal (e.g.,
hotel) are abandoned by the developer.
Gaming Facility CY 2018
Finger Lakes Gaming & Race Track -$25,980,759
Tioga Downs Casino -$6,908,381
Vernon Downs Casino -$17,131,026
Turning Stone Resort Casino -$55,402,184
Total Market Impact -$105,422,350
Wilmot Casino & Resort GGR $158,097,966
Percent Displacement -66.7%
Competitive Impact of Wilmot Casino Resort on Gross
Gaming Revenue (Net Win), CY 2018
Notes: 1. Revenue in 2013 constant dollars. 2. Assumes J anuary 1, 2016 start
date for Wilmot Casino & Resort.
iv

million in gaming taxes in its first calendar year of operations (CY 2016) and $49.1 million
at operational maturity (CY 2018). However:

The proposed Wilmot Casino & Resorts impact on existing facilities gross
gaming revenues will therefore reduce the amount of tax revenue and shared
revenue collected by the State of New York from those gaming facilities.

Based on current revenue sharing percentages (2013-2014) with the race
track casinos and Turning Stone Resort Casino, it is estimated that state
revenue collection from those gaming facilities will be $35.0 million less
(CY 2018) than would have been the case without the proposed Wilmot
Casino & Resort.

If this revenue reduction is subtracted from the estimated gaming tax
payment by the proposed Wilmot Casino & Resort, then the proposed
casinos net impact on gaming tax revenues will be $14.5 million annually.

The Oneida Indian Nations (2013, 5) Settlement Agreement with the State of New York
(Section III.B.) stipulates that twenty-five percent (25%) of the revenue collected from
Turning Stone Casino Resort by the State shall be allocated to the County of Oneida. By
2018, this would result in Oneida County receiving $2.4 million less annually in revenue
than would be the case without the proposed Wilmot Casino & Resort and this loss will
result in less local economic activity than would otherwise have been the case.

As a part of the New York Gaming Economic Development Act of 2013, the State of New
York is required to distribute ten percent (10%) of the funds its receives under the tribal-
state compacts to counties within the exclusivity zones that do not already receive a share
Tioga Downs Adjustment -$345,419
Net Gaming Tax Change $14,481,368
Competitive Impact of Wilmot Casino Resort on State Gaming
Tax Gaming Revenues (Net Win), CY 2018
Notes: 1. Revenues in 2013 constant dollars. 2. Assumes J anuary 1, 2016 start date for
Wilmot Casino & Resort. 3. Gaming taxfor VLT facilities based on percent allocated to
Education Allowance and Marketing Allowance. 4. Taxrate for Tioga Downs will be
reduced from37% to 32% as a result of new facility in its market area.
v

of these funds under provisions in the tribal-state compacts.
5
These funds are to be
distributed on a per capita basis and it is estimated that Onondaga County will receive
approximately $2.5 million per year under this legislation and based on Turning Stone
Casino Resorts current and projected performance.

The $2.5 million distribution to Onondaga County is scheduled to fund municipal bonds
for the construction of an Onondaga Lake amphitheater in the county (Weaver 2014).
Consequently, the potential loss or reduction of these funds may place those bonds in
jeopardy, but also jeopardize the construction jobs and permanent operations jobs that will
be generated by the amphitheater, as well as the jobs dependent on ancillary tourism
expenditures generated by the amphitheater.

Negative Economic Impacts

The IMPLAN model predicts that the proposed Wilmot Casino & Resort operations with
$158.1 million in gross gaming revenue and $18.9 million in non-gaming revenue will
generate 1,227 jobs and $32.3 million in direct employee compensation. Thus, IMPLAN
generated estimates of direct employment and earnings that are considerably lower (-573
jobs) than the estimates provided by the developers of the proposed Wilmot Casino &
Resort.
6

Moreover, after subtracting job losses due to the displacement of gaming and non-gaming
revenue at existing New York gaming facilities, including Turning Stone Resort Casino,
the proposed Wilmot Casino & Resort will have a net impact of only 122 direct jobs and
$6.7 million in employee earnings in the Eastern Southern Tier.

5
For example, the Settlement Agreement with the Oneida Indian Nation stipulates that Oneida County will
receive twenty-five percent (25%) of the Nation Payment to the State of New York and an additional sum of
$2.5 million annually for 19.5 years. Under the same Settlement Agreement, Madison County will receive
$3.5 million annually. Consequently, neither county is eligible to receive funds from the ten percent
distribution mandated by state legislation.
6
Wilmorite (2013) predicts 1,800 direct jobs in its initial press release.
Gaming Facility
Gross Gaming
Revenue
Non-Gaming
Revenue
Direct
Employment

Employee
Earnings
Turning Stone Resort Casino -$55,402,184 -$10,974,104 -510 -$12,631,381
Finger Lakes Gaming & Race Track -$25,980,759 -$1,298,960 -375 -$8,507,594
Tioga Downs Casino -$6,908,381 -$345,419 -104 -$2,091,249
Vernon Downs Casino -$17,131,026 -$1,370,482 -116 -$2,389,904
Total Market Impact -$105,422,350 -$13,988,965 -1105 -$25,620,128
Wilmot Casino & Resort $158,097,966 $18,891,442 1,227 $32,343,309
Percent Displacement -66.7% -74.0% -90.1% -79.2%
Competitive Impact of Wilmot Casino Resort on Gross Gaming Revenue (Net Win), Non-Gaming Revenue,
Employment & Earnings, CY 2018
Notes: 1. Revenue in 2013constant dollars. 2. Assumes J anuary 1, 2016start date for Wilmot Casino & Resort and first year of stablized operations in
CY 2018.
vi

The IMPLAN model predicts that the operations of the proposed Wilmot Casino & Resort
will support an additional 154 jobs in the Eastern Southern Tier through indirect impacts
(i.e., casino-related purchases) and 95 jobs through induced impacts (i.e., casino employee
purchases) by CY 2018. The employment generated by indirect and induced impacts will
support an additional $10.2 million in employee compensation in the Eastern Southern
Tier.

However, as a result of reduced employment and purchases by the four existing gaming
facilities that will be its direct competitors, the proposed Wilmot Resort & Casino will
actually generate a net decline of 2 indirect jobs and a net decline of 57 induced jobs, with
a corresponding loss of employee earnings in these other sectors of the regional economy.

Most of this net job loss will be concentrated in Oneida County and Onondaga County as
a result of the significant loss of jobs at Turning Stone Resort Casino and the corresponding
loss of consumer purchasing power by its former employees.

Comparable Case Studies: Displacement is Real

The levels of displacement and cannibalization forecast in this report are already being
realized in comparable venues in the Northeast:

From FY 2006 to FY 2013, the combined gross gaming revenue for Atlantic
City casinos declined from $5.2 billion to $2.8 billion (-46.2%). Declines in
gross gaming revenue exceeded 50% -- and even 60% -- at some of the
Atlantic City casinos resulting in the shuttering of four gaming facilities in
the last twelve months (NJ Office of the Attorney General 2014a).

While some of this decline is attributable to the onset of the Great
Recession, it should be noted that the revenue decline accelerated in
Gaming Facility
Indirect
Employment
Indirect
Employee
Earnings
Induced
Employment
Induced
Employee
Earnings
Finger Lakes Gaming & Race Track -50 -$2,100,343 -50 -$1,775,354
Tioga Downs Casino -9 -$354,103 -6 -$193,050
Vernon Downs Casino -26 -$986,950 -16 -$564,101
Turning Stone Resort Casino -71 -$3,749,666 -80 -$3,430,506
Total Market Impact -156 -$7,191,062 -152 -$5,963,011
Wilmot Casino & Resort 154 $6,946,808 95 $3,322,904
Competitive Impact of Wilmot Casino Resort
on Indirect and Induced Employment and Employee Earnings, CY 2018
Notes: 1. Revenue in 2013 constant dollars. 2. Assumes J anuary 1, 2016 start date for Wilmot Casino & Resort and first year of
stablized operations in CY 2018.
vii

Atlantic City as soon as Pennsylvania opened new casinos in the eastern
part of that state from 2007 onward. This decline was compounded
following the introduction of table games at the slot parlors and racinos in
Delaware, Pennsylvania, and Rhode Island, and then again by the
introduction of racetrack casinos in New York.

The result is that six of Atlantic Citys twelve casinos have filed for
bankruptcy since 2006, while four of those casinos the Atlantic Club,
Showboat, Trump Plaza, and Revel have closed their doors perhaps
permanently. The number of casino employees in Atlantic Citys has
correspondingly dropped to less than 26,000 in 2014 (-38.6%) (New J ersey
Office of the Attorney General 2014b).
7

Similarly, at Foxwoods Resort Casino, slot machine revenue fell from
$805.5 million in FY 2007 to $507.9 in FY 2014 (-36.9%). Slot machine
revenue at Mohegan Sun Casino fell from $916.4 million in FY 2007 to
$587.7 in FY 2014 (-35.9%). These revenue declines forced Connecticuts
two mega-casinos to reduce their combined number of employees from
23,300 in 2006 to about 16,400 in 2012 (-29.6%). Furthermore, the two
casinos collectively defaulted on more than $3 billion in debt, which
resulted in hundreds of millions of dollars in write-offs, haircuts, and
deferred interest payments by bond investors and bank lenders.
8

Likewise, on J une 23, 2009, UTGR, Inc., the former owner of Twin River
Casino in Lincoln, Rhode Island filed for Chapter 11 bankruptcy. The filing
stated that As successful as [Twin Rivers] operations have been, their
revenues cannot support the substantial demands imposed by the state tax
rate and the debtors debt services obligations on $589 million in loans.
The consensual agreement with Twin Rivers investors, led by Merrill
Lynch Capital, wrote off $290 million in debt owed to the investors, and
eliminated $153 million in owner equity. The state also effectively reduced
its share of net terminal income by agreeing to reimburse the facility for up
to $20 million annually in marketing costs.
9

Net terminal income at Newport Grand Slots in Rhode Island has declined
in seven of the last eight years.

7
Lisa Selin Davis, Plan B for Atlantic City: Casinos Can Take a City Only So Far, Planning (December
2013): 40-43; Craig Anderson, Delaware Casinos Face Tough Odds Against Competition, see,
http://delaware.newszap.com/home/117853-84/delaware-casinos-face-tough-odds-against-competition.
8
Brian Hallenbeck, Debt Deal Lifts Veil on Foxwoods Finances, New London Day, October 14, 2012;
Matthew Sturdevant, Foxwoods Report Details Revenue Erosion, Debt Details, Risks of Increased
Competition, Hartford Courant, J anuary 7, 2014.
9
In 2013, the State of Delaware also agreed to pick up $10 million in gaming machine vendor fee costs that
were previously paid by the casinos, see, Delaware Public Media (NPR News) at
http://www.wdde.org/64035-casino-aid-bills-clear-state-senate.
viii

Finally, despite spectacular growth in revenues at the Pennsylvanias new
casinos from $0 in FY 2006 to $3.2 billion in FY 2013, even that states
gaming revenues have reached a plateau and flattened despite the
introduction of new casino venues in the last year.
10

The introduction of new casinos may increase the size of the overall gaming market up to
a point, if they are strategically located in underserved markets, but even when this occurs
much of the new casinos growth occurs at the expense of existing gaming facilities,
which see their operating margins driven so low that they are forced into bankruptcy and
default with a corresponding loss of employment in the industry. There is simply no
question that if given the green light by state legislators, voters, or regulators marginal
operators will continue to join the casino arms race to the point of mutual assured
destruction.

For example, the addition of new gaming supply has not generated net new gaming
revenues across the Mid-West gaming market, which includes Illinois, Indian, Iowa, and
Missouri. One of the most dramatic illustrations of this intra-state displacement effect in
a nearly saturated market is the opening of the Rivers Casino in Des Plaines, Illinois. The
Rivers Casino has a 43,000 square foot gaming floor with 1,000 slot machines and 48 table
games. The property also has five restaurants, including a buffet.

The Rivers Casino, which opened in J uly 2011, has had a significant
negative impact on other Chicago area casinos. According to the Illinois
Commission on Government Forecasting & Accountability (2013, 18, 36):
As expected Des Plaines success has been at the expense of other
riverboats in Illinois, especially those near the new casino in the Chicago
metropolitan area. When looking at the four older casinos in the Chicago
area since Des Plaines J uly 2011 opening, their combined adjusted gross
receipts (AGR) have fallen $216.7 million or 25.5% (comparing FY 2011
totals to FY 2014). This level of cannibalization of existing facilities means
that with FY 2014 AGR of $421.5 million that only 48.6% of Des Plaines
AGR is new growth in the Chicago market.

Likewise, the opening of Oxford Casino in Maine as a direct competitor to Hollywood
Casino Bangor provides another illustration of the intra-state cannibalization effect that
occur when even a comparatively small gaming facility without a hotel or extensive non-
gaming amenities opens in a location where each facilitys secondary market area
penetrates the other facilitys primary market area:

Oxford Casino cannibalized approximately 19% of Hollywood Casinos net
slot machine revenue in its first year of operation despite there being a 165
minute drive time distance between the two facilities.

10
Associated Press, Pennsylvania Reports First Annual Slots Revenue Decrease, J uly 3, 2013, see,
http://triblive.com/news/adminpage/4302000-74/machines-pennsylvania-percent#axzz2qO3egQfO.
ix

After the opening of Oxford Casino, year-to-year monthly net slot machine
revenue immediately turned negative and had not recovered from this trend
as of December 2013 (Barrow 2013; Maine Gambling Control Board 2014).

Analysis and Conclusions

The proposed Wilmot Casino & Resort will have a significant negative impact on the
Turning Stone Casino Resort, Vernon Downs Casino & Hotel, Finger Lakes Gaming, and
to a lesser extent on Tioga Downs. Much of the economic activity generated by the
proposed Wilmot Casino & Resort will merely be displacement transfers from Oneida
County and Onondaga County to Seneca County. This will result in net negative
employment and earnings impacts on the two affected counties.

The proposed Wilmot Casino & Resort will primarily serve a local and regional market,
with only a small percentage of its revenues and visitors coming from beyond a 90 minute
drive time or from out of state. It is estimated that 67.0% of the proposed Wilmot Casino
& Resorts gross gaming revenues will be displacement and cannibalization of existing
casino gaming revenues in New York, with almost half of the total negative impact
accruing to Turning Stone Casino Resort and its employees.

Thus, when one incorporates Wilmot Casino & Resorts negative impact on existing New
York gaming facilities it will generate far fewer jobs and less tax revenue than claimed by
the facilitys developers. Furthermore, these negative impacts will not only affect Turning
Stones employees, but will be distributed across 152 sectors of the regional economy,
including the existing gaming facilitys suppliers and vendors and consumer related
businesses that provide goods and services to casino employees. Since most of the positive
impacts of Wilmot Casino & Resort will accrue to Seneca County, the opening of the new
facility will not offset the negative impacts on Oneida and Onondaga Counties.

The cannibalizing of gaming revenues from existing gaming facilities may be viewed as a
rational and beneficial policy choice for state decision makers when they are recapturing
gaming revenues that would otherwise be spent by a states residents at casinos in adjacent
states, because the displacement of gaming revenues in neighboring states becomes new
growth in gaming and tax revenues for states that are just entering the market or expanding
their existing gaming portfolio. However, the cost-benefits calculus of displacement
changes when revenue displacement comes at the expense of a states own gaming
facilities.

x

TABLE OF CONTENTS
___________________________________________________________________________________________________________
Page
EXECUTIVE SUMMARY................................................................................................... i

FIGURES............................................................................................................................... xiv

TABLES................................................................................................................................ xv

1.00 PURPOSE OF THE STUDY...................................................................................... 1

1.10 STRUCTURE OF THE U.S. CASINO INDUSTRY

1.20 THE NORTHEASTERN CASINO INDUSTRY

1.30 NEW YORK GAMING FACILITIES

1.31 NEW YORK RACE TRACK CASINOS

1.31a Batavia Downs
1.31b Empire City Casino at Yonkers Raceway
1.31c Hamburg Casino at the Fairgrounds
1.31d Finger Lakes Gaming and Race Track
1.31e Monticello Casino and Raceway
1.31f Resorts World at Aqueduct
1.31g Saratoga Gaming & Raceway
1.31h Tioga Downs Casino
1.31i Vernon Downs Casino and Hotel

1.32 NEW YORK INDIAN CASINOS

1.32a Akwesasne Mohawk Casino
1.32b Seneca Allegany Casino
1.32c Seneca Buffalo Creek Casino
1.32d Seneca Niagra Casino
1.32e Turning Stone Casino Resort

2.00 METHODOLOGY................................................................................................... 19

2.10 DEFINITIONS

2.20 GRAVITY MODEL

xi

TABLE OF CONTENTS
___________________________________________________________________________________________________________
Page
3.00 THE COMPETITIVE SET.......... 25

3.10 TURNING STONE RESORT CASINO

3.20 FINGER LAKES GAMING & RACE TRACK

3.30 TIOGA DOWNS CASINO

3.40 VERNON DOWNS CASINO

4.00 COMPETITIVENESS OF PROPOSED WILMOT CASINO & RESORT. 29

4.10 MARKET AND FACILITY ASSUMPTIONS

4.20 DESIGNATED MARKET AREA

4.30 MARKET BREAK POINTS

4.31 TURNING STONE RESORT CASINO
4.32 FINGER LAKES GAMING AND RACE TRACK
4.33 TIOGA DOWNS CASINO
4.34 VERNON DOWNS CASINO

4.40 MARKET POTENTIAL OF THE PROPOSED WILMOT CASINO
& RESORT

4.50 IMPACT ON FINGER LAKES GAMING & RACE TRACK GROSS
GAMING REVENUES

4.60 IMPACT ON TIOGA DOWNS CASINO GROSS GAMING REVENUES

4.70 IMPACT ON VERNON DOWNS CASINO GROSS GAMING REVENUES

4.80 IMPACT ON TURNING STONE RESORT CASINO GROSS GAMING
REVENUES

4.90 SUMMARY: MARKET IMPACT & DISPLACEMENT

xii

TABLE OF CONTENTS
___________________________________________________________________________________________________________
Page
5.00 ECONOMIC IMPACTS OF A PROPOSED WILMOT CASINO & RESORT... 47

5.10 DEFINITIONS

5.20 PARAMETERS FOR ECONOMIC IMPACT ANALYSIS

5.30 METHODOLOGY: THE IMPLAN MODELING SYSTEM

5.40 DATA SOURCES

5.41 Assignment to IMPlan Industry Sectors
5.42 Regional Purchase Coefficient
5.43 Trade and Freight Margins

5.50 CASINO OPERATIONS IMPACTS

5.51 Direct Economic Impacts
5.52 Indirect and Induced Economic Impacts

6.00 FISCAL IMPACT ANALYSIS..... 57

SOURCES CONSULTED 59

APPENDIX A: DESCRIPTION OF THE CONSULTANT.. 67

APPENDIX B: GRAVITY MODELING.. 69

APPENDIX C: MARKET AREA GROSS GAMING REVENUES, FY 2009 THROUGH
FY 2014... 79
xiii

FIGURES
________________________________________________________________________

Page

Figure 1. Regions for Casino Gaming Development.................................... 1
Figure 2. Casino Zones..................... 2
Figure 3. Market Areas for Finger Lakes, Tioga Downs, Turning Stone, and
Proposed Wilmot Casino....................................................................... 4
Figure 4. US GDP, 1990 to 2012 (Q4): Percent Change by Quarter
(Real Dollars).......... 7
Figure 5. Class II Casinos & Racinos in the Northeast, 2014. 9
Figure 6. Architectural Rendering of the Proposed Wilmot Casino & Resort... 30
Figure 7. Proposed Wilmot Casino & Resort Designated Market Areas... 32
Figure 8. Class III Casinos & Racinos in the Northeast, 2004... 41
Figure 9. Class III Casinos & Racinos in the Northeast, 2014... 41
Figure 10. Northeast Gaming Market Percentage Point Change in Share
of Total Gross Gaming Revenues, CY08-CY13. 42

xiv

TABLES
________________________________________________________________________

Page
Table 1. North American Classification System.................................................. 6
Table 2. Total Casino Expenditures in the Northeast, CY 2013.......................... 9
Table 3. New York Racinos and Indian Casinos, CY 2013..................... 13
Table 4. Finger Lakes Designated Market Area: Demographic and Market
Summary, FY 2013 (est.)... 26
Table 5. Tioga Downs Casino Designated Market Area: Demographic and
Market Summary, FY 2013 (est.).. 27
Table 6. Vernon Downs Casino Designated Market Area: Demographic and
Market Summary, FY 2013 (est.).... 28
Table 7. Gravity Factor: Ratio of Wilmot Casino & Resort to Finger Lakes
Gaming & Race Track.............. 33
Table 8. Gravity Factor: Ratio of Wilmot Casino & Resort to Tioga Downs
& Casino............... 34
Table 9. Gravity Factor: Ratio of Wilmot Casino & Resort to Vernon Downs
& Casino................................... 35
Table 10. Estimated Revenue for Wilmot Casino & Resort, CY 2016
Thru CY 2020.................. 37
Table 11. Estimated Revenue for Turning Stone Resort Casino, CY 2014
Thru CY 2020: Competitive Impact of Wilmot Casino & Resort... 38
Table 12. Estimated Revenue for Finger Lakes Gaming & Race Track,
CY 2014 Thru CY 2020: Competitive Impact of Wilmot
Casino & Resort............... 39
Table 13. Estimated Revenue for Tioga Downs Casino, CY 2014
Thru CY 2020: Competitive Impact of Proposed Wilmot
Casino & Resort...... 39
Table 14. Estimated Revenue for Vernon Downs Casino, CY 2014 Thru
CY 2020: Competitive Impact of Wilmot Casino & Resort....... 40

xv

TABLES
________________________________________________________________________

Page
Table 15. Competitive Impact of Wilmot Casino Resort on Gross Gaming
Revenues (Net Win), CY 2018.... 40
Table 16. U.S. Casino Employment & Wages by State, 2012. 48
Table 17. Casino Gaming Tax Revenues, Effective Tax Rates, & Employment
Ratios by State, 2012. 49
Table 18. Competitive Impact of Wilmot Casino & Resort on Gross Gaming
Revenue (Net Win), Non-Gaming Revenue, & Employment,
CY 2018. 54
Table 19. Competitive Impact of Wilmot Casino & Resort on Indirect and
Induced Employment and Employee Earnings, CY 2018. 55
Table 20. Turning Stone Impact: Non-Casino Employment Losses in Oneida and
Onondaga Counties.... 56
Table 21. Competitive Impact of Wilmot Resort & Casino on State Gaming Tax
Revenues (Net Win), CY 2018...... 57

xvi

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xvii


xviii

Displacement Impacts of Proposed Wilmot Casino & Resort
1.00 PURPOSE OF THE STUDY

The purpose of this study is to estimate the potential impact on existing gaming facilities of
regional gaming expansion in New Yorks Eastern Southern Tier. The State of New York currently
has nine (9) race track casinos that operate approximately 29,000 video lottery terminals (VLTs)
and five (5) Class III Indian casinos with approximately 10,000 slot machines and 325 table games
(New York State Gaming Commission 2014; Meister 2014, 17). On November 5, 2013, the Empire
States voters approved an amendment to the state constitution that authorized Las Vegas style
commercial casino gaming in New York for the first time. The Upstate New York Gaming and
Economic Development Act (Chapters 174 and 175 of the Laws of 2013) outlines the procedure
and process for siting destination gaming resorts in New York State. At the present time, the Act
authorizes up to four destination gaming resorts in Upstate New with at least one facility in each
of three regions: Capital, Catskills/Hudson Valley, and Eastern Southern Tier (see Figure 1).
11

Figure 1

However, the Act retains designated zones of geographical exclusivity for the states five Indian
casinos (see Figure 2) so the three regions established for commercial resort casinos are essentially
the residual territories that remain outside the tribal exclusivity zones. Nevertheless, the creation
of exclusivity zones does not mean that Turning Stone (owned by the Oneida Tribe of New York)
will not face competition from any of the proposed commercial casinos, particularly since the
proposed new casinos will be competing for resort casino customers.
11
No more than two of the four facilities can be located in any of the three regions.
1

Figure 2

Note: Seneca exclusivity zone is now confirmed.

