Gaming Machine Arrangements Review Department of Justice & Regulation Office of Liquor, Gaming & Racing

Transcription

1 AMSTEL GOLF CLUB & RANFURLIE GOLF COURSE Gaming Machine Arrangements Review Department of Justice & Regulation Office of Liquor, Gaming & Racing 2016 A u t h o r i s e d S u b m i s s i o n - F i n a l Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page i

2 Contents 1. CLUBS OPERATE FOR THE BENEFIT OF MEMBERS AMSTEL GOLF CLUB & RANFURLIE GOLF COURSE AT A GLANCE 2015 SNAPSHOT EXECUTIVE SUMMARY QUESTIONS FOR CONSIDERATION ATTACHMENTS....i Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page ii

3 Clubs Operate for the Benefit of Members The Board of Directors for Amstel Golf Club and Ranfurlie Golf Course are pleased to submit this paper to the Department of Justice and Regulation with a hope that Government can distinguish between the operations and offering of Licenced Clubs and Hotels that provide electronic gaming as part of their service repertoire. We are firmly of the opinion that Clubs (be they Golf, Bowls, Football, Racing, Special Interest or Broad-Based Community) do more and provide more by way of suburban / regional programs and social support to their immediate community by offering a place of respite that they own (as Part of a Community Asset) and which is more personable and relaxed with a convivial environment that welcomes both members and guests alike. Part of this philosophy is that we prefer our Community (i.e. All Who Come Through Our Doors) to feel a part of the Club without necessarily spending a great deal if nothing at all so long as they have an opportunity to socialise and enjoy the company of others Our Clubs are open to all who come to take advantage of our services and we are not motivated by maximising revenues without giving something back. Our motivations are rather to provide a good value entertainment experience whether you play golf or gaming machines; whether you come with family to enjoy live entertainment with a meal and a social bet with friends or finally that cool cleansing ale at the end of a great game of golf. For our Club members and the wider community in which we operate, we could not provide the good quality offering with subsidised services (Golf Facilities, Green Fees, Functions, F&B, Gala Nights, Presentation Dinners and so on) without electronic gaming and consider as a licenced and legal product that whilst earning an income from same that we are both mindful and justifiably proud of our approach with our patrons to harm minimisation from gambling. With Two Golf Club offerings since 2002 now situated on the Cranbourne-Frankston Road, the Board of Directors of Amstel Golf Club and Ranfurlie Golf Course both Past and Present have presided over a great many capital works programs and infrastructure developments for the benefit of their members and the wider local community. We remain a good club with a solid balance sheet achieved through both a fiscally responsible and prudential approach to gaming where our current business has been built around the presiding entitlement system and now updated taxation arrangement. Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page 3

4 Amstel Golf Club & Ranfurlie Golf Club Amstel Golf Club and Ranfurlie Golf Course are Multi-Million Dollar Businesses that operate under the auspice of being Not For Profit Entities which entail that surpluses must be distributed back to Members through various means including improvements to facilities, food & beverage discounts, competitive green fees, new equipment plus maintenance and repairs on any general wear and tear relating to the up-keep of building and grounds. For the Golfing Fraternity, Members enjoy access to extensive first class practice facilities including driving range, putting green and dedicated short game areas as well as a modern clubhouse incorporating Sports Bar, Members Lounge and Function Rooms. Whilst the Amstel Park Course welcomes public golfers 7 days a week, the facilities and course conditions have continued to be maintained to the same high standards as expected of a member only course and therefore green fee players experience playing conditions normally reserved for members of exclusive clubs. For our House Members, various benefits are offered including a free birthday meal with birthday card, redemption of in-house rewards and recognition from loyalty activities, random chance winning of prizes, free AFL footy tipping competition with cash prize plus monthly cash draws and club magazine for members. Regular Promotional Activity to reward our Members for their continued patronage is offered as well as regular Live Music Entertainment which is subsidised by the Club. We have recently taken back control of the Bistro (Amstel Park) and are able to offer well priced quality meals at competitive prices for our both Members and the Wider Community ranging from $10 to $30 depending on item ordered. The Board are delighted with the early results and a major club refurbishment is contemplated once the State Government is able to provide certainty on the future entitlement environment and taxation regime Only then can we really plan with certainty when contemplating a major multi-million dollar investment to improve our facilities for all membership categories. Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page 4

