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1 BEFORE THE MISSOURI GAMING COMMISSION

STATE OF MISSOURI

2

3 Meeting

Thursday, December 6, 2001

4 518 Vine Street

Boonville, Missouri

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6 COMMISSIONERS PRESENT:

Robert Smith, Vice Chairman

7 Lynne R. Nikolaisen, Secretary (Via Telephone)

J. Joe Adorjan (Via Telephone)

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21 REPORTED BY:

TRACY L. CAVE, CSR

22 Associated Court Reporters

714 West High Street

23 Jefferson City, Missouri 65101

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1 I N D E X

2 Call to Order

3 Update of State on Isle of Capri 5

4 Consideration of Relicensure of Class A Licensees: 10

5 Resolution No. 01-081

Resolution No. 01-075

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Consideration of Relicensure of Certain Suppliers: 73

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Consideration of Licensure of Certain Supplier: 77

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Consideration of Disciplinary Action:

9 DC-01-062 80

DC-01-063 83

10 DC-01-064 85

11 Consideration of Approval of Change in Control: 87

12 Consideration of Licensure of Certain

Level I/Key Applicant: 89

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Consideration of Proposed Rules & Regulations: 90

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Consideration of Renewal of Bingo

15 Manufacturers & Suppliers: 96

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1 VICE CHAIRMAN SMITH: I think it's time to

2 begin the meeting. Everybody take a seat.

3 Looks like this is not only a historic

4 occasion for Boonville, but we're in a historic building.

5 This is very impressive and we appreciate someone making

6 this available to us for this meeting.

7 I want to welcome everybody here first, and I

8 also want to explain why I'm the only one here. We have a

9 problem this time with one of our Commissioners being out of

10 the country. The former Chairman's term has expired and

11 they have not appointed a replacement. And two of the other

12 members of the Commission couldn't get here, but are

13 available by telephone.

14 The Missouri statutes authorize us to have

15 telephonic meetings and we don't do this very often. We

16 like to have everybody here, but it was so important to have

17 everything set here in Boonville, we decided to go ahead

18 today, but Commissioner Adorjan and Commissioner Nikolaisen

19 are on the speaker telephone. They both had copies of all

20 of the documents and materials ahead of time and a chance to

21 look at them. So they'll be free to ask questions as we go

22 along.

23 EXECUTIVE DIRECTOR MULLALLY: Mr. Chairman,

24 I'll speculate that when you were mayor of Columbia, you

25 would have preferred that the City Council not show up.

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1 VICE CHAIRMAN SMITH: That applied to one or

2 two people in the audience that always showed up for every

3 meeting too. But -- well, I'm glad everybody's here.

4 I guess the next order of business is to call

5 the role.

6 MS. FRANKS: Commissioner Smith?

7 VICE CHAIRMAN SMITH: Present.

8 MS. FRANKS: Commissioner Nikolaisen?

9 COMMISSIONER NIKOLAISEN: Present.

10 MS. FRANKS: Commissioner Battle?

11 (No response.)

12 MS. FRANKS: Commissioner Adorjan?

13 (No response.)

14 MS. FRANKS: Commissioner Adorjan?

15 VICE CHAIRMAN SMITH: Looks like we've lost

16 him.

17 MR. MULLALLY: Joe, are you there?

18 COMMISSIONER ADORJAN: Yes, I am.

19 MR. MULLALLY: We're calling the role.

20 COMMISSIONER ADORJAN: Okay. I can barely

21 hear Bob. I can hear you fine, Kevin.

22 VICE CHAIRMAN SMITH: Maybe I can get closer

23 to this. Can you hear me now?

24 COMMISSIONER ADORJAN: Yes, sir. Thank you.

25 VICE CHAIRMAN SMITH: I've got some fancy

0005

1 machine here on an arm and I'll see if I can keep my mouth

2 close to it.

3 I think the first item of business should be

4 the report on where we are on the Isle of Capri. The

5 Commission, at a previous meeting in November, authorized

6 the opening of the Isle of Capri subject to the final review

7 by the executive director and the staff.

8 And, Kevin, I'd like to call on you first for

9 a report on where we are on that.