The proposed destination resorts can be entirely new resorts or conversions and expansions of
racinos. The proposed facilities will also retain their geographical exclusivity for at least seven (7)
years after the first gaming license is issued by the New York Gaming Commission. The New
York Gaming Commission issued a formal Request for Applications (RFA) on April 7, 2014.

The applications for a casino license are being reviewed and evaluated by the Resort Gaming
Facility Location Board, which is required to evaluate applications on the following scale:
70 percent: Economic activity and business development factors,
20 percent: Local impact and siting factors, and
10 percent: Workforce enhancement factors.
The economic activity and business development factors include:
Realizing maximum capital investment exclusive of land acquisition and
infrastructure improvements,
Maximizing revenues received by the state and localities,
Providing the highest number of quality jobs in the gaming facility,
Building a gaming facility of the highest caliber with a variety of quality amenities
to be included as part of the gaming facility,
Offering the highest and best value to patrons to create a secure and robust gaming
market in the region and the state,
2

Providing a market analysis detailing the benefits of the site location of the gaming
facility and the estimated recapture rate of gaming-related spending by residents
travelling to an out-of-state gaming facility,
Offering the fastest time to completion of the full gaming facility,
Demonstrating the ability to fully finance the gaming facility, and
Demonstrating experience in the development and operation of a quality gaming
facility.

The stated purposes of the Upstate New York Gaming and Economic Development Act are to
increase total employment in the leisure and hospitality sector, generate net new revenues for state
and local governments, and to recapture New York gaming dollars that are currently leaving the
state for Connecticut, Pennsylvania, and New J ersey (New York State Gaming Commission
2014).
12

However, the facilities siting process and the evaluation criteria employed for selecting casino
licensees raise three additional considerations for the Resort Gaming Facility Location Board.
First, it is possible that some proposals for new gaming facilities could potentially destabilize the
states gaming market by displacing (cannibalizing) existing gaming revenues and, thereby,
adversely affect existing gaming facilities, employment, and state revenues. In this case, the
economic benefits of such facilities will be overstated by developers if the displacement of existing
jobs and revenues is not factored into the economic impact analysis. Second, the location of
facilities near borders will be an important factor in their ability to intercept gaming dollars that
are leaving the state or attract gaming and tourism dollars from out-of-state regional residents.
Third, gaming officials will need to consider whether it is best to locate gaming facilities in areas
with high levels of economic distress, where there is a tangible need for additional employment
and revenue, or whether to locate the facilities in areas that bring additional benefits to generally
healthy economies.

Wilmorite, a commercial real estate company that operates Eastview Mall and other shopping
centers in the Rochester area unveiled a proposal on December 12, 2013 to construct the Wilmot
Casino & Resort in Tyre, New York (Eastern Southern Tier) near Exit 41 off the New York State
Thruway. The proposed $300 to $350 million casino and resort would include a casino with 2,000
slot machines and 100 table games, a 200 room hotel and convention center, as well as four
restaurants, two entertainment venues, and a spa and fitness center. The proposed casinos
developers claim that the new gaming venue will attract 3.3 million visitors annually an average
of 9,000 daily -- and employ up to 1,800 permanent casino and resort workers at full build out with
an annual payroll of $50 million (Harding 2013; Shaw 2014; Wilmorite 2014). The proposed
casinos developer also claims that the Tyre facility will draw visitors from well beyond the local
markets of Syracuse and Rochester metro areas by working jointly with the already robust
regional tourist attractions to further establish Seneca County as a premier upstate destination.

12
The Consultant conducted a study in 2012, which found that New York residents spend approximately $3.8 billion
at out-of-state casinos in Connecticut, New J ersey, Pennsylvania, and Nevada. New York residents account for 22%
of all visits to Atlantic City casinos, 12% of all visits to Connecticut casinos, and 17% of visits to the four Pennsylvania
casinos on New Yorks border. New York is also one of the top ten feeder markets to Las Vegas (Harrahs 2006).
3

The proposed casino in Tyre, New York will be a direct competitor with Finger Lakes Gaming
and Racetrack, Tioga Downs Casino, Vernon Downs Casino, and Turning Stone Resort Casino in
their primary and secondary market areas. The proposed Wilmot Casino and Resort will be
competing for destination travelers (Vernon Downs and Turning Stone), as well as regional
convenience gamblers (Tioga and Finger Lakes) residing in the proposed facilitys primary and
secondary market areas, who are already served by existing facilities (see Figure 3).

Figure 3
Market Areas for Finger Lakes, Tioga Downs, Turning Stone, and Proposed Wilmot Casino

Note: Finger Lakes market areas outlined in white. Tioga Downs market areas outlined in black. Turning Stone market
area outline in orange. Wilmot Casino market area illustrated with red, green, purple, and blue rings. Market areas
consist of 30 minute drive time bands.

1.10 STRUCTURE OF THE U.S. CASI NO I NDUSTRY

Casino gaming is a significant component of the leisure, hospitality, and entertainment industry in
the United States with 39 states (2013) now hosting some type of Class III casino gaming. There
are 940 casino gaming venues in the United States, including 448 Indian casinos and 492
commercial casinos (including race track casinos). Nearly half (46%) of all commercial casinos
are now located in non-traditional jurisdictions (i.e., outside Nevada and New J ersey) and, if one
includes Indian casinos, then seventy-two percent (72%) of all U.S. casinos are now located in
non-traditional jurisdictions (AGA 2013, 12-22; Meister 2014, 15, 73). All types of Class III
casinos combined generated $64.7 billion in gross gaming revenues in 2012 with $50.8 billion
(78.6%) of that amount accruing to venues outside the traditional jurisdictions of Nevada and New
J ersey. It is estimated that total industry revenues (gaming and non-gaming) were approximately
$74 billion in 2012. The casino industry as a whole employed more than 670,000 people
4

nationwide and made approximately $10.2 billion in direct payments to state and local
governments.
13
The percentage of adults who gambled at a casino at least once in the
previous year has climbed from 17 percent in 1990 to 32 percent in 2012, when 76.1 million
Americans made more than 400 million visits to casinos (Harrahs 2006; AGA 2013, p. 3).

Moreover, since the late 1980s, when new casinos began opening in non-traditional jurisdictions,
nearly 82 percent of the increase in casino visitations has occurred in non-traditional casino
jurisdictions.

The significance of casino gaming within the leisure and hospitality sector is now recognized in
the industrial classification system used by the United States Government to collect data on
employment, wages, and business establishments. In 1997, the United States began phasing out
the old Standard Industrial Classification (SIC) System, which had been designed mainly for
classifying business establishments in an industrial economy. The North American Industry
Classification System (NAICS), which replaced the SIC system, was designed specifically to
identify trends in new and emerging industries and to capture the growing importance of service
industries in general in the new economy (Executive Office of the President 1997, 3).

NAICS classifies business establishments into twenty major Sectors with gaming establishments
assigned to Sector 71 Arts, Entertainment, and Recreation and Sector 72 -Accommodation and
Food Services:

Subsector 711. Performing Arts, Spectator Sports, and Related Industries
Subsector 712. Museums, Historical Sites, and Similar Institutions
Subsector 713. Amusement, Gambling, & Recreation
Subsector 721120. Casino Hotels

Spectator sports, art museums, and casinos are classified in the same major sector, because each
industry group provides a comparable service in the form of amusement or entertainment. A
customer can be amused or entertained by a sporting event, an art exhibit, or a slot machine, and
one can be equally disappointed if ones favorite sports team loses a game, if an art exhibit is
uninspiring, or if a gambler has a bad day at the blackjack table. Each industry provides a service
called amusement or entertainment.
Casinos and other gaming establishments were assigned their own six-digit NAICS Codes for the
first time in 1997 and the new coding system explicitly differentiates between types of
establishments by assigning different codes to Casinos (713210), Other Gambling Industries
(713290, i.e., slot parlor/racinos), and Casino Hotels (721120) (see Table 1). Casino
establishments include land-based casinos, riverboat casinos, dockside casinos, and cruise ships,
which offer a wide range of slot machine games and table games. Resort casinos with hotels
typically offer the same gambling options, but also offer non-gambling amenities, such as high-
end designer retail outlets, gourmet dining establishments, dance clubs, comedy clubs, cabarets,
concert and sporting arenas, spas, golf courses, and meeting and conference facilities. Other
Gambling Industries consists primarily of so-called racinos or slot parlors, where slot machines or
13
Calculated from data in Alan Meister, Indian Gaming Industry Report (Newton, MA: Casino City Press, 2014) and
American Gaming Association, State of the States, 2013 (Washington, D.C., 2013). The reported tax payments and
revenue sharing do not include corporate income taxes, sales, meals, and lodging taxes, property taxes, and other
license and fee payments.
5

video lottery terminals (VLTs) are installed at an existing pari-mutuel facility, such as a dog track,
horse track, or jai-alai fronton.

Table 1
NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM

711212 Racetracks
Comprises establishments primarily engaged in operating racetracks. These
establishments may also present and/or promote the events, such as auto, dog, and horse
races, held in these facilities.

713210 Casinos (except Casino Hotels)
Comprises establishments primarily engaged in operating gambling facilities that offer
table wagering games along with other gambling activities, such as slot machines and
sports betting. These establishments often provide food and beverage services. Included
in this industry are floating casinos (i.e., gambling cruises, riverboat casinos).

713290 Other Gambling Industries
Comprises establishments primarily engaged in operating gambling facilities (except
casinos or casino hotels) or providing gambling services. Included in this industry are
bingo, off-track betting, card rooms, and slot machine parlors.

721120 Casino Hotels
Comprises establishments primarily engaged in providing short-term lodging in hotel
facilities with a casino on the premises. The casino on premises includes table wagering
games and may include other gambling activities, such as slot machines and sports
betting. These establishments generally offer a range of services and amenities, such as
food and beverage services, entertainment, valet parking, swimming pools, and
conference and convention facilities.

Thus, the casino industry is actually differentiated into many niche markets that are distinguished
by the type of facility, size of facility, consumer demographics, and customer motivation.
Consequently, the economic and fiscal impacts of the industry vary widely from state to state
depending on the particular configuration of casino establishments and whether a states gaming
policy allows essentially unrestricted market entry (subject to licensing), such as Nevada, New
J ersey, and Mississippi, or whether a state limits market entry to a fixed number of establishments
at pre-determined locations (e.g., Michigan). The economic and fiscal impacts of the industry can
also vary depending on whether a state hosts state-licensed and regulated commercial casinos or
Indian casinos that operate under federal laws and tribal ordinances.

1.20 THE NORTHEASTERN CASI NO I NDUSTRY

The Northeastern casino gaming market must currently be assessed within the larger context of
two trends: (1) the lingering impact of the Great Recession (December 2007-J une 2009), which
was the longest and deepest recession since the Great Depression and (2) the emergence of an
increasingly competitive Northeastern gaming market that encompasses both the New England
14

14
Connecticut, Maine, Massachusetts, Rhode Island, New Hampshire, and Vermont.
6

and the Mid-Atlantic
15
states. As noted earlier, casino gaming is classified as part of the U.S.
economys arts, amusement, and recreation sector (NAICS Code 71) and as part of its hospitality
sector (NAICS Code 72 -- Accommodation and Food Services).

Casino gaming in all its forms depends on discretionary consumer spending, which is one of the
first types of spending that is restrained by consumers when they are uncertain about their jobs
and income and it is also the last type of spending to be restored once an economic recovery is
underway. However, based largely on the previous experience of Las Vegas and Atlantic City,
many analysts viewed the casino industry as recession proof or at least as recession resistant.
Until 2008, Las Vegas and Atlantic City had seen gambling revenues fall only once since 1970 -
- in the aftermath of the September 11, 2001 terrorist attacks -- when gaming revenues dropped 1
percent in 2002 as compared to 2001. However, in 2008, gaming revenues began declining on a
year-to-year basis in most casino jurisdictions, including Nevada and New J ersey, although some
new jurisdictions such as Maine, Pennsylvania, New York, and Rhode Island, have seen gaming
revenues increase on a year-to-year basis during this time.

Figure 4

Source: Bureau of Economic Analysis (2014).

The United States economy essentially dropped off a cliff in calendar year 2008 to begin the
longest and deepest recession since the Great Depression of the 1930s. The National Bureau of
Economic Research (NBER) Business Cycle Dating Committee defines a recession as a
significant decline in economic activity spread across the economy, lasting more than a few
months, normally visible in production, employment, real income, and other indicators. A
recession begins when the economy reaches a peak of activity and ends when the economy
reaches its trough.
16
The Business Cycle Dating Committee has determined that a peak in
15
Delaware, New Jersey, New York, Pennsylvania, and West Virginia.
16
NBER Business Cycle Memo (December 11, 2008): The committee believes that the two most reliable comprehensive
estimates of aggregate domestic production are normally the quarterly estimate of real Gross Domestic Product and
the quarterly estimate of real Gross Domestic Income, both produced by the Bureau of Economic Analysis. In
concept, the two should be the same, because sales of products generate income for producers and workers equal to
the value of the sales.
7

economic activity occurred in the United States in December 2007.
17
The NBER recently
determined that the Great Recession ended in J une 2009. However, in making this determination,
the NBERs Business Cycle Dating Committee observed that in determining that a trough
occurred in J une 2009, the committee did not conclude that economic conditions since that month
have been favorable or that the economy has returned to operating at normal capacity. Rather, the
committee determined only that the recession ended and a recovery began in that month.
18

The simple lesson of the Great Recession is that casino gaming is no longer recession proof, but
due to increased reliance on non-gaming amenities (i.e., diversification) and an increased supply
of gaming nationally, it is now subject to the same macro-economic factors as any other consumer
retail or service industry. The Northeastern gaming market is still being buffeted by the lagging
effects of the Great Recession and this setback will not be reversed until the economy enters a
stronger growth phase and unemployment rates in the region decline to lower levels.

Yet, the Great Recession (December 2007-J une 2009) and its aftermath has paradoxically been a
time of rapid expansion in the Northeastern casino gaming industry. The Northeastern gaming
market, which includes the New England and Mid-Atlantic states, has expanded from 28 Class III
gaming facilities in 2004 to 61 Class III gaming facilities in 2013. This number includes 45 full-
fledged casinos with slot machines and table games
19
and 16 racetrack casinos or slot parlors with
video lottery terminals or slot machines (see Figure 5).
20
Thus, it is important to note that the
Northeastern gaming market has continued adding capacity despite the lingering effects of the
Great Recession and the emergence of an increasingly competitive gaming market.

In 2007, there were 39 Class III commercial and Indian gaming venues in the Northeast, including
major destination resort casinos, local casinos, race track casinos, and slot parlors. By 2013, there
were 61 Class III casinos in the Northeast generating $16.9 billion in gross revenues with
additional facilities proposed or planned for Maryland, Massachusetts, New York, and
Pennsylvania (see Table 2).

17
NBER Business Cycle Memo (Nov. 28, 2008): The [dating] committee determined that a peak in economic activity
occurred in the U.S. economy in December 2007.
18
NBER Business Cycle Memo (September 20, 2010) at http://www.nber.org/cycles/sept2010.html.
19
Seven (7) of the casinos are owned and operated by Indian tribes in New York (5) and Connecticut (2).
20
Four (4) Class III facilities have been authorized in Massachusetts, one (1) in Pennsylvania, two (2) facilities in
Maryland, and four (4) facilities in New York so there will likely be at least 72 Class III gaming venues in the Northeast
by 2016 or 2017.
8

Figure 5

Table 2

Atlantic City now has 8 resort casinos that compete directly against Mohegan Sun and Foxwoods.
New J ersey Governor Chris Christie signed an Atlantic City rescue package into law on February
1, 2011 at the previously abandoned Revel Casino project and simultaneously announced a $1.15
billion loan package that allowed the projects owners to complete what was then Atlantic Citys
Slot Win Other Gaming Total Gaming NonGaming Gross Revenue
Connecticut $1,144,936,706 $502,118,862 $1,647,055,568 $415,090,944 $2,062,146,512
Rhode Island $516,742,324 $41,322,389 $516,742,324 $48,573,778 $565,316,102
Maine $105,623,657 $20,650,716 $126,274,373 $10,607,047 $136,881,420
Delaware $373,996,300 $58,062,142 $432,058,442 $40,613,494 $472,671,936
Maryland $580,762,201 $169,609,665 $750,371,866 $71,285,327 $821,657,193
New Jersey $2,063,826,000 $798,243,000 $2,862,069,000 $1,021,758,633 $3,883,827,633
New York (VLTS) $1,925,565,097 $0 $1,925,565,097 $146,342,947 $2,071,908,044
New York (Indian) N/A N/A $921,400,000 $124,200,000 $1,045,600,000
Ohio $818,725,477 $251,884,381 $1,070,609,858 $100,637,327 $1,171,247,185
Pennsylvania $2,384,098,225 $729,830,366 $3,113,928,591 $292,709,288 $3,406,637,879
West Virginia $1,018,692,997 $179,489,189 $1,198,182,186 $101,845,486 $1,300,027,672
GRAND TOTAL $10,932,968,984 $2,751,210,710 $14,564,257,305 $2,373,664,271 $16,937,921,576
TOTAL CASINO EXPENDITURES IN THE NORTHEAST, CY 2013
Sources: State gaming regulatory commissions; Meister, Indian Gaming Indusry Report, 2011-2013 ; U.S. SEC 10-K Filings; Pyramid Associates, LLC (2014).
9

twelfth casino.
21
The Revel opened on April 2, 2012 and while the Revel mega-project recently
filed for an orderly bankruptcy, the New J ersey rescue package also encourages the construction
of smaller boutique casinos (with less than 600 room hotels).
22

Pennsylvania also has 12 full-fledged casinos with slot machines and table games, and some such
as the Sands Bethlehem, Mt. Airy, and Valley Forge have a hotel.
23
Pennsylvania expects to add
another two casinos within the next two years, including a second casino in Philadelphia. New
York now has 17,666 video lottery terminals, an increase of 4,296 from 2011. Much of the VLT
increase is due to the opening of Resorts World New York at Aqueduct Raceway in Queens, New
York.
24
With the addition of Resorts World, the State of New York now has nine racinos, with
nearly 10,000 VLTs strategically located at Empire State Raceway in Yonkers and Resorts World
in Queens, which are currently the largest race track casinos in the world based on the number of
VLTs and gaming revenues, respectively. There are also five Class III Indian casinos operating in
western and upstate New York, which generate more than $1 billion annually in gross gaming
revenues.
25
New York has also authorized up to four commercial casinos in the Catskills
Mountains, the Albany area, and the Southern Tier region along the border with Pennsylvania.

