Broadcaster Press 11 October 8, 2013 www.broadcasteronline.com Video lottery was losing market share before smoking ban took effect in 2010 By Bob Mercer State Capitol Bureau Past and current members of the South Dakota Lottery Commission and its administrators, as well as those involved in Deadwood casinos, have consistently held that the smoking ban South Dakota voters placed on alcohol establishments in 2010 would and did cut into gambling revenue at video lottery establishments and Deadwood casinos. But a new report shows that video lottery’s difficulties began years earlier. Video lottery revenue began to stagnate in 20052006 and actually dropped in the two years before the ban began. The ban accelerated a trend that was already under way. Video lottery’s share of South Dakota’s gambling market stood at 60.7 percent in 2002 and by 2012 had fallen to 42.2 percent. During that same decade, documented play at Deadwood casinos and estimated play at tribal casinos doubled. Their market shares grew: Deadwood from 19.4 percent to 25.6 percent; and tribal casinos from 16.4 percent to 26.5 percent. Video lottery also lost some market share to other South Dakota Lottery products. Scratch tickets nearly doubled in sales and jackpot lotto sales did double. Their shares likewise went up: scratch tickets from 1.5 percent to 2.4 percent; and lotto tickets from 2.1 percent to 3.3 percent. The report by Union Gaming Analytics, a Las Vegas-based company, was delivered last week to the South Dakota Lottery Commission. It is the deepest look at video lottery since the electronic poker, blackjack, keno and bingo games became legal in 1989. Lottery officials wanted the study because they sought a detailed map of the current market, including competition from neighboring states, as well as a blueprint for possible changes that can be made in the next few years to increase video lottery’s revenue to the state treasury and to the businesses that own and manage the terminals. “Every time I read it, I get more information,” commissioner Roger Novotny of Fort Pierre said. The main conclusion reached in the report by consultant Rich Baldwin calls for concentrating on gaining back more of the South Dakota market. He notes that southeastern South Dakota faces a “formidable” new competitor when the Hard Rock Casino opens in Sioux City, Iowa. Baldwin said the new “line-up” games, which are similar to casino slot machines, are producing substantially more revenue than the “legacy” terminals, most of them VLC 8700s, which have been around for 20 years or more and were officially declared obsolete long ago by the commission. Many of the recommendations aim at getting more line-up games into establishments. As of Aug. 31 the terminals statewide stood at 18 percent line-up and 82 percent legacy. Baldwin suggested the 50-50 split of net machine income – the money lost or left behind by players after winnings are paid – be changed: For legacy machines, state government should increase its take to 60 percent and then 70 percent; while line-up games would be at 30 percent for the first year and 40 percent the second year before settling at 50 percent. The report made many other recommendations such as allowing establishments to have 15 terminals rather than the standard 10 if the additional five are new line-up games. “This really is a call to arms. We need to take this report as a call to action,” commissioner Doyle Estes of Hill City said. “If the industry doesn’t change, we’re not going to get the share of income the state of South Dakota has gotten over the last 25 years.” Net machine income from video lottery was $207.7 million in 2002 and was down to $176.4 in 2012. Deadwood casinos meanwhile rose from $66.3 million to $107.4 million and tribal casinos climbed from an estimated $56 million to $110.9 million. Scratch tickets during that period went from $5.1 million to $9.9 million. Lotto sales increased from about $7 million to $14 million. Video lottery peaked at $224.7 million of net machine income in 2008, with state government receiving nearly $112 million. NMI fell to $220.1 million in 2009 and $215.5 million in 2010. Those numbers are for the state fiscal year, which runs July 1 through June 30. The smoking ban’s approval in November 2010 set off a steep decline. NMI fell to $191.8 million for 2011 and kept dropping in 2012 to $176.6 million. Fiscal 2013 saw the start of a rebound, for at least one year, to $184.6 million. Development of the Hard Rock Casino in Sioux City could affect the pocket of South Dakota that generated the most video lottery revenue, led by Minnehaha County at $51 million and Union County – North Sioux City – at $12 million, based on unaudited numbers from the lottery office for the past year. Union County is the