1 A P P E A R A N C E S

2 Mr. Floyd Bartch - Chairman

3 Mr. Jack Gant - Commissioner

4 Ms. Judith Sutter-Hinrichs - Commissioner

5 Mr. George Hartsfield - Commissioner

6 Mr. Ralph Biele - Commissioner

7 Mr. Kevin P. Mullally - Executive Director

8 Ms. Angie Franks – Administrative Assistant

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Concannon & Jaeger St. Louis, Missouri (314) 421-1000

1 CHAIRMAN BARTCH: Call the roll.

2 MS. ANGIE FRANKS: Chairman Bartch.

3 CHAIRMAN BARTCH: Present.

4 MS. FRANKS: Commissioner Hinrichs.

5 COMMISSIONER HINRICHS: Present.

6 MS. FRANKS: Commissioner Gant.

7 COMMISSIONER GANT: Present.

8 MS. FRANKS: Commissioner Hartsfield.

9 COMMISSIONER HARTSFIELD: Present.

10 MS. FRANKS: Commissioner Biele.

11 COMMISSIONER BIELE: Present.

12 MR. KEVIN MULLALLY: Mr. Chairman, as you are

13 aware, this is a special meeting today where there is no

14 Commission business other than to hear from the four

15 companies that have proposals for either downtown St.

16 Louis or the southern metropolitan portion, southern

17 portion of St. Louis metropolitan market. So without

18 wasting any other time, because we still have to get

19 downtown yet today to view two of the sites, the first

20 company to make a presentation is Harrah's, who will

21 present for a location in south St. Louis County.

22 MR. GARY LOVELAND: Ladies and gentlemen of the

23 Commission, my name is Gary Loveland. I'm the president

24 and chief executive officer of Harrah's Entertainment.

25 I'm pleased to be with you here this afternoon to speak on

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Concannon & Jaeger St. Louis, Missouri (314) 421-1000

1 behalf of our company's interest in developing a casino in

2 south St. Louis at the Jefferson Barracks site. As you

3 can see before you here on the screen and guests who

4 joined us here in the audience this afternoon, Harrah's

5 believes that our effort to put a casino in Jefferson

6 Barracks really is supported by three or four simple

7 notions.

8 As you know, Harrah's is a 67-year-old company, the

9 first to be listed on a public stock exchange as a casino

10 operator. We have a long history operating both here in

11 Missouri in our two locations, around the country across

12 many jurisdictions. And we believe that we bring the

13 greatest experience and wealth of knowledge to the

14 operation of another license here in the State of

15 Missouri. We have a proven and unblemished record here

16 operating on a substantial scale over a number of years.

17 We're very fond, and we think you will be too, of the

18 Jefferson Barracks site. And we come before you today

19 with an unparalleled financial position, the only

20 investment grade balance sheet in the game with immediate

21 access to the large sum of capital necessary to do the

22 proposed project without any hinderance.

23 As I indicated, William W. Harrah started the

24 company 67 years ago. It's the only casino operating on

25 the S & P 500 index, the only one that carries an

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Concannon & Jaeger St. Louis, Missouri (314) 421-1000

1 investment grade for our debt holders. We are by far the

2 most recognized brand name in the casino industry. We

3 have 28 million adults who hold our Harrah's Total Rewards

4 Card, which provides considerable value to us, bringing

5 guests into the Missouri area from around the country.

6 The company has a longstanding dedication to excellence in

7 customer service and excellent service. Also to our

8 employees of whom you're familiar with here in Missouri

9 already.

10 We have embodied this commitment in something I've

11 described as something that was pathbreaking in our

12 industry, something called Harrah's code of commitment.