Moreover, additional capacity has been added elsewhere in the Northeast. On November 4, 2008,
Maryland voters approved a constitutional amendment to legalize slot-machine gambling in that
state. The constitutional amendment allows 15,000 slot machines distributed among five locations
in the state. Although initial efforts to introduce slot parlors and racinos to Maryland fell short of
the legislatures original expectations,
26
two racinos opened in September 2010 and J anuary 2011
that currently operate more than 2,200 slot machines (Sharrow 2011). A third slot venue opened
in Hanover, Maryland in 2012 with approximately 4,700 slot machines and Horseshoe Baltimore
opened in August 2014. Another major resort casino is planned for National Harbor (MGM).

To counter competition from Pennsylvania, and the anticipated competition from Maryland, West
Virginia has completed its sixth full calendar year of table games at its four racinos. Delawares
legislature also authorized the reintroduction of a sports betting lottery (Darrow 2008). Finally,
several major expanded gaming initiatives are in various phases of approval or implementation.
On November 22, 2011, Governor Deval Patrick signed a bill legalizing casinos in Massachusetts
that authorizes three full-scale casinos and one slot parlor in the state. Massachusetts has already
licensed a slot parlor, which will open in the spring of 2015, and it has licensed two resort casinos
in Everett and Springfield, Massachusetts. The Rhode Island General Assembly scheduled a
November 6, 2012 statewide and local referenda to allow table games at its two gaming venues.
The referendum passed in Lincoln, but failed in Newport, Rhode Island. Twin River began offering
21
See,
http://www.myfoxphilly.com/dpp/news/politics/local_politics/Atlantic_City_Tourism_District_Bill_020111; Also,
http://online.wsj.com/article/SB10001424052748703313304576132511718912484.html.
22
The Atlantic Club, which was previously Atlantic Citys 12
th
casino, recently filed for bankruptcy. It was purchased
by Tropicana Entertainment and Caesars Entertainment and is no longer open for business. Its slot machines and table
games were claimed by Tropicana, while its hotel furnishings were claimed by Caesars.
23
The Mt. Airy casino already has a resort hotel and other non-gaming amenities.
24
See, http://www.gentingcasino.com/genting-casino-news/september-2010/genting-ny-set-for-green-light-for-
aqueduct-racino-deal/.
25
Alan Meister, Indian Gaming Industry Report 2014 (Newton, MA: Casino City Press, 2014), p. 19.
26
In February 2009, Maryland received six proposals for its five gaming sites, which collectively proposed to install
only 10,550 of the 15,000 authorized slot machines (Wagner and Helderman 2009).
10

live table games on J une 19, 2013 and another referenda is on the ballot to allow tables games at
Newport Slots.

Maines voters also narrowly approved a casino for Oxford, Maine in a statewide referendum on
November 2, 2010. Oxford Casino became the Pine States second Class III gaming venue when
it opened on J une 5, 2012 with 500 slot machines, 12 table games, a restaurant, and bar. The casino
expanded its offering in September 2012 to include 812 slot machines and 22 table games. On
March 29, 2013, it was announced that Oxford Casino was being sold to Churchill Downs for $160
million in cash. Meanwhile, on November 8, 2011, the residents of Penobscot County voted to
authorize table games at the former Hollywood Slots and Raceway. On March 16, 2012, the
renamed Hollywood Casino Bangor opened its first 14 table games, which was increased to 16
tables by the end of 2012.
27

Elsewhere in the Northeast, Ohio voters passed the Four Casinos Initiative on November 3, 2009,
which amended the state constitution to allow casinos in Cincinnati, Cleveland, Columbus and
Toledo, which are all now fully operational. Caesars Entertainment has now opened Horseshoe
branded Casinos in Cleveland and Cincinnati, while Penn National has opened Hollywood branded
casinos in Toledo and Columbus. Racetrack casinos were also opened in Ohio at Scioto Downs,
Thistle Downs, Hard Rock Northfield Park with others scheduled for opening in the near future.

This rapid and continuing proliferation of casino gaming has led many scholars, industry analysts,
and media outlets to question how much more casino gaming can be introduced in the region
before the impacts of oversaturation start to negatively impact the overall industry through self-
cannibalization, over-building, and a general deterioration in the quality and competitiveness of
the product within the leisure, entertainment, and hospitality industry.
28
In assessing this question,
it is important to emphasize that the potential problem is not saturation, but oversaturation in
particular local markets.

The economic definition of saturation is the point of a product life cycle where the market has
been completely filled so that no more sales for goods and services can be taken up.
29
In other
words, saturation is a state of market equilibrium where the existing demand for a good or service
is fully supplied by the existing suppliers of a good or service. The problem for any industry, in
this respect, occurs when new suppliers enter a saturated market through over-building or over-
production, which eventually lowers prices, quality, and operating margins to the point that the
entire industry is placed in jeopardy.

27
In a statewide referendum on November 2, 2010, Maines voters narrowly approved a small ($160 million) resort
casino for Oxford, Maine, which became the states second Class III gaming venue when it opened in the early summer
of 2012. On November 1, 2011, Maine voters rejected referenda questions that would have allowed up to three
additional racinos and casinos, but in this same election Penobscott County voters authorized table games at the former
Hollywood Slots & Raceway.
28
Donald Wittkowski, New Casinos Divide Smaller Revenues In Saturated Market, Press of Atlantic City, J uly
27, 2013; Richard N. Velotta, Gaming Execs Say Casino Industry Has Reached Saturation Point, September 26,
2013, see, http://www.vegasinc.com/business/gaming/2013/sep/26/gaming-execs-say-casino-industry-has-reached-
satur/.
29
Shim and Siegel (1995, 306).
11

There are signs that the Northeastern gaming market is reaching a saturation in specific areas and,
consequently, the location of any new facilities is becoming a more important consideration than
previously. A decade ago (2004), Connecticut, Delaware, West Virginia, New J ersey, and Rhode
Island were the only five states in the Northeast to have Class III gaming. The peak of casino
gaming industry revenues was in 2006 and since that time gross gaming revenues in Atlantic City
have plummeted from $5.2 billion in FY 2006 to $3.0 billion in FY 2012 (-42%) with GGR at
some facilities falling by more than sixty percent (60%) during this time. While some of this
decline is attributable to the onset of the Great Recession, it should be noted that the revenue
decline accelerated in Atlantic City as soon as Pennsylvania opened new casinos in the eastern part
of the state from 2007 onward. This decline was compounded following the introduction of table
games at the slot parlors and racinos in Delaware, Pennsylvania, and Rhode Island, and then again
by the introduction of racetrack casinos in New York. The result is that six (6) of Atlantic Citys
previous twelve (12) casinos have filed for bankruptcy since 2006, while four of those casinos
the Atlantic Club, Showboat, Trump Plaza, and Revel may have closed their doors
permanently.
30
The number of casino employees in Atlantic City correspondingly dropped to less
than 32,000 in 2012 (-23.8%).
31

Similarly, Connecticuts two mega-casinos have seen their gross revenues decline from a
combined peak of $3.2 billion in CY 2006 to $2.2 billion in CY 2012 (-31.3%), which resulted in
those two casinos reducing the number of employees from 23,300 in 2006 to about 16,400 in 2012
(-29.6%). The two casinos collectively defaulted on more than $3 billion in debt, which resulted
in hundreds of millions of dollars in loan write-offs, bond swaps, and deferred interest payments
by bond investors and bank lenders.
32

Likewise, on J une 23, 2009, UTGR, Inc., the former owner of Twin River Casino in Lincoln,
Rhode Island filed for Chapter 11 bankruptcy. The filing stated that As successful as [Twin
Rivers] operations have been, their revenues cannot support the substantial demands imposed by
the state tax rate and the debtors debt services obligations on $589 million in loans. The
consensual agreement with Twin Rivers investors, led by Merrill Lynch Capital, wrote off $290
million in debt owed to the investors, and eliminated $153 million in owner equity. The state also
effectively reduced its share of net terminal income by agreeing to reimburse the facility for up to
$20 million annually in marketing costs. Net terminal income at Newport Grand Slots in Rhode
Island have declined in seven of the last eight years. Finally, despite spectacular growth in revenues
at the Pennsylvanias new casinos from $0 in FY 2006 to $3.2 billion in FY 2013, even that
states gaming revenues have reached a plateau and flattened despite the introduction of new casino
venues in the last year.
33
Thus, the recent history of the Northeastern gaming market demonstrates
that the introduction of new casino gaming venues may increase the size of the overall market up
to a point, but even where this occurs, much of that growth occurs at the expense of existing
30
The Trump Taj Mahal may become the fifth Atlantic City casino to close its doors in the near future.
31
Lisa Selin Davis, Plan B for Atlantic City: Casinos Can Take a City Only So Far, Planning (December 2013):
40-43; Craig Anderson, Delaware Casinos Face Tough Odds Against Competition, see,
32
Brian Hallenbeck, Debt Deal Lifts Veil on Foxwoods Finances, New London Day, October 14, 2012; Matthew
Sturdevant, Foxwoods Report Details Revenue Erosion, Debt Details, Risks of Increased Competition, Hartford
Courant, J anuary 7, 2014.
33
12

facilities, who see their operating margins driven so low that they are forced into bankruptcy and
default with a corresponding loss of employment in the local area.

1.30 NEW YORK GAMI NG FACI LI TI ES

The State of New York currently has nine race track casinos with 17,666 electronic gaming
machines that generate $1.9 billion in annual gross gaming revenues (see Table 3). It is estimated
that these facilities generate an additional $146.3 million in annual non-gaming revenues for
combined annual gross revenues of nearly $2.1 billion (See Table 2). The State of New York also
has five (5) Class III Indian casinos and three (3) Class II Indian gaming venues that generate
nearly $1.1 billion in annual gross gaming revenues. These facilities generate an additional $124.2
million in non-gaming revenues for annual gross revenues of nearly $1.2 billion (See Table 3).
Both types of casinos combined constitute a $3.2 billion industry in the State of New York.

Table 3

Name City/Town County
# VLTs
(Weighted) FY 13 GGR (Win)
Batavia Downs Casino Batavia Genesee 666 46,492,312 $
Empire City Casino at Yonkers Raceway Yonkers Westchester 5,327 559,946,387 $
Hamburg at the Fairgrounds Hamburg Erie 940 76,820,976 $
Finger Lakes Gaming and Race Track Farmington Ontario 1,268 131,461,308 $
Monticello Gaming & Raceway Monticello Sullivan 1,110 62,821,386 $
Resorts World Casino New York Ozone Park Queens 5,004 785,128,863 $
Saratoga Casino and Raceway Saratoga Springs Saratoga 1,782 159,594,798 $
Tioga Downs & Casino Nichols Tioga 802 59,591,749 $
Vernon Downs & Casino Vernon Oneida 767 43,707,318 $
Sub-Total: 17,666 1,925,565,097 $
Indian Casinos 11,204 1,056,600,000 $
Total: 28,870 2,982,165,097 $
New York Racinos & Indian Casinos, CY 2013
Sources: New York State Gaming Commission; Meister, Indian Gaming Industry Report, 2014.
13

1.31 NEW YORK RACE TRACK CASI NOS

1.31a Bat avi a Downs
Opened in 1940, Batavia Downs is located in
Batavia, New York, approximately halfway
between Buffalo and Rochester. It is the oldest
lighted harness racetrack in the United States. VLTs
were introduced in 2005 and the facility now houses
approximately 650 electronic gaming machines.
Gross gaming revenue in CY 2013 was over $46
million.

1.31b Empi r e Ci t y Casi no at Yonk er s
Rac ew ay

Yonkers Raceway was
founded in 1899 as the Empire
City Trotting Club. Yonkers
Raceway closed its doors in
J une 2005 to construct its VLT
gaming operation. After
several expansions, Empire
City Casino at Yonkers
Raceway now offers more than
5,300 electronic gaming machines, electronic roulette, and electronic craps. The property has five
restaurants, two bars and one lounge, live entertainment, and year-round live harness racing and
simulcast. Empire City Casino is New Yorks second largest facility in terms of gross gaming
revenue with approximately $600 million dollars in GGR in CY 2013.

1.31c Hambur g Casi no at t he Fai r gr ounds
Hamburg Casino at the Fairgrounds is a
racino located in Hamburg, New York that
features harness racing, simulcast wagering, and
a 55,000 square feet gaming space with 940
electronic gaming machines. The property
includes three restaurants and one bar and offers
live entertainment on the weekends. Gross
gaming revenue in CY 2013 was over $76
million.

14

1.31d Fi nger Lak es Gami ng and Rac e Tr ac k
Finger Lakes Gaming & Racetrack, first opened in 1962,
is a one mile thoroughbred horse racing track and racino
located in Farmington, New York. VLTs, new dining
options, and entertainment venues were added in 2004, and
the facility once again expanded in 2006 with the addition
of a 280-seat buffet restaurant and space for additional
video gaming machines. The racinos 44,000 square foot
gaming space currently features over 1,500 electronic
gaming machines. Gross gaming revenue in CY 2013 was
over $131 million.

1.31e Mont i c el l o Casi no and Rac ew ay
Monticello Casino and Raceway is a
racino located in Monticello, New York.
The racino features year round harness
racing on one of the largest all-weather
tracks in the country and it offers 40,000
square feet of gaming space with over
1,100 electronic gaming machines. The
property has three restaurants that include
a buffet and a food court. Gross gaming revenue in CY 2013 was over $62 million.

1.31f Resor t s Wor l d at Aqueduc t
Resorts World New York is located at the Aqueduct
Raceway in Queens. The facility offers more than
5,000 slot and table game machines in its two casinos
as well as a high slot limit area. The casino also has
two restaurants, a buffet, food court, bar, and
nightclub. Gross gaming revenue in CY 2013 was
over $785 million. The facility continues to offer
thoroughbred racing at its Aqueduct Racetrack from
October through May.

15

1.31g Sar at oga Gami ng and Rac ew ay
Saratoga Casino and Raceway is located in
Saratoga Springs, New York and includes a half
mile harness racing track. In 2004, the property
became the first racing facility in New York to open
video lottery games. The racinos 55,000 square foot
gaming space features over 1,700 electronic gaming
machines. The property also includes multiple
restaurants, three bars and a nightclub. Gross
gaming revenue in CY 2013 was over $159 million.

1.31h Ti oga Dow ns Casi no
Tioga Downs is a 138 acre racino located
in Nichols, New York. First called Tioga
Park and opened in 1976, the facility
closed after only three years of racing.
The facility was renamed Tioga Downs
and re-opened in 2006 with two tracks
that feature harness racing and 19,000
square feet of gaming space, which
includes year round simulcast betting and approximately 800 electronic gaming machines. The
property also has three restaurants, a buffet, and two bars and a stage area that hosts concerts.
Gross gaming revenue in CY 2013 was over $59 million.

1.31i Ver non Downs Casi no & Hot el
Vernon Downs Casino & Hotel, originally
opened in 1956, is located in Vernon, New
York and features seasonal harness racing,
year-round daily live simulcasting, and live
entertainment on weekends. The racino
features 767 electronic gaming machines in
34,500 square foot of gaming space. The
property also includes six restaurants, one bar,
and a hotel with 150 guestrooms and suites.
Gross gaming revenue in CY 2013 was nearly
$44 million.

16

1.32 NEW YORK I NDI AN CASI NOS

1.32a Ak w esasne Mohaw k Casi no
The Akwesasne Mohawk Casino, located in the
Saint Regis Mohawk Tribes territory in Hogansburg,
New York, opened with Class III gaming in April
1999. The casino includes 140,000 square feet of
gaming space with more than 1,800 slot machines
and 30 table games. The casino has four dining
options, including a buffet, bar & grill and a food
court.

1.32b Senec a Al l egany Casi no
Seneca Allegany Casino opened in May of 2004 and is
located on the Seneca Nations Territory in the City of
Salamanca, New York. The facility occupies
approximately 120,460 square feet, with 68,300 square
foot gaming space featuring nearly 2,000 gaming
machines and over 30 table games. The property has five
restaurants and a hotel with 212 guest rooms.

1.32c Senec a Buf f al o Cr eek Casi no
Seneca Buffalo Creek Casino is located in Buffalo,
New Yorks Inner Harbor area. Opened in 2007, the
name Seneca Buffalo Creek Casino refers to the
Seneca Nation of Indians original Buffalo Creek
Territory, which occupied lands surrounding the
current 9-acre casino site. The casino recently
completed a $130 million renovation and currently
features a 147,000 square foot casino with 18 table
games and approximately 800 slot machines. The facility also includes 6 dining outlets and a sports
bar.

17

1.32d Senec a Ni agar a Casi no
Seneca Niagara Casino & Hotel is located on
approximately 24 acres on the Seneca Nations
Territory in the City of Niagara Falls, New York. The
casino features over 4,000 electronic gaming
machines and over 95 table and poker games in
147,000 square feet of gaming space. The property
has a multitude of restaurants, a caf, a snack bar, and
a night club. The Seneca Niagara Casino & Hotel is
one of the largest hotels in Western New York and is
located just blocks from Niagara Falls. The hotel
includes 594 rooms as well as a spa, workout facility,
indoor pool, and 30,000 square feet of meeting and
conference space.

1.32e Tur ni ng St one Resor t Casi no
Turning Stone Resort Casino, located on the Oneida
Nations Territory in Verona, New York, opened with
Class III gaming in J uly, 2003. The casinos 125,000
square foot gaming space features over 2,400 gaming
machines and 85 table games, a 32 table poker room,
and Bingo. The property also showcases five golf
courses, an 800 seat showroom, a 5,000 seat event
center, 20 restaurants and 4 hotels, including two
AAA four-diamond award winning properties with
709 rooms, a salon, day spa and retail outlets.

18

2.00 METHODOLOGY

The impact estimates in this report are based on well-established demand analysis techniques that
are commonly utilized for forecasting visits and revenues at casinos in the United States. The
analysis and conclusions are derived from a gravity model (see Appendix B and Section 2.20),
with inputs to the model consisting of public secondary data sources for population (U.S. Census),
disposable personal income (U.S. Bureau of Economic Analysis), and drive times between
different locations (MS MapPoint).

2.10 DEFI NI TI ONS

There are many specialized terms and concepts that are unique to the gaming industry, but
that are used frequently in this report. These terms include:

Handle the total amount of money and tokens bet during the course of a day,
month, or year. It does not measure the amount of money won or lost by a patron,
but measures the velocity of money. For example, if a casino patron starts the
evening with an initial stake of $100, loses $75 of it, then wins back $150, and
continues to successively win and lose money over the course of an evening, then
the amount actually wagered by the patron could be $500, $1,000, $2,000, or more
over several hours. However, if at the end of the evening the patron leaves with
$20 of their original $100 gambling stake, then over the course of the evening the
patron lost $80. The $80 would be recorded by the casino as the win (see below)
from that patron, while the total amount wagered during the evening would be the
handle.

Drop the total amount of cash and other negotiable instruments that are taken by
the dealer at a table game and placed into the drop box in exchange for chips or the
actual amount of cash inserted into a slot machine. Drop is different from handle,
since it is the initial stake put at risk by a player and not the total amount wagered
by a patron (and a patron may cash out and not wager the total drop).

Payout the amount of money returned to casino gamblers from the handle or
wager. Resort casinos in non-traditional jurisdictions usually return from 90% to
93% of the total amount wagered (handle) on slot machines each month to casino
gamblers.
34
The average payout on table games varies by the type of game, but it
is generally 82% to 85% on most games, although the payout on particular games
can fluctuate from month to month depending on the skill and luck of players.

Win or Hold the amount of money retained by a casino from the handle wagered
by patrons. Resort casinos in non-traditional jurisdictions usually retain 7% to 10%
of the total amount wagered (handle) on slot machines each month by casino
gamblers. Resort casinos in non-traditional jurisdictions usually win 15% to 18%
34
Non-traditional casino gaming jurisdictions include all states other than Nevada and New Jersey.
19

of the total amount dropped or paid in commissions at table games each month by
casino gamblers, although this number can vary.

Gross Gaming Revenue (GGR) the total amount of gaming revenue (win)
retained by the casino during a day, month, or year, including the value of
promotional allowances. GGR is the figure most commonly used to determine what
a casino, racetrack, lottery, or other gaming operation earns before taxes, salaries,
and other expenses are paid. GGR is the equivalent of sales in other retail and
service industries and should not be confused with profit. GGR is the revenue
base for levying gaming taxes, although different jurisdictions may have different
treatments of promotional allowances (see below).

Non-Gaming Revenue (NGR) the total amount of sales by non-gaming
operations, such as a hotel, retail outlets, food and beverage outlets, convention and
meeting space, golf course, and spa, including the value of promotional allowances.

Gross Revenue the total revenue retained by a casino from both its gaming
(GGR) and non-gaming operations (NGR).

