Strong hand on the table

By The Gazette Editorial Board


The commission earlier this month released market studies from research firms it hired to analyze the impact of the Cedar Rapids project, as well as one in western Iowa’s Greene County.

Whether you believe the projections of those reports or those of one commissioned by the Cedar Rapids group or something in between, there’s little doubt that if Cedar Crossing Casino is built, it would cannibalize some revenue from nearby casinos in Riverside, Tama, Waterloo and Dubuque, at least in the early going. But the state’s research from Marquette and Union also covered other factors. They described a changing market in which rural “destination” casinos with their own hotels and other resort-type amenities are “less relevant,” while a casino in an urban area — where more residents have shorter travel times — is better positioned.

Increased competition in border states also is compacting Iowa’s gambling markets.

Bottom line, Marquette projected that participation in gambling by Cedar Rapids residents would grow 30 percent and overall state gaming revenue would increase at least $25 million annually even if the studies’ substantial cannibalization rates prove true.

When you place that conclusion alongside the other criteria state commissioners are supposed to consider when weighing a license application, it’s clear that Cedar Rapids investors still have a strong hand to play on the state’s gaming table.


There are six major categories the commission considers for applications: Compliance with Iowa law, integrity of the operation, economic impact and development locally and statewide, efficiency and safety, community support and nurture of the racing industry (the latter refers to horse or dog racing).

Within the economic category are seven subcategories, and one of those is the overall net financial benefit to the state gaming industry — including the impact on existing operators.

The latter has tended to get lots of attention. A major part of the commission’s role has been to protect this highly regulated industry, thus ensuring a steady tax revenue stream that state government has increasingly relied upon. This is not a free-market industry.

However, we think the commission should be wary of stifling competition. The state shouldn’t be in the business of guaranteeing a profit, or specific level of profit, to any one casino.

The Cedar Rapids investor group’s leaders cite the Dubuque and Davenport markets, where two and three casinos, respectively, operate without putting each other out of business. Competition has driven improved operations. Statewide, some casinos’ revenue has grown, others have declined. No land-based casino has gone out of business. Overall, total gaming revenue for the state has continued to grow, albeit more slowly in recent years — from $1.415 billion in fiscal year 2009 to $1.442 billion in fiscal 2013.

The commission’s latest studies don’t fully account for future population growth in their projections. Given that Linn County is the second largest county and one of the state’s fastest-growing areas, that’s a significant point. Combined with the likelihood that the percentage of residents who gamble will increase because of a casino’s proximity, a Cedar Rapids casino would almost certainly add to the state’s overall gambling revenue.


Which, in turn, means more overall revenue for community non-profit organizations that, by state law, are to receive a percentage of casino takes. In Linn County, the amount would zoom from about $100,000 a year to an estimated $2.4 million. That’s a big impact in a large county whose non-profits provide a wide variety of charitable services to thousands of people.

Under the investors’ plan, Cedar Rapids city government also would get 1 percent of the gross revenues annually, plus $1 million, if the license is granted.

Several hundred jobs with benefits also are promised. Local tourism officials say the casino would give them another marketing tool to attract visitors and conventions.

And while surrounding casinos may make less revenue, at least for a while, there’s no compelling evidence that a Cedar Rapids casino would harm their viability.


Would, however, a casino in Linn County also be accompanied by more problem gamblers — those with addictions that harm themselves and their families, ultimately affecting more peoples’ quality of life — one of the criteria on the state’s list? Yes, although the number likely would be relatively small. State officials say 88 percent of Iowans gamble, with 3 percent developing a gambling problem at some level.

Problem gambling shouldn’t be ignored. Resources to educate the public and help problem gamblers recover should be adequately funded by gaming revenues. As for another related health problem, we still hope state legislators will some day snuff casinos’ exemption from the state’s smoke-free law that other businesses and workplaces must observe.

Still, absent drastic changes in state government’s direction, the gaming industry is here to stay in Iowa.

More than 60 percent of Linn County voters said they want gaming. Cedar Rapids investors have a strong plan in place, one that almost surely would add to the state’s coffers overall without sinking another casino. Instead, it would spur competition that could improve the industry. And while Cedar Rapids doesn’t need a casino for its economy to thrive, the project would boost the pace of redevelopment and revival of the near-west side that was ravaged by the 2008 flood.

All things considered, we think the Cedar Rapids casino proposal trumps the cannibalization worries.

Comments: or (319) 398-8262

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