5 At a Glance Snapshot Amstel Golf Club abides by the process as set out by the State Government for its Community Benefit Statement (CBS) requirements where we exceed the funds level required. The CBS statement is a good discipline for clubs to demonstrate their genuine bona fides as giving back to Community. At a Glance, we cater to nearly 6,000 members in one of Melbourne s fastest growth corridors with 50 personnel gainfully employed as part of our contribution to the social fabric and wellbeing of our staff. We further supported during 2015 by either Direct Cash Donation or Free Green Fees for our Community and further afield (Schools & Various Other Community Associations raffling off Green Fees as part of their Charity Drives which Amstel Park donates as part of its charter and obligation). Amstel Golf Club & Ranfurlie Golf Course Club Members House 5,192 Golf 586 Total 5,778 Employment Employees 50 Apprenticeships 5 Wages Bill $ 1,500,000 Community Programs Cash & Green Fee Raffles (Donatees) 25 Amstel Golf Club & Ranfurlie Golf Course Community Programs Baypoint Drive Pre-School Blindbight Community Centre Cranbourne Cricket Club Cranbourne East Primary School Devon Meadows Pre-School Devon Meadows Football Club End Womens Cancer (Peter Mac) Endeavour Hills Police Station Fruit Bats Darts Club Monash Childrens Hospital Peninsula Arts Society Peninsula Home Hospice Piercedale Primary School Piercedale Rural Fire Brigade Range Bank Pre-School Royal Childrens Hospital Southern Boat Fishing Club St John the Baptist Primary St Johns Primary School St Peters College St Teresas Primary School Turning Point (Cranbourne Christian Fellowship Centre) Victorian Responsible Gaming Foundation Vision Australia Woodbine Road Pre-School Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page 5

6 Executive Summary The Board s response to the key questions posed by the Gaming Machine Arrangements Review is set out as follows: 1. By and large the three objectives for the new venue operator model have had some success although some areas are still Work in Progress. Independence for Clubs has allowed Clubs to become more competitive with Hotels but bridging the gap will take many years (if ever) given the 20 years of lower investment into Clubs by both former Gaming Operators (Tatts & TABCORP). It is also considered that Intralot in terms of service accountability and response/restoration rates are below market standards and expectations. The VCGLR appear to be performing their function as expected. 2. There are basic and prima facie statistics to support an increase in entitlement numbers across the State (including population increase by 1.5 million over the last two decades plus growth and prosperity with a need for like services in new metropolitan and regional growth areas that established LGAs take for granted). An increase to 30,000 entitlements to forecast out for up to the next two decades is not an unreasonable proposition. Ownership restrictions should have greater clarity and be seen as more equitable as opposed to the current limits (Single entity Hotel Operator -4,790 entitlements versus Clubs at 420 entitlements). Should entitlement numbers be increased to 30,000, there should be some bias towards Clubs for total allocations in the state pool and the maximum number of licenced entitlements under roof-line for Clubs (up to a maximum of 200). 3. The current tiered taxation rates for Clubs and Hotels satisfy the revenue return sought by Government therefore it is suggested that no further tinkering take place for Clubs. It is noted that taxation returns decreased after the transition hence the revision and increase to rates from May 2014 onwards. It is requested that no further increase is imposed in the current licence period. It has also been determined that the drop in total Tax-Take for the Government can be back-filled by an increase in the Hotel CBS Taxation on Base Rate. 4. The current taxation structure satisfies Government requirements and captures revenues based on performance. A flat tax would not capture Super tax as the present system does. The increase in taxation has unfairly hit Clubs (who paid their way) and we implore the Government to review the base-level threshold for Hotel CBS Taxation at currently 8.33% of the first $2,666 paid per Hotel. In line with revenue losses and reduced total tax take by the Government (From a maximum of $180M Year 1 to now $100M Year 3), Amstel Golf Club consider a lift in the tax rate on Base ($2,666 per month) for Hotel CBS Taxation to a level that demonstrates comparability to Club Community Spend is required. 5. Perpetual licences to operate Gaming Machines is the best and most preferred option to give all parties (Government, Venue Operators) certainty. It suggested that unlike Taxation that a flat fee based on a percentage of total revenue paid monthly would be the most efficient and predictive system for funds transfer to Government coffers. 6. In line with Perpetual entitlements, the determination of relevant costs to each venue is via an administrative process where Government determines the rate relative to each Market Segment (Clubs and Hotels) and the relevant percentage as decreed that satisfies yearly collections for Government Programs. 7. The Monthly Payment for Entitlements is a Premium Payment on top of the Gaming Taxation paid to Government 8. If the number of entitlements is increased to 30,000, there will be little need for the transfer market and the Government will derive additional taxes and entitlement payments from these additional 2,638 EGM entitlements Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page 6

