Unanswered question - Will Cedar Rapids casino add or subtract?

Todd Dorman
Published: February 3 2013 | 4:05 am - Updated: 28 March 2014 | 10:53 am in
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Opponents of a casino in Cedar Rapids stopped by for a sit-down this past week.

Among the many arguments they made, opponents wondered why our elected leaders, city or county, didn’t launch an effort to compile independent research on the potential economic effects of a casino project before they endorsed it. Good question. Seems like government usually studies the heck out of stuff.

I know, I know, it’s too late now. Still, it would have been nice if some neutral entity had gathered any and all studies and data applicable to our predicament. Instead, all we have is analysis for hire, or statistical scraps cherry-picked from far and wide to underscore preconceived arguments.

I suppose neutral fact-finding wouldn’t have had much effect. Nothing in it would have swayed opponents to embrace gambling, or prompted supporters to abandon their plans. But for the rest of us, the still indecisive at this hour, it might have made the approach of March 5’s referendum less daunting.

Take, for instance, an issue I’m interested in as I formulate a final opinion. And that’s the question of whether a new casino here would hurt existing businesses by coaxing away their customers. Among economists, this is known as substitution or displacement, or how much of the money being gambled is money that’s not being spent on movie tickets or dinner at a local eatery. I think this cuts to the heart of the issue of whether this will be an economic benefit or detriment.

Casino backers say, according to their consultants' analysis, that the facility will spawn more than 130 new, indirect jobs in other businesses, due to the multiplier effect of casino jobs and the purchase of casino supplies locally. They stand by that estimate. Makes sense, since they paid good money for it.

Just Say No Casino claims there will be no net new job growth from the casino, due to the damage they say it will do to the local economy and the social costs it will spawn. They cite snippets from several studies over the last decade or so, and a 2007 Wall Street Journal article damning the economic promises of casinos.

But opponents say they don’t have the resources to deliver a full study countering casino backers’ claims, apples to apples. These are the same people who have criticized casino investors for not wanting to sink big money into picking a site before March 5.

Everyone’s got money for TV ads, however.

Stumble around on the interwebs, and you’ll find more conflicting substitution data. A 2005 study on the socioeconomic impacts of gambling in Iowa, commissioned by the Legislature, estimated that about 30 percent of the money spent at casinos is displaced from being spent on other stuff. Some studies have pegged displacement at a much lower percentage, while others found it’s much higher. Depending on many factors. Always depending on many factors.

The New England Gaming Research Project is skeptical. “The substitution argument starts with the assumption that local, state, or regional economies are a zero sum game in which no business can expand or grow except at the expense of other businesses. If this was inherently true, it would be hard to explain how a McDonald’s can continue to increase sales when a Wendy’s opens across the street.”

If you have a favorite study, please send it along. Soon.

Casino backers say only about $18 million of the proposed facility’s $80 million in estimated annual revenues would come at the expense of nearby casinos. Local opponents now cite that as evidence that most of its revenue will come from the pockets of local folks at the expense of local businesses.

And yet, other opponents, those who own those nearby casinos, claim that the $18 million figure is way too low. The draw from existing gamblers will be much higher. Which set of opponents should we believe?

Without some more solid, independent numbers, we’re left to sift through what are basically slick sales pitches or emotional appeals. Backers, at times, seem to be arguing that they’re building a casino as a public service, instead of investing big bucks with hopes of getting big bucks in return.

Opponents seem to be arguing that they must protect us from gambling, in a state with 21 casinos and a huge lottery. The barons of “greed” are going to sweep us from the streets, toss us into the casino and suck the paychecks from our pockets.

One side says Cedar Rapids will be even more special with a casino. The other says this “rare” city will be much less special. So we’re in the midst of a very special episode of “Casino Referendum.” So far, I think the plot has lacked substance.

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