third-largest producer of video lottery revenue. Other counties in the cluster also contribute a lot: Lincoln $4.4 million, Clay $2.2 million and Yankton $7.5 million. The No. 2 county for video lottery is Pennington. The fiscal 2013 revenue was $26.6 million. Meade County was $3.1 million, Fall River was $2.5 million and Butte was $1.9 million. Statewide, Brown County ranks No. 4 at $11.5 million. Other centers of video lottery activity are Codington HERRITY & ASSOCIATES INC. REAL ESTATE & BRUCE R. BROCK REAL ESTATE, L.L.C. Auction by: Brock Auction Co., Inc. PUBLIC LAND AUCTION Friday, October 25th, 2013 @ 10:00 am 291.2 Ac. Of Prime High Quality Farmland in Brule & Richland Twsp., Union Co., SD Land will be sold in 3 tracts. Watch upcoming ads for more info! For Details & Pictures see: WWW.BROCKAUCTION.COM Elisabeth Kalstad Hanson Heirs - Owners JOHN HERRITY, Broker BRUCE R. BROCK, Broker & Herrity & Associates, Inc. Real Estate World Champion Auctioneer 1609 Arnold Palmer Lane Bruce R. Brock Real Estate, LLC. Elk Point, SD 57025 30 Plymouth St. SW (712) 259-6408 Le Mars, IA 51031 www.herrityre.com (605) 593-1099 / (877) 653-4016 Licensed in IA, NE, SD *Auctioneer/Broker represents the sellers interests in this transaction CLAY COUNTY, SD LAND AUCTION 159.54 ACRES PLEASANT VALLEY TOWNSHIP THURSDAY, OCTOBER 24th, 2013 11:00 AM We will sell at public auction the following real estate at the land site located from Vermillion, SD 8 miles north on SD Hwy 19, 1 1?2 miles west on 309th St. This land offers a great opportunity to purchase productive southeastern SD agricultural land in Clay County. The land is currently in a corn/soybean rotation and is available to the new owner for the 2014 crop year. According to the FSA there is 149.8 acres of cropland with a 77.8 acre corn base/ 84 bushel yield/118 bushel CC yield and a 49.9 acre soybean base/ 27 bushel yield/32 bushel CC yield. Currently there are 16 acres enrolled in CRP/ annual payment $2202/ expires 9-302020 and 2.4 acres/ annual payment $283/expires 9-30-2016. Also included is a 4.10 acre acreage site, shelter belt, grain bin and older buildings. Predominate soils include Egan-Clarno-Chancellor, Egan-Clarno- Trent and Baltic silty clay loam. County soil rating of .696 and according to Surety/ AgriData the land has a productivity rating of 79. Taxes: $3026.96. Don’t miss this auction if you are looking to expand your current farming operation or purchase as an investment. Legal Description: SE 1?4 33-94-52 Clay County, SD For additional information, terms, maps and pictures visit: www.westraatkins.com Ronald and Deborah Hesla, Owners County at $6.4 million; Davison County $6.1 million; Hughes County $5.8 million; Beadle County $5.3 million; and Brookings County $4.5 million. Not all counties struggled in the wake of the smoking ban, however. Yankton climbed 6.5 percent in 2012 and 7.7 percent in 2013. Davison grew 0.1 percent and 7.8 percent. Beadle increased 3.9 and 3.0 percent. Some smaller counties also showed two consecutive years of gains, such as Deuel, Turner, Stanley, Bon Homme, Hutchinson and Jones. The Lottery Commission will meet again in five to six weeks to further discuss the report and recommendations. Chairman Bob Hartford of Pierre asked the commissioners to rank the 19 recommendations as part of developing another strategic plan. “I think the whole process needs to be done again,” said Hartford, who previously was the chief executive for the South Dakota Music and Vending Association, whose members are some of the largest businesses involved in video lottery. Some of the recommendations can be accomplished by the commission through rule changes, but most need approval by the Legislature. “We need to prioritize what we want to change, or to accept, and what we need to do that,” Hartford said. Buy Local! Shop the Classifieds! State water board has a busy day By Bob Mercer State Capitol Bureau The city of Yankton received approval Friday for a $12,850,000 loan package from the state Board of Water and Natural Resources for a major upgrade to the municipal water system. Yankton will receive $1 million of loan forgiveness, in essence a grant. That reduces the loan amount to $11,850,000 to be repaid over 20 years at 3 percent interest. Board members also gave their OK to a $259,000 loan for Gregory to replace part of the existing sewer system. The loan is for 10 years at 2.25 percent interest. Freeman and Vermillion received recycling grants from the board. Freeman will get $195,000 for expanding its recycling center. Vermillion will see $400,000 to help replace its baler building that burned down. The Lewis and Clark watershed clean-up project was approved for an additional $200,000 by the board to be used toward further reducing runoff of feedlot