Operating Revenue the total revenue retained by a casino from both its gaming
(GGR) and non-gaming operations (NGR) after subtracting promotional
allowances.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
operating revenue minus operating expenses. EBITDA does not include deductions
for interest expense, taxes or revenue sharing, depreciation, amortization, or
management and development fees paid to third parties.

Propensity to Gamble the percentage of the adult population that gambles at
least once per year and the average number of visits per year to casinos by those
who gamble. The propensity to gamble can also be measured as a percent of
disposable personal income (DPI) spent on gambling in a specific year.

Promotional Allowances complimentary food and beverage, hotel, retail,
entertainment, and other services provided to casino patrons. The retail value of
these complimentary items is included in gross revenues and then deducted as
promotional allowances to arrive at net or operating revenue.

2.20 GRAVI TY MODEL

Gravity modeling is the most reliable and commonly used method for estimating the demand for
proposed casinos and the potential competitive impact of casinos in a specific market area. Gravity
modeling is based on a modified version of Sir Isaac Newtons Law of Gravitation, which has been
in use since 1931 when Professor William J . Reilly of the University of Texas introduced his Law
of Retail Gravitation to predict the movement of people, commodities, and sales (money) between
competing commercial centers (see Appendix B). Newtons Law of Gravitation states that the
20

gravitational force between two objects is proportional to the product of their masses and inversely
proportional to the square of the distance between the two objects. William J . Reillys restatement
of this principle as the Law of Retail Gravitation states that larger retail facilities (i.e., those with
greater mass) will have larger spheres of attraction -- or a greater gravitational force -- than smaller
facilities of a comparable type. The Law of Retail Gravitation states that the Break Point (BP)
at which a consumer will choose one comparable facility over another is equal to the Distance (d)
between the two facilities, divided by 1 (a constant) plus the Square Root of the size of Place One
(p1) divided by the size of Place Two (p2) (see Equation 1):

Equation 1

d
BP = _____________
______
1 + p1/p2
______________________________________________________________________________

Reillys Law assumes that the geography of an area is flat without any rivers, roads, or mountains
that would alter a consumers decision about where to purchase a particular good or service.
However, since Reilly first introduced the Law of Retail Gravitation, it has been recognized that
geography, road quality, and accessibility (i.e., convenience) do affect a consumers decision about
what facilities to patronize, especially when they are comparable in scale, quality, and product
offerings. Consequently, many gravity models, including the one utilized in this report, use
functional distance by substituting estimated drive times for mileage. This is an important
modification, because casino patrons in local and regional markets are highly sensitive to drive
time as well as position availability
35
and the range of gaming and non-gaming amenities offered
by a casino.
36

In addition, since 1931, the basic gravity model has been modified by researchers in many ways
with specific adaptations to account for the levels of retail gravitation attributable to different types
of facilities (e.g., regional malls, theme parks, casinos) and to incorporate empirical behavioral
research that specifies this relationship with greater precision for different types of facilities and
for different geographic jurisdictions (e.g., behavioral surveys of the propensity to gamble or the
use of players club data). With these modifications to the gravity model, a casinos ability to attract
patrons and spending can be reliably estimated by incorporating data on the number of adults (age
21+) living at different distances from the casino, their estimated propensity to gamble at various
35
Position availability refers to a patrons ability to find a place at their preferred game. Thus, if a slot machine player
repeatedly finds that a local casinos gaming devices are occupied, and that there is a long wait time to find a position
at their preferred device, they will often be willing to travel a longer distance to a larger facility to insure that a position
is available, since the time to position (i.e., drive plus wait) is essentially the same or shorter, despite the longer
initial drive-time.
36
Many casino patrons are attracted to the general atmosphere and physical attractiveness of gaming facilities or they
are attracted by the presence of non-gaming amenities, e.g., cabarets, night clubs, concerts, gourmet dining, spas, golf,
etc. It is estimated that up to 27% of a resort casinos customers never or rarely gamble when visiting a casino, but
visit the facility for its other forms of entertainment and recreation, see, American Gaming Association, State of the
States: The AGA Survey of Casino Entertainment, 2012 (Washington, D.C., 2013), p. 3.
21

distances, and the percentage of disposable personal income that will be allocated for casino
spending by different households.

The gravitational force of a casino all things being equal -- is in inverse proportion to its
functional distance from population (i.e., potential customers). In other words, if one doubles the
distance of an individuals residence from a casino, visitations to the casino decline in inverse
proportion to that distance, although this mathematical relationship can be modified in gravity
models by incorporating empirically-based behavioral data, or players club data, since it has been
documented that a casinos gravitational force is not always according to Reilly (Cummings
2006). Normally, however, the further the distance from a casino, the less likely residents are to
visit it (unless there is no alternative), and those who do visit it will visit it less frequently. It has
generally been found that while patrons who live further away from a casino will visit it less often,
they are likely to spend more per visit, since they will generally stay longer and spend on a wider
range of amenities. As competing casinos get closer to residents, one eventually reaches a Break
Point, where the retail gravitation of the competing facility exerts greater force over potential
patrons and customer visits and revenues shift toward the competing facility.

The size (mass) of a retail facility is a critical element in any casinos ability to attract customers
in a competitive environment. Most gravity models measure a casinos mass exclusively in terms
of gaming positions.
37
However, it is known that customer decisions about competing facilities are
also influenced by the types of gaming options available (i.e., video lottery terminals, slot
machines, table games, poker, bingo, keno), parking availability, and the availability of non-
gaming amenities, such as a hotel, spa, entertainment venues, retail outlets, food and beverage
offerings, a golf course, etc. Non-gaming entertainment and resort amenities are not usually
incorporated into most gravity models, although the Pyramid Associates model explicitly and
transparently incorporates these amenities into its calculation of gravity factors.

The Consultant built a Master Database consisting of 3,591 communities in New York and
Pennsylvania to analyze the gaming market area for the proposed Wilmot Casino and Resort and
its existing competitors (i.e., Tioga Downs, Vernon Downs, Finger Lakes, and Turning Stone).
The Master Database includes data by town and city on total population, the adult population (age
21+), per capita income, total income, disposable personal income (DPI), and drive-times to the
nine race track casinos in New York, the five Class III Indian casinos in New York, and two casinos
in Pennsylvania (i.e., Mohegan Sun at Pocono Downs and Mt. Airy), with the drive-times based
on geo-codes for the actual addresses of each facility. The Master Database contains 156,684
discrete data points that form the basis for the gravity model.

The Master Database was sorted to exclude communities beyond a 2.5 hour drive-time, since it is
assumed that patrons visiting the facilities from outside a 2.5 hour drive-time will do so primarily
as the result of non-gaming related leisure or business activities. These potential visitors are
classified as out-of-market tourists for purposes of the analysis, rather than regular patrons of
the gaming facilities, although they are incorporated into the gravity model. The initial gravity
model developed from this data base relies on reasonable and conservative assumptions about the
37
One slot machine equals one gaming position, while one table game is normally six positions, because it can
accommodate multiple players.
22

propensity to gamble at different functional distances, as well as gaming expenditures as a ratio of
DPI at different functional distances.

23



24

3.00 THE COMPETI TI VE SET

The Wilmot Casino and Resort proposed for Tyre, New York will be a direct competitor with
Turning Stone Resort Casino, Finger Lakes Gaming and Racetrack, Tioga Downs Casino, and
Vernon Downs Casino due to overlapping primary and secondary market areas. The proposed
Wilmot Casino and Resort will be competing for destination travelers (Turning Stone and Vernon
Downs, as well as regional convenience gamblers (Tioga Downs and Finger Lakes) residing in the
proposed facilitys primary and secondary market areas, and who are already served by existing
gaming facilities (see Figure 3). Destination resort casinos can draw customers from as far as away
as a four hour drive time, while they can also intercept business traffic (e.g., business travelers and
long-haul trucks), regional conferences, and leisure travelers, who stop temporarily on their way
to other destinations. Thus, to a certain extent, the proposed Wilmot Casino and Resort is indirectly
competing against every other gaming facility in New York, as well as destination casinos in
Connecticut and New J ersey (and soon Massachusetts), although the distribution of facilities and
their proximity to population centers makes it likely that the most direct competition will be with
gaming facilities located within 120 minutes of Tyre, New York. Beyond that distance the
gaming venues, makes it unlikely that casino gamblers will travel further than that distance solely
for the purpose of visiting a casino.

3.10 TURNI NG STONE RESORT & CASI NO

The Consultant reviewed confidential and proprietary data that was made available to the
Consultant by Turning Stone pursuant to a non-disclosure agreement, including its players club
data base, annual customer head counts, and audited financial statements. This data allowed the
Consultant to model Turning Stones designated market area, gross gaming revenue, annual
visitors, and annual visits by functional distance.

3.20 FI NGER LAKES GAMI NG & RACE TRACK

There are approximately 2.4 million adults (age 21+) living in Finger Lakes Gaming and Race
Tracks Designated Market Area (DMA) and these individuals have $129.8 billion in disposable
personal income (DPI). In CY 2013, Finger Lakes generated $131.5 million in gross gaming
revenues from a 159,506 person customer base (est.), who it is estimated visited the race track
casino an average of 9 times annually for more than 1.4 million visits (see Table 4).

Finger Lakes is a convenience gaming facility with 1,268 electronic gaming machines and this
type of facility normally draws the majority of its customers from within a 30 minute to 60 minute
drive time.
38
It is estimated that Finger Lakes generates approximately seventy percent (70%) of
its annual gross gaming revenue and seventy-one percent (71%) of its annual visits from within a
38
Race track casinos with video lottery terminals rarely draw customers from a distance beyond a 90 minute drive
time. For example, Twin River in Lincoln, Rhode Island draws ninety percent (90%) of its total annual visits from
within a 60 minute drive time, while Newport Grand in Newport, Rhode Island draws ninety-one (91%) of its total
annual visits from within a 60 minute drive time (Barrow and Borges 2013, 28).
25

densely populated and comparatively high income 30 minute drive time band around the race track
casino. Tyre, New York is a 34 minute drive-time from Finger Lakes Gaming & Race Track, which
places the facility inside the proposed Wilmot Casino & Resorts primary market area. This makes
Finger Lakes particularly vulnerable to competition from a resort casino in Tyre, which will offer
a large percentage of its customers greater convenience (i.e. a shorter drive time), more gambling
options (e.g. table games), and other entertainment amenities.

Table 4

3.30 TI OGA DOWNS CASI NO

There are approximately 850,000 adults (age 21+) living in Tioga Downs Casinos Designated
Market Area (DMA) and these individuals have $41.0 billion in disposable personal income (DPI).
In CY 2013, Tioga Downs generated $59.6 million in gross gaming revenue from 119,950 person
customer base (est.), who visited the race track casino an estimated average of 10 times annually
for nearly 1.2 million visits (see Table 5). The proposed Wilmot Casino & Resort will be located
within a 106 minute drive time of Tioga Downs.

Tioga Downs is a convenience gaming facility with 802 electronic gaming machines and this type
of facility normally draws the majority of its customers from within a 30 minute to 60 minute drive
time. However, the specific geographic distribution of population and income within its designated
market area display characteristics that make it uniquely susceptible to competition for customers
with in its primary (0 to 60 minutes) and secondary market areas (61 to 90 minute drive time).
39

39
Race track casinos with video lottery terminals rarely draw customers from a distance beyond a 90 minute drive
time unless there are no alternatives. For example, Twin River in Lincoln, Rhode Island draws ninety percent (90%)
of its total annual visits from within a 60 minute drive time, while Newport Grand in Newport, Rhode Island draws
ninety-one (91%) of its total annual visits from within a 60 minute drive time (Barrow and Borges 2013, 28).
Within 0 - 30
Minutes
Within 31 - 60
Minutes
Within 61 - 90
Minutes Total
Total Population 844,693 599,292 1,895,238 3,339,223
Adult Population (Age 21+) 604,368 437,024 1,380,803 2,422,195
Disposable Personal Income $32,822,463,023 $23,575,439,625 $73,432,074,171 $129,829,976,819
Gross Gaming Revenues at Finger Lakes $91,549,634 $28,181,783 $11,729,891 $131,461,308
GGR as Ratio of DPI 0.0028 0.0012 0.0002 N/A
Annual Visitors 101,902 34,676 41,085 159,506
Propensity to Gamble at Finger Lakes 17% 8% 3% N/A
Annual Visits 1,019,016 242,730 164,340 1,426,086
Percent of Annual Visits 71% 17% 12% 100%
Average Visits Per Year 10 8 5 9
Percent of GGR by Functional Distance 69.6% 21.4% 8.9% 100.0%
Average Spend Per Visit 89.84 $ 116.10 $ 71.38 $ 92.18 $
Finger Lakes Designated Market Area:
Demographic and Market Summary, CY 2013 (est.)
Sources: U.S. Census (2013), U.S. Bureau of Economic Analysis (2013), Pyramid Associates, LLC (2014).
26

First, only thirty-five percent (35%) of Tioga Downs annual visits come from individuals within
a 30 minute drive of the facility, and thirty-four (34%) percent of its gross gaming revenues are
generated by individual living within this drive time band largely because it is located in a sparsely
populated area of New Yorks Eastern Southern Tier. In contrast, Tioga Downs draws sixty-five
percent (65%) of its annual visits, and sixty-six percent (66%) of its gross gaming revenues from
residents living within 31 to 90 minutes of the facility, which means that any competing gaming
facility within an overlapping market area (i.e., located within 120 minutes of Tioga Downs) has
the potential to cut deeply into its customer base depending on the size, location, and amenities of
the competing facility (see Table 5).

Table 5

3.40 VERNON DOWNS CASI NO

There are approximately 1.2 million adults (age 21+) living in Vernon Downs Casinos Designated
Market Area (DMA) and these individuals have $62.7 billion in disposable personal income (DPI).
In CY 2013, Vernon Downs generated $43.7 million in gross gaming revenues from a 150,862
person customer base (est.), who visited the race track casino an estimated average of seven (7)
times annually for approximately 1 million total visits (see Table 6).

Vernon Downs is a small convenience gaming facility with 767 electronic gaming machines and
while this type of facility normally draws the majority of its customers from within a 30 minute to
60 minute drive time, the specific geographic distribution of population and income within its
designated market area displays characteristics that make it uniquely susceptible to competition
for customers within its primary (0 to 60 minutes) and secondary market areas (61 to 90 minute
drive time).

It is estimated that Vernon Downs generates fifty-one percent (51%) of its gross gaming revenue
from residents living within a 31-60 minute drive time of the facility, and its generates sixty-seven
Within 0 - 30
Minutes
Within 31 - 60
Minutes
Within 61 - 90
Minutes Total
Total Population 129,669 435,681 595,833 1,161,184
Adult Population (Age 21+) 92,040 320,847 437,352 850,238
Gross Gaming Revenues at Tioga Downs $20,509,437 $34,199,192 $4,906,671 $59,591,749
Annual Visitors 31,058 54,127 34,765 119,950
Propensity to Gamble at Tioga Downs 34% 17% 8% 14%
Annual Visits 403,758 541,270 221,378 1,166,406
Tioga Downs & Casino Designated Market Area:
27

percent (67%) of its gross gaming revenue from residents living within a 31-90 minute drive time
of the facility. Tyre, New York is 74 minutes from Vernon Downs, which means that the primary
and secondary market areas of both facilities overlap at points where Vernon Downs draws the
majority of its gaming revenue. The proposed Wilmot Casino and Resort will therefore offer a
large percentage of Vernon Downs customers greater convenience (i.e. a shorter drive time),
which is the primary consideration in convenience gamblers decision about where to spend their
gambling dollars.

Table 6

Within 0 - 30
Minutes
Within 31 - 60
Minutes
Within 61 - 90
Minutes Total
Total Population 229,315 675,045 777,547 1,681,906
Adult Population (Age 21+) 169,284 485,963 568,556 1,223,803
Gross Gaming Revenues at Vernon Down $14,441,178 $22,274,937 $6,991,203 43,707,318 $
Annual Visitors 50,369 72,298 28,195 150,862
Propensity to Gamble at Vernon Downs 30% 15% 5% N/A
Annual Visits 475,796 413,568 115,475 1,004,839
Vernon Downs & Casino Designated Market Area:
28

4.00 COMPETI TI VENESS OF PROPOSED WI LMOT
CASI NO & RESORT

The purpose of this report is to estimate the market potential and the market impact of the Wilmot
Casino & Resort proposed for Tyre, New York and particularly its impact on the current and future
operations of existing gaming facilities located within its primary and secondary market areas. The
New York State Gaming Commission is moving forward with plans to license up to four (4) resort
casinos in the late fall of 2014.
40
If a resort casino license is awarded to Wilmorite, it is conceivable
that it could have slot machines and table games installed in a new facility by J anuary 2016, with
the expectation that it will achieve full build out and maximum gaming capacity in calendar year
2018.

The proposed Wilmot Casino & Resorts market potential will depend on a variety of factors
beyond the market areas demographic characteristics, including but not limited to:

The quality of the physical property (see Figure 6),
The quantity and types of gaming machines available,
The quantity and types of table games available,
Location and accessibility of the property,
The quality and range of non-gaming amenities offered on site,
Customer service levels,
Marketing programs,
Proximity to major population centers,
Levels of disposable personal income in the designated market area,
The regional populations propensity to gamble, and
Existing and future competition in the designated market area.
41

40
New York State Gaming Commission, The Siting Process, available at
http://www.gaming.ny.gov/gaming/casinos.php?ID=4
41
Existing competitors to the proposed Wilmot Casino & Resort include Turning Stone Resort Casino, Finger Lakes
Gaming & Race Track, Tioga Downs Casino, and Vernon Downs Casino.

29

Figure 6
Architectural Rendering of the Proposed Wilmot Casino & Resort

Source: http://www.wilmotcasinoandresort.com/Description.aspx

4.10 MARKET AND FACI LI TY ASSUMPTI ONS

The description, location, and quality of the proposed Wilmot Casino & Resort is described in
Section 1.00. In addition to the physical characteristics of the proposed resort casino and hotel, the
market impact analysis makes several assumptions about the casino gaming market in New York
and about the proposed Wilmot Casino & Resort. These assumptions are that:

All things being equal, proximity to a casino is a major factor in choosing to
patronize a specific gaming venue. Given the choice between comparable facilities,
casino patrons will normally visit the nearest comparable casino.

Drive times of up to two hours and more (one way) are acceptable to persons who
visit resort casinos, although the propensity to gamble at resort casinos also
increases with proximity and declines with distance and drive time.

If the option of casino gambling is made available, then a known average
percentage of the population will patronize casinos as a form of entertainment.
Therefore absent local opportunities, some residents will opt not to gamble, while
others will travel further to locations that offer casino gaming.

Substantial numbers of New York residents already gamble at casinos in New York,
Connecticut, Pennsylvania, and New J ersey, and the average propensity to gamble
30

will increase as new facilities are added in the region until the market reaches
saturation.
42

The proposed Wilmot Resort Casino:

will open J anuary 1, 2016, with a new facility by installing 1,000 slot
machines and 50 table games,

will be a $300 million capital investment that is well-designed and attractive
to potential customers,

will operate 2,000 slot machines and 100 table games and poker tables at
operational maturity,

will include one hotel with a total of 200 rooms, a spa, and fitness center,

will include 4 restaurants,

will include 2 entertainment venues,

will include 10 to 17 restaurants,

will operate at 50% of its full potential in CY 2016 and 100% of its full
potential in CY 2018 as it ramps up its operations and marketing,

will be aggressively marketed within its Designated Market Area (DMA)
and beyond,

will be well managed and operated by its owners.

A gaming and resort venue with these dimensions and amenities will exert considerable gravity on
the regional gaming market and be strategically positioned to capture a significant percentage of
existing gaming venues customer base in the Eastern Southern Tier, New York City, northern
New J ersey and northeastern Pennsylvania.

4.20 DESI GNATED MARKET AREA

The Designated Market Area (DMA) for the proposed Wilmot Casino & Resort is differentiated
into primary, secondary, and tertiary market areas. The primary market area is defined as a drive-
time of 0 to 60 minutes to the proposed facility. The secondary market area is defined as a drive-
time of 61 to 120 minutes, while the tertiary market area is defined as a drive-time of 121 minutes
42
Shim and Seigel (1995, 306) define market saturation as the point of a product life cycle where the market has
been completely filled so that no more sales for goods and services can be taken up, i.e., as the point where supply
and demand are in equilibrium.
31

or more, including out-of-market tourists who visit the facility while staying in the region for other
business or leisure activities (see Figure 7).
43

Figure 7
Proposed Wilmot Casino & Resort Designated Market Areas

4.30 MARKET BREAK POI NTS

For purposes of estimating the proposed Wilmot Casino & Resorts market impact on competing
gaming facilities, the DMA was refined by calculating break points between Finger Lakes, Tioga
Downs, Vernon Downs, and Turning Stone, since the proposed Wilmot Casino & Resorts
secondary and tertiary market areas overlap with much of the same market areas for these gaming
facilities. The Market Break Point (MBP) is the point at which a casinos ability to attract
customers either ends because a comparable facility is closer or drops exponentially because a
comparable facility is further away, but continues to exert an attraction on customers due to its
larger size and range of offerings.

