Iowa casino cartel remains favorite in latest CR license push


A lighting fixture above a central bar on the casino floor at the Riverside Casino & Golf Resort in Riverside, Iowa on Wednesday, March 20, 2019. (Jim Slosiarek/The Gazette)

So, would you bet on the odds of a Cedar Rapids casino landing a long-sought state gambling license? At this point, I recommend saving your money. The house, in this case the existing casino cartel, is favored to win again.

I hate to be a wet blanket in the face of fresh civic optimism that the Iowa Races and Gaming Commission will license a casino in Cedar Rapids. Third time is a charm after the commission rejected license offers in 2014 and 2017, isn’t it? The landscape has changed, I hear.

But two major factors that stood between Cedar Rapids investors and the opening of a casino remain in place. Namely, the state’s long-standing regulatory philosophy and, well, you know what – is concerned about the cannibalization of gaming revenue by a Cedar Rapids gaming parlor from existing state-licensed casinos, particularly at Riverside and Waterloo.

Proponents of a local gambling joint are putting a positive spin on a pair of market studies presented to the Racing and Gaming Commission earlier this month. They showed that new casinos in Nebraska, Illinois, and Wisconsin will take a significant chunk of total gaming revenue in Iowa, $183 million or $256 million, depending on which study you believe.

Local boosters therefore argue that it is in the state’s interest to approve a Cedar Rapids operation, which, according to a study by Innovation Group, would increase the state’s gambling revenue by 51, $8 million. This would soften the big revenue hit caused by out-of-state competition.

“Now is the time,” City Manager Jeff Pomeranz told The Gazette’s Marissa Payne, who first reported on the studies.

May be. But as we saw in two licensing applications, the state’s overall gambling revenue picture was a minor factor in the commission’s final verdict on a Cedar Rapids casino. The big picture matters far less than the turf wars waged by existing casinos protecting their piece of the pie.

For decades, the state’s overriding regulatory philosophy has been to encourage large and expensive casino developments with multiple amenities. In exchange for these large investments, the state protected the casinos against defeatist competition. That’s why I nicknamed it a cartel. It’s not a free market.

In 2014, Cedar Rapids investors presented the commission with an expensive casino project with 840 slot machines, 30-35 table games, and a slew of restaurants and other amenities. This Cedar Crossing casino in downtown Cedar River reportedly brought in $81 million in annual revenue.

But two market researchers predicted that much of that revenue would be cannibalized in Riverside and Waterloo. A study, conducted by Union Gaming, predicted that Cedar Crossing alone would earn up to 46% of Riverside’s revenue. The other, by Marquette Advisors, predicted a 29% bite.

When Cedar Rapids investors presented a plan in 2017 for a small downtown casino with 550 slot machines and 15 to 20 table games, a study by White Sand Gaming predicted it would get more than half of its $62.9 million in annual revenue from cannibalization, 20 percent of which. of Riverside’s revenue. A second study, by Marquette Advisors, predicted that Riverside would suffer a 20-25% drop in revenue.

The new studies don’t offer much better news.

The Innovation Group study estimates that a casino in Cedar Rapids would cannibalize $43 million from Riverside and Waterloo, a 21% reduction in combined revenue. But a casino in Cedar Rapids would also boost gaming revenue in east-central Iowa by $63.4 million. So it’s a net gain.

Research from Spectrum Gaming also warns of the dreaded you-know-what.

“Based on Spectrum’s analysis, it appears that Cedar Rapids is well served by Waterloo and Riverside casinos, both located within an hour of Cedar Rapids. Adding a casino to Cedar Rapids risks cannibalizing these two properties significantly,” the study says without providing specific numbers.

So the game plan for opponents Riverside and Waterloo is the same. Go to the Races and Gaming Commission and argue that a casino in Cedar Rapids will bring its businesses to their knees, resulting in lost jobs, less local nonprofit spending, and reduced amenities. You promised to protect our investment, so don’t tell Cedar Rapids. He got his chance in 2003. Riverside owner Dan Kehl will do whatever it takes to make Cedar Rapids an underdog again.

This is a difficult argument to overcome, as we discovered in 2014 and 2017.

More people in costume, fighting with tens of millions of dollars at stake. This is what I call a place of entertainment.

Yes, the cannibalization numbers seem a bit better. But these new studies look at a theoretical casino plan. We won’t know more about the market effect of a Cedar Rapids casino until there’s a plan detailing its size, amenities, etc. There will no doubt be further market research.

Elsewhere in Payne’s article, Pomeranz talks about a facility having “much more than games”, with bars, restaurants and entertainment venues. It sounds good. But the flip side is that the bigger and more attractive you make the place, the more cannibalization is possible. Like I said, it’s not a free market.

And yes, we have five gaming commissioners who have never voted on a Cedar Rapids offer. But what are the chances that they will rise up, challenge the cartel and reject the philosophy of regulation?

The massive success of sports betting is already bolstering statewide revenue by putting gaming parlors on phones in our pockets, not by building a new brick-and-mortar casino.

This is not the result I want. But after watching this commission work for years, long before I got to The Gazette, it seems the game is still against Cedar Rapids. But, hey, like I heard somewhere, you can’t win if you don’t play.

(319) 398-8262; [email protected]

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