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1 City of Lewiston Executive Department EDWARD A. BARRETT City Administrator PHIL NADEAU Deputy City Administrator September 30, 2011 To: Mayor and Members of the City Council Fr: Edward A. Barrett Su: November Referendum on Lewiston Casino As you are aware, a referendum will be on the ballot in November seeking approval for a casino in Lewiston on the Bates Mill 5 property. As we approach the election, I felt it would be useful to present information on the impact of such a facility on the City as part of an effort to ensure that the public is educated about the proposal and what it might mean. Option Agreement The City has optioned the Mill 5 property to Great Falls Recreation LLC for use as a casino. To date, Great Falls has made non-refundable option payments of $50,000. The major points of the option include: An additional $100,000 option payment is due by December 31, 2011. This payment, unlike earlier ones, can be applied to the purchase price; If the ballot measure passes in November, the option will automatically extend until 90 days after the project receives final regulatory approvals; Great Falls must begin the approval process within 120 days of voter approval; If the property is not purchased by December 31, 2012, Great Falls will pay the City $5,000 per month; and The property will be purchased at fair market value. Financial Benefits to the City from Casino The City will benefit in a number of direct and indirect ways from the revenues produced from the Casino. In accordance with the initiative’s language, the City will receive a certain percentage of net revenues. In this context, net revenues are defined as the total amount wagered, less a State 1% tax on all wagers and less amounts returned as winnings. ---PAGE BREAK--- 2 PURPOSE PERCENTAGE General Fund 2.0% Lewiston/Auburn Joint Expenditures 0.5% Infrastructure 0.5% Downtown Revitalization 0.3% Renewable Energy Grants and Loans 0.3% Androscoggin County 1.0% (0.28% offset to our County Tax) LAEGC 1.0% Less directly, the City might benefit from a number of other revenue dedications including: PURPOSE PERCENTAGE Androscoggin River Water Quality 3% Rail Improvements 3% Bethel Area Rail Improvements 2% City of Auburn 1% LA to Brunswick Bike Path A complete list of gaming revenue beneficiaries is attached. Additional benefits include property taxes that will be paid by the gaming facility, an annual $25,000 license fee, the potential reuse of the Mill 5 building, and the jobs that will be created for local and regional residents both on an on-going basis and during construction. FINANCIAL IMPACT It is difficult to specifically estimate the revenue and economic impact associated with a casino in Lewiston given the authorized casino in Oxford County, the potential approval of an additional casino in Southern Maine, and the reality that the State Legislature has the authority to modify citizen approved initiates at its discretion. Even with these uncertainties, a range of potential outcomes can be projected. Direct Gaming Revenues In order to determine the range of revenue that the City would achieve on an annual basis, we can first look to the experience in Bangor. Between calendar years 2007 and 2010, the total amount bet at Bangor averaged about $650,000,000 per year. The net retained after paying out winnings averaged about $54 million per year. Revenue to beneficiaries is computed as a percentage of net less the state’s 1% tax on the total amount bet. In the projections that follow, the best case scenario assumes Lewiston performing similarly to Bangor. The medium case assumes performing at 75% of that level. The worst case assumes 50%. The following chart projects the revenue Lewiston would receive from gaming receipts based on these scenarios. ---PAGE BREAK--- 3 ANTICIPATED GAMING REVENUES TO BENEFIT LEWISTON Purpose % Best Medium Worst Lewiston General Fund 2.0% $950,000 $712,500 $475,000 LA Joint Expenditures 0.5% $237,500 $178,125 $118,750 Lewiston Downtown 0.3% $142,500 $106,875 $ 71,250 Energy Grants/Loans 0.3% $142,500 $106,875 $ 71,250 LAEGC 1.0% $475,000 $356,250 $237,500 Androscoggin County 0.28% $133,000 $99,750 $ 66,500 Lewiston Infrastructure 0.5% $237,500 $178,125 $118,750 TOTAL $2,080,500 $1,560,375 $1,040,250 Based on these estimates, the City can anticipate receiving gaming revenues in a range from $1 to $2 Million per year to be used for a variety of purposes. General Fund revenues can be used for any governmental purpose. Joint Expenditures with Auburn could assist in funding any of the existing joint agencies, particularly should they be facing capital needs that would otherwise require borrowing or an increase in annual appropriation. Alternatively, these funds could be used to assist in the implementation costs of new joint ventures, be they service consolidations or additions. For example, there have been conversations in the past about establishing a joint downtown manager position to assist in the communities in our efforts to reinvent our downtowns. Downtown funding could be used to increase City grant and loan programs to assist in rehabilitation and reuse of existing structures. These funds could also be used for streetscape improvements or to address other downtown infrastructure needs. Grants and loans could be made to residents or commercial property owners to assist in transitioning to renewable energy sources. Funding for LAEGC could reduce the current direct funding Lewiston and Auburn provide that organization, capitalize various economic development loan pools, invest in development properties, or a combination of these areas. Note that the decision on how to use these funds would rest with the board of LAEGC on which both Lewiston and Auburn have representation. Finally, the revenues to the County would go to offset the County tax. Lewiston currently pays about 28% of that tax, and the number above reflects this