10 MR. MULLALLY: Thank you, Mr. Chairman.

11 Before I get into the actual report, I had a

12 nice conversation with one of the local news reporters this

13 morning and one of the things that she asked was how

14 yesterday's exercise differed from some of the others in the

15 early days.

16 And it caused me to reflect, and somewhat

17 awestruck by the depth and complexity of yesterday's

18 exercise as opposed to the ones we did back in 1994. And

19 there are -- Matt Brown I think is here and a few others,

20 Rick Wilhoit, that were probably there in 1994.

21 And I just can't tell you how pleased I am

22 with the staff, the level of expertise that we have

23 developed and the thoroughness and complexity of the

24 simulations and the review that the Isle of Capri employees

25 underwent yesterday.

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1 And I think that Steve Johnson will give a

2 report that will describe and summarize what we did

3 yesterday, but I think that I can say with all confidence to

4 the people of the State of Missouri that the Isle of Capri

5 operation has been given the most thorough review possible

6 for any gaming operation in the country and I couldn't be

7 more pleased with our employees.

8 I'd like to specifically mention Larry

9 Buschjost who coordinated this effort from day one really.

10 It's been a multi-month long ordeal. He's been a constant

11 presence in Boonville. And Clarence Greeno has also played

12 a significant role in this thing. And I'm sure Steve will

13 have many, many more to thank, but at this time I'll call

14 him forward to give you a little more detailed report on

15 yesterday's activities.

16 MR. JOHNSON: Mr. Chairman, members of the

17 Commission, thank you.

18 In a word, the mock cruise yesterday went

19 very, very well. We noticed and documented very crisp table

20 play and table interaction. The guest services and

21 ticketing area was crisp and well executed.

22 We put enough pressure on them, the crowds

23 created additional pressure for these people. It was

24 handled very well. Some adverse issues related to irate

25 folks at ticketing were resolved in a very timely manner and

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1 very well. The slot activity was good. The drop went very

2 well.

3 The accountability in the cage seems to be to

4 the standard that we would want and expect and, in fact,

5 reflects the experience of the company in terms of depth of

6 management and those functions.

7 And we're pleased to report that the only

8 issues that we noticed last night that had a potential to

9 delay this opening were related to surveillance, which has

10 been -- of course, it's a vastly complicated system

11 involving a lot of hardware, wiring issues and camera

12 placement issues, lenses and inevitably when you're working

13 with devices of this type, you have failures and problems.

14 They surfaced and they were resolved

15 overnight. An absolutely outstanding effort on behalf of

16 Isle of Capri to address these issues in the interim period.

17 We can report that it was a very good overall

18 practice excursion and we believe from the operational

19 standpoint that the Isle of Capri is ready to open today.

20 The director mentioned offering appreciation

21 to various folks that were involved. He has mentioned the

22 gaming enforcement managers. This has been a team effort

23 within the confines of the core concept in every sense of

24 the word. And if I start listing folks that we owe

25 appreciation to, I will inevitably miss some.

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1 You look out in this room and if they're

2 assigned to the Gaming Commission, they were involved in the

3 preparation for testing the Isle of Capri and the

4 preparation for the opening of this facility.

5 From our standpoint, barring any concerns that

6 you may have, we certainly feel like our recommendation to

7 the director to open is justified.

8 VICE CHAIRMAN SMITH: Thank you.

9 I notice that one of the suppliers couldn't

10 spell Boonville, but everything else seemed to work pretty

11 well.

12 MR. JOHNSON: Lots of E's floating around in

13 Boonville.

14 VICE CHAIRMAN SMITH: Anything else to report

15 on, Kevin?

16 MR. MULLALLY: No, sir.

17 VICE CHAIRMAN SMITH: Do we have anybody else

18 to appear on this, Kevin, or is that --

19 MR. MULLALLY: No. Mr. Chairman, as you know,

20 last week the Commission delegated to the director the

21 authority to issue the license. This morning I have signed

22 and have prepared for you the license for the Isle of Capri

23 of Boonville.