13 This is a statement of voluntary principles to which we

14 hold ourselves accountable. These principles apply to our

15 guests, to our employees, and, of course, to the

16 communities in which we operate. This has been a way that

17 we have put into practice and put into context our

18 commitment to responsible gaming practices that have been

19 truly pathbreaking in the industry, that put into

20 practice our treatment with respect and substantial career

21 opportunities to our employees across the country. And

22 our commitment to make -- I'm sorry -- our communities

23 vibrant places to live and to work. And that's exactly

24 what we would have in mind with this exciting project at

25 Jefferson Barracks.

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1 When you take a look at our operations now across

2 the country, we have a proven record of operating what is

3 the largest casino operating company in the world. We

4 have over one-and-a-half million square feet of casino

5 space operating across the country, in excess of 15,000

6 hotel rooms in the United States, 111 restaurants, more

7 than 42,000 employees, and we're licensed to operate in 12

8 states. If you take a look at brand recognition of casino

9 brands across the country, Harrah's many years ago

10 replaced Caesar’s, formerly the best known brand in the

11 casino industry, as the brand now best known across the

12 United States by people in the active casino sector. This

13 is both a function of the way we market our business, the

14 quality of service we deliver, and, of course, the

15 geographic reach of the business. This turns out to be a

16 very important issue, because it gives us the capacity to

17 move customers into our site here in St. Louis in a way

18 that other companies can't. Because we have access to so

19 many people across the country who are familiar with and

20 attached to our brand that we have a source of demand

21 generation that truly is unique. I'll say a little bit

22 more about that in a moment.

23 Some 28 million American adults hold the Total

24 Rewards Card. This is our loyalty program card. It's our

25 way of identifying and engaging with guests across the

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1 country. They do so through a tiered program, beginning

2 with our gold card and working up to our diamond card.

3 This has become the de facto standard in the gaming

4 industry. It's widely accepted as a measure of stature in

5 the gaming business. And, as I've indicated, it gives us

6 the capacity to immediately generate demand. De novo

7 development has occurred, for example, in Escondido,

8 California on behalf of the Rincom (phonetic) tribe Native

9 Americans. And we had an immediate high level of demand

10 from Southern California, who already were familiar with

11 Harrah's through the Total Rewards Program, and had an

12 immediate stimulation of demand that no other operating

13 company could have generated. Of course, the same would be

14 true here with significant footprints in Missouri. As we

15 began looking at customers, they are moving across the

16 country principally with the notion that we would come

17 wherever they might live. But it's turned out to be more

18 dynamic than that. This past year we reported in excess of

19 $1 billion of casino revenue in our company generated by

20 guests who know us principally in their local environment,

21 but with visits to a second, third, or fourth location

22 around the country. So these are, for example, residents,

23 let's say of Chicago, who are now visiting St. Louis. And

24 because they know us in Chicago they come immediately to

25 our casino here in St. Louis. They may be from

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Concannon & Jaeger St. Louis, Missouri (314) 421-1000

1 Philadelphia coming to St. Louis or from the New Orleans

2 area coming to St. Louis. This proprietary channel of

3 demand is something unknown elsewhere in the industry and

4 is a big part of how we provide growth in our business.

5 We have truly been leaders in the pathbreaking

6 policies on responsible gaming. Harrah's was the first

7 recipient of the American Gaming Association’s Responsible

8 Gaming Award. We were one of the first to set aside

9 practices known in the industry even today, that include

10 the cashing of public assistance checks, payroll wheels

11 and activities of this sort that we consider to be

12 inconsistent with responsible gaming practices. We were

13 the first company to be so recognized by the National

14 Council on Responsible Gaming. And our code of commitment

15 that I described to you was recently used as the model for

16 the American Gaming Association’s own code of commitment

17 enacted this past September, which many of my colleagues

18 here today have had their companies involved in as well.

19 Here in the state of Missouri we've had two places

20 now for some time that we're very proud of. One here in

21 Maryland Heights where we began as a partner with Players

22 International and subsequently bought out their interest

23 so that we now have the entire property under our

24 management. And, of course, also in North Kansas City.

25 And the management team here joins me today as they look

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1 after both of these businesses. In North Kansas City we

2 opened in 1994. We've made $194 million in total capital

3 investments starting with $90 million in the initial

4 construction of the company, $104 million in subsequent

5 improvements. The property has 60,000 square feet of

6 gaming space, 2,000 gaming machines, and 49 tables.

7 Recent improvements have included a buffet and diamond

8 lounge. I have been for many years a student and advocate

9 of great management practices in casinos. And this

10 particular casino has always been a case study for me,

11 because we've competed in Kansas City with a larger

12 competitor, first Stations and now Ameristar, that have

13 had as much as double our capital investment, some $400

14 million versus the roughly $200 that I just described. And

15 up until recently, our business ran at a higher rate of

16 cash flow and profitability than did our competitor with

17 double its capital investment. That's due entirely to the

18 quality of the of the management team that we've had there

19 and the work that we've done satisfying guests.