7 Questions for Consideration The Consultation Paper released 15 th December 2015 in response to the Gaming Machine Arrangements Review announced mid 2015 provides insight and clarifies more fully the Terms of Reference under eight areas of Review and further seeks from the Industry pertinent information on a supplemental question requesting additional thoughts and views on recommendations to improve the regulatory framework for gaming machines. All Subject Matter requiring response will be covered off from Amstel Golf Club s perspective where we will seek to take a balanced view in the interests of the industry. The questions are outlined below with response to the questions provided over page. QUESTIONS 1 Do you think that the venue operator model is meeting the three objectives listed and why? How do you think the venue operator model could better achieve its objectives? 2 Do you think the current distribution limits are appropriate? If not, what changes would you suggest and why? You can comment on any or all of the distribution limits identified. 2 Are the ownership restrictions appropriate? If not, should they be increased or decreased, and why? 2 Should different ownership restrictions apply to hotel entitlements and club entitlements and, if so, why? 3 What mechanism should be used by the government to obtain its share of the value of gaming machine entitlements, for example, taxation, premium payments or other mechanisms? 3 Does the progressive tax structure provide for a fair distribution of the revenue from gaming machines? 3 Should the tax bands or rates in the progressive tax structure be varied, and if so, how and why? 3 Is there an alternative tax structure that should be considered? 3 Should the tax differential for clubs and hotels be maintained and, if so, why? 3 Should changes be made to the way clubs are required to demonstrate their community benefit? 4 Should any future gaming machine entitlements be issued for a 10-year term, a shorter or longer fixed term or in perpetuity and why? 5 What type of allocation process would be appropriate to allocate any new gaming machine entitlements and why? 6 How should the price of any new gaming machine entitlements be determined and why? Should the price of any new gaming machine entitlements be paid by way of a premium payment, be factored into 6 the tax rate or be via another payment option? Please explain why. 7 If premium payments are required, what are the preferred terms for those payments and why? 8 Are there any improvements that could be made to the transfer market? 8 Should the State extract a share of any increased value of entitlements through the transfer market and, if so, how? 9 Do you have any suggestions to improve the regulatory framework for gaming machines? Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page 7

