City of Danville, Virginia: Comprehensive Casino Selection Services

Project Details

Location
City of Danville, VA
Skills
Strategic Advisory, Project Feasibility, Casino Assessment, Contract Negotiations

Project Description

Convergence Strategy Group worked with City leadership from the initial consideration of bringing gaming to Danville, through the process of operator selection and final negotiations with its selected operator, Caesars Entertainment.

The stated goal of the state legislation was to assist economically distressed communities in Virginia, with Danville named as one of 5 potential casino locations.  In the end, the City of Danville attracted the development of a $400 million casino resort, including the purchase of a City-owned former industrial site, the creation of 1,300 jobs, a one-time payment of $15 million to the City, and nearly $34 million in direct payments to the City annually.

The broad scope of our work included:

  1. Gaming market assessment for a casino resort of various scales, at four alternative locations in the city. Initially, the tax rate that had been in proposed legislation was 10%. A copy of our summary presentation to the City Council can be accessed here.
    • Projection of gaming revenues, patronage and non-gaming expenditures
    • Consideration of the implication on demand (as well as the tax implications) of casinos being legalized in the North Carolina market (Danville is on the VA/NC border)
    • Assumptions regarding the necessary hotel room count to accommodate demand, based on the gravity model source of patrons
    • Development of a financial pro forma to demonstrate potential payment levels to the local government, while still providing a reasonable level of return to the operator
    • Economic impact assessment, demonstrating potential impacts on employment and various local taxes
    • Municipal services impact assessment, including assessment of potential crime impacts
  2. Assisting the City with the crafting of an RFP to potential casino developers/operators
    • Involved a series of meetings with City leadership in order to gain an understanding of issues of greatest concern to everyone, as well as to ensure that bidders were proposing developments and financial structures that were most attractive to the City, while also appearing financially feasible (not risky in execution and/or long-term success)
    • Evaluation and analyses of RFP responses from seven casino operators vying to build a casino in Danville
    • Illustrating to City leadership how the RFP responses differed and assisting in the process of selecting the winning proposal
  3. Collaborating with the City’s lobbyist at the Virginia State Capitol to educate legislators on issues related to optimal gaming industry taxation. During the legislative session, the Senate Finance Committee proposed a significantly higher tax rate than originally considered by the legislature, and multiple members of the legislative bodies began promoting this rate. Convergence Strategy Group’s principals met with legislators and demonstrated the likely impacts of varying tax rates on the potential investments by casino operators as well as the resulting effects on job creation (the proposed tax rates would not have made large-scale resorts feasible).  The ultimate rate structure arrived at was in line with the Convergence Strategy Group recommendation – a tiered tax structure, with effective rates likely in the 18-20% range for most properties.
  4. Assisting the City with contract negotiations with their selected casino operator
    • Collaborated with industry colleagues at the Jones Walker law firm and City officials to craft a development agreement between Danville and Caesars Entertainment
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