Cedar Rapids prepares for high-stakes casino deliberation

Local officials hope gaming commission will look at long-term growth versus market-share issue

CEDAR RAPIDS — Mayor Ron Corbett said on Tuesday that community leaders and investors who support the proposed Cedar Crossing Casino here will be listening intently on Thursday to hear what the Iowa Racing and Gaming Commission has to say to two consulting businesses that specialize in the analysis of gaming markets.

Last week, the companies, Marquette Advisors of Minneapolis and Union Gaming Analytics of Las Vegas, Nev., both reached similar chilling conclusions for the Cedar Rapids casino plans: Both said that the state’s casino gaming market was all-but saturated and that proposed casinos in Cedar Rapids and Jefferson would gain most of their business by taking it from, or "cannibalizing," the existing 18 casinos now licensed by the state of Iowa.

As a result, both companies recommended that the five-member state commission, which hired the firms, not add new casinos.

"We will be paying close attention to the questions that the Racing and Gaming commissioners ask to those who have done the studies," Corbett said. "That may give us an indication of their level of concern, which may equate to how they weigh this particular issue (cannibalization) compared to all the other issues when it comes to their final vote on April 17."

The Union Gaming study, in particular, paints a particularly grim picture for the potential of gains with the expansion of casino gaming in the nation and in Iowa. The study compares the "proliferation" of casinos in recent years to the growth of shopping malls in the 1970s, many of which are now closed — "victims of changing psychographic preferences and trends," the study begins.

Corbett, a former speaker of the Iowa House, said everyone today understands that the casino gaming market in Iowa, which had the nation’s first riverboat casinos back in the 1990s, is a "mature" one in which opportunities for the success of new ventures is not as great as 10 or 15 years ago.

"But that doesn’t mean there aren’t opportunities for new casinos," he said.

Corbett said the state commission also is focused on how much new overall revenue will come into the state with a Cedar Rapids casino.

The Marquette study said the proposed Cedar Crossing Casino in Cedar Rapids will bring in $32 million in new revenue to the state of Iowa, when $10 million from the Meskwaki tribal casino, which operates outside the state-licensed system, is factored in.

At the same time, the Union Gaming study put the new revenue figure at $26.5 million, $11 million of which would come from the Meskwaki’s current casino business.

Even so, the Marquette study said a Cedar Rapids casino would take 27 percent of the business by 2017 from its nearest would-be competitor, the Riverside Casino and Golf Resort, while the Union Gaming study estimated that the Riverside venue would lose 42 percent of its business by 2016 to a Cedar Rapids casino.

Corbett on Tuesday said the Iowa Lottery, which now offers both Powerball and Mega Millions jackpot drawings, provided an instructive example of how gaming can expand in a way beneficial to the state’s bottom line. Fewer people may play Powerball now, but overall the state has more revenue from both games, he said.

"No one ever talks about new lottery games cannibalizing the other lottery games. They look at the overall tax revenue," the mayor said.

"By having a Cedar Rapids casino license, it will bring in new revenue to the state. And I think that’s our powerful argument that we have to overcome this market-share issue."

The Marquette market study does appears to offer projections that proponents of a Cedar Rapids casino can grab.

For example, the Marquette analysis states that the state will see additional gaming participation, particularly in Linn County, with a new Cedar Rapids casino because of the convenience for Linn County residents.

Cedar Rapids City Council member Pat Shey, who has attended recent Racing and Gaming Commission meetings, said Tuesday that the strongest case that Cedar Rapids casino investors have made with their own market study is that many of a Cedar Rapids casino’s customers would come from "organic growth" within the Cedar Rapids metro area and Linn County and not beyond.

The market consultant for the investors, who are being led by Cedar Rapids businessman Steve Gray, has said that the Riverside casino would lose just 9 percent of its business to a Cedar Rapids casino.

Shey said Cedar Rapids is projected to see steady population increases in the years to come, which he said would translate into more customers for a Cedar Rapids casino.

"Why shouldn’t a Cedar Rapids casino capture the gaming revenue because of that growth?" Shey asked. "Shouldn’t we be the ones to be in a position, as our city grows, to benefit from that growth?

"That’s a key factor that I hope the commission is looking at. Not just a picture in time, but looking at long-term demographic trends."

The lengthy gaming studies commissioned by the state commission also said:

In 2013, 52.8 percent of the casino gaming revenue in Iowa, which has casinos dotting its borders, came from Iowans, the rest from those who reside outside the state, Union Gaming said. At the same time, the study said that states around Iowa are seeking to increase their gaming options, which will put pressure on Iowa’s casinos. By way of example, video gaming in Illinois bars and restaurants already has had a small impact, the study said.

Marquette Advisors said that 50 percent of Linn County gamblers who go to Iowa casinos go to the Riverside casino, which accounts for about one-third of Riverside’s business. About 80 percent of Johnson County casino customers go to Riverside, though, the college-age population in Johnson County has a "lower propensity" to go to a casino than other adult Iowans, the study found.

Jeff Lamberti, chairman of the Iowa Racing and Gaming Commission, has said that Iowa’s state-regulated gaming industry does come with some bias in that the state commission does consider how a proposed new casino might harm existing ones where investors previously have invested money.

In this regard, the commission has been paying attention to the Quad Cities market, where Iowa riverboat casinos in Davenport, especially, and in Bettendorf have been contending with the new land-based Jumer’s Casino & Hotel across the Mississippi River in Rock Island, Ill., since 2008.

As a result, a new land-based casino in Davenport is going up along Interstate 80 with Dan Kehl, who has an ownership interest in both the Riverside and Larchwood, Iowa, casinos, heading up the investor group. The Marquette Advisors study anticipates that the Bettendorf casino will move to a new land-based site as well.

The Marquette report said this, not about the proposed new Cedar Rapids casino, but about the existing casinos in the Quad Cities: "The introduction of improved land-based casinos with high-quality, supporting amenity components is expected to have a positive impact upon gaming participation rates in the Quad Cities region, although there is certain to be a redistribution of revenues amongst the three facilities within an increasingly competitive region."

On Tuesday, Cedar Crossing Casino’s Steve Gray said he and his investor group continue to review the Marquette Advisors and Union Gaming studies, which he said have "numerous factual and methodological issues."

At the same time, he and his investor group continue to believe that their market expert has provided the better analysis of Iowa’s casino industry.

"Our proposed investment would yield more revenue to the state and to local communities, and Cedar Crossing would not threaten the financial viability of any of the surrounding markets," Gray said. "Surrounding market impact is only one of the criteria the commissioners will consider in their decision."

Like what you're reading?

We make it easy to stay connected:

to our email newsletters
Download our free apps

Give us feedback

Have you found an error or omission in our reporting? Tell us here.
Do you have a story idea we should look into? Tell us here.