8 Gaming Machine Arrangements Review Do you think that the venue operator model is meeting the three objectives listed and why? How do you think the venue operator model could better achieve its objectives? The three objectives for the venue operator model feature below 1. a venue-based model that ensures that the financial benefits of gaming are fairly and more broadly distributed to the Victorian community 2. continued high standards of probity through a strengthened Victorian Commission for Gambling Regulation and an independent monitoring system to ensure the integrity and transparency of gaming venues 3. opportunities for venue operators to better respond to consumer demands and choice The Board of Amstel Golf Club consider the venue based model has given many in the Industry an opportunity for real independent operation without interference from other Third Parties as was experienced by this Club in its closing stages of the prior gaming operator licence in early 2012 when transferring to the Tatts Group (Tatts Pokies) from TABCORP (Tabaret). There were difficulties in negotiations with our gaming business partner of the day (TABCORP) who maintained a position of not selling EGMs to Venues until early in 2012 (AGC had signed a contract with the Tatts Group late 2011 to ensure continuity of our operation was safe-guarded and last minute deals would not be countenanced given unpredictability). A number of venues in our position who had contracts expiring prior to 12 th August 2012 also departed TABCORP due to this somewhat high-handed approach. Accordingly no third party can now interfere in any substantial way in the operation of gaming at individual venues where Business As Usual means that Clubs (& Hotels) are not answerable to large Corporate Providers and receive at the discretion of the Gaming Operator their EGM Product, Support, Service and Advice based on their revenue return to the Business and to each of these company s (Tatts / TABCORP) shareholders. Additionally, the Board feel it is important to let the Government know that payment of entitlements within five years of a ten year licence has been at times challenging where lower revenues in quieter trading periods can put a squeeze on our funds with these quarterly repayments which thereby contributes to reducing our Capital Expenditure Program for maintenance and up-keep of our Golf Courses and associated Clubhouse infrastructure for the benefit of our Membership. Accordingly the Board pose this conundrum of payment priority to the Government where entitlement payments will always take first place over that of any contribution to community. It is considered that we could allocate much more to our community spend projects if this cost of doing business could be spread evenly across the licence period (i.e. as a proportion of revenue in a monthly charge either during a future licence period or preferably in perpetuity). Secondly the Board are informed that the VCGLR Inspectorate are performing their function with particular reference to spot-checks for all compliance matters relating to effective harm minimisation coupled with appropriate checks on gaming cash handling procedures and reconciliations plus further ensuring all liquor related practices are viewed with access to all appropriate staff licences. The same cannot be said of Intralot as the Independent Monitoring Service who appear only now at present day to be at best average in service and technical help. Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page 8

9 And finally with independence, Clubs can now compete with Hotels on a level playing field given first-hand access to New Gaming Product at the same time rather than receive second-hand or hand me down product from the Gaming Operators. Do you think the current distribution limits are appropriate? If not, what changes would you suggest and why? You can comment on any or all of the distribution limits identified. Are the ownership restrictions appropriate? If not, should they be increased or decreased, and why? Should different ownership restrictions apply to hotel entitlements and club entitlements and, if so, why? The Board have witnessed great strides in population growth in the Greater Cranbourne Area which has placed pressure on various services at times on the general populace. Given there are many growth areas in the greater Melbourne Metropolitan Area coupled with steady growth in Regional Centres (achieved by many prior State Government s push for City People Relocations through both lifestyle choice and Regional Development programs), we consider that entitlements should be increased to cater to the population growth that has occurred over the last 25 years since inception of gaming in Victoria. The population has grown from 4.4M (1990) to reportedly present day 5.9M (2015). This represents an additional 1.5M people who now reside in Victoria being an increase of just over 30% of the base population (1990). Gaming machine entitlements have remained static since 1995 (27,500) and were reduced in line with Government Negotiations for the extended Crown Licence (now 27,372). The changing demography of the Victorian Landscape would indicate that in some areas with ageing consumers that demand for EGM entitlements will be severely curtailed (adversely impacting some Clubs and even Hotels in the future) and with more housing starts in growth areas that demand will outstrip supply. This situation for Clubs in particular is not desired as additional entitlements will assist investment into infrastructure to cater for the entertainment, sporting and social needs of their LOCAL AND GROWING communities. Our Position is to responsibly increase entitlement numbers to a minimum of 30,000 over the forward period of the new licence (2022 ) with all appropriate checks and balances remaining in the application process for additional electronic gaming machines. If the Government seek for Clubs to do more of the Heavy Lifting in their local communities; it stands to reason that the additional entitlements should be allocated more so in favour of Clubs with a maximum operating limit greater than the current limit of 105 EGMs. The range should be anywhere between 115 ( 10% increase) to 200 based on a case by case basis taking into account social disadvantage, SEIFA index, EGMs/1,000 head population and other appropriate measures. The current ownership restrictions relating to Hotels seem somewhat at odds versus Clubs where neither is based on some formulae based calculation or factual data. Single Hotel Group entities can own up to 4,790 entitlements (35%) whereas Clubs can only operate a maximum of 420 entitlements. This would seem somewhat at odds in favour of Hotels. We believe the level of Club entitlements operated by one Club group should be lifted to a more commercially acceptable limit given potential changes over the future decades where possible mergers may take place to save small clubs. Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page 9

