Economic Impact Assessment

Economic Impact Assessment,
Arapahoe Park:
Arapahoe County, Colorado

September 2014

Prepared by:

THE INNOVATION GROUP
231 Midland Ave., Suite 204
Basalt, CO 81621

The Innovation Group Project #006-14-2 September 2014 Page i
Economic Impact Assessment, Arapahoe Park

Table of Contents

INTRODUCTION......................................................................................................................... 1
METHODOLOGY ........................................................................................................................... 1
Multi-Regional Analysis.......................................................................................................... 3
ONGOING OPERATIONS IMPACT ........................................................................................ 4
INPUTS ......................................................................................................................................... 4
ECONOMIC IMPACT ...................................................................................................................... 4
FISCAL IMPACTS .......................................................................................................................... 5
Gaming Taxes ......................................................................................................................... 6
Taxes from Food and Beverage and Retail Sales ................................................................... 6
Taxes from Production ....................................................................................................... 6
ONE TIME CONSTRUCTION IMPACTS ............................................................................... 8
INPUTS ......................................................................................................................................... 8
ECONOMIC IMPACT ...................................................................................................................... 8
FISCAL IMPACT ............................................................................................................................ 9

The Innovation Group Project #006-14-2 September 2014 Page 1
INTRODUCTION
This report describes the results of The Innovation Groups (IG) Economic Impact assessment
for Arapahoe Park in Arapahoe County, Colorado. The proposed gaming facility would operate
slot machines and table games and be subject to Colorados $100 bet limit. The facility would
contribute 34% of adjusted gross proceeds (AGP) to a K-12 Education Fund.

The economic impact study assesses the benefits that could be expected during the construction
phase as well as the ongoing operational stage of the proposed development. The construction
and/or renovation phase of the project is considered as a one-time benefit to the area. This refers
to the fact that these dollars will be introduced into the economy only during the construction
phase of the project, and cannot be expected to continue to provide permanent jobs or revenues
beyond the projects completion. This differs from the economic benefits that accrue from the
annual operations of the facility once the casino is open. These are termed ongoing benefits, as
they are revenues, jobs, earnings, and tax dollars that can be expected to accrue annually as a
result of gaming operations and the attraction of gaming patrons.

The inputs for this report were derived from the IGs gaming market assessment, the 2014 Blue
Book prepared by the General Assemblys Legislative Council Staff, and pro forma financial and
staffing estimates from Mile High USA, Inc. (Mile High). The impacts are presented on a local
and state-wide basis and reflect stabilized operations. The local market is defined as the counties
of Arapahoe, Denver and Adams.

Methodology
Direct, indirect, and induced impacts are assessed for both the construction of the facility and
ongoing operations.

Direct impacts result from the economic activity that occurs on the property itself. In the case of
ongoing operations, these expenditures ultimately derive from patron spending. The direct
impact effectively represents the expenditures made by the facility in the form of employee
compensation, purchases of goods and services, and patron spending on the food, beverage,
hospitality, and retail sectors of the complex. Patron spending on the casino floor has been
discounted to exclude gaming taxes, since these represent direct transfers to government coffers
and are accounted for in the fiscal impact analysis.

Indirect impacts reflect the economic spin-off that is made possible by the direct purchases of the
facility. Local firms providing goods and services to the proposed facility will have incomes
partially attributable to these gaming operations. These dollars contribute to the vendors
spending power, and therefore the incremental increase in their spending attributable to this
income is considered an indirect impact. These additional expenditures and revenues continue to
flow throughout the economy in a rippling effect.

Induced impacts result from the direct impacts on labor income. As household incomes are
affected by direct employment and spending, this money is re-circulated through the household
spending patterns causing further local economic activity.


The economic impact analysis results in the following outputs:

1. Employmentor number of total jobs supported.

2. Labor Income (Earnings/Salaries) in IMPLAN consists of two parts. First is the total
payroll cost of the employee paid by the employer: wage and salary, all benefits, and
employer-paid payroll taxes (e.g. employer side of social security, unemployment taxes,
etc). Second, proprietor income consists of payments received by self-employed
individuals and unincorporated business owners.