24 I can state based on the staff's review with

25 all confidence that we believe they are prepared and ready

0009

1 to open this casino and do so in accordance with the

2 Missouri laws and regulations. You have found them suitable

3 and we think they're ready to go. So if you would like to

4 call someone forward and --

5 VICE CHAIRMAN SMITH: Let's find out first if

6 either of the other commissioners have any questions before

7 we go ahead and issue the license.

8 COMMISSIONER NIKOLAISEN: I have none.

9 COMMISSIONER ADORJAN: I have none.

10 VICE CHAIRMAN SMITH: Fine. Is there a

11 representative here from the Isle of Capri? We'll go ahead

12 and --

13 MR. MULLALLY: I believe Tom Carr is here

14 representing the Isle of Capri.

15 MR. CARR: Excuse my appearance. I have my

16 casino opening clothes on as opposed to my Commission

17 clothes.

18 VICE CHAIRMAN SMITH: That's all right. We'd

19 rather see you in working condition.

20 It's our pleasure to present you with your

21 license for the Isle of Capri at Boonville and wish you lots

22 of luck and wish the people of Boonville a lot of luck with

23 the new project.

24 MR. CARR: Thank you very much. I just would

25 like to thank the Commission for their confidence. We

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1 really appreciate it. This has been a long process for

2 Boonville and I know this is going to be a casino this

3 community is going to be proud of.

4 I also want to thank the staff. When I first

5 met with Kevin and staff early on, we talked about

6 partnering and being there as a resource and that's really

7 been the case here. It's somewhat unique in my experience.

8 We've worked through some issues. Larry is

9 our partner, but a demanding partner, let's say, but we've

10 worked through a lot of things and their help has really

11 allowed us to get here and I do appreciate that.

12 With those few words, I'm going to go open a

13 casino, if that's all right.

14 VICE CHAIRMAN SMITH: That's fine.

15 MR. CARR: Thank you very much.

16 VICE CHAIRMAN SMITH: The next order of

17 business is consideration of relicensure of Class A

18 licensees. And the first item on the agenda is Ameristar

19 Casino of Kansas City, Incorporated.

20 MR. MULLALLY: Mr. Chairman, there are --

21 these two items are somewhat related in that it's the same

22 parent company that owns both Kansas City and St. Charles,

23 so with the permission of the Commission, I think what we

24 would suggest is that Troy Stremming will present on both --

25 will combine his presentation with regard to Ameristar

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1 Kansas City and Ameristar St. Charles.

2 We would then hear from representatives from

3 the City of Kansas City and the City of St. Charles, then

4 open the agenda for public comment. And then Sergeant Jeff

5 Smith would present the staff investigative report with

6 regard to both facilities and then you could vote on them

7 individually, if that's all right.

8 VICE CHAIRMAN SMITH: That will be fine. We

9 still have separate resolutions at the end.

10 MR. MULLALLY: That's correct.

11 VICE CHAIRMAN SMITH: We'll go ahead and

12 proceed then.

13 MR. STREMMING: Morning, Commissioners and

14 Executive Director Mullally. My name is Troy Stremming.

15 I'm vice president of legal and government affairs for

16 Ameristar Casinos.

17 I have with me today Tony Raymon, who's our

18 senior vice president and general manager of our St. Charles

19 facility; and Tom Burke, who's our senior vice president and

20 general manager of our Kansas City facility.

21 Let me start by apologizing this morning that

22 our corporate officers were not able to be here. They're

23 currently out on an equity finance offering on a road show.

24 And we -- we would like to think that that's going to even

25 more strengthen the balance sheet of our company. So I

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1 apologize they couldn't be here.

2 VICE CHAIRMAN SMITH: That means that they'll

3 build a new garage in Kansas City?

4 MR. STREMMING: That's absolutely correct.

5 We'll report on that to you a little later, Tom will.

6 Our presentation this morning will begin by

7 providing you with the requested information pursuant to the

8 memorandum that we received from the staff, then I'll turn

9 the presentation over to the general managers to discuss

10 some of the exciting future developments that we have at our

11 two properties. And, lastly, we'll entertain any questions

12 that the Commission or the staff might have.