To calculate the actual Market Break Points, it is necessary to estimate the comparative size or
retail mass of each gaming facility. This calculation is based on the number of slot machines,
number of table games, number of hotel rooms, and amenities, such as the number of restaurants
43
Drive times were estimated with MS MapPoint.
32

and bars, entertainment and retail venues. Each factor is weighted proportionate to its average
contribution to the percentage of total casino revenues for a destination resort casino.

4.31 TURNI NG STONE RESORT CASI NO

The Consultant obtained data on Turning Stone Resort Casino from several sources, including the
casinos website
44
and Casino Citys North American Casino Directory. The Consultant also
reviewed confidential and proprietary data that was made available to the Consultant by Turning
Stone pursuant to a non-disclosure agreement, including number of gaming positions and players
club data base. This data allowed the Consultant to model Turning Stones designated market area,
its gross gaming revenues, and patterns of annual visitation to the casino. The Consultant also
possesses proprietary data on patron origins for all of the race track and Indian casinos in New
York and Pennsylvania. This data also made it possible for the Consultant to calculate a
comparative gravity factor for Turning Stone Resort Casino and the proposed Wilmot Casino &
Resort.

4.32 FI NGER LAKES GAMI NG & RACE TRACK

The Wilmot Casino and Resort will have a Gravity Factor of 1.63 when compared to Finger Lakes
Gaming & Race Track, which means that it has significantly more capacity to attract customers
within the designated market area and a similarly greater capacity to attract customers from further
distances (see Table 7 and Equation 2). The Market Break Point for the proposed Wilmot Casino
and Resort was adjusted accordingly using Reillys Law of Retail Gravitation (see Equation 3).
The proposed Wilmot Casino & Resort is 34 minutes from Finger Lakes and the adjustment for
the gravity of the competing facilities indicates that the proposed Wilmot Casino & Resort will be
competing for customers in Finger Lakes primary and secondary market areas. It will potentially
begin capturing as much as half of Finger Lakes current customers at a functional distance +15
minutes (see Equation 5).

Table 7

44
http://turningstone.com/
No. Slots No. Tables
Hotel
Rooms
Other
Amenities
Wilmot Casino 2,000 100 200 8
Finger Lakes 1,192 0 0 9
Ratio 1.68 2 2 0.89
Weight 0.64 0.16 0.05 0.15
Gravity Factor 0.56 0.32 0.46 0.06
Gravity Factor:
Ratio of Wilmot Casino & Resort to Finger Lakes Gaming & Race Track
33

______________________________________________________________________________
Equation 2 (Gravity Factor)

(1.68 * 0.64) +(2.00 * 0.16) +(2.00 * 0.05) +(0.89 * 0.15) =1.63

______________________________________________________________________________
Equation 3 (Break Point)

34 minutes
___________ =15 minutes
____
1 + 1.63

______________________________________________________________________________

4.33 TI OGA DOWNS CASI NO

The Wilmot Casino and Resort will have a Gravity Factor of 2.26, compared to Tioga Downs
Casino, which means that it has more than twice capacity to attract customers within the designated
market area and a similarly greater capacity to attract customers from further distances (see Table
8 and Equation 4). The Market Break Point for the proposed Wilmot Casino and Resort was
adjusted accordingly using Reillys Law of Retail Gravitation (see Equation 5). The proposed
Wilmot Casino & Resort is 106 minutes from Tioga Downs and the adjustment for the gravity of
the competing facilities indicates that the proposed Wilmot Casino & Resort will be competing for
customers in Tioga Downs primary and secondary market areas and it will potentially begin
capturing as much as half of Tioga Downs current customers at a functional distance +42 minutes
(see Equation 5).

Table 8

Hotel
Rooms
Other
Amenities
Tioga Downs 802 0 0 5
Ratio 2.49 2.00 2.00 1.60
Weight 0.64 0.16 0.05 0.15
Gravity Factor 1.60 0.32 0.10 0.24
Gravity Factor:
Ratio of Wilmot Casino & Resort to Tioga Downs Casino
34

______________________________________________________________________________

(2.49 * 0.64) +(2.00 * 0.16) +(2.00 * 0.05) +(1.60 * 0.15) =2.26

______________________________________________________________________________


106 minutes
___________ =42 minutes
____
1 + 2.26
______________________________________________________________________________

4.34 VERNON DOWNS CASI NO

The Wilmot Casino and Resort will have a Gravity Factor of 2.22, compared to Vernon Downs
Casino, which means that it has more than twice capacity to attract customers within the designated
market area and a similarly greater capacity to attract customers from further distances (see Table
9 and Equation 6). The Market Break Point for the proposed Wilmot Casino and Resort was
adjusted accordingly using Reillys Law of Retail Gravitation (see Equation 5). The proposed
Wilmot Casino & Resort is 74 minutes from Vernon Downs and the adjustment for the gravity of
the competing facilities indicates that the proposed Wilmot Casino & Resort will be competing for
customers in Tioga Downs primary and secondary market areas and it will potentially begin
capturing as much as half of Tioga Downs current customers at a functional distance +30 minutes
(see Equation 5).

Table 9

Hotel
Rooms
Other
Amenities
Vernon Downs 767 0 173 7
Ratio 2.61 2.00 1.16 1.14
Weight 0.64 0.16 0.05 0.15
Gravity Factor 1.67 0.32 0.06 0.17
Gravity Factor:
Ratio of Wilmot Casino & Resort to Vernon Downs Casino
35

______________________________________________________________________________

(2.61 * 0.64) +(2.00 * 0.16) +(1.16* 0.05) +(1.14* 0.15) =2.22

______________________________________________________________________________


74 minutes
___________ =30 minutes
____
1 + 2.22
______________________________________________________________________________

4.40 MARKET POTENTI AL OF THE PROPOSED WI LMOT
CASI NO & RESORT

There are approximately 5.5 million adults (age 21+) living in the proposed Wilmot Casino &
Resorts Designated Market Area (DMA) and these individuals have $279.0 billion in disposable
personal income (DPI), although eighteen (18) resort casinos (with hotels), 13 casinos (one with a
hotel), and nine (9) race track casinos (one with a hotel) in four states Connecticut, New Jersey,
New York, and Pennsylvania -- are competing for gaming dollars in this market.

The gravity model operationalized for the proposed Wilmot Casino & Resort employed propensity
to gamble ratios for disposable personal income and population that are consistent with other
facilities in New York and that are within or near the proposed Wilmot Casino and Resorts market
area. The gravity model forecasts gross gaming revenues of nearly $84.4 million in CY 2016 (2013
dollars), the first year of operations, and gross gaming revenues of $158.1 million in CY 2018 after
all construction is completed and the facility is operating at full capacity (2013 dollars) (see Table
10).
45

45
For purposes of modeling the proposed Wilmot Casino & Resort, the Consultant has assumed a standard
construction schedule for similar type and size facilities, which normally begin with limited gaming operations and
then build out over a two to three year period as they add more food and beverage outlets, retail outlets and, finally, a
hotel. A phased approached carries risk to the State of New York. Other states, such as Pennsylvania and Maine, have
approved facilities with a phased approach, but once gaming operations commence, the more capital intensive and
labor intensive phases of the original proposal with higher (e.g., hotel) are abandoned by the developer.
36

The Upstate New York Gaming and Economic Development Act Based establishes a statutory tax
rate for Region 5 of thirty-seven percent (37%) of gross gaming revenue on slot machines and ten
percent (10%) of gross gaming revenue from all other sources. Based on these tax rates, the
proposed Wilmot Casino & Resort will nominally generate $28.4 million in gaming taxes in its
first calendar year of operations (CY 2016) and $49.1 million at operational maturity (CY 2018).

Table 10

However, the estimates of gross gaming revenue and annual visits at full build out warrant two
caveats:

Despite being billed as a destination resort, sixty-nine percent (69%) of its gross
gaming revenue and eighty-seven percent (87%) of its annual visits will be
generated by residents living in the local area (0-60 minutes), while fourteen
percent (14%) of gross gaming revenue and three percent (3%) of annual visits will
originate at drive times of 91 minutes or more from the facility.

With a maximum hotel capacity of 73,000 room nights, the facility will simply not
have the capacity to generate additional destination resort or out-of-market casino
customers, who generally prefer to stay overnight at the facility for a full casino
entertainment experience (see Table 10).

The Wilmot Casino and Resort proposed for Tyre, New York will be a direct competitor with
Turning Stone Resort Casino, Finger Lakes Gaming and Racetrack, Tioga Downs Casino, and
Vernon Downs Casino due to overlapping primary and secondary market areas. The proposed
Wilmot Casino and Resort will be competing for destination travelers (Vernon Downs and Turning
Stone), as well as regional convenience gamblers (Tioga and Finger Lakes) residing in the
proposed facilitys primary and secondary market areas, who are already served by existing
facilities (see Figure 3). Destination resort casinos can draw customers from as far as away as a
four hour drive time, while they can also intercept business traffic (e.g., business travelers and
long-haul trucks), regional conferences, and leisure travelers, who stop temporarily on their way
to other destinations. Thus, to a certain extent, the proposed Wilmot Casino and Resort is indirectly
CY 2016 CY 2017 CY 2018 CY 2019 CY 2020
No. Slots 1,000 1,500 2,000 2,000 2,000
No. Table Games + Poker 25 50 100 100 100
Daily Win Per Unit $203 $287 $338 $336 $342
Daily Win Per Table $1,144 $1,182 $953 $1,060 $1,082
Slot Win (Annual) $73,989,848 $104,818,952 $123,316,414 $122,557,543 $125,008,694
Table Win (Annual) $10,434,466 $21,564,563 $34,781,553 $38,702,382 $39,476,430
Gross Gaming Revenue $84,424,314 $126,383,514 $158,097,966 $161,259,925 $164,485,124
Slot revenue as % of GGR 88% 83% 78% 76% 76%
Slot Tax 27,376,244 $ 38,783,012 $ 45,627,073 $ 45,346,291 $ 46,253,217 $
Table Tax 1,043,447 2,156,456 3,478,155 3,870,238 3,947,643
Total Gaming Tax 28,419,690 40,939,468 49,105,228 49,216,529 50,200,860
Gaming Taxes by Fiscal Year (2016-2020) 14,209,845 34,679,579 45,022,348 49,160,879 49,698,851
Estimated Revenue for Wilmot Casino & Resort, CY 2016 Thru CY 2020
Notes: 1. Revenues in 2013 constant dollars. 2. Assumes January 1, 2016 start date for Wilmot Casino & Resort.
Source: Pyramid Associates, LLC (2014).
37

competing against every other gaming facility in New York, as well as destination casinos in
Connecticut and New J ersey (and soon Massachusetts), although the distribution of facilities and
their proximity to population centers makes it likely that the most direct competition will be with
gaming facilities located within 120 minutes of Tyre, New York. Beyond that distance the
gaming venues, makes it unlikely that casino gamblers will travel further than that distance solely
for the purpose of visiting a casino.

4.50 I MPACT ON TURNI NG STONE RESORT CASI NO
GROSS GAMI NG REVENUE

The Consultant reviewed confidential and proprietary data made available by Turning Stone
pursuant to a non-disclosure agreement. This data includes the casinos gross gaming and non-
gaming revenue, annual visitor counts, number of electronic gaming machines and table games, as
well as its players club data base. The Consultant also possesses independently collected
proprietary data on patron origins for all of the race track and Indian casinos in New York and
Pennsylvania. This data allowed the Consultant to model Turning Stones designated market area,
gross gaming revenue and non-gaming revenue by functional distance, annual visitors, and annual
visits by functional distance. This data also made it possible for the Consultant to calculate a
comparative gravity factor for Turning Stone Resort Casino and the proposed Wilmot Casino &
Resort. This data, and the calculations based on it, are the basis of the Consultants estimate of the
market impact of the proposed Wilmot Casino & Resort on Turning Stones gross gaming revenue.

The analysis estimates that the proposed Wilmot Casino & Resort will capture $55.4 million of
Turning Stones projected gross gaming revenue once the proposed gaming facility is operating at
full capacity in 2018 (see Table 11).

The proposed Wilmot Casino & Resort will also have a medium-sized hotel and other non-gaming
amenities that will make it attractive to resort destination customers and other leisure travelers.
Consequently, it will also have a significant impact on Turning Stones non-gaming revenues. The
analysis estimates that the proposed Wilmot Casino & Resort will capture $11.0 million of Turning
Stones projected non-gaming revenue once the proposed gaming facility is operating at full
capacity in 2018 (see Table 11).

Table 11

CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CY 2020
Competitive Impact of Wilmot (dollars- GGR) - - 27,637,191 $ 42,855,219 $ 55,402,184 $ 55,402,184 $ 55,402,184 $
Competitive Impact of Wilmot (dollars- NGR) - - 5,474,394 $ 8,488,792 $ 10,974,104 $ 10,974,104 $ 10,974,104 $
Estimated Revenue for Turning Stone Resort Casino, CY 2014 Thru CY 2020
Competitive Impact of Wilmot Casino & Resort
38

4.60 I MPACT ON FI NGER LAKES GAMI NG & RACE
TRACK GROSS GAMI NG REVENUE

The Consultant operationalized the gravity model for the designated market area and conducted a
market impact analysis for Finger Lakes Gaming and Race Track based on the comparative gravity
factor and market potential of the proposed Wilmot Casino & Resort. The analysis estimates that
the proposed Wilmot Casino & Resort will capture 17.9% of Finger Lakes projected gross gaming
revenue ($26.0 million) once Wilmot is operating at full capacity in 2018 (see Table 12).

Table 12

4.70 I MPACT ON TI OGA DOWNS CASI NO GROSS
GAMI NG REVENUES

The Consultant operationalized the gravity model for the designated market area and conducted a
market impact analysis for Tioga Downs Casino based on the comparative gravity factor and
market potential of the proposed Wilmot Casino & Resort. The analysis estimates that the proposed
Wilmot Casino & Resort will capture 10.5% of Tioga Downss projected gross gaming revenue
($6.9 million) once Wilmot is operating at full capacity in 2018 (see Table 13).

Table 13

CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 CY 2019 CY 2020
No. Slots 1,268 1,268 1,268 1,268 1,268 1,268 1,268 1,268
Daily Win Per Unit (w/o Wilmot) $284 $290 $296 $301 $307 $314 $314 $314
Gross Gaming Revenue (w/o Wilmot) $131,461,308 $134,090,534 $136,772,345 $139,507,792 $142,297,948 $145,143,907 $145,143,907 $145,143,907
Gross Gaming Revenue (w/Wilmot) $131,461,308 $134,090,534 $136,772,345 $126,017,388 $121,807,043 $119,163,147 $119,163,147 $119,163,147
Competitive Impact of Wilmot (dollars) $0 $0 $0 $13,490,403 $20,490,904 $25,980,759 $25,980,759 $25,980,759
Competitive Impact of Wilmot (percent) 0.0% 0.0% 0.0% 9.7% 14.4% 17.9% 17.9% 17.9%
Daily Win Per Unit (w/Wilmot) 284 $ 290 $ 296 $ 272 $ 263 $ 257 $ 257 $ 257 $
Estimated Revenue for Finger Lakes Gaming & Race Track, CY 2014 Thru CY 2020
Note: 1. Revenues in 2013 constant dollars. 2. Assumes J anuary 1, 2016 start date for Wilmot Casino & Resort. 3. Assumes 2% annual real growth in GGR through CY
2018 and no real growth due to increased competition fromCY 2019 and CY 2020.
No. Slots 802 802 802 802 802 802 802 802
Estimated Revenue for Tioga Downs Casino, CY 2014 Thru CY 2020
2018 and no real growth due to increased competition fromCY 2019 and CY 2020.
39

4.80 I MPACT ON VERNON DOWNS CASI NO GROSS
GAMI NG REVENUES

The Consultant operationalized the gravity model for the designated market area and
conducted a market impact analysis for Vernon Downs Casino based on the comparative gravity
factor and market potential of the proposed Wilmot Casino & Resort. The analysis estimates that
the proposed Wilmot Casino & Resort will capture 35.5% of Vernon Downss projected gross
gaming revenue ($17.1 million) once Wilmot is operating at full capacity in 2018 (see Table 14).

Table 14

4.90 SUMMARY: MARKET I MPACT & DI SPLACEMENT

The proposed Wilmot Casino & Resort will capture approximately $105.4 million in gross gaming
revenue from director competitors, which currently serve its primary and secondary market areas
(see Table 15). Thus, approximately 67.0% of the proposed resort casinos gross gaming revenues
will be a displacement of existing gaming activity and merely transfer gaming expenditures and
employment from existing New York gaming facilities to the proposed new facility.

Table 15

No. Slots 767 767 767 767 767 767 767 767
Estimated Revenue for Vernon Downs Casino, CY 2014 Thru CY 2020
2018(see Appendix C) and no real growth due to increased competition fromCY 2019 and CY 2020.
Percent Displacement -66.7%
Competitive Impact of Wilmot Casino Resort on Gross
Gaming Revenue (Net Win), CY 2018
Notes: 1. Revenue in 2013 constant dollars. 2. Assumes
J anuary 1, 2016 start date for Wilmot Casino & Resort.
40

The forecast displacement impact of the proposed Tyre, New York casino is the new reality of
expanded gaming in the United States. The rapid and continuing proliferation of casino gaming
has led many scholars, industry analysts, and media outlets to question how much more casino
gaming can be introduced in the Northeast before the impacts of oversaturation start to negatively
impact the overall industry through self-cannibalization, over-building, and a general deterioration
in the quality and competitiveness of casino products and services.
46
The problem, as for any
industry occurs when new suppliers enter a saturated market through over-building or over-
production, and eventually lowers price, quality, and operating margins to the point that the entire
industry is placed in jeopardy.

Prior to 1988, when the U.S. Congress passed the Indian Gaming Regulatory Act, casino gambling
was legal in only two states Nevada and New J ersey. Indeed, even until recently, Atlantic City,
New J ersey, and Connecticuts two Indian casinos constituted a de facto duopoly in the
Northeastern resort casino market. However, since 1988, Class III Las Vegas style casino
gambling has expanded into 39 states and all but two states in the Northeast Vermont and New
Hampshire have or will soon have some form of Class III casino gaming.

Expanded gaming has resulted in robust growth for the industry as a whole, but it has also created
a far more competitive market as is visually illustrated in Figure 8 and Figure 9. In 2004, there
were 29 Class III gaming facilities in the Northeast with 12 (41%) of them located in Atlantic City
and barely half of these facilities offered table games. The only significant competition for Atlantic
City casinos was Foxwoods Resort Casino and Mohegan Sun Casino in Connecticut -- roughly a
3 to 3 drive from Atlantic City. There are now 64 Class III gaming establishments in the
Northeast, which constitute a $16.9 billion industry.

Figure 8

Figure 9

46
Donald Wittkowski, New Casinos Divide Smaller Revenues In Saturated Market, Press of Atlantic
City, J uly 27, 2013; Richard N. Velotta, Gaming Execs Say Casino Industry Has Reached Saturation Point,
September 26, 2013, see, http://www.vegasinc.com/business/gaming/2013/sep/26/gaming-execs-say-casino-
industry-has-reached-satur/
41

______________________________________________________________________________

Industry supply will inevitably continue to grow as Pennsylvania licenses an additional casino in
Philadelphia, New York licenses four resort casinos in upstate and western New York,
Massachusetts licenses three resort casinos and a slot parlor, and Maryland adds casinos in
Baltimore and National Harbor. This means that even if an additional casino (i.e., Trump Taj
Mahal) closes in 2014, by the end of calendar year 2017, it is entirely possible, if not likely, that
there will be 74 Class III casinos in the Northeast, with many of the planned and proposed facilities
located closer to major population and income centers (e.g., Baltimore, Boston, Philadelphia, New
York City, and Washington, D.C.).

However, much of the new growth in the Northeastern casino gaming industry has come at the
expense of existing casino gaming venues and this is a comparatively new development in the
industry, which has long operated with a build it and they will come philosophy. Customers do
in fact still come to new casinos, but more and more they are merely transferring their patronage
from one gaming facility to another one as illustrated in Figure 10. As Figure 10 documents, as
new casinos are opened in the Northeast, the displacement impacts on existing casinos are real.

Figure 10

In Calendar Years 2008 through 2013, Connecticuts share of the Northeastern casino gaming
market (as measured by gross gaming revenue) has fallen by 5.6 percentage points, while
Delawares market share has fallen by 1.8 percentage points, New J erseys by 17.7 percentage
points, and West Virginias by 2.8 percentage points. There has been a significantly and
measurable redistribution of gaming revenues away from the legacy states (i.e., those with
casino gaming by 1994 or earlier) and these declines in market share come despite the addition of
table games in West Virginia and Delaware, the addition of a new MGM hotel and casino at
Foxwoods Resort, and the addition of a new gaming floor at Mohegan Sun Casino.