3. Value Added is comprised of Labor Income, Indirect Business Taxes, and Other
Property Type Income. It demonstrates an industrys value of production over the cost of
its purchasing the good and services required to make its products. Value Added is often
referred to as Gross Regional Product (GRP). Value Added = Labor Income + Indirect
Business Taxes + Other Property Type Income.

4. Output (Total Spending) represents the value of industry production. In IMPLAN these
are annual production estimates for the year of the data set and are in producer prices. For
manufacturers this will be sales plus/minus change in inventory. For service sectors
production = sales. For retail and wholesale trade, output = gross margin and not gross
sales. Output = Intermediate Inputs + Value Added.

Economic impact analyses use industry multipliers that have been developed based on U.S.
Census data to determine the indirect impacts that occur from direct expenditures. The
Innovation Group has utilized IMPLAN 3.0 software and data for the purpose of these
calculations. IMPLAN accounts closely follow the accounting conventions used in the "Input-
Output Study of the U.S. Economy" by the Bureau of Economic Analysis.

However, as noted by the Center for Policy Analysis at the University of Massachusetts
Dartmouth in a study from 2004, IMPLAN multipliers are lower than those calculated by the
Bureau of Economic Analysis:

The IMPLAN modeling system accounts for substitution effects by applying local and
regional multipliers to disposable personal income only. The modeling systems balanced
accounts matrix insures that disposable income which is spent on one type of good or
service cannot be spent simultaneously on some other good or service. The application of
multipliers to disposable personal income and the imposition of a balanced accounts
matrix results in multiplier effects that are substantially less than those recommended in
the U.S. Bureau of Economic Analysis Regional Input-Output Modeling System II
(RIMS II). Thus, the indirect and induced impacts represent net new job creation and
not merely a transfer of jobs from one sector to another.

Multi-Regional Analysis
In order to model local and statewide economic impacts, we relied upon the multi-regional input-
output (MRIO) analysis method available in the IMPLAN 3.0 software. As noted, the local
market is defined as the counties of Arapahoe, Denver and Adams.

In this process, we enter the impacts associated with the construction and operation of the casino
in the three-county local market. Then, this three-county model is linked to a model of all the
other Colorado counties. This allows our analysis to capture purchases and employment that
occur outside of the local area but within Colorado. Our analysis of these linked models yields
direct, indirect, and induced effects for the local area, as well as indirect and induced effects for
the balance of the state; direct effects occur only in the local area, as all purchases and
employment associated with construction, employment, and redevelopment activities occur
there. The IMPLAN model contains information about supply chains that estimate local and
regional spending patterns.

ONGOING OPERATIONS IMPACT
Annual ongoing impacts from operations are estimated using The Innovation Groups forecast
for gaming revenue and other inputs generated by Mile High, including:

1. Revenues for the Food and Beverage and Retail departments;
2. Number of total employees, all departments including Casino, F&B, Retail, and G&A;
3. Total Earnings (Wages and Salaries, Tips, Benefits, Payroll Taxes).

Inputs
The table below summarizes the inputs. These figures are based on stabilized operations. In
total, it is estimated that the facility will require 1,435 employees to operate, with total earnings
of $59 million.

Combined Operating Inputs (in thousands)
Revenues
Gaming Net of Taxes $222,170
Food and Beverage $25,336
Retail and Other $884

Payroll

Employees 1,435
Total Earnings* $59,355
Source: Mile High; The Innovation Group; 2014 Colorado
Blue Book
*Includes an estimate of tipping for dealers and F&B.

Economic Impact
The on-going spin-off benefits from operating the facility are assessed through a multi-regional
analysis utilizing IMPLAN software. The multi-regional analysis results in impacts for the local
area and the rest of the state (termed Balance of State in the table headings).

The gaming facility at Arapahoe Park is estimated to generate a total of more than 2,300 jobs and
labor income of $123 million in the local area.