13 The first area we were -- that we were asked

14 to report on was the -- were the development agreements that

15 we have with our home dock cities. Ameristar Casino

16 St. Charles enjoys a wonderful relationship with the City of

17 St. Charles through its Mayor, Patti York, and its City

18 Council.

19 Ameristar Casino St. Charles does not have a

20 development agreement with the City of St. Charles.

21 However, Ameristar intends to continue to work very closely

22 with the city leaders to further the economic impact

23 resulting from riverboat gaming in the City of St. Charles.

24 We believe this is evident from our recent

25 commitment to invest $170 million in the completion of the

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1 new entertainment facility and riverboat casino within the

2 city. This is in addition to the substantial capital

3 investment that Ameristar has already made within the city.

4 And I believe Lyn Porterfield, the City attorney, is here

5 today who can speak to our relationship a little further.

6 Similar to Ameristar Casino St. Charles,

7 Ameristar Kansas City has a great relationship with city

8 government as well. However, unlike Ameristar Casino

9 St. Charles, Ameristar Casino Kansas City is party to a

10 development agreement with the Port Authority of the City of

11 Kansas City.

12 Ameristar Casino assumed those obligations

13 pursuant to this development agreement as a result of the

14 purchase of the Station Missouri properties. Ameristar

15 Casino Kansas City is currently in full compliance with all

16 obligations pursuant to the agreement.

17 In addition to other obligations, Ameristar

18 Casinos makes the following annual payments to the Port

19 Authority of Kansas City each year: $100,000 to the Problem

20 Gaming Awareness and Scholarship Fund and $250,000 to the

21 Riverfront Project Fund, which was developed for the

22 marketing and development of the Kansas City riverfront.

23 Mike Burke, who is the counsel to the Port

24 Authority, is also here today and he can show you some of

25 the marketing materials that some of those funds have been

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1 used for.

2 This agreement originated in January of 1997.

3 Ameristar Casino will continue to make these annual payments

4 for the duration of the development agreement, which is

5 10 years. Ameristar has also agreed to make an additional

6 $200,000 annual payment for the next five years into a

7 foundation to be set up by the Port Authority for the

8 benefit of minority and women business enterprises.

9 Ameristar Casino is currently waiting for the

10 Port Authority to present us with a formal structure for the

11 foundation in which Ameristar will deposit its

12 contributions.

13 Although this foundation structure was

14 intended to be completed by year's end, the Port Authority

15 has not yet established a formal structure. Accordingly,

16 Ameristar expects to enter into a six-month extension with

17 the Port Authority to reach an agreement as to the

18 foundation structure. It is presently contemplated that the

19 foundation structure will be presented to Ameristar for

20 approval in early 2002 and at that time we'll make our first

21 contribution into the foundation.

22 As part of the development agreement,

23 Ameristar is also obligated to use its best efforts to meet

24 certain minority and women goals in purchasing and

25 employment. Currently 40 MBEs and WBEs are among our

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1 vendors and suppliers at Kansas City.

2 Pursuant to the development agreement and

3 consistent with our corporate policy, we provide equal

4 opportunity to prospective vendors and suppliers

5 irrespective of their race, color, religion, sex, age or

6 national origin. It is also our policy to take affirmative

7 action to identify and engage the services of qualified MBEs

8 and WBEs.

9 During the current period of licensure,

10 Ameristar has purchased approximately $2,128,540 worth of

11 goods and services from qualified MBEs and WBEs. This

12 accounts for 13 percent of Ameristar's total purchase of

13 goods and services this year.

14 Although this falls short of Ameristar's goals

15 as set forth in the development agreement, the property has

16 shown consistent and steady growth each of the last two

17 years in MBE and WBE utilization. This is the result of the

18 establishment and implementation of a strategic plan

19 instituted in the last two years which the Port Authority,

20 through their private contractor, helped us to establish.

21 Ameristar is also proud to announce that more

22 than 60 percent of the construction costs associated with

23 the building of our new $20 million parking garage in Kansas

24 City will be paid for services and products provided by MBEs

25 and WBEs. In addition, Ameristar Casino Kansas City

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1 substantially exceeds its goals for the employment of

2 minorities and women pursuant to the development agreement.

