Friday, August 28, 2009

Casino Metrics Again and Again

Hey look, before I start.  Trib story has the city admiting that the city's total pension liability could easily be over a billion dollars.  Who said that?  You don't know what grief I got when I threw that out there. At the time the city denied it pretty vehemently all around as most of the folks covering the topic know well.  Again, just stating the obvious. Anyone want to parse the financial logic given in the article for why the liability could be higher than previously anticipated.

But on the casino.  I really meant that just keeping track of casino metrics could be a full time blog.  I had some comments last week on the comparative payout rates here versus other venues.  The Trib had their own piece on Tuesday looking at slots payout rates at the casino during its first weeks of operation.  In both the general point thus far is that the local payout rates are right on par with what is going on elsewhere in the state.

Then the PG had a little piece yesterday about the initial revenues at the casino compared to forecasts.  I didn't know that there was a proejction from the casino folks themselves expecting revenue of $427.8 million in the first year of operation.  If nothing else that is an awfully precise projection for a business without any history in a new market. The PG story comments that if you extrapolate out those initial numbers, you get a first year revenues of $242 million. Of course it may be too early to extrapolate much of anything, though my presumption was that the the initial numbers would more likely be higher than the steady state  for the year. I thought casinos have a bump from being new and after the initial buzz wears off you get something lower, but steadier.

But what is a good number?  The $427.8 million may be a a decent number in the end, I really don't know.  But before anyone knew who was going to get the casino license there were projections completed.  One from a consultant hired to come up with a forecast came up with a pretty thoroughly backed up projection of first year revenues at $317 million. That might be right, that might be wrong, but the logic and data that got to that conclusion is all right there to go through if you are interested.

I have no idea which projection will prove closer to reality.  The very earliest indication is that the projections completed long before the casino license was even awarded might be the best. Amazing that.   But we will keep track of how it goes in the future. 

It all ties together with every other story in town.  Pensions, Act 47, city budget and related miasmas around town....  Remember that current and future city budgets rely on a bunch of revenue from taxes on casino revenue.  So if the revenues at the casino falls short, all those other problems are that much worse, if that is even possible. Both the city and the county are slated to get 2% of the casino's revenues or $10mil, whichever is larger.  To get beyond the minimum, the casino would have to get over $500 million, or twice that of the initial PG extrapolation.  I sense a new argument for table games. 

and lest we forget, casino is also supposed to be making those payments to the Sports and Exhibition Authority to pay for the bonds that financed the new arena.  As Fester reminds us, there are state guarantees tied up in there somehow.. but there was also the story that popped up recently and is one of those things that just gets forgotten about.  The story was a tif of sorts between the SEA and the casino over when the payments were going to start.  They somehow disagreed by a couple years.  Their agreement as reported was that something needed to be worked out by August or else the state gaming board would get involved  Today is what?  The last work-day in August maybe?  Did I miss some news on this?


Anonymous Anonymous said...

While reading the PG article this weekend I kept wondering why the reporter or one of the interviewees didn't look at initial revenues at other casinos in the region, and how they did at the end of a year. Wouldn't that give us at least an indication of how Rivers might do at the end of the year?

Monday, August 31, 2009 9:21:00 AM  
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