Operating ImpactsLocal (000s)
Employment Labor
Income
Value
Added
Output
Direct Effect 1,435 $59,355 $120,333 $248,391
Indirect Effect 491 $40,205 $55,203 $87,666
Induced Effect 391 $23,393 $38,716 $61,973
Total 2,317 $122,953 $214,252 $398,029
IMPLAN Group, LLC, IMPLAN System (data and software); The Innovation Group

The spending from ongoing operations will have an indirect and induced impact on other
communities within Colorado, supporting an additional 108 jobs and $6 million in labor income
throughout the state.

Operating ImpactsBalance of State (000s)
Employment Labor
Income
Value
Added
Output
Direct Effect

Indirect Effect 69 $4,170 $6,745 $14,026
Induced Effect 39 $1,949 $3,385 $6,106
Total 108 $6,119 $10,130 $20,132

In total, the statewide impact of operating the gaming facility at Arapahoe Park is estimated at
approximately 2,400 jobs and labor income of $129 million.

Operating ImpactsTotal Colorado Statewide (000s)
Employment Labor
Income
Value
Added
Output
Direct Effect 1,435 $59,355 $120,333 $248,391
Indirect Effect 560 $44,374 $61,948 $101,692
Induced Effect 430 $25,342 $42,102 $68,079
Total 2,425 $129,072 $224,382 $418,162

Fiscal Impacts
In addition to the economic impacts, the casino should generate positive fiscal impacts for local
and state governments.

Gaming Taxes
Gaming taxes accruing to a K-12 Education Fund would total $114.5 million
1
. This direct
payment would generate spin off economic impacts from the hiring of staff, purchase of goods
and services, and/or support of infrastructure projects. To estimate these impacts, IG utilized the
State/Local Government Education Institution Spending Pattern sector from IMPLAN. In total,
the $114.5 million payment is estimated to generate more than $61 million in indirect and
induced benefits to Colorado.

Statewide Indirect and Induced Impacts from Gaming Taxes (000s)
Employment Labor
Income
Value
Added
Output
Indirect Effect 24 $1,850 $2,744 $4,672
Induced Effect 356 $21,195 $35,106 $56,732
Total 380 $23,045 $37,851 $61,404

Taxes from Food and Beverage and Retail Sales
According to the Colorado Department of Revenue, the state sales tax rate is 2.9%. Food and
beverage and retail sales would also be subject to Arapahoe Countys 0.25% sales tax, the
Regional Transportation Districts sales and use tax of 1.0% and the Scientific and Cultural
Facilities Districts sales and use tax of 0.1%.

Based on estimated F&B and retail sales as shown previously, sales tax would total more than $1
million, with the State receiving $760 thousand.

Sales Taxes
State $760,406
Local $353,982
Total $1,114,388
Source: The Innovation Group

Taxes from Production
In addition to the tax impact from consumer F&B and retail sales as outlined above, IMPLAN
calculates the taxes that go into production (i.e., construction and operations) such as business
taxes (including sales taxes from the propertys purchase of goods and services), payroll taxes,
and state income tax from employee wages. The spending from ongoing operations is estimated
to generate $26 million in state and local taxes.

1
2014 Blue Book prepared by the General Assemblys Legislative Council Staff.

Statewide Fiscal Impacts Operations
Employee
Compensation
Tax on
Production
and Imports
Households Corporations
Dividends $0 $0 $0 $27,894
Social Ins Tax- Employee Contribution $51,068 $0 $0 $0
Social Ins Tax- Employer Contribution $100,406 $0 $0 $0
Tax on Production and Imports: Sales Tax $0 $10,990,844 $0 $0
Tax on Production and Imports: Property Tax $0 $10,315,071 $0 $0
Tax on Production and Imports: Motor Vehicle Lic $0 $298,905 $0 $0
Tax on Production and Imports: Severance Tax $0 $278,413 $0 $0
Tax on Production and Imports: Other Taxes $0 $741,971 $0 $0
Tax on Production and Imports: S/L NonTaxes $0 $351,251 $0 $0
Corporate Profits Tax $0 $0 $0 $301,521
Personal Tax: Income Tax $0 $0 $1,867,339 $0
Personal Tax: NonTaxes (Fines- Fees) $0 $0 $389,126 $0
Personal Tax: Motor Vehicle License $0 $0 $124,070 $0
Personal Tax: Property Taxes $0 $0 $39,951 $0
Personal Tax: Other Tax (Fish/Hunt) $0 $0 $131,488 $0
Total State and Local Tax $151,476 $22,976,456 $2,551,974 $329,415