Thus, it is necessary to ask whether there are signs that a saturation point is being reached in the
Northeastern casino gaming industry. A decade ago (2004), Connecticut, Delaware, West Virginia,
New J ersey, and Rhode Island were the only five states in the Northeast have Class III gaming.
Since 2006 the peak of casino gaming industry revenues in those venues we are seeing evidence
-5.6%
-1.8%
0.5%
5.6%
6.2%
-17.7%
6.1%
9.4%
0.1%
-2.8%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
CT DE ME MD NY NJ OH PA RI WV
Source: Individual state lotteries/gaming boards; Pyramid Associates
Northeast Gaming Market
Percentage Point Change in Share of Total Gross
Gaming Revenues
CY08 - CY13
- 42 -

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that the levels of displacement and cannibalization forecast in this report are already being realized
in comparable venues in the Northeast:

From FY 2006 to FY 2013, the combined gross gaming revenue for Atlantic City
casinos declined from $5.2 billion to $2.8 billion (-46.2%). Declines in gross
gaming revenue exceeded 50% -- and even 60% -- at some of the Atlantic City
casinos resulting in the shuttering of four gaming facilities in the last twelve months
(NJ Office of the Attorney General 2014a).

While some of this decline is attributable to the onset of the Great Recession, it
should be noted that the revenue decline accelerated in Atlantic City as soon as
Pennsylvania opened new casinos in the eastern part of that state from 2007
onward. This decline was compounded following the introduction of table games
at the slot parlors and racinos in Delaware, Pennsylvania, and Rhode Island, and
then again by the introduction of racetrack casinos in New York.

The result is that six of Atlantic Citys twelve casinos have filed for bankruptcy
since 2006, while four of those casinos the Atlantic Club, Showboat, Trump
Plaza, and Revel have closed their doors perhaps permanently. The number of
casino employees in Atlantic Citys has correspondingly dropped to less than
26,000 in 2014 (-38.6%) (New J ersey Office of the Attorney General 2014b).
47

Similarly, at Foxwoods Resort Casino, slot machine revenue fell from $805.5
million in FY 2007 to $507.9 in FY 2014 (-36.9%). Slot machine revenue at
Mohegan Sun Casino fell from $916.4 million in FY 2007 to $587.7 in FY 2014 (-
35.9%). These revenue declines forced Connecticuts two mega-casinos to reduce
their combined number of employees from 23,300 in 2006 to about 16,400 in 2012
(-29.6%). Furthermore, the two casinos collectively defaulted on more than $3
billion in debt, which resulted in hundreds of millions of dollars in write-offs,
haircuts, and deferred interest payments by bond investors and bank lenders.
48

Likewise, on J une 23, 2009, UTGR, Inc., the former owner of Twin River Casino
in Lincoln, Rhode Island filed for Chapter 11 bankruptcy. The filing stated that As
successful as [Twin Rivers] operations have been, their revenues cannot support
the substantial demands imposed by the state tax rate and the debtors debt services
obligations on $589 million in loans. The consensual agreement with Twin Rivers
investors, led by Merrill Lynch Capital, wrote off $290 million in debt owed to the
investors, and eliminated $153 million in owner equity. The state also effectively
47
Lisa Selin Davis, Plan B for Atlantic City: Casinos Can Take a City Only So Far, Planning (December 2013):
40-43; Craig Anderson, Delaware Casinos Face Tough Odds Against Competition, see,
48
Brian Hallenbeck, Debt Deal Lifts Veil on Foxwoods Finances, New London Day, October 14, 2012; Matthew
Sturdevant, Foxwoods Report Details Revenue Erosion, Debt Details, Risks of Increased Competition, Hartford
Courant, J anuary 7, 2014.
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reduced its share of net terminal income by agreeing to reimburse the facility for
up to $20 million annually in marketing costs.
49

Net terminal income at Newport Grand Slots in Rhode Island has declined in seven
of the last eight years.

Finally, despite spectacular growth in revenues at the Pennsylvanias new casinos
from $0 in FY 2006 to $3.2 billion in FY 2013, even that states gaming revenues
have reached a plateau and flattened despite the introduction of new casino venues
in the last year.
50

Thus, the introduction of new casinos may increase the size of the overall gaming market up to a
point, but even where this occurs, much of that growth occurs at the expense of existing gaming
facilities, which see their operating margins driven so low that they are forced into bankruptcy and
default with a corresponding loss of employment in the industry. There is simply no question that
if given the green light by state legislators, voters, or regulators marginal operators will continue
to join the casino arms race to the point of mutual assured destruction.

The cannibalizing of gaming revenues from existing gaming facilities may be viewed as a rational
and beneficial policy choice for state decision makers when they are recapturing gaming
revenues that would otherwise be spent by a states residents at casinos in adjacent states, because
the displacement of gaming revenues in neighboring states becomes new growth in gaming and
tax revenues for states that are just entering the market or expanding their existing gaming portfolio
(McGowan 2009; Dense and Barrow 2003). However, the cost-benefits calculus of displacement
changes when revenue displacement comes at the expense of a states own gaming facilities.

For example, the addition of new gaming supply has not generated net new gaming revenues across
the Mid-West gaming market, which includes Illinois, Indian, Iowa, and Missouri. One of the most
dramatic illustrations of this intra-state displacement effect in a nearly saturated market is the
opening of the Rivers Casino in Des Plaines, Illinois. The Rivers Casino has a 43,000 square foot
gaming floor with 1,000 slot machines and 48 table games. The property also has five restaurants,
including a buffet.

The Rivers Casino, which opened in J uly 2011, has had a significant negative impact on other
Chicago area casinos. According to the Illinois Commission on Government Forecasting &
Accountability (2013, 18, 36): As expected Des Plaines success has been at the expense of other
riverboats in Illinois, especially those near the new casino in the Chicago metropolitan area.
When looking at the four older casinos in the Chicago area since Des Plaines J uly 2011 opening,
their combined adjusted gross receipts (AGR) have fallen $216.7 million or 25.5% (comparing FY
2011 totals to FY 2014). This level of cannibalization of existing facilities means that with FY
49
In 2013, the State of Delaware also agreed to pick up $10 million in gaming machine vendor fee costs that were
previously paid by the casinos, see, Delaware Public Media (NPR News) at http://www.wdde.org/64035-casino-aid-
bills-clear-state-senate.
50
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2014 AGR of $421.5 million that only 48.6% of Des Plaines AGR is new growth in the Chicago
market.

Likewise, the opening of Oxford Casino in Maine as a direct competitor to Hollywood Casino
Bangor provides another illustration of the intra-state cannibalization effect that occur when even
a comparatively small gaming facility without a hotel or extensive non-gaming amenities opens in
a location where each facilitys secondary market area penetrates the other facilitys primary
market area:

Oxford Casino cannibalized approximately 19% of Hollywood Casinos net slot
machine revenue in its first year of operation despite there being a 165 minute drive
time distance between the two facilities.

After the opening of Oxford Casino, year-to-year monthly net slot machine revenue
immediately turned negative and had not recovered from this trend as of December
2013 (Barrow 2013; Maine Gambling Control Board 2014).

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5.00 ECONOMI C I MPACTS OF A PROPOSED WI LMOT
CASI NO & RESORT

The developer of the proposed Wilmot Casino & Resort has claimed that the new gaming facility
will create 1,800 permanent jobs (Harding 2013; Wilmorite 2013). The Consultant conducted an
economic impact analysis of the proposed casino and resort to independently test this claim,
including the potential for job losses at existing gaming facilities.

5.10 DEFI NI TI ONS

Many specialized terms and concepts are utilized in measuring the economic impacts of the
gaming (or any other) industry. Economic impacts measure the importance of an economic activity
primarily in terms of the output (total gross revenues), employment, and personal income
generated by that activity:
Output -- the value of goods and services produced at the identified business
establishment or construction project.
Employment -- the number of people employed at the identified business
establishment or construction project, including wage and salary employees and
self-employed persons.
Personal income -- the wages, benefits, and other income derived from
employment that is linked geographically to the identified work site.

Economic impacts consist of direct impacts, indirect impacts, induced impacts, and total impacts.
Direct impacts are the economic activities carried out at a business establishment or construction
project and are therefore an immediate consequence of the economic activity that would not have
occurred in the absence of the business establishment or construction project.

Indirect impacts derive primarily from off-site economic activities that are attributable to the
identified business establishment. These economic activities occur mainly as a result of non-
payroll expenditures by the business within a defined local area (i.e., town, city, county,
metropolitan statistical area). Local expenditures include a range of operating expenses such as
construction materials, office supplies, motor transport, horticultural services, furniture, utilities,
maintenance and repairs, business machines, business services, management consulting, and so
forth. Indirect impacts differ from direct impacts insofar as they originate entirely off-site,
although the indirect impacts would not have occurred in the absence of the identified business
establishment. Induced impacts are the multiplier effects of the direct and indirect impacts created
by successive rounds of spending by employees and proprietors.
51
Total impacts are the sum of
the direct, indirect, and induced impacts.
51
Most of the take-home income earned by employees is spent locally. Some of this spending becomes income to
local individuals who provide services to employees. Some the spending by employees goes to local businesses and
becomes income to the business owners and their employees. Subsequently, part of these second-round incomes are
also spent locally and thus become income to another set of individuals. As successive rounds of spending occur,
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5.20 PARAMETERS FOR ECONOMI C I MPACT ANALYSI S

In FY 2012, commercial casinos and race track casinos employed 337,672 persons in the United
States and had a total payroll of $13.2 billion with average annual wages of $39,509 (AGA 2013),
although the local impacts of the industry vary depending on the size, type, and location of
facilities. The non-traditional jurisdictions now account for 60.7 percent of total employment in
the casino/racino sector with a total payroll of $4.6 billion and annual average wages of $35,550
(see Table 16).

Table 16

In FY 2012, U.S. commercial casinos and race track casinos generated $37.3 billion in gross
gaming revenue. On average, casinos employ 9 persons for every $1 million in gross gaming
revenue, although employment ratios vary widely depending on the size, type, and location of
additional income is created in the local area, region, and state. The impact of these successive rounds of spending is
called the multiplier effect.
State
No. of
Casinos
Gross Gaming
Revenue
(billions)
Total
Employment
Total Wages
(billions)
Annual
Average
Wage
Nevada 265 $10.86 170,206 7.69 $ 45,198 $
South Dakota 35 $0.11 1,686 0.04 $ 22,639 $
Colorado 41 $0.77 9,278 0.22 $ 23,361 $
New J ersey 12 $3.05 34,726 0.91 $ 26,269 $
Mississippi 30 $2.23 23,377 0.85 $ 36,260 $
Ohio 4 $0.43 4,197 0.09 $ 21,746 $
Maine 2 $0.10 879 0.01 $ 13,538 $
Florida 6 $0.43 3,319 0.10 $ 31,534 $
Oklahoma 2 $0.11 870 N/A N/A
Iowa 18 $1.47 9,558 0.34 $ 35,686 $
Louisiana 18 $2.40 15,061 0.63 $ 41,896 $
Michigan 3 $1.42 7,972 0.37 $ 45,977 $
Missouri 13 $1.77 9,631 0.34 $ 34,877 $
Delaware 3 $0.53 2,775 0.11 $ 37,906 $
Indiana 13 $2.61 12,543 0.46 $ 36,819 $
Illinois 10 $1.64 7,687 0.32 $ 42,212 $
West Virginia 5 $0.95 4,351 0.13 $ 30,954 $
Kansas 3 $0.34 1,344 0.05 $ 37,537 $
New Mexico 5 $0.24 918 0.03 $ 32,429 $
Pennsylvania 11 $3.16 10,162 0.34 $ 33,435 $
New York 9 $1.80 5,233 0.19 $ 36,237 $
Rhode Island 2 $0.53 1,400 N/A N/A
Maryland 3 $0.38 499 0.02 $ 35,010 $
Total 513 $37.31 337,672 $13.24 39,509 $
Non-Traditional States 236 $23.40 204,932 $4.64 35,550 $
U.S. Casino Employment & Wages by State, 2012
Source: AGA (2013, 4, 11-22).
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gaming facilities. Employment is primarily generated by labor intensive table games and by non-
gaming amenities, such as hotels, food and beverage outlets, retail stores, entertainment venues,
conference and meeting facilities. Thus, employment ratios range from a low of one (1) employee
per $1 million in GGR in Marylands slot parlors to a high of sixteen (16) employees per $1 million
in GGR in Nevadas destination resort casinos (see Table 18).

Based on average employment levels in the non-traditional jurisdictions, the proposed Wilmot
Resort & Casino would at best generate 1,348 permanent jobs with stabilized operations at full
build-out, although the small hotel and range of other non-gaming amenities would suggest an
even lower level of total permanent employment.

Table 17

5.30 METHODOLOGY: THE I MPLAN MODELI NG SYSTEM

The direct, indirect, and induced employment impacts of the proposed Wilmot Casino & Resort
have been specified using IMPLAN (IMpact Analysis for PLANing). IMPLAN is an econometric
modeling system developed by applied economists at the University of Minnesota and the U.S.
Forest Service. The IMPLAN modeling system has been in use since 1979 and it is currently used
by over 500 private consulting firms, university research centers, and government agencies. The
State
No. of
Casinos
Gross Gaming
Revenue
(billions)
Gaming Tax
Revenue
(billions)
Effective
Gaming Tax
Rates
Total
Employment
Employees per
$1 million GGR
Nevada 265 $10.86 $0.869 8.0% 170,206 16
South Dakota 35 $0.11 $0.017 15.5% 1,686 16
Colorado 41 $0.77 $0.104 13.6% 9,278 12
New J ersey 12 $3.05 $0.255 8.4% 34,726 11
Mississippi 30 $2.23 $0.273 12.3% 23,377 11
Ohio 4 $0.43 $0.138 32.1% 4,197 10
Maine 2 $0.10 $0.043 43.4% 879 9
Florida 6 $0.43 $0.162 37.8% 3,319 8
Oklahoma 2 $0.11 $0.020 18.0% 870 8
Iowa 18 $1.47 $0.341 23.3% 9,558 7
Louisiana 18 $2.40 $0.579 24.1% 15,061 6
Michigan 3 $1.42 $0.320 22.6% 7,972 6
Missouri 13 $1.77 $0.471 26.6% 9,631 5
Delaware 3 $0.53 $0.217 41.3% 2,775 5
Indiana 13 $2.61 $0.807 30.9% 12,543 5
Illinois 10 $1.64 $0.574 35.0% 7,687 5
West Virginia 5 $0.95 $0.403 42.4% 4,351 5
Kansas 3 $0.34 $0.092 27.0% 1,344 4
New Mexico 5 $0.24 $0.063 26.0% 918 4
Pennsylvania 11 $3.16 $1.487 47.1% 10,162 3
New York 9 $1.80 $0.823 45.7% 5,233 3
Rhode Island 2 $0.53 $0.329 62.3% 1,400 3
Maryland 3 $0.38 $0.218 57.8% 499 1
Total 513 $37.31 $8.605 23.1% 337,672 9
Non-Traditional States 236 $23.40 $7.48 32.0% 204,932 9
Casino Gaming Tax Revenues, Effective Tax Rates, & Employment Ratios by State, 2012
Source: AGA (2013, 4, 11-22).
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Consultant has been a licensed and certified IMPLAN user since 1999 and regularly employs it
for conducting economic and fiscal impact analyses for a wide range of industries.
52

The IMPLAN modeling system combines the U.S. Bureau of Economic Analysis Input-Output
Benchmarks with other data to construct quantitative models of trade flow relationships between
businesses and between businesses and final consumers. From this data, one can examine the
effects of a change in one or several economic activities to predict its effect on a specific state,
regional, or local economy (impact analysis). The IMPLAN input-output accounts capture all
monetary market transactions for consumption in a given time period. The IMPLAN input-output
accounts are based on industry survey data collected periodically by the U.S. Bureau of Economic
Analysis and follow a balanced account format recommended by the United Nations.

IMPLAN also includes social accounting data (e.g., personal income and gross state product) that
makes it possible to measure non-industrial transactions such as the payment of indirect taxes by
businesses and households. The IMPLAN data base provides data coverage for the entire United
States by county and has the ability to incorporate user-supplied data at each stage of the model
building process to insure that estimates of economic impacts are both up-to-date and specific to
an economic impact area.
53
IMPLAN can construct local input-output models in units as small as
five-zip code clusters.

IMPLANs Regional Economic Accounts and the Social Accounting Matrices are used to
construct local, county, or state-level multipliers specific to an impact area. Multipliers describe
the response of an economy to a change in demand or production. The multipliers allow economic
impact analysis to move from a descriptive input-outputs model to a predictive model. Each
industry that produces goods or services generates demand for other goods and services and this
demand is multiplied through a particular economy until it dissipates through leakage to
economies outside the specified area. Thus, multipliers calculate the response of the economic
impact area to a change in demand or production.

IMPLAN models discern and calculate leakage from local, regional, and state economic areas
based on workforce configuration, the inputs required by specific types of businesses, and the
availability of both inputs in the economic area. Consequently, economic impacts that accrue to
other regions or states as a consequence of a change in demand are not counted as impacts within
the economic area. In addition, multipliers are applied only to personal disposable income to
obtain a more realistic estimate of the multiplier effects from increased demand. The reliability of
these estimates has been proven through empirical testing (Department of Commerce 1981;
Brucker et al 1990).

52
In addition to the gaming industry, the Consultant has conducted similar market feasibility, economic, and fiscal
impact analyses for business establishments in the retail, textile and apparel, marine science and technology, arts and
crafts, tourism, and defense industries, among others.
53
The IMPLAN modeling system draws on a variety of statistical sources, including the Bureau of Labor Statistics
Growth Model, Bureau of the Census, ES-202 employment and earnings data, the Regional Economic Information
System (REIS), and the Bureau of Economic Analysis Gross State Product data.

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A predictive model is constructed by specifying a series of new expenditures in a specific
economic area (e.g., new employment or construction) which is then applied to the industry
multipliers for that particular region. Based on these calculations, the model estimates final
demand, which includes employment, employee compensation (excluding benefits), and point-of-
work personal income (including benefits). The initial IMPLAN data details all purchases in a
given area, including imported goods and services. Importantly, IMPLANs Regional Economic
Accounts exclude imports to an economic area so the calculation of economic impacts identifies
only those impacts specific to the economic impact area. IMPLAN calculates this distinction by
applying Regional Purchase Coefficients (RPC) to predict regional purchases based on an
economic areas particular characteristics. The Regional Purchase Coefficient represents the
proportion of goods and services that will be purchased regionally under normal circumstances,
based on the areas economic characteristics described in terms of actual trade flows within the
area.

The Consultant built input-output models for each existing gaming facility in the proposed Wilmot
Casino & Resorts competitive set, as well as for the proposed Wilmot Casino & Resort that
measured economic impacts at the county level and combined five county level (i.e., Eastern
Southern Tier) using the IMPLAN Professional 3.0 model building software and data packages.
The data used in the model are for 2013, which is the latest available. Model outputs are reported
in 2013 dollars.

It is possible to estimate the economic impact of a casinos operations and capital expenditures
simply by changing the output of the appropriate industries in the econometric model. This method
assumes that the Wilmot Casino & Resorts production function is the same as the average for the
entire industry in New York, which includes slots only race track casinos, race track casinos with
hotels, and tribally operated destination resort casinos.

5.40 DATA SOURCES

Expenditures for payroll and local purchases are calculated based on gross gaming revenues and
non-gaming revenues. Commercial casinos directly generate an average of 9 jobs per $1 million
in GGR nationwide, while New Yorks race track casinos generate an average of 3 jobs per $1
million in GGR. These averages were used to triangulate and cross check the direct employment
figures generated by the IMPLAN modeling system. The main data input into the IMPLAN model
was the proposed Wilmot Casino & Resorts gross gaming revenue (CY 2018) and an estimate of
non-gaming revenue (output), which generated estimates of employment and wages for the
proposed gaming facility. A similar model was constructed for each of the existing gaming
facilities in the competitive set to determine the negative impacts on employment and wages. In
these cases, the main data inputs into the IMPLAN model were the revenue losses (displacement)
incurred as a consequence of the proposed Wilmot Casino & Resorts competitive impact on those
facilities, which generated estimates of employment and wage losses for the existing gaming
facilities.

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5.41 Assi gnment t o I MPLAN I ndust r y Sec t or s

The allocation of employment and expenditures among the 528 IMPLAN industry sectors
(account sub-codes) was estimated by assigning gaming-related and non-gaming related
expenditures to the following IMPLAN sub-codes:

330 Miscellaneous Retail
405 Independent Artists, Writers, & Performers
409 Other Amusement Gambling and Recreation,
411 Hotels & Motels,
413 Food Services & Drinking Places.

5.42 Regi onal Pur c hase Coef f i c i ent

The economic impacts of the proposed Wilmot Casino & Resort on the three race track casinos
(i.e., Vernon Downs, Finger Lakes, and Tioga Downs) are calculated for the combined counties in
the Eastern Southern Tier, with purchases from vendors outside the designated impact area
excluded from the calculation of economic impacts for the local area.
54

The economic impacts of the proposed Wilmot Casino & Resort on Turning Stone Resort Casino
are calculated for Oneida and Onondaga counties in the Eastern Southern Tier, with purchases
from vendors outside the designated impact area excluded from the calculation of economic
impacts for the local area. Gambling operations have a regional purchase coefficient (RPC) of
47.1% and only that portion of non-payroll purchases are included in the calculation of indirect
impacts. The RPC is 90.0% for Food Services and Drinking Places. The RPC is 100.0% for Hotels
& Motels. The RPC for Retail is 99.3%. The RPC is 35.1% for entertainment.