3 And I'll touch more on those just a little later in the

4 presentation.

5 The second piece of information that we were

6 requested to respond to was our projections and actual

7 performance to AGR. When Ameristar Casino submitted its

8 application in late 2000, the AGR budget through

9 September 30th was set at just over $94 million. In

10 St. Charles our actual AGR through September 30th was

11 $104,505,000.

12 You'll also notice in the presentation -- or

13 in the flip book that we provided, we've made a

14 comparison -- not only are we exceeding the budget, but

15 we've made a comparison to the AGR for 2000 as opposed to

16 2001 and there's an increase of almost $20 million over

17 2000. So it's a substantial increase in AGR in the City of

18 St. Charles.

19 Regarding Kansas City, the budget that was

20 submitted by Ameristar was about $144,400,000. Our AGR

21 actual through September 30th, 2001 is $143,764,000, just

22 shy of the budget but at the same time was almost $7 million

23 more in AGR than what was gained in 2000.

24 So, again, we've shown steady growth.

25 Although we set our budget a little high, I believe we have

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1 continued to show steady growth in Kansas City as well.

2 Similarly, admissions -- our admissions in the

3 city or in the -- at the property in St. Charles budgeted by

4 Ameristar in their original application were 4,483,000

5 through September 30th. Our actual admissions through

6 September 30th were 4,261,260. And that number is slightly

7 up over 2000 on actual numbers.

8 In Kansas City we've seen a little bit of a

9 different trend. I think when we opened the Kansas City

10 property, we were somewhat of a tourist attraction. We

11 obviously are still a tourist attraction, but I think we had

12 a lot of lookers and a lot less gamblers when we first

13 opened that property and we've seen a decrease in our number

14 of admissions.

15 Ameristar Casinos budgeted through

16 September 30th on their application just over 7 million

17 admissions. And our admissions actual through

18 September 30th were 6,547,546. And that number is also down

19 over actual numbers in 2000 slightly.

20 Next, we were asked to provide a summary of

21 the total capital investment in the project. And I'll start

22 with St. Charles. The acquisition cost -- and all this is

23 broken out in your flip chart, but the acquisition cost of

24 Ameristar for the St. Charles property -- and this is on

25 page 13 of the flip chart -- was $160,000,000.

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1 Since that time, through capital improvements

2 at the property as well as the first phase of investment in

3 the build-out in St. Charles, an additional $14,277,000 has

4 been invested in the St. Charles project for a total through

5 September 30th of 2001 of $174,277,000.

6 In addition to that, there's obviously a

7 substantial amount of money that's being invested in the

8 finishing of that project. We recently announced that that

9 project, as I stated earlier, would be expanded to an

10 additional $170,000,000 in the project.

11 In Kansas City, at our property there, the

12 original investment was $328,000,000 by Ameristar in the

13 acquisition from Station Casinos. Since that time, in

14 capital improvements, slot product, etc., that property has

15 spent an additional $5,340,000 for a total investment

16 through September 30th of $333,340,540.

17 And obviously that number will be expanded

18 even further with our commitment to build -- which we've

19 already broken ground on the parking garage in Kansas City

20 for another $20 million.

21 Next, we were asked to compare the projected

22 employment with the actual performance. In December of

23 2000, when Ameristar Casinos took over operations of Station

24 Casino St. Charles, the casino employed approximately 1,040

25 individuals in 12 various departments.

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1 Currently, Ameristar Casino St. Charles

2 employs 1,037 full-time employees with an average hourly

3 wage of $8.96. In addition, toked employees receive, on the

4 average, $2.72 per hour in the slot department, $7.99 per

5 hour in the valet department, 51 cents per hour in the cage

6 department and $10.56 per hour in the table games

7 department.

8 In addition, Ameristar Casino St. Charles

9 anticipates that we will be hiring an additional 700 to 800

10 employees between now and mid-2002 when we anticipate

11 opening the new Ameristar Casinos entertainment venue and

12 riverboat casino.