20 Turning to St. Louis, we opened there in 1997 with

21 an initial total investment of $152 million and

22 subsequently $203 million of additional capital, which

23 includes, of course, the interest of Players, interest in

24 that facility. The property includes 120,000 square feet

25 of gaming space, 2,500 slot machines, 58 table games, for

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1 a total of 2,831 total positions. We've just put another

2 $81 million into the facility, which includes a new hotel

3 tower that we plan to open here this fall. It also has a

4 new diamond lounge for our diamond customers.

5 Turning now to the coffers of the State of

6 Missouri, you'll see that we've paid a considerable sum

7 and have been pleased to do so. The state's recovery in

8 the last several years from the Maryland Heights property

9 has made from $87 million in 2001 to some 76 -- I'm sorry,

10 $87 million in 2001 to some $76 million in 2003. And

11 Kansas City, a steady 61 or 62 million dollars, totaling

12 about $138 million annually from our company to residents

13 of Missouri. At the same time we've carefully made

14 decisions that we will purchase from local vendors.

15 Maryland Heights some $48 million in purchases from

16 vendors in the state of Missouri or locationally a split,

17 $27 million to residents in the state of Missouri and $21

18 million locally. And in Kansas City $25 and a half million

19 of purchases from state vendors, locational vendors

20 collectively.

21 I think it's clear, and I want you to know

22 personally how committed we've been to our businesses in

23 Missouri. We've been through several referendums as you

24 know. Our employees have been active over the years in

25 supporting those and we pay great attention to regulatory

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Concannon & Jaeger St. Louis, Missouri (314) 421-1000

1 practices and policies procedurally in the State of

2 Missouri. Since opening, Maryland Heights has contributed

3 $1.1 million to its surrounding communities, something

4 that Harrah's as a company in each of our operating

5 businesses take very seriously indeed. In North Kansas

6 City we've contributed $2.3 million from the company. And

7 perhaps more importantly, our employees have generated

8 thousands and tens of thousands of employee volunteer

9 hours to worthy causes throughout the area. Nationwide,

10 the company has donated $30 million to charitable

11 organizations and tens of thousands of hours of our 42,000

12 member work force in volunteer activities during the year

13 2003 alone.

14 Now, turning to our employees. Some of our most

15 innovative practices is respect to our employees and have

16 been here at our properties in St. Louis and in North

17 Kansas City. And we have two remarkably gifted and

18 motivated work forces. In 2003, Maryland Heights, we had

19 just over 1,800 employees receiving a total payroll in

20 excess of $48 million. 40 percent of our employees in St.

21 Louis are minority, 46 percent women, and 99 percent of

22 these employees metro St. Louis area residents. In North

23 Kansas City, 1,515 employees at the end of 2003 receiving

24 some $46.6 million in payroll. 31 percent of the employees

25 are minorities, 53 percent women, and 90 percent Missouri

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1 residents. So, in sum and before I turn this to my

2 colleague, Carlos Tolosa, who is our division president

3 here in the eastern division of our company, we believe

4 strongly that there is a simple and economic reason to

5 favor our company in its effort to build and operate a new

6 facility for you at Jefferson Barracks. And it's simply

7 we bring the best and most experienced operating expertise

8 to bear on this project. And we're very proud of that.

9 We have a longstanding track record here in Missouri. We

10 leave it for you to decide the quality of that. You've

11 certainly observed it with great detail over the years,

12 but we're proud of it and believe it to be unblemished.

13 We're very proud of the Jefferson Barracks site. You'll

14 hear about it in much more detail from my colleague. I

15 think it stands as a site that will endure and do well for

16 you over a long period of time. And we have the financial

17 strength at this moment, at any time, to proceed without

18 any hindrance or complexity to proceed on this project,

19 and we'd be proud to do so. So let me introduce to you

20 now a colleague of mine who's worked in our company for

21 more than 30 years despite his evident youth, eastern

22 division president, Carlos Tolosa.

23 MR. CARLOS TOLOSA: Thank you, Gary. And good

24 afternoon. I clearly say from a complimentary side

25 relative to all the other casinos this is a great location,

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1 high visibility from the highway.