5.43 Tr ade and Frei ght Mar gi ns

When a casino purchases goods or services, its expenditure covers at least the prices of the goods
or services, but it may also include the cost of shipping, insurance, wholesale margin, retail margin,
and brokerage fees. IMPLAN provides sector-specific margins to account for these exported
expenditures.

54
An inherent weakness of a single-region input-output model, such as IMPLAN, is that it cannot capture the feedback
effects that result when purchases from a supplier outside the region lead to additional purchases within the region by
that supplier or suppliers. It is possible to construct a multi-region input-output model to capture feedback effects, but
such a model requires a great deal of data collection and is not supported by the IMPLAN software.
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5.50 CASI NO OPERATI ONS I MPACTS

The economic impact analysis for the proposed casinos operations is for CY 2018, the first year
of stabilized operations at full build-out of the casino and hotel.
55
Casino operations generate
economic impacts that continue as long as the facility remains in existence. The IMPLAN
modeling system uses U.S. Bureau of Labor Statistics earnings and income data and the U.S.
Bureau of Economic Analysis Regional Economic Information System (REIS) to calculate place
of work income. These estimates are based on direct employment data specific to the different
aspects of a casinos operations and based on actual compensation rates in a particular state,
county, or locality.

Employment is defined as the total number of wage and salaried employees and self-employed
jobs in a region. It includes both full-time and part-time workers. The data sets used to calculate
total employment are the ES-202 data, County Business Patterns, and the Regional Economic
Information System.

Employee compensation is wages and other income derived from employment that is linked
geographically to the workplace site. Employee compensation does not include tip income, which
is normally an additional 22% of the actual wages of many casino operations employees (e.g.
dealers, food and beverage servers); nor does it include fringe benefits, which is normally about
twenty-five percent (25%) of the wages and salaries of full-time employees.

The inputs to the model are that the proposed Wilmot Casino & Resort will:

generate $158,097,966 in gross gaming revenue by CY 2018 (year 3 of
operations),

generate $18,971,740 in non-gaming revenue (primarily hotel, food and beverage,
and retail) by CY 2018 (year 3 of operations).

displace $55,402,184 in gross gaming revenue and $10,974,104 in non-gaming
revenue at Turning Stone Resort Casino.

revenue at Finger Lakes Gaming & Race Track,

displace $6,908,381 in gross gaming revenue and $345,419 in non-gaming
revenue at Tioga Downs Casino, and

55
Economic impacts for Wilmot Casino & Resort are estimated for all counties in the Eastern Southern Tier, including
the displacement impacts on Vernon Downs Casino & Hotel, Finger Lakes Gaming, and Tioga Downs Casino.
Displacement impacts of Wilmot Casino & Resort on Turning Stone Casino Resort are calculated for Oneida and
Onondaga Counties.
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revenue at Vernon Downs Casino.
56

The direct, indirect, and induced impacts have been estimated on the basis of current (2013)
earnings specific to New York and based on a business profile specific to the proposed Wilmot
Casino & Resort.

5.51 Di r ec t Ec onomi c I mpac t s

The IMPLAN model predicts that the proposed Wilmot Casino & Resort operations with $158.1
million in gross gaming revenue and $18.9 million in non-gaming revenue will generate 1,227 jobs
and $32.3 million in direct employee compensation (see Table 19). Thus, IMPLAN generated
estimates of direct employment and earnings that are considerably lower (-573 jobs) that the
estimates provided by the developers of the proposed Wilmot Casino & Resort (see Table 18).
57

Moreover, after subtracting job losses due to the displacement of gaming and non-gaming revenue
at existing New York gaming facilities the proposed Wilmot Casino & Resort will have a net
impact of only 122 direct jobs and 4.9 million in employee earnings in the Eastern Southern Tier
(see Table 18). Approximately 90.1% of direct employment and 79.2% of direct employee
earnings will simply be mere transfers of employment and earnings from the regions existing
gaming facilities with the most significant impacts affecting Turning Stone Resort Casino and its
surrounding counties.

Table 18

56
The estimates of non-gaming revenue are based on standard average ratios of non-gaming to gaming revenue for
similar type and sized gaming facilities, while the estimate for Turning Stone Resort Casino is based on its audited
financial statements.
57
Wilmorite (2013) predicts 1,800 direct jobs in its initial press release.
Gaming Facility
Gross Gaming
Revenue
Non-Gaming
Revenue
Direct
Employment
Direct
Employee
Earnings
Turning Stone Resort Casino -$55,402,184 -$10,974,104 -510 -$12,631,381
Finger Lakes Gaming & Race Track -$25,980,759 -$1,298,960 -375 -$8,507,594
Tioga Downs Casino -$6,908,381 -$345,419 -104 -$2,091,249
Vernon Downs Casino -$17,131,026 -$1,370,482 -116 -$2,389,904
Total Market Impact -$105,422,350 -$13,988,965 -1105 -$25,620,128
Wilmot Casino & Resort $158,097,966 $18,891,442 1,227 $32,343,309
Competitive Impact of Wilmot Casino Resort on Gross Gaming Revenue (Net Win), Non-Gaming Revenue,
Employment & Earnings, CY 2018
Notes: 1. Revenue in 2013 constant dollars. 2. Assumes J anuary 1, 2016 start date for Wilmot Casino & Resort and
first year of stablized operations in CY 2018.
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5.52 I ndi r ec t & I nduc ed Ec onomi c I mpac t s

In 2013, the Oneida Indian Nation, which owns and operates Turning Stone Casino Resort, spent
$125.7 million in Oneida and Onondaga Counties with 885 different businesses as follows:

$82,144,247 spent with 360 businesses in Oneida County,
$43,571,404 spent with 525 business in Onondaga County (Oneida Indian Nation 2014).

These non-payroll local business expenditures generate indirect impacts (i.e., additional
employment and income) by supporting other businesses in those counties. The Oneida Indian
Nation also paid $155 million in salaries to 4,572 employees, which generate induced impacts (i.e.,
additional employment and income) as those employees purchase consumer goods and services
from local businesses (Onedia Indian Nation 2013).

The IMPLAN model predicts that the operations of the proposed Wilmot Casino & Resort will
support an additional 154 jobs in the Eastern Southern Tier through indirect impacts (i.e., casino-
related purchases) and 95 jobs through induced impacts (i.e., casino employee purchases) by CY
2018. The employment generated by indirect and induced impacts will support an additional $10.2
million in employee compensation in the Eastern Southern Tier (see Table 19).
58

However, as a result of reduced employment and purchases by the four existing gaming facilities
that will be its direct competitors, and disruptions of existing local supply chains, the proposed
Wilmot Resort & Casino will actually generate a net decline of 2 indirect jobs and a net decline of
57 induced jobs, particularly in Oneida and Onondaga Counties, with a corresponding loss of
employee earnings in these other sectors of the local economy (see Table 19). Table 20 provides a
partial list of these employment losses by sector for Oneida and Onondaga Counties that occur as
a result of the negative impacts on Turning Stone Resort Casino.
59

Table 19

58
The total local purchases and payroll for the Oneida Indian Nation include purchases and payroll not directly related
to Turning Stone Casino Resort. The inputs to the IMPlan model (i.e., itemized gross revenues and payroll) include
only purchases and payroll for Turning Stone Casino Resort and, therefore, generate results specific to the impact on
the Nations casino operations.
59
The negative impacts in Table 20 will actually be higher due to the impact of Wilmot Casino on Vernon Downs
Casino & Hotel and will be distributed across 150 different sectors of the local economy.
Gaming Facility
Indirect
Employment
Indirect
Employee
Earnings
Induced
Employment
Induced
Employee
Earnings
Finger Lakes Gaming & Race Track -50 -$2,100,343 -50 -$1,775,354
TiogaDowns Casino -9 -$354,103 -6 -$193,050
Vernon Downs Casino -26 -$986,950 -16 -$564,101
Turning Stone Resort Casino -71 -$3,749,666 -80 -$3,430,506
Total Market Impact -156 -$7,191,062 -152 -$5,963,011
Wilmot Casino & Resort 154 $6,946,808 95 $3,322,904
Notes: 1. Revenue in 2013 constant dollars. 2. Assumes J anuary 1, 2016 start date for Wilmot
Casino & Resort and first year of stablized operations in CY 2018.
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Table 20
*

The combined direct, indirect, and induced negative employment impacts on the Eastern Southern
Tier will result in a total job loss of 1,413 with approximately 703 of those job losses concentrated
in Oneida County and Onondaga County. All things being equal (as of September 2014), these job
losses would increase the unemployment rate in Oneida County from 5.9% to 6.1%, while the
unemployment rate in Onondaga County would increase from 5.5% to 5.8%.
60

60
Calculation based on Local Area Unemployment Statistics data (New York Department of Labor 2014).
Industry Sector Indirect Induced Total
Food services and drinking places 6 10 16
Real estate establishments 3 3 5
Services to buildings and dwellings 4 1 5
Offices of physicians, dentists, and other health practitione 0 5 5
Legal services 4 1 5
Private hospitals 0 5 5
Accounting, tax preparation, bookkeeping, and payroll servi 4 0 4
Employment services 3 1 4
Wholesale trade businesses 1 2 4
Management of companies and enterprises 3 0 4
Nursing and residential care facilities 0 4 4
Retail Stores - Food and beverage 0 3 3
Advertising and related services 3 0 3
Retail Stores - General merchandise 0 3 3
US Postal Service 2 0 3
Performing arts companies 2 0 2
Individual and family services 0 2 2
Monetary authorities and depository credit intermediation a 1 1 2
Retail Stores - Motor vehicle and parts 0 2 2
Radio and television broadcasting 2 0 2
Private junior colleges, colleges, universities, and professio 0 2 2
Maintenance and repair construction of nonresidential struc 2 0 2
Civic, social, professional, and similar organizations 1 1 2
Dry-cleaning and laundry services 1 0 2
Medical and diagnostic labs and outpatient and other ambula 0 2 2
Business support services 1 0 2
Automotive repair and maintenance, except car washes 1 1 2
Newspaper publishers 1 0 2
Retail Stores - Miscellaneous 0 1 2
Retail Stores - Clothing and clothing accessories 0 2 2
Other state and local government enterprises 1 1 2
Turning Stone Impact:
Non-Casino Employment Losses in Oneida & Onondaga Counties
Source: Implan (2014).
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6.00 FISCAL IMPACT ANALYSIS

The proposed Wilmot Casino & Resorts displacement of existing facilities gross gaming revenue
will reduce the amount of tax revenue collected by the State of New York from those existing
facilities. Based on current revenue sharing percentages (2014-2015) with the race track casinos
and Turning Stone it is estimated that state revenue collection from existing gaming facilities in
the designated market area will be $35.0 million less (CY 2018) than would be the case without
the proposed Wilmot Casino & Resort. If this revenue reduction is subtracted from the estimated
gaming tax payment by the proposed Wilmot Casino & Resort then the proposed casinos net
impact on gaming tax revenues will be $14.5 million annually (CY 2018, see Table 21) instead of
the $49.1 million nominal revenue collection.

Table 21

The Oneida Indian Nations (2013, 5) Settlement Agreement with the State of New York (Section
III.B.) stipulates that twenty-five percent (25%) of the revenue collected from Turning Stone
Casino Resort by the State shall be allocated to the County of Oneida. By 2018, this would result
in Oneida County receiving $2.4 million less annually in revenue than would be the case without
the proposed Wilmot Casino & Resort and this loss will result in less local economic activity than
would otherwise have been the case.

As a part of the New York Gaming Economic Development Act of 2013, the State of New York
is required to distribute ten percent (10%) of the funds its receives under the tribal-state compacts
to counties within the exclusivity zones that do not already receive a share of these funds under
provisions in the tribal-state compacts.
61
These funds are to be distributed on a per capita basis and
61
For example, the Settlement Agreement with the Oneida Indian Nation stipulates that Oneida County will receive
twenty-five percent (25%) of the Nation Payment to the State of New York and an additional sum of $2.5 million
annually for 19.5 years. Under the same Settlement Agreement, Madison County will receive $3.5 million annually.
Consequently, neither county is eligible to receive funds from the ten percent distribution mandated by state
legislation.
Tioga Downs Adjustment -$345,419
Net Gaming Tax Change $14,481,368
Competitive Impact of Wilmot Casino Resort on State Gaming
Tax Gaming Revenues (Net Win), CY 2018
Notes: 1. Revenues in 2013 constant dollars. 2. Assumes J anuary 1, 2016 start date for
Wilmot Casino & Resort. 3. Gaming taxfor VLT facilities based on percent allocated to
Education Allowance and Marketing Allowance. 4. Taxrate for Tioga Downs will be
reduced from37% to 32% as a result of new facility in its market area.
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it is estimated that Onondaga County will receive approximately $2.5 million per year under this
legislation and based on Turning Stone Casino Resorts current and projected performance.

The $2.5 million distribution to Onondaga County is scheduled to fund municipal bonds for the
construction of an Onondaga Lake amphitheater in the county (Weaver 2014). Consequently, the
potential loss or reduction of these funds may place those bonds in jeopardy, but also jeopardize
the construction jobs and permanent operations jobs that will be generated by the amphitheater, as
well as the jobs dependent on ancillary tourism expenditures generated by the amphitheater.

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APPENDIX A
Description of the Consultant

Pyramid Associates, LLC is a registered Massachusetts company (est. 2006) that specializes in
gaming market analysis (gravity modeling), industry analysis, economic impact analysis, and
behavioral survey research. Recent clients (2010-2014) include state and local governments,
Fortune 500 companies, U.S. Indian tribes, and other entities doing business in California,
Connecticut, Illinois, Maine, Massachusetts, New Hampshire, Nevada, New York, Oregon,
Pennsylvania, Rhode Island, Texas, and Wisconsin.

The companys general manager (and principal investigator for this report) is Dr. Clyde W. Barrow
(Ph.D., UCLA, 1984). Dr. Barrow is a Professor of Public Policy and Chair of the Department of
Political Science at the University of Texas Pan American. He was formerly a Chancellor
Professor of Public Policy at the University of Massachusetts, Dartmouth and Director of the
UMass Dartmouth Center for Policy Analysis (1987-2014). He has been studying the economic,
fiscal, and community impacts of casino gaming for the last 19 years. He is project manager for
the Northeastern Gaming Research Project, which publishes an annual New England Casino
Gaming Update and a biennial New England Gaming Behavior Survey. His research and expert
commentary have been cited in more than 2,300 newspaper articles, including the Wall Street
Journal, New York Times, Washington Post, Christian Science Monitor, and USA Today. He has
published articles on expanded gaming in the Gaming Law Review and Economics, Gaming
Research & Review Journal, Casino Enterprise Management, Massachusetts Benchmarks, and
Journal of Travel Research. He has delivered invited expert testimony to numerous state
legislatures, as well as other state and federal agencies. He is also a Gaming Specialist for the
Gerson Lehrman Group, LLC (New York), where he provides briefings and consultation about the
gaming industry to capital management firms, investment banks, venture capital funds, and bond
traders.

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APPENDIX B
Gravity Modeling
The gravity model is a tool first developed by economists in the late 1920s and early 1930s for the purpose
of estimating retail trade flows between various geographic areas, although private retail companies quickly
recognized their utility for estimating the potential customer base and future annual sales of new stores.
Gravity models are actually derived from Sir Isaac Newtons Law of Gravitation, which was first used to
predict the movement of people, commodities, and sales by William J . Reilly, a professor of business at the
University of Texas. Reilly published The Law of Retail Gravitation in 1931 after he realized that Newtons
Law of Gravitation seemed to loosely express the empirical regularities he observed while conducting
several trading area investigations for chain grocery stores in Texas during the late 1920s (Reilly 1929).

Newtons Law of Gravitation, which was first articulated in his Philosophi Naturalis Principia
Mathematica (1687) states that the gravitational force between two masses is proportional to the product of
the two masses and inversely proportional to the square of the distance between them. Reilly argued that
Newtons Law of Gravitation seemed to provide a good working hypothesis for defining the boundaries of
competing retail trade areas if one translated the law into two behavioral concepts: (a) that the ability of a
city to attract non-resident trade is a function of its population (mass) and (b) that the flow of nonresident
trade to a city is an inverse function of distance (force) (Thompson 1967, 37). If one adopted this hypothesis,
then the law of retail gravitation could be used to calculate the breaking point between two places, where
customers will be drawn to one or another of two competing commercial centers (Anas 1987, 45-54;
Golledge and Timmermans 1988). In this sense, Reilly argued that two cities attract retail trade from an
intermediate city or town in the vicinity of the breaking point approximately in direct proportion to the
populations of the two cities and in inverse proportion to the square of the distances from the two cities to
the intermediate town (Huff 1963, 81-82), although notably, Reillys formulation of the law presumes that
the geography of an area is flat without any rivers, roads, or mountains to alter a consumers decision about
where to travel to purchase a particular good or service.

Reillys Law remained an interesting hypothesis for more than a decade and, as late as 1944, the editor of
The Journal of Marketing, which became a key academic testing ground for Reillys Law, wrote that there
is a real need for inductive studies of consumer buying habits (quoted in Bennett 1944, 405). Professor
Victor W. Bennett published one of the first study of this type based on a survey of 240 families living in
Laurel, Maryland. The families were questioned on their choice of shopping venues in Baltimore, Maryland
and Washington, D.C. and, in one of the first empirical tests of Reillys Law, Bennett (1944, 413) found
that there is more out-of-town buying by Laurel consumers in Baltimore than in Washington, [which]
conforms roughly to the application of Reillys Law.

Bennetts study was followed by the noteworthy work of P.D. Converse (143, 1946, 1948), a professor of
business at the University of Illinois, who examined retail customer movement between several
communities in Illinois and established the usefulness of Reillys Law for defining retail trade areas across
a much larger geographic area. However, Converse made a significant addition to Reillys Law that more
precisely determined the breaking point between competing trading areas centered in two different cities.
Converse defined the breaking point between two trading areas as an equilibrium boundary line where B
a
=Bb, i.e., the point up to which one city exercises a dominant trading influence and beyond which another
city dominates. The mathematical version of this adaptation is:

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(Equation 1)

Dab
Bab =
_____
1 + Pa/Pb

Where Bb =the breaking point between city A and city B in miles from B
Dab =the distance separating city A from city B
Pa =the population of city A; and
Pb = the population of city B

This breakthrough was followed by the work of Frank Strohkarck and Katherine Phelps, who were working
for the Curtis Publishing Company. They authored a 1948 article on the mechanics of constructing a trade
area map that for the first time visually represented competing trade areas as a series of concentric and
overlapping circles emanating from central places much like the three dimensional topographical or contour
maps familiar to geographers. Thus, Strohkarck and Phelps added an important cartographic dimension to
the gravity model as well as a mathematical refinement of the breaking point concept.

The pioneering work of Strohkarck and Phelps was further refined by Edna Douglas (1949a; 1949b), who
employed three methods for identifying retail customer origins in Charlotte, North Carolina: (1) the records
of the Credit Bureau of the Charlotte Merchants Association to determine customers addresses, (2) checks
deposited during one week by a group of local retail stores to determine the location of the banks against
which they were drawn and (3) an origin-destination study of passenger cars leaving Charlotte. Douglass
(1949b, 60) findings reinforced previous studies and again found that Reillys law of retail gravitation
provides a remarkably accurate delineation of the Charlotte retail trading area. However, Douglass
empirical findings also suggested a slight modification to Strohkarcks and Phelps concept of concentric
market areas.

First, Douglas (1949b, 59-60) found that the retail trading area was not a single concentric circle with one
breaking point, but a series of circles within circles that comprised primary, secondary, and tertiary market
areas, with customers in the tertiary market coming from otherwise significant trading areas that were in
competition with Charlotte. This led Douglas to conclude that market breaking points were not hard
boundaries, where all the potential customers on one side gravitated in one direction and all of those on the
other side gravitated in the other direction, but porous boundaries that delineated points where an
exponentially decreasing proportion of customers would be drawn to a trading area. In this formulation, the
Strohkarck and Phelps breaking point formula defines the outer boundary of a primary market area at which
point the proportion of customers attracted to a trading area begins to decline exponentially, while the
tertiary market area marks another point of exponential decline in customer attraction (force), because the
gravitational pull of a competing, but closer trading area begins to exert greater force on customers. Douglas
also found that the primary market area was indeed nearly circular as hypothesized by Strohkarck and
Phelps, but the secondary market area became somewhat elliptical, while the boundaries of the tertiary
market area were quite erratic depending upon the level of competition from outlying areas with significant
trading centers.

The next major advance in gravity modeling was stimulated by the emergence of regional shopping centers
(i.e., malls). By the 1950s, the investors in costly real estate projects, such as banks, insurance companies,
and other financial institutions, were no longer willing to rely on the intuition of business entrepreneurs for
making decisions, but increasingly sought to base investment decisions on solid factual information as to
the profitability of a proposed real estate investment. Similarly, prospective store tenants, often the large
retail chains that were being asked to anchor the new shopping centers, conducted their own studies to
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evaluate proposed shopping center locations. This second generation of trade area studies incorporated
concepts and research techniques from marketing, geography, statistics, economics and the behavioral
science disciplines (e.g., psychology and sociology) (Applebaum 1965, 234). By the mid-1950s, this type
of gravity model was being applied to both inter-urban and intra-urban market areas for the purpose of
determining the market feasibility of local malls, large chain stores, and regional shopping centers (Ellwood
1954) and by the 1960s gravity models were being used to assist government officials with economic
development and urban planning (Huff 1963; Lakshmanan1964). Subsequently, gravity models were used
to predict consumer preferences for a wide variety of competing retail and service industry outlets, such as
hospitals (Bucklin 1971), large chain stores (MacKay 1973), banks (Ali and Greenbaum 1977), and movie
theatres (Davis 2006). By the 1970s, gravity models were being extended to the leisure and social travel
industries (Gilbert, Peterson, and Line 1972; Stutz 1973; Vickerman 1974).