13 In Kansas City, in December of 2000 when

14 Ameristar Casinos took over the operations from Station

15 Casino, the casino employed approximately 1,859 employees,

16 again in 12 various departments. Currently, Ameristar

17 Casino Kansas City employs 1,713 full-time employees with an

18 average hourly wage of $8.37, very similar to St. Charles.

19 In addition, the toked employees receive, on

20 the average, $2.87 per hour in the slot department, $8.10

21 per hour in the valet department, 29 cents per hour in the

22 cage department, and $10.85 in the table games department.

23 So that's our update on the employment at both

24 the properties. Our employment numbers are slightly down in

25 Kansas City, but that's come through some operational

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1 efficiencies that Tom can speak to shortly.

2 Next, we were asked to explain our affirmative

3 action plan and our minority hiring practices. And I'll

4 address both of these -- obviously our company policies are

5 the same at both properties, so I'll address both of these

6 simultaneously. And this is on page 19 in your flip book.

7 Ameristar Casino St. Charles and Ameristar

8 Casino Kansas City's affirmative action plans specifically

9 outline the commitment we make in providing equal employment

10 opportunities to all employees and applicants in full

11 compliance with all applicable laws.

12 Ameristar Casino St. Charles and Kansas City

13 recognize each employee and applicant as an individual

14 without regard to race, age, gender, color, religion,

15 national origin or disability.

16 These plans extend to all persons in all

17 aspects of the employment relationship including, but not

18 limited to, recruiting, advertising, hiring, promoting,

19 upgrading, transferring and terminating, as well as the

20 selection for training and educational assistance, social

21 and recreational programs and all other privileges, terms

22 and conditions of employment.

23 In St. Charles, currently over 26 percent of

24 our employment force are minorities. This number exceeds

25 the actual local demographic composite of minorities as

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1 compiled in the 2000 census by 10 percent. Ameristar Casino

2 St. Charles routinely advertises employment opportunities in

3 publications targeted to minorities and regularly solicits

4 new recruitment sources that provide qualified minority

5 applicants.

6 In addition, Ameristar Casino strives to

7 promote qualified minorities and women from within its work

8 force into supervisory and management positions within the

9 company.

10 Like Ameristar Casino St. Charles, Ameristar

11 Kansas City strives to provide equal employment

12 opportunities to all employees. Ameristar Casino Kansas

13 City also uses its best efforts to meet or exceed its

14 minority and women employment goals pursuant to the

15 development agreement that I previously discussed. Those

16 goals are 25 percent and 10 percent respectively.

17 During the current period of licensure,

18 Ameristar Casino of Kansas City has significantly exceeded

19 these goals. Currently, 30 percent of our employees at the

20 Kansas City property are minorities and 47 percent of the

21 work force are women.

22 Like Ameristar Casino St. Charles, Kansas City

23 routinely advertises employment opportunities in

24 publications targeted at minorities and regularly solicits

25 new recruitment sources that provide qualified minority

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1 applicants.

2 In addition, in Kansas City, something a

3 little different that we have established which was led to

4 through our strategic plan, was the establishment and

5 implementation of a mentorship program to recognize mentors

6 and promote qualified minorities and women into supervisory

7 and management positions within the company.

8 In addition, we were asked to provide a

9 demographic breakdown of the employees included by state of

10 residence as well as the minority percentages that I just

11 discussed. And this is on page 24 through 27 of your flip

12 chart.

13 Ameristar Casino St. Charles, approximately

14 91 percent of our employees are Missouri residents and

15 9 percent are residents of the State of Illinois.

16 In Kansas City, approximately 88 percent of

17 our employees are Missouri residents and 12 percent are

18 residents of the state of Kansas.

19 Next, we were asked to submit a report

20 regarding our employee turnover rate. We've provided a

21 monthly breakdown of our turnover rate in your flip book,

22 which is located on pages 29 and 30, but I'll just give you

23 the summary report.

24 Ameristar Casino St. Charles, the turnover

25 rate for employees through September 30th of this year is

0023

1 32.85 percent through this period of licensure. And during

2 that same period of time, the turnover rate for employees at

3 Ameristar Casino Kansas City is 42.73 percent.