Millions more for non-profit partners compared to Hard Rock and Warrior proposals
SIOUX CITY, Iowa, March 15, 2013 /PRNewswire-USNewswire/ -- In a third installment study released by Strategic Economics Group, an Iowa-based research organization, the two Hollywood casino proposals will generate the most dollars for their non-profit partner.
Under state law, casino operators are required to have a partnership with a qualified sponsoring organization (QSO), which in turn must support community initiatives with the funds received from the commercial operator. All finances and payouts related to the casino operations are subject to audits conducted by the State of Iowa.
While each applicant has a different agreement with their respective QSO, state law requires a minimum 3% of adjusted gross revenue (AGR) go the non-profit partner. Hard Rock's QSO agreement requires a 4.25% of AGR payment to MRHD, their non-profit partner. Warrior's agreement with Siouxland Great is a little more complex, provides an initial 3% of AGR to the QSO which increases to 3.25% after 5 years and 3.5% 5 years after that. Hollywood's agreement with its QSO, Greater Siouxland Improvement Association, starts it payments at 7.5% of EBITDA (earnings before interest, taxes, depreciation and amortization), increasing to 17.5% of EBITDA of $20-25 million, 25% of EBITDA between $25 and $30 million and 33% of EBITDA above $30 million. The expected year one EBITDA of Hollywood is $29 million.
Despite the complicated formulas, the anticipated payouts to non-profit partners are straightforward over the next 20 years. Hollywood Casino Siouxland will pay out $148.3 million and Hollywood Casino Sioux City will distribute $123.7 million, compared to a $107.7 million payout by Hard Rock Casino and $68.4 million from Warrior Casino.
The study can be found here.
The authors of the study are Harvey Siegelman, President of SEG and former State of Iowa Economist (1982 – 2001) and Mike Lipsman, senior economist at SEG and former Research Manager for the Iowa Department of Revenue.
SOURCE Strategic Economics Group