ONE TIME CONSTRUCTION IMPACTS
Inputs
The following table presents the construction budget for the Arapahoe Park facility. For
economic impact purposes, we removed the gaming equipment budget because, in most cases,
the spending and potential economic impact does not accrue within the host state. Inclusive of
contingency, hard construction costs are estimated to be run approximately $97.4 million, with
$17.7 million in furnishings, fixture and non-gaming equipment, and $6.1 million of architectural
and engineering fees.

Total Construction Summary (MMs)
Hard Construction $97.4
FFE Excluding Gaming Equipment $17.7
Architectural & Engineering $6.1
Total $121.1
Source: Mile High Entertainment; The Innovation Group

Economic Impact
The one-time benefits from constructing the facility are assessed through a multi-regional
analysis utilizing IMPLAN software. The multi-regional analysis results in impacts for the local
area and the rest of the state (termed Balance of State in the table headings).

Construction of the gaming facility at Arapahoe Park is estimated to generate a total of more than
1,320 jobs
2
and labor income of $90 million in the local area, on a one-year equivalent basis.

Construction ImpactsLocal (000s)
Employment Labor
Income
Value
Added
Output
Direct Effect 803 $55,998 $57,768 $106,542
Indirect Effect 214 $16,741 $23,676 $40,424
Induced Effect 309 $17,385 $28,763 $45,763
Total 1,327 $90,123 $110,206 $192,729

2
On a one-year basis, or person-years of employment.

The spending from construction will have an indirect and induced impact on other communities
within Colorado, supporting an additional 80 jobs and $4.5 million in labor income throughout
the state.
Construction ImpactsBalance of State (000s)
Employment Labor
Income
Value
Added
Output
Direct Effect

Indirect Effect 49 $3,078 $5,139 $11,345
Induced Effect 31 $1,446 $2,511 $4,539
Total 80 $4,524 $7,651 $15,883

In total, the one-time, one-year equivalent statewide impact of constructing the gaming facility at
Arapahoe Park is estimated at approximately 1,400 jobs and labor income of nearly $95 million.

Construction ImpactsTotal Colorado Statewide (000s)
Employment Labor
Income
Value
Added
Output
Direct Effect 803 $55,998 $57,768 $106,542
Indirect Effect 263 $19,819 $28,815 $51,768
Induced Effect 340 $18,831 $31,274 $50,302
Total 1,406 $94,648 $117,857 $208,612

Fiscal Impact
Construction is estimated to have a fiscal impact of approximately $6.9 million statewide.

Statewide Fiscal Impacts Construction
Employee
Compensation
Tax on
Production
and Imports
Households Corporations
Dividends $0 $0 $0 $7,223
Social Ins Tax- Employee Contribution $34,327 $0 $0 $0
Social Ins Tax- Employer Contribution $67,490 $0 $0 $0
Tax on Production and Imports: Sales Tax $0 $2,276,033 $0 $0
Tax on Production and Imports: Property Tax $0 $2,136,090 $0 $0
Tax on Production and Imports: Motor Vehicle Lic $0 $61,899 $0 $0
Tax on Production and Imports: Severance Tax $0 $57,655 $0 $0
Tax on Production and Imports: Other Taxes $0 $153,651 $0 $0
Tax on Production and Imports: S/L NonTaxes $0 $72,739 $0 $0
Corporate Profits Tax $0 $0 $0 $78,069
Personal Tax: Income Tax $0 $0 $1,404,219 $0
Personal Tax: NonTaxes (Fines- Fees) $0 $0 $292,619 $0
Personal Tax: Motor Vehicle License $0 $0 $93,299 $0
Personal Tax: Property Taxes $0 $0 $30,042 $0
Personal Tax: Other Tax (Fish/Hunt) $0 $0 $98,878 $0
Total State and Local Tax $101,817 $4,758,067 $1,919,057 $85,291

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