10 What mechanism should be used by the government to obtain its share of the value of gaming machine entitlements, for example, taxation, premium payments or other mechanisms? Does the progressive tax structure provide for a fair distribution of the revenue from gaming machines? Should the tax bands or rates in the progressive tax structure be varied, and if so, how and why? Is there an alternative tax structure that should be considered? Should the tax differential for clubs and hotels be maintained and, if so, why? Should changes be made to the way clubs are required to demonstrate their community benefit? By our research and understanding, the Government s share of Gaming Revenue / Player Losses prior to August 2012 was in the vicinity of 38+% of the State Total. At changeover from the Duopoly the revenue from gaming post-transition (August 2012 ) dropped significantly (to 34.2%) in part affected by continuity of supply of gaming operations via Intralot including SMIB / other Interface issues and lack of experience with complex diagnostics plus the ATM prohibition. The Government lifted taxation on gaming for both Clubs and Hotels by 4.2% in both middle and toptier tax brackets. This lifted returns to the Government of nearing 37%. The taxation thresholds for both Clubs and Hotels appear to satisfy the Government s taxation requirements for the moment but given the nature of surprise already imposed by the former Government, the Board are not confident that the current Government will not consider upping the ante for increasing their take as part of new policy measures which could strip Clubs of any ability to ensure they invest future capital into their offerings and maintain current employee numbers. The Board earnestly request the Government do not consider lifting the taxation rate further after payment of entitlements (August 2017 ) so as funds can be invested for the benefit to our members and our involvement with various community groups and their programs (as has been highlighted earlier in this paper). In terms of Community Benefit Taxation paid by the Hotel Segment, the Board have made some rudimentary calculations and determined the Taxation Take on average as part of Total Revenue for the Three Years preceding the transition was roughly $145M. This being calculated 8.33% of the 33.3% share for Hotels (or 25% of the total Hotel Tax Take) State F'10 State F'11 State F'12 Total Revenue $2,585,513,552 Total Revenue $2,640,508,323 Total Revenue $2,670,780,841 Venue Share $717,851,825 Venue Share $732,494,280 Venue Share $740,717,965 Government $1,003,758,857 Government $1,026,755,114 Government $1,038,792,720 Operator $861,837,850 Operator $881,258,929 Operator $890,260,280 CBS Hotel Tax $141,921,007 CBS Hotel Tax $145,496,185 CBS Hotel Tax $148,532,439 Avg Hotel Tax $145,316,544 Post the transition to the new Venue Operator model, the Hotel Community Benefit Taxation Impost is now calculated at 8.33% on various tiered thresholds at a differential to Clubs (Tier % vs 0%, Tier % vs 46.7%, Tier % vs 54.2%) Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page 10

11 The Government Share of Total Revenue has fallen post transition where it experienced severe losses F 13 to F 12 ($180M) to present day F 15 compared to F 12 at circa $98M State F'10 State F'11 State F'12 Total Revenue $2,585,513,552 Total Revenue $2,640,508,323 Total Revenue $2,670,780,841 Venue Share $717,851,825 Venue Share $732,494,280 Venue Share $740,717,965 Government $1,003,758,857 Government $1,026,755,114 Government $1,038,792,720 Operator $861,837,850 Operator $881,258,929 Operator $890,260,280 CBS Hotel Tax $141,921,007 CBS Hotel Tax $145,496,185 CBS Hotel Tax $148,532, LGA F'13 LGA F'14 LGA F'15 Network EGMs $2,490,307,542 Network EGMs $2,503,992,233 Network EGMs $2,567,906,644 Venue Share $1,636,418,095 Venue Share $1,646,380,507 Venue Share $1,628,376,845 Government $853,889,447 Government $857,611,727 Government $939,529,799 Operator $0 Operator $0 Operator $0 In part given Clubs and Hotels have had to equally prepare for independent operation taking into account for their budgets such items as EGM purchases (where relevant), entitlement funding and other regulatory taxes and charges (VCGLR Inspectorate, GST), it is apparent that the Government may wish to find a means to capture and back-fill these losses (irrespective of current percentage take). We can roughly calculate that Clubs have been disadvantaged in the comparative Tax Calculation for Hotel CBS Taxation set at 8.33% which we assume still collects circa $130M to $140M per annum. At the same time, the audited Community Benefit Contributions provided by all Clubs valued in F 15 was calculated at $286.2M. To bridge this gap, the Government should look at increasing this base tax to create a fairer and even playing g field plus capture their share of revenues from Hotels that perform at double the rate that of the Club Segment. If this taxation was lifted to 22.5%, the Government would yield: 13,685 operating entitlements x 12 months x 22.5% x $2,666 = $98,507,367 rounded to $98.5M which is roughly equivalent to the decremental loss for F 15 versus F 12. No other changes to the Taxation structure are offered beyond the increase to Hotel CBS first tier percentage taxation rate. Further the Board do not consider that an alternative taxation structure be in the best interests of the Industry with particular reference to any contemplation of a flat tax. Such a tax is regressive and smaller Clubs and Hotels paying in the range of 37% to 38% of their revenue based on the Government of the Day enshrining this into Legislation would find many small to medium tier businesses doing more than their fair share given other similar on-costs (currently LGA based entitlement payments, utility costs and other operating overheads). Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page 11