percentage. ---PAGE BREAK--- 4 Indirect Gaming Revenues Several other beneficiaries in the proposed initiative may also provide significant benefits to our region. These include: PURPOSE % BEST MEDIUM WORST Androscoggin Water Quality 3.0% $1,620,000 $1,215,000 $810,000 Rail Improvements 3.0% $1,620,000 $1,215,000 $810,000 Rail Improvements Bethel 2.0% $1,080,000 $ 810,000 $540,000 LA to Brunswick bike path 0.5% $ 270,000 $ 202,500 $135,000 City of Auburn 0.1% $ 540,000 $ 405,000 $270,000 The City would be eligible to receive funding for projects that we are mandated to undertake to address combined sewer overflows and non-point source stormwater impacts. This funding could relieve the pressure on the City’s stormwater utility and reduce future increases in our fees. Freight and Passenger rail have historically been essential to our region’s economy. Additional improvements to the rail system could enhance our status as a regional transportation and intermodal center. Establishing passenger rail from Portland through LA and Bethel to Montreal would enhance our region’s quality of life and economic activity. Similarly, a multimodal trail system linking LA to Brunswick along the Androscoggin would enhance our region’s quality of life and serve as an attraction to tourists and visitors. Property Taxes The City will also receive property taxes. Penn National invested approximately $130 million in their facility in Bangor, including both the gaming space and a 150 room hotel. Using the same assumptions used above for gaming revenues and adjusting for our assessment ratio (85%) and tax rate, the range of property tax revenues the City can anticipate are: BEST MEDIUM WORST Property Taxes $2,836,900 $2,127,675 $1,418,450 Note that these figures do not include any ancillary development that might take place either on the property or in the surrounding area. The City could consider designating a portion of these funds for specific purposes such as implementing the riverfront island master plan. In Bangor, property taxes from the casino have been dedicated toward downtown and riverfront redevelopment and replacing the Bangor Auditorium, causes that some indicate assisted in developing local support for the casino project. Based on this analysis and based on the initiative as written, we can reasonably expect to see fairly direct financial benefits to the City in the range of $2.3 to $4.6 million depending ---PAGE BREAK--- 5 upon the extent of competition in the region and the final development plans for the property. For informational purposes, I have included in the attached summary the potential revenues that could be received by all beneficiaries included in the Lewiston casino initiative. Other Benefits There are a number of other benefits associated with a casino in Lewiston. These include: New Jobs. We can project between 300 and 500 new jobs with an annual payroll of between $8.5 and $14 million per year. These jobs will be at a variety of skill levels. Local Purchases. We can anticipate that the facility will procure a wide variety of goods and services from within our regional economy, supporting indirect job growth in other sectors. Redevelop the Mill 5 property. Casino use appears to be one of the few feasible reuses for the Mill 5 property. Should that property become a casino, additional space exists within the building for other uses and the owner would have an incentive to work hard to attract or develop them. At a minimum, the City would no longer face the potential need to demolish this structure. Temporary Construction Jobs and Spending. A $50 to $100 million construction project will produce a significant number of construction jobs at a time when that industry is depressed. Jump-Start Riverfront Island Development. A major project like this could provide a significant impetus to redevelopment of this area of the City, one which is seen as key to our region’s future. ---PAGE BREAK--- 6 LEWISTON CASINO INITIATIVE BENEFICIARIES PURPOSE % BEST MEDIUM WORST LEWISTON BENEFIT Lewiston Downtown 0.3% $ 142,500 $ 106,875 $ 71,250 Yes Lewiston Energy Efficiency 0.3% $ 142,500 $ 106,875 $ 71,250 Yes Lewiston 2.0% $ 950,000 $ 712,500 $475,000 Yes Androscoggin County 0.28% $ 133,000 $ 99,750 $ 66,500 Yes LA Economic Growth Council 0.5% $ 237,500 $ 178,125 $118,750 Yes LA Joint Expenditures 0.5% $ 237,500 $ 178,125 $118,750 Yes Lewiston Infrastructure 0.5% $ 237,500 $ 178,125 $118,750 Yes SUBTOTAL $2,080,500 $ $1,560,375 $1,040,250 Androscoggin River WQ 3.0% $ 1,620,000 $ 1,215,000 $ 810,000 Yes Statewide Downtown Revitalization 2.7% $ 1,458,000 $ 1,093,500 $ 729,000 Possible Statewide Energy Grants/Loans 2.7% $ 1,458,000 $ 1,093,500 $ 729,000 Possible Other Counties (Exc. Andro) 3.0% $ 1,620,000 $ 1,215,000 $ 810,000 No Ports and Fisheries 3.0% $ 1,620,000 $ 1,215,000 $ 810,000 No East/West Highway 3.0% $ 1,620,000 $ 1,215,000 $ 810,000 No Rail Improvements 3.0% $ 1,620,000 $ 1,215,000 $ 810,000 Possible Rail Improvements Bethel 2.0% $ 1,080,000 $ 810,000 $ 540,000 Possible Higher Education Capital 1.0% $ 540,000 $ 405,000 $ 270,000 No Games of Chance 1.0% $ 540,000 $ 405,000 $ 270,000 Possible Agricultural Fair Support 1.0% $ 540,000 $ 405,000 $ 270,000 No Job Creation Through Ed Opportunity 1.0% $ 540,000 $ 405,000 $ 270,000 No State Tourism 1.0% $ 540,000 $ 405,000 $ 270,000. Indirect Finance Authority of Maine 1.0% $ 540,000 $ 405,000 $ 270,000 Possible Beano or Bingo 0.5% $ 270,000 $ 202,500 $ 135,000 Indirect Harness Racing Purses 0.5% $ 270,000 $ 202,500 $ 135,000 No Humane Societies 0.5% $ 270,000 $ 202,500 $ 135,000 Possible LA to Brunswick bike path 0.5% $ 270,000 $ 202,500 $ 135,000 Possible Meals on Wheels 0.5% $ 270,000 $ 202,500 $ 135,000 Indirect Municipalities Adjacent to Lewiston 0.5% $ 270,000 $ 202,500 $ 135,000 No City of Auburn 1.0% $ 540,000 $ 405,000 $ 270,000 Indirect SUBTOTAL $ 17,766,000 $13,324,500 $8,883,000 TOTAL $19,846,500 $14,884,875 $9,923,250