Cedar Rapids Mayor: Existing Casinos Cannibalize Cedar Rapids
By Rick Smith, Reporter
CEDAR RAPIDS, Iowa - Who's taking from whom? That's the question Mayor Ron Corbett posed on Wednesday, a day after two national firms that specialize in the analysis of gaming markets said the proposed Cedar Rapids casino would derive most of its business by "cannibalizing" from existing casinos, especially the Riverside Casino & Golf Resort.
"The reality is the casinos in Eastern Iowa have taken a lot of money out of Cedar Rapids over the last five to seven years, and no one is talking about cannibalization in the reverse," Corbett said. "They've been cannibalizing the revenue out of Cedar Rapids and Linn County since they've been opened."
The damage that the proposed Cedar Crossing casino along the Cedar River across from downtown Cedar Rapids might do to existing casinos is a key focus of the Iowa Racing and Gaming Commission as it works to decide if it will grant the Cedar Rapids casino investor group the state's 19th license to operate a casino.
For that reason, the commission hired two firms to study Iowa's casino market, and the commission made the firms' reports public on Tuesday.
Marquette Advisors, with offices in Minneapolis, Seattle and Washington, D.C., concluded that a Cedar Rapids casino would generate approximately $81 million in adjusted gross revenue by 2017, $59 million of which will come from the "cannibalization" of revenue from existing casinos. Of that, $25 million would come from the Riverside casino, or 27 percent of the projected revenue for the Riverside venue in 2017. Another $10 million of the revenue would come from the Isle Waterloo Casino Hotel, the Marquette study said.
In the second study, Union Gaming Group of Las Vegas, Nev., concluded that the proposed Cedar Rapids casino would bring in $82 million in revenue in 2016, but $66.8 million would be cannibalized from existing Iowa casinos. Of that, $37.3 million would come from the Riverside casino and $9.3 million from the Waterloo casino. The amounts represent 42.1 percent of Riverside's revenue in 2013 and about 11 percent of the 2013 revenue at the Waterloo casino, the study said.
Both the Riverside casino, which opened in August 2006 south of Cedar Rapids, and the Waterloo casino, which opened in June 2007 north of Cedar Rapids, came to be after voters in Linn County rejected casino gaming decisively in November 2003. Linn County voters changed their mind and approved gaming in March 2013.
Corbett on Wednesday said he was not "a big believer" in the idea that cannibalization should play a large role in the decisions of the Racing and Gaming Commission.
"My background is more free enterprise and that competition is good so, hopefully, that ways in on the commissioners," he said.
He said existing casinos in Iowa emphasize cannibalization as a way to forestall competing casinos from entering the market.
"Cannibalization sounds better than 'We like a monopoly with no competition,'" Corbett said.
Even so, Corbett said the two commission studies matter, and he said the results of the two show a deeper impact of a Cedar Rapids casino on the Riverside casino than the study conducted for the Cedar Rapids casino investor group led by Steve Gray. That study found that Riverside would lose just 9 percent of its business to a Cedar Rapids casino.
"But nobody went into this thinking there would not be an impact," the mayor said. "A brand-new, $130-million casino in Cedar Rapids versus one that is several years old. There is going to be an impact."
Corbett said the Gray-led investor group and supporters from government, business and labor in the Cedar Rapids metro area will continue to make the case for a Cedar Rapids casino at the commission's meeting next Thursday and on April 3, when the commission comes to Cedar Rapids to tour the Cedar Crossing casino site and to conduct a public hearing. The commission is slated to make a decision April 17.
Corbett said the investor group and the Cedar Rapids community have done all that the state commission has asked of it to date. He said the casino project was backed by a large majority of voters, is fully funded, has a strong management team in place, enjoys strong community support and helps the city's flood recovery and its flood-protection plans.
"We have a lot of reasons for the Racing and Gaming Commission to say 'Yes,'" he said. "Over the months, we've been dealing with the commission, and they've been supportive of Cedar Rapids moving through their process. So if there's no chance of getting a license, they would have told us that from the very beginning."
Jeff Lamberti, the commission's chairman, on Tuesday said Iowa's casino industry is state-regulated and is not designed as a wide-open, free-market competition where any casino investor can get a license to open a casino. Rather, the state commission has allowed casinos that have received a license "a certain market share" in trade for the investments they have made, Lamberti said.