12 The Board do not envisage great change to the Community Benefit Statement Process other than providing education to some Club Managers and their Boards for proper and effective reporting on Categories A, B and C. We suspect that some goods and services provided for various local programs and charities are not swept up in the records due to passing the threshold and submitting. It is an onerous exercise and one that we respect but question its real and underlying purpose for being. Surely Clubs across Australia and especially Victoria (after 20+ years) have demonstrated a marked point of difference in that we stand for providing goods and services to benefit our members and guests (community) and re-invest back into our clubhouse whereas Hoteliers (quite rightly) invest for Asset Appreciation and Personal Wealth Creation. Should any future gaming machine entitlements be issued for a 10-year term, a shorter or longer fixed term or in perpetuity and why? The Board support a licence in perpetuity. This will ensure Government can immediately access funds from these assets without waiting for a big kick every 10, 15, 20 or 25 years. The payment of entitlements is predicated on retaining the current taxation structure and looks to the precedent set under the former licence with the Tatts Group where this Gaming Operator (as half of the Industry) was charged a 7% premium on their revenue to allow continued gaming operations during the terms of their licence. Revenues reported in FY 2014/15 (F 15) were consistent with prior trading years in which Hotels achieved total revenues of $1.713B of $2.567B (66.7%) and Clubs achieved $854M (being 33.3% of the Total). Given the relativities in performance and the low payment for Hotel CBS plus the inequity of entitlement payments between Hotels (Average $39,000) and Clubs ($33,000) for the current licence, it is suggested that Hotels that perform on average at twice the rate should also pay double that of Clubs for their entitlements. Accordingly this is represented as follows: $1,712,942,662 x 5% = $85,647,133 per annum (Average cost for Hotel Entitlement at 10 Years comparable [i.e. current licence] is $62,580) $853,762,824 x 2.5% = $21,344,070 per annum (Average cost for Club Entitlement at 10 Years comparable [i.e. comparable licence] is $15,595) The total accumulation of entitlement funds is equal to $106,991,120 per annum / rounded $107M per average year (Average $39,087 for a 10 Year Period). This proposal falls in line with the average costings for entitlements particularly across the Eastern Seaboard where Hotel entitlements are valued at roughly 2.5 to 3.0 times that of Clubs (See Attachment PPB Advisory The Value of Poker Machine Entitlements March 2013) Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page 12