However, during this period (1950-1970), there were two additional developments in the science of gravity
modeling. First, as Louis P. Bucklin (1971, 489) observes: In its original formulation, the retail gravity
model was used to predict the point between two cities where trade between them would be divided. This
breaking point defined the geographical size of the market which each city controlled I the other.
However, Bucklin (1967a; 1967b) was among the first scholars to test the gravity models ability to predict
intra-urban shopping patterns as opposed to inter-urban shopping patterns. For example, in one study,
Bucklin conducted a survey of 500 female heads of household in Oakland, California. In this study, he
(1967b, 42) concluded that mass retains much influence in the selection of an intra-urban shopping center,
but this innovation also shifted the concept of mass from the size of an areas population to the size and
composition of the facility. This subtle shift built on the work of Professor George Schwartzs (1963)
University of Illinois marketing group, which had generated impressive statistical evidence to validate
Reillys original hypothesis that one could use population or retail square footage as the sole proxy for
measuring retail mass in gravity models.

The results of these studies were so consistent and so reliable that nearly three decades after the publication
of Reillys Law of Retail Gravity (1931), Robert Ferber (1958, 302) was able to declare that: The two
variables included in Reillys Law and in subsequent formulations population and distance account for
almost all the variations in sales between cities. Indeed, after three decades of testing Reillys Law, Allen
F. J ung (1959, 62), a research associate at the University of Chicago suggested that through the years little,
if any, evidence has been presented which conflicts with this [Reillys] law. These claims were reaffirmed
by David L. Huff (1963, 81), who observed that empirical evidence is available to indicate that in many
cases the use of such [gravity] models has provided fairly good approximations of the limits of a number
of retail trade areas.

The Huff Model:
Variety, Time, Income, and Probability

Scholars, retail executives, real estate investors, and urban planners enthusiastically embraced Reillys Law
of Retail Gravitation as an iron law of retail trade distribution, but at the same time a number of
methodological amplifications were introduced in the 1960s and 1970s which culminated in the
introduction of the Huff model (Applebaum 1965, 234). It is actually David L. Huff, a former professor
of business at the University of California, Los Angeles (UCLA), who pioneered the type of gravity model
utilized most frequently by the casino industry and casino industry consultants. Huff (1963, 85) proposed
four modifications to Reillys Law that were critical to the development of the Huff model: (1) Merchandise
Offerings (or the number of items of the kind a consumer desires that are carried by the retail outlet), (2)
the travel time that is involved in getting from a consumers travel base to alternative retail facilities, (3)
the average household income of people living in the trading area, (4) probability contours as opposed to
breaking points. We might suggest by way of analogy that just as Newtonian mechanics was superseded
though not displaced by Niels Bohrs quantum mechanics a similar phenomenon occurred in the business
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and social sciences as the focus shifted from aggregate populations to individual consumer behavior or
from planetary bodies to sub-atomic particles.

First, Huff suggested that it is not just the square footage that measures the mass of a retail facility, but
rather square footage is really a proxy indicator for the number of stores, types of stores, and range of
merchandise offerings at a particular location, because it is this variety that justifies traveling longer
distances by making more purchasing options available at a single location. In the gravity models used by
the casino industry and its consultants, this concept of mass has typically been operationalized exclusively
in terms of gaming positions, where one slot machine equals one gaming position and one table game equals
five or six positions, because a table can accommodate multiple players. These accumulated modifications
to the concept of mass are often referred to today as destination effects (Black 1983).

Second, and despite widespread recognition of this shortcoming, most gravity models, including those used
in the casino industry are based on the assumption that customers patronize a facility according to some
rule involving the comparative distance between two facilities, all other things being equal. A customer
prefers facility A over facility B if the distance to facility A is shorter than some function of the distance to
facility B (Drezner Drezner, and Eiselt 1996). However, Richard Nelson (1958, 149) was one of the first
scholars to suggest that driving time, rather than distance was a more important determinant of customer
preference for alternative shopping facilities (Nelson 1958, 149). Similarly, by the late 1950s, Eugene J .
Kelley (1958, 32) had commented that convenience costs are assuming more importance as patronage
determinants compared to distance. Kelley observes by this time that marketers had actually identified
ten convenience forms with place convenience being only one of the ten forms. Nevertheless, Kelleys
work continued to emphasize the importance of place, or geographic area, as defined by the concentration
or dispersion of population as did Reilly.

Yet, Kelley did introduce two new elements into the concept of place convenience. Kelley (1958, 35)
challenged the equivalence of the distance concept with convenience by noting that distance involves
time-cost elements rather than a purely spatial one. Higher road speeds and the emergence of large
planned retail centers were actually changing consumers perceptions of distance, because one could travel
further faster and obtain more goods and services at a single location. Kelley (1958, 35) also noted the
importance of parking to retail structures as an element of time convenience, observing that it is generally
agreed that shoppers resist walking more than 600 feet from their parked cars to the nearest center store...this
suggests a limit to the maximum parking distance that can be used before a retail center loses its other
advantages over competing centers and certainly anyone who operates, manages, or visits a casino will
recognize the importance of parking, i.e., finding a space quickly, getting into the facility quickly, and
avoiding inclement weather.

Kelleys observations was validated in subsequent research, including a study Professors J ames A. Brunner
and J ohn L. Mason (1968), who studied consumer preferences for various shopping centers in Toledo, Ohio
based on drive-times as opposed to distance. The findings confirmed the drive-time hypothesis as superior
to the simple distance concept proposed by Reilly, but given the limited geographic sample, Brunner and
Mason (1968, 61) called on other researchers to ascertain the degree to which these observations are
generally true for other shopping centers in other communities. A license plate survey of 93,500 passenger
cars in 18 Greater Cleveland shopping centers by Cox and Cooke (1970, 13) in fact confirmed that the
driving time required to reach a center is highly influential in determining consumer shopping center
preferences (also see, McCarthy 1964, 577; Cox and Erickson 1967, 52; Berry 1967).

However, Cox and Cooke also found that the drawing power (i.e., gravity factor) of a shopping center
still had to be incorporated into the gravity model, because consumers were willing to drive farther to reach
a shopping center depending upon relative attractiveness compared to other shopping centers. Cox and
Cooke (1970, 14) suggested that a number of factors could be used to measure the attractiveness of a facility,
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such as the number of parking spaces, the size of the center, and the types of stores in the center, since
these factors could partially overcome the friction or inertia of drive-time and distance. Furthermore,
Gautschi (1981) points out that the first gravity models constructed to evaluate the potential trade areas of
planned shopping centers assumed the automobile of the 1950s and the 1960s, as well as the transportation
network in place at the time. Consequently, Gautschi (1981, 172) argues that the development of better,
faster, and more comfortable automobiles, the construction of superior road systems (parkways, interstate
highways), and urban mass transit means (at least theoretically) that the travel time parameter has an
inflated absolute value, which serves to underestimate the expanse of a centers trading area.

However, even as late as 1978, Raymond Hubbard found that the vast majority of the literature on gravity
modeling and retail trade areas still utilized objective distance data, rather than drive times partly because
distance data was easily available, but drive times were not available in any readily useable format. The use
of distance, rather than drive-time, has been almost universal in the casino industrys gravity models, but
the difference between distance and drive-time can be significant in various geographies that are not flat,
where the width and quality of roads is not consistent, where weather can be a factor, and where urban
congestion or other choke points can significantly alter the relationship between distance and drive-time.
However, the lack of available data on drive-times is a technical problem that should largely have been
eliminated by the introduction of computer and internet programs, such as MapPoint, Google Maps, Yahoo
Maps, Map Quest, Free Mileage Calculator, and other programs that have made drive-time data easily
accessible for incorporation into gravity models.

Third, while Reilly accounted for differences of population, he did not account for differences of income.
Yet, as early as 1958, Ferbers (1958, 303) consumer behavior research, which was based on Reillys Law
had found that income is a major factor influencing variations in per capita retail sales between cities for
most categories of sales. Similarly, Bucklin (1967b, 42) found but that consumer perceptions about the
value mass imparts vary considerably among consumers depending on the motivation of consumers. In
particular, he found that mass had a higher attraction (force) for those with higher incomes, since these
consumer cohorts were willing to travel farther to a primary retail center to obtain the benefits of retail
mass, while secondary centers held a greater attraction for those seeking convenience, and tertiary centers
(i.e., small out of the way stores) were more likely to attract price conscious consumers. Thus, subsequent
research has found that mass and income are two factors that will interact to promote excess travel
behavior (Hubbard 1978, 8-10). This is not only because a larger mass exerts more gravitational force on
consumers, but because those individuals showing evidence of higher income levels are more readily able
to bear the costs involved in shopping around, and therefore tend to travel greater distances in the journey
to consume (Hubbard 1978, 9; for example, McAnnally 1965; Schiller 1972). Thus, a larger and more
attractive retail facility increases the likelihood that higher income consumers will travel distances in excess
of those that are theoretically justified (Hubbard 1978, 9). By the late 1960s, consumer behavior surveys
were documenting that the nearest center postulate provided an inadequate description of consumer
movements and that large numbers of consumers deviated from what was defined as spatially lawful
behavior (Golledge et al 1967; Rushton et al. 1967; Hubbard 1978, 3-4). This is particularly important to
gravity modeling in the casino industry, where surveys have documented that the individuals who patronize
destination resort casinos, in particular, have incomes higher than the median income of its host jurisdiction
(AGA, 2013; Barrow and Borges 2013).

Finally, David L. Huff (1961, 84) identified another significant limitation to the application of Reillys
Law, which is that the calculation of breaking points to delimit a retail trade area conveys an impression
that a trading area is a fixed boundary circumscribing the market potential of a retail facility, when in fact
there is an exponential distance decay factor of declining retail attraction within the trade area, as well as
interpenetration and overlap between designated market areas. This problem had been identified earlier in
the development of gravity modeling by scholars, such as Edna Douglas, who had mapped trade areas based
on actual consumer origins, rather than distance postulates. Huff (1961, 490) built on this work, but was
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more emphatic in stating that trading areas do not have hard boundaries, but shade off into another and,
therefore, probabilistic models are appropriate measures of this process. Thus, Huff proposed that
breaking points be replaced by exponents, which are the statistical units that capture and measure the
distance decay factor in terms of the probability that an individual consumer will choose to patronize a
specified facility. This does not mean that the breaking point formula is irrelevant, but that it defines the
0.50 probabilistic contour or the point up to which a customer has a greater or less than fifty percent (50%)
probability of selecting one facility over another. The lines demarcating or connecting the geographical
units with comparable decay factors on a map are called probability contours instead of market
boundaries, because they delimit the statistical probability that individuals will select a particular trading
area or facility.

The most obvious deficiency in the application of this principle at the time was the lack of direct
information on the actual spatial movements and expenditures of individuals (Golledge et al. (1966, 261).
This difficult has largely been removed in the casino industry where the annual Harrahs (2006) surveys of
propensity to gamble now conducted by the American Gaming Association (2007-2013) has provided
reliable data at the state level. The development of sophisticated players club databases, hotel guest
databases, and daily headcounts by casinos have perhaps made the industry a leader in this area, particularly
as this proprietary information is often provided to consultants, who can then develop more elaborate
models based on actual player origins and gaming behavior (e.g., spend per visit).

The Huff model, which was first articulated in two articles published in 1963 and 1964, incorporated these
four modifications to Reillys Law to construct an alternative model of retail gravitation based on consumer
behavior theory and goods theory, rather than central place theory. In Huffs 1963 (87-88) article, he walks
the reader through a seven step process for constructing a gravity model that incorporates drive times and
that maps trade areas based on exponential decay factors, the actual population residing within these
probabilistic contours, and the average household income of the households residing within each contour
of the map.

The seven step process for constructing a Huff models is as follows:

1. Divide the area surrounding any existing or proposed shopping center into small statistical units.
These units could be Census enumeration districts.
2. Determine the square footage of retail selling space of all shopping centers included within the
area of analysis.
3. Ascertain the travel time involved in getting from a particular statistical unit to each of the
specified shopping centers.
4. Calculate the probability of consumers in each of the statistical units going to the particular
shopping center under investigation for a given product purchase.
5. Map the trading area of the shopping center in question by drawing lines connecting all statistical
units having like probabilities.
6. Calculate the number of households within each of the statistical units. The, multiply each of
these figures by their appropriate probability values to determine the expected number of
consumers (expressed in households) who will patronize the shopping center in question for a
particular product purchase.
7. Determine the annual average per household incomes of each of the statistic units. Compare such
figures to corresponding annual household budget expenditures in order to determine the average
expected amounts spent by such families on various classes of products, e.g., clothing and
furniture. Estimate annual sales for the shopping center under investigation by multiplying each
of the product budget figures by expected number of consumers from each statistical unit who are
expected to patronize the shopping center in question. Then, sum these individual estimates to
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arrive at a total annual sales potential by product class for the selected shopping center (Huff
1963, 87-88).

With respect to Step 6: Huff (1963, 87) notes that in addition to the likelihood [propensity] of consumers
from various statistical units patronizing a proposed shopping center, it is necessary to know the expected
number of such consumers from each of the units. For example, it might be that a given contour possesses
a high probability value but the consumers within its confines may be few in number and, therefore,
provide few customers and little revenue to the proposed facility. Similarly, with respect to Step 7, Huff
(1963, 88) observes that in terms of purchasing potential, another contour possessing a much smaller
expected number of consumers may have a greater disposable income level and thus greater purchasing
potential.

A formal expression of the Huff (1964, 36) model is:

(Equation 2)
S
j
Pij =______
Tij

n Sj
Tij

j=1

where Pij =the probability of a consumer at a given point of origin traveling to a particular
shopping center j;
Sj =the size of a shopping center j (measured in terms of the square footage of selling area
devoted to the sale of a particular class of goods);
Tij =the travel time involved in getting from a consumers travel base I to a given shopping
center j; and
= a parameter which is to be estimated empirically to reflect the effect of travel time on
various kinds of shopping trips.

As Huff (1964, 36) described it, the expected number of consumers at a given place of origin i that shop at
a particular shopping center j is equal to the number of consumers at i multiplied by the probability that a
consumer at i will select j for shopping.

That is:

(Equation 3)

Eij =Pij * Ci

where Eij =the expected number of consumers at i that are likely to travel to shopping
center j; and
Ci =the number of consumers at i.

Huff (1964, 36) noted that his model resembles the original model formulated by Reilly, but he argued
that it differed from Reillys Law of Retail Gravitation in several important respects. The most important
theoretical difference is that Huffs (1964, 36-37) model was not a contrived formulation designed post-
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hoc to describe observed empirical regularities, but a theoretical abstraction of consumer spatial behavior.
As a result, real data including population, average household income, square footage, drive times, and
propensity factors can be used in mathematical calculations to deduce probabilistic conclusions about the
number of consumers and the spend per consumer that can be predicted for a particular type and size of
retail facility.

Gravity Models and Casino Gaming

In 1988, the federal government passed the Indian Gaming Regulatory Act (IGRA), which established the
legal framework for the expansion of tribal gaming across the United States (Rand and Light 2006).
Subsequently, nine states legalized commercial casinos, including South Dakota (1989), Iowa (1989),
Colorado (1990), Illinois (1990), Mississippi (1990), Louisiana (1991), Missouri (1993), Indiana (1993),
and Michigan (1996). J ohn Williams (1997) correctly argued at the time that one of the main areas of future
research in the emerging field of gambling studies would be patronage and revenue forecasts. Williams
(1997, 402-403) did not elaborate the details of how this research would be conducted, but he did observe
that specific data points would have to be incorporated into future visitation and revenue models, including
population, demographics, and disposable personal income.

As noted earlier, there has been almost no academic literature on gravity modeling in the casino industry
since that time, although a number of private consulting firms have developed proprietary gravity models,
including Caesars Entertainment, Economic Research Associates, Spectrum Gaming, The Innovation
Group, Christiansen Capital Advisors, Cummings Associates, and many other management and financial
consulting firms. In these gravity models, the exponents were originally operationalized as counties,
although as greater sophistication was introduced into the models, it became possible to use towns and
cities, zip codes, census county divisions, or census blocks as the geographic units for population and
income. The geographical units might vary depending on the political jurisdictions in different parts of the
country or the availability of commercial databases (e.g., Claritas).

Likewise, official government data on disposable personal income, per capita income, and average
household income for these units of analysis has become more easily available as a result of the CD-ROMs,
the internet, and the commercial repackaging of public data. Spreadsheet programs, a user-friendly
Statistical Package for Social Sciences (SPSS), and other statistical software packages, coupled with rapid
developments in personal computing power have made it possible to construct gravity models with tens of
thousands of individual data points that can be linked together in mathematical formulas. Expectations
about spend per visitor and the propensity to gamble are now based on surveys, data from comparable
existing casinos, data from comparable casino jurisdictions, and proprietary consultant databases
constructed through many years of access to casinos players clubs and other databases. Consequently, a
casinos ability to attract visitations and spending can be reliably estimated using gravity models, which
incorporate data on the number of people living at different distances from the casino. However, we want
to suggest that some important modifications to these models could improve their performance and may be
necessary going forward in the industry. The function and complexity of gravity models in the casino
industry has undergone at least three phases of development, with the most recent phase requiring that we
reconsider how measure the gravity factor or mass of casinos.

The first phase of gravity modeling in the casino industry was the period of its greatest expansion (1976-
2005), beginning with the opening of casinos in Atlantic City and culminating with the opening of three
commercial casinos in Detroit, Michigan. During this phase, casinos were opening in new jurisdictions,
often with limited entry restrictions designed to protect new operators, so gravity models were
comparatively simple efforts to measure the potential revenue that would be captured by casinos, including
the percentage of revenues and visitors that would be captured from out-of-state or out-of-region visitors
(Eadington 1995, 1998; Hsu 1999, Chaps. 5-8; Walker 2007, Chap. 2-4; Meister, Rand, and Light 2009).
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The second phase of gravity modeling has revolved around late entrants to the expanded gaming movement,
such as New York, Pennsylvania, Delaware, Maryland, Massachusetts, Maine, and Ohio (2005 -2012),
where gravity modeling has focused more on the ability of local or regional facilities to recapture visitors
and revenues (Barrow and Borges 2010; Dense and Barrow 2003; McGowan 2009). This has meant that
location and mass have become more important to estimating a casinos probability of success in the
political terms that now structure expanded gaming debates. It also means that gravity models have become
increasingly complex, or confronted with increasing difficulties in measuring the comparative impact of
different facilities in a congested market area.

Moreover, as expanded gaming debates have shifted from capturing revenues from adjacent states to
recapturing revenues being lost to adjacent states, it has raised an additional question for gravity modelers:
What types and size of gaming facilities (i.e., mass) are necessary to effectively compete with existing
gaming facilities in adjacent states, particularly if the objective is to generate a new destination as opposed
to merely recapturing local convenience gamblers. This has juxtaposed the question of using multiple small
convenience facilities taxed at high rates to capture convenience gamblers (e.g., Pennsylvania) against the
construction of resort casinos designed to generate new destinations and bolster the larger tourism and
hospitality industry (e.g., Massachusetts). Finally, it appears that gravity modeling is about to enter a third
phase of development as expanded gaming reaches maturity, but new market entrants either seek to enter
saturated or nearly saturated markets at lower operating margins or they seek to displace existing venues
by constructing more elaborate facilities with a higher gravity factor. This debate is already surfacing in a
number of U.S. jurisdictions and it means that the problem of measuring mass is becoming even more
important in the construction of gravity models for the casino industry.

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Appendix C
Name
FY 09 GGR
(Win)
FY 10 GGR
(Win)
FY 11 GGR
(Win)
FY 12 GGR
(Win)
FY 13 GGR
(Win)
FY 14 GGR
(Win)
Avg. Annual
Percent Change
Finger Lakes Gaming and Race Track 111,066,222 $ 115,743,471 $ 122,007,880 $ 129,612,318 $ 131,401,368 $ 130,849,471 $ 3.6%
TiogaDowns & Casino 49,352,263 $ 53,036,884 $ 56,989,100 $ 61,701,011 $ 59,591,749 $ 58,151,725 $ 3.6%
Vernon Downs Casino & Hotel 37,149,183 $ 41,279,444 $ 43,337,320 $ 43,684,082 $ 43,707,318 $ 43,370,912 $ 3.3%
State 1,019,279,108 $ 1,087,749,279 $ 1,259,252,847 $ 1,802,211,532 $ 1,925,565,097 $ 1,912,319,807 $ 17.5%
Market Area Gross Gaming Revenues FY 2009 Thru FY 2014
Source: NewYork State Gaming Commission (2014).
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