Update of the Legislators' Guide To Video Lottery Terminal Gambling

Chapter 3. Estimating Video Lottery Terminal Revenues in Maryland 12
West Virginia, and the District of Columbia. An average urban/rural mix is maintained for all of
these potential consumers.
Revenue forecasting is an evolving process. DLS periodically updates existing gaming
facility revenues and market conditions, checks for model robustness and potential specification
error, performs sensitivity analysis by employing an additional estimation technique, and tests
the model’s ability to forecast given existing facilities. DLS used fiscal 2006 data in its revenue
forecasts.
Naturally, to the extent the assumptions are changed, WPD will vary in kind. DLS has
advised that the gross VLT revenue estimates could be higher or lower than estimated depending
on the actual locations awarded VLT licenses, the envisioned structure and amenities offered by
industry participants submitting projects for construction, and the economic and market
conditions that subsequently develop as the bill is implemented, including any expansion of
gambling in the surrounding states.
VLT Revenue Estimates for Maryland
Under the 2007 VLT legislation, up to five VLT facilities in the State may be licensed to
operate a total of 15,000 VLTs. As a result, DLS estimates that total revenues generated – after
payouts to winning players, but before any other distributions are made – could total
approximately $156.5 million in fiscal 2011, $1.019 billion in fiscal 2012, and $1.361 billion in
fiscal 2013.
These estimates assume that (1) all five facility licenses will be awarded; (2) facilities
will initially operate at 50 percent capacity and reach full capacity one year later; and (3) all
15,000 VLTs are awarded. It is assumed that the locations with pre-existing facility
infrastructure are awarded licenses and begin operations in February 2011, two years after the
bid submission deadline, and locations that are newly constructed begin operations six months
later in August 2011. Revenues will be potentially higher or lower than estimated to the extent
that facilities begin operations earlier or later than estimated, either in temporary or permanent
facilities.
The WPD estimates for the VLT facilities are based on the potential locations and
number of VLTs at each location specified in the bill, through an independent analysis by DLS
of the market for VLTs in Maryland. The market analysis is based on the modeling techniques
described above and includes the impact of recent VLT expansions in Delaware and West
Virginia, the opening of VLT facilities in Pennsylvania since 2006, and the proximity of
proposed Maryland locations to other VLT facilities and population centers. DLS advises that
the gross VLT revenue estimates could be higher or lower than estimated depending on the
actual locations awarded VLT licenses and the economic and market conditions in place as the
bill is implemented, including any expansion of gaming in the surrounding states.