CASINO COSA, AFDC & FDC

Accelerated Facility Development Commission (AFDC) 940 NEWS (NOV 10, 2006) (Originally Posted)Subsequent to the end of the third quarter, the BCLC unveiled an initiative to improve the economic model of casino redevelopment in the province, which was developed in consultation with casino service providers to recognize the recent significant increases in development costs. The initiative provides for an additional FDC amount equal to 2% of the gross win from the redeveloped casino property on projects approved by the BCLC after July 1, 2006, which will be payable weekly beginning on the later of April 1, 2007 or the opening of the redeveloped property. The AFDC is a one-time initiative that is limited to the initial redevelopment of a property.Once the approved eligible costs of the redevelopment are recovered through the existing FDC and the AFDC, the service provider is no longer eligible for AFDC on the project.

The AFDC will apply to both the Burnaby redevelopment and the potential Lake City redevelopments. Although the Burnaby redevelopment was approved prior to July 1, 2006, the Fund has received confirmation that the project is eligible for AFDC. Accordingly, beginning with the opening of the new casino in late spring 2008, the Fund will receive total FDC for Burnaby equal to 5% of the gross win from the new casino. Once all approved eligible costs have been recovered, FDC will accumulate at a rate of 3% of gross revenue, to be applied against future eligible approved expenditures. Management anticipates that the implementation of AFDC will reduce the recovery period on the Burnaby redevelopment by approximately five years.

Gateway WebsiteGATEWAY CASINOS INCOME FUND REPORTS RECORD THIRD QUARTER FINANCIAL RESULTS
*What is the Facility Development Fund?Under the terms of the COSAs with the BCLC, the BCLC deposits a facility development fee (”FDF”), equal to 3% of the total revenue generated from the table games and slot machines at each BC casino, into a trust account managed by the casino operator, for payout of additional compensation based on eligible capital expenditures. When Gateway incurs an eligible expenditure, it submits this to the BCLC for approval and, once approved, can draw the amount of the expenditure from the Facility Development Fund. Any funds not reimbursed accumulate in the facility development fund for future eligible expenditures.
What types of expenditures are eligible for additional compensation from the Facility Development Fund?In general, all capital expenditures to develop a casino and all capital expenditures that improve the casino are eligible for additional compensation from the Facility Development Fund.

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Don Quixote Note: The payments into the AFDC and FDC funds are percentages of GROSS REVENUE while the payments to the Host Community is a percentage of NET INCOME. It is easy to see that an increase in the amount from 3% in the FDC to 5% in the AFDC has an downward effect on the payout to the HOST City.
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(Above material from reposting of Feb.26, 2007)