13 What type of allocation process would be appropriate to allocate any new gaming machine entitlements and why? The Board suggests that the competitive auction process conducted in 2010 for entitlement allocation was not successful given that major individual groups had sway in the bidding process coupled with outside advice prior to auction with instruction to bid at the lowest price possible and assess based on whether the Government algorithm created bidding tension. In some LGAs, individual operators for whatever reason took the bidding process to extreme and put their price way past the Industry Average for no real commercial gain they just overpaid (See Warrnambool, Shepparton, Phillip Island to name but some LGAs) This competitive process for all intents and purposes was impacted by influence, lack of knowledge and understanding of reserve pricing plus lack of algorithm reaction / system inertia. Accordingly, the Board are in favour of an Administrative Process that charges Venues at the end of each trading month the relevant percentage for entitlement costing based on their category (be they 5.0% of Total Revenue or 2.5% of Total Revenue). There is complete certainty in this process for the Government who will always get their contribution from each venue in perpetuity. How should the price of any new gaming machine entitlements be determined and why? Should the price of any new gaming machine entitlements be paid by way of a premium payment, be factored into the tax rate or be via another payment option? Please explain why. The Board have indicated their preference for entitlements in perpetuity. For the Government this does not mean a loss of control of a Once in a Decade Windfall but rather that there is a reliable source of income over and above gaming taxes paid at the same time as the monthly gaming taxation to the State Government each and every month. The Government can budget with certainty on knowing these funds will be continuously paid and are therefore a reliable and predictable source of income. By definition, this entitlement payment is an additional charge over and above the gaming taxes paid by each venue and is therefore classified as a Premium Payment. It must not be included into the Gaming Taxation owed by Venues so as to be clearly identified as a separate line item on the Balance Sheet / Profit & Loss Statement and reminds all Venue Operators to account for this cost to business in all forecasting and cash-flow budgets. As indicated previously, the perpetual charge allocated to Clubs and Hotels is recommended as a percentage of the total monthly gaming revenue accumulated by each venue individually across the State of Victoria. If premium payments are required, what are the preferred terms for those payments and why? The Board consider a percentage proportion of the total revenue calculated as a separate charge outside of gaming taxation to be a premium payment. Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page 13

14 We consider the preferred arrangement for payment to be as an accompaniment to the monthly gaming taxes paid by each venue to the State Government. Accordingly two separate amounts should be drawn from the Venue Operators Gaming Account, these being: Total Monthly Gaming Taxation (as determined by Tiered Tax Structure) Total Monthly Entitlement Payment (as determined by relevant percentage allocation) Are there any improvements that could be made to the transfer market? Should the State extract a share of any increased value of entitlements through the transfer market and, if so, how? The transfer market should ideally remain as a free market under the current licenced entitlement numbers across the State (27,372 entitlements). If the Government sees its way clear to increase the entitlement number to 30,000; there will be very little need for the transfer market for reallocation and redistribution of entitlements. The Board consider the question to be one that asks should the State get value from internal LGA transfers or Intra-LGA transfers. If entitlements do lift to the recommended number (30,000), the Government will receive a perpetual fee from each new entitlement by way of allocating same over and above the current approved maximum entitlement number (27,372 entitlements). There will be 2,628 additional points across the State for taxation collection and perpetual premium payments. Do you have any suggestions to improve the regulatory framework for gaming machines? The process by which Amstel Golf Club like all other venues must go through to redistribute and relocate EGMs within the green line is onerous (involving IGS, Break-Fix/IMAC Provider, Manufacturers and VCGLR approval for any deployment works). One would question the real value of over-involvement by all parties. The Board are of a view that we act entirely within the guidelines but are at times frustrated by the slowness to react from various parties to approve changes to the gaming floor layout for relocating EGMs and installing new boxes and games. We act within all regulatory parameters but respectfully request if the Government could find its way clear to allow a way for Venues to fast-track their gaming upgrade works and provide reporting to IGS and the VCGLR after the fact for the sign-off. This would promote less Red Taper and Greater Efficiencies (and potentially better revenues for investment into programs for improved social outcomes) Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page 14