waste and other material into area tributaries of the Missouri River reservoir. This is the third phase of a continuing project that to date has invested approximately $7 million from producers and government sources in animal wastemanagement systems. Jim Feeney, an administrator for the state Department of Environment and Natural Resources, said he expects an application in the near future for phase-four funding on what is approaching a 10-year project. At Yankton, city officials plan to renovate an existing watertreatment plant and construct a new collector well 1.5 miles downstream of the current two treatment plants. The city plans to ask the board at a later date for another loan to replace the other existing treatment plant. The overall timetable calls for the work to be completed by end of 2016. “Together with the recently completed wells on the Nebraska side of the river, the city will have the capacity to provide an adequate amount of water to its customers through at least the year 2035,” city manager Amy Nelson said in her application to the board. The board also placed 12 new projects on its loan-planning lists for improvements in drinking water, wastewater and storm water systems. GUBBELS SALVAGE WANTED: • Old Cars • Farm Machinery • Any Type of Scrap Iron • Grain Bin We now offer a towing service Removal and skid loader work. Paying Top Dollar 1-402-640-6335 Will Pick Up Coleridge, NE Save Up To $4100 NOW* *Hurry limited time rebates Efficient and Comfort only from... HEATING & COOLING 920 Broadway Yankton, SD • 665-9461 OUTSTANDING MISSOURI RIVER FARM FOR SALE HERE IT IS FOLKS!! THE LARGEST AND MOST DIVERSE FARM EVER OFFERED FOR SALE IN UNION COUNTY. 993.2 +/- Acres farmland in Sections 21, 22, 27, and 28, “West” Elk Point Township, Union County, South Dakota. Approximately 800 acres tillable cropland with the balance in CRP and prime wildlife habitat. Sealed bids due before Thursday, October 10th at 3:00 P.M. Call or e-mail for bid forms. Private tours available upon request - more information at herrityre.com. TO BE OFFERED IN TWO TRACTS. Tract #1 - 766.24 Taxed Acres Approx. 672 tillable acres (Assessors Avg. Rating .729) Tract #2 – 226.95 Taxed Acres Approx. 127 Tillable acres and 25 acres CRP (Assessors Avg. Rating .698) LEGAL DESCRIPTION: Tract #1 - Lots 1-2-3 & Wyant Tract 1 of Govt. Lot 1 in Sections 21 and 28; and Ray Tract 1 in NE 1/ 4 SW1/4 & SE1/4 SW1/4 & SE1/4 NE 1/4 & SW1/4 SE1/4 and the SE1/4. Consisting of 766.24 taxed acres. Tract #2 – Lot A W1/2 NW1/4 & W1/2 SW1/4 and Lot 4 of W1/2 SW1/4. Consisting of 226.95 Taxed acres. LOCATION: Elk Point, SD. 3 miles west of Elk Point on paved 324th Street, then south 1/2 mile on 473rd. avenue, Tract #1 is on the west side of 473rd Ave., Tract #2 is on the east side. Look for the signs. BROKERS NOTES: The Ray Family has decided to sell this excellent 993.2 acre farm established in 1969 by Faye Ray and the late M.W. (Dick) Ray. This farm has approximately 800 acres irrigated cropland and 1 mile of Missouri River frontage. Nearly 1,000 acres contiguous farmland make this a dream farm for any owner/operator or investor and with endless recreational opportunities, what more could you ask for? This farm has 3 irrigation systems, a modern 2 bedroom cabin, large steel pole building, and 25,000 bu. grain storage. This high yielding farm would make an outstanding investment or turn-key addition to any operation. Don’t miss this once-in-a-lifetime opportunity. TERMS & CONDITIONS: Call or e-mail for bid form. All bidders shall deliver or mail a sealed bid to our office by Thursday October 10th, 2013 at 3:00 P.M. accompanied by a $25,000 check for earnest money made payable to Herrity and Associates, Inc. Real Estate Trust, 2007 Jack Nicklaus Dr., Suite 101, Elk Point, SD 57025. The highest bidders for each tract will be invited to a private auction conducted by world champion auctioneer Bruce Brock. Successful bidders will enter into a purchase agreement and will be required to provide an additional amount equal to 10% of the purchase price. Closing to be on or before November 25th, 2013 at the offices of Union County Title and Abstract Co., 104 West Main Street, Elk Point, SD. The sellers have the right to accept or reject any and all bids. SELLERS: Faye Ray, Tom and Marsha Ray, Kevin Ray, Michelle Livermore, Patty Parrish and Jacqueline Stanfield Joel R Westra, Broker, Beresford, SD 605-310-694 Joel A Westra, Broker Associate, Chancellor, SD 605-957-5222 Pete Atkins, Broker Associate, Tea, SD 605-351-9847 Phil Eggers, Broker Associate, Renner, SD 605-351-5438 Mark Zomer, Vande Vegte Zomer Auctions, Rock Valley, IA 712-470-2526 JOHN HERRITY BROKER CELL: 712-259-6408 jpherrity@iw.net DENNIS HENZE, BROKER ASSOCIATE 712-259-0247 dhenze@iw.net www.herrityre.com