Other regulatory and legal matters will include the ownership requirements of the licensed entity, licensing requirements, security and surveillance obligations, renewal parameters, land ownership and/or lease arrangements, and social safeguards. The RFP will also outline the scope and content of the respondents’ proposals. This can include the minimum requirements or outline a structure for the proposal to include details on the development concept, amenities, and positioning, the required investment and timing for the construction, financing details, financial projections, employment, marketing and operating strategies, potential environmental impacts (including traffic and social impacts) and future plans for potential expansion. Evaluation criteria can also be outlined, as was included in the Singapore RFPs discussed earlier. These can include any number of criteria, but we suggest that the governing body develops conceptual outlines and communicates important elements to bidders rather than developing strict guidelines. This allows bidders to be creative in their responses, leveraging their experiences in and knowledge of other market areas, and allows the market to determine the required level of investment, hiring criteria, and other investment and operating decisions in light of the criteria outlined by the Commonwealth during a competitive bidding process.
On-Going Capital Expenditures Previously, we noted the possibility of including the concept of a mechanism that would set aside some funding for ongoing Capital Expenditures for the casino properties in Massachusetts. The focus behind such a concept is to ensure that the facilities in Massachusetts remain competitive with other regional facilities, even during possible economic swings. Given the estimates of the volume of visitors that are expected to patronize various aspects of the facilities, it is important that the properties be well-maintained, that carpeting is replaced, slot machines are upgraded and replaced and other public spaces are well maintained and are appealing to consumers. We suggest that a percentage of annual net gaming revenues (i.e. 3.5%) be set aside for such ongoing capital expenditure requirements. Consideration should be given as to whether the money set aside under this mechanism should include “maintenance capital expenditure” items or just new expansions or major changes to the facility. The concept that we have suggested is meant to act as a minimum requirement and to be inclusive of “maintenance capital expenditures” as long as they are treated as such and capitalized on a company’s books. This concept therefore would include items such as refurbishment, machine upgrades and other normal ongoing capital replacement items and not just be oriented towards major expansions or redevelopments. It is our opinion that any expansions, major developments or addition of significant amenities to a facility should be market driven meaning that operators will react to the market opportunities and competitive landscape and only then would move forward on major capital projects. This concept is generally consistent with how the hotel industry has traditionally viewed their business from the perspective that ongoing reinvestment and capital maintenance is an ongoing aspect of operating a facility. In the gaming industry, this concept has been included in a number
The Innovation Group Project #044-10
June 2010
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