15 Attachments PPB Advisory Insights The value of poker machine entitlements March 2013 A venue s gaming revenue and overall value is directly affected by its entitlements to operate poker machines.due to the changing regulatory environment, financiers and borrowers should be aware of the current regulatory frameworks. In this Insight, we review the basic poker machine entitlement (PME) frameworks under which hotels and clubs in different states and territories operate. We have sourced the following information from public resources and also from sources that are not readily available to the public. Financiers should ensure PMEs: have adequate security, given PMEs can be traded without notification to the financier are assigned a value by venues that aligns with industry averages for the applicable state jurisdiction are purchased at a rational amount. National snapshot Forfeiture requirements (one in three PME sales) will affect the purchase of any PMEs. A borrower with only a leasehold interest should be aware that the landlord generally owns the PMEs. From August 2012, venue operators receive a greater proportion of gaming revenue compared to the previous duopoly structure (Tatts Group Limited and Tabcorp Holdings Limited). However, venue operators will now NSW VIC also assume responsibility and regulatory costs for owning and operating gaming machines. Vendors may be required to pay 75% of any profit gained from PME sales before 16 December 2013 to the Victorian Government. Need to factor in the security position if the borrower purchased PMEs on deferred payment terms. QLD Hotel PMEs can generally only be traded three times a year, with only one bid accepted per licensed venue per region (best offer only). The relevant state authority is paid 33% of the price of every PME sold. SA PMEs can only be traded during trading rounds (there have only been two trading rounds announced since the approved trading system was introduced in 2011). Forfeiture requirements (one in four PME sales) will affect the purchase of any PMEs. Hotels should consider renting PMEs from Club One on a temporary basis, subject to approval by the relevant state authority. ACT In August 2012, the ACT Government passed legislation that allowed limited direct PME trading between venues: Clubs within a group can transfer up to 10 machines or 10% of the existing machines of the receiving club (whichever is lesser), without completing a social impact assessment (requirement under discretion of the relevant state authority). New or single-venue clubs can access a pool of 150 machines to help them establish new venues on land the ACT Government deems suitable. TAS A private company (Federal Hotels) owns and leases PMEs to all venues. This exclusive arrangement (which includes casino and keno operations) is in force until Check whether gaming machine leases are transferred in the event of a business sale. NT Currently PMEs cannot be directly traded between venues. In July 2008, the NT Government announced it was looking into developing a PME trading scheme for venues, but no further announcements have been made since then. WA PMEs are restricted to casinos, and no PMEs are held by hotels and clubs. Note:The terminology for the right to operate poker machines varies across states, so for simplicity we have used the term poker machine entitlements (PMEs). Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page i

16 The following is a high-level outline of the PME frameworks used by the major gaming states. Hotels QLD Clubs Most recent values per PME (excl. GST) $61.1k South East $51.4k Coastal $31.3k Western $5.5k South East $10.5k Coastal No tender for Western QLD to date Method of trade Tender process generally held every four months Approval from the relevant state authority or when tender process announced Sale condition 33% of sale price is contributed to the relevant state authority 33% of the sale price is contributed to the relevant state authority NSW Hotels Clubs Most recent values (excl. GST) $200k - $225k CBD (for block of three) $180k - $200k country (for block of three) $30k $35k (for block of three) Method of trade Directly between venues subject to approval from the relevant state authority Directly between venues subject to approval from the relevant state authority Sale condition One in three PMEs forfeited at sale One in three PMEs are forfeited at sale Hotels SA Clubs Most recent values per PME (excl. GST) $60k $60k Trading round held when announced One in four PMEs forfeited at sale Method of trade Sale condition Trading round held when announced One in four PMEs are transferred to Club One at sale Hotels $40k - $43k CBD $30k - $33k Other VIC Clubs Most recent values per PME (excl. GST) Online market (Entitlement Transfer Market) administered by the relevant state authority Method of trade Sale condition $12k - $15k CBD $4k - $6k Other Online market (Entitlement Transfer Market) administered by the relevant state authority For transfers before 16 December 2013, vendors may be required to pay the state government 75% of the profit, if any, gained from a sale For transfers before 16 December 2013, vendors may be required to pay the government 75% of the profit,if any,gained from a sale Sources/relevant state authority: NSW Office of Liquor, Gaming and Racing Victorian Commission for Gambling and Liquor Regulation QLD Office of Liquor and Gaming Regulation SA Department of Treasury & Finance Government of South Australia Consumer and Business Services Important: This information is not advice. Readers should not act solely on the basis of information contained in this document. We recommend that formal or independent advice be sought before acting in the areas covered herein INS. March Amstel Golf Club Response to Office of Liquor, Gaming & Racing Page ii