Job projections debated, Gray responds to criticism
By Sarah Binder
CEDAR RAPIDS—It might come down to unions vs. churches.
Proponents of a Cedar Rapids casino rallied labor union support to gather more than 16,000 signatures in just a few weeks, pushing the project’s referendum date up to March 5.
If the referendum passes, the proposed casino’s license application moves on to the Iowa Racing and Gaming Commission (IRGC).
Frank King, chairman of the Just Say No Casino campaign, said religious leaders who oppose gambling on moral grounds are among his most active members.
“They are working tirelessly to make sure their congregations get out the vote,” he said.
With the election date just over a month away, both sides are taking their message to the public, debating the merits of a casino and encouraging early voting.
The centerpiece of the Vote Yes Linn County campaign is the promise of more than 600 new jobs, including 137 short-term construction jobs, 362 permanent jobs and 134 jobs indirectly created by surrounding businesses.
“We’re not going to have enough bars and restaurants to feed and serve all the people who will want to come there all the time,” said Steve Gray, the lead investor of the pro-casino group.
The campaign estimated the casino could draw 1.1 million admissions per year. That estimate is slightly lower than Riverside Casino & Golf Resort in Riverside and The Isle Casino/Hotel in Waterloo, which drew 1.9 million and 1.4 million admissions in 2012, respectively, according to the IRGC website.
Mr. King, however, debated whether a casino would be good for surrounding small businesses.
“Casinos are designed to be a one stop-shop. You can smoke if you smoke, you can drink if you drink, you can eat if you’re hungry,” Mr. King said. “For every job gained in a casino, there’s going to be a potential for jobs lost.”
Mr. Gray said the pro-casino group is about to close the second round of investment. The first round, with 22 Iowan investors, was for a July 2012 market study, which projected job numbers, admissions, and adjusted gross revenues of about $80 million per year. The second round is supporting the referendum campaign and if it passes, the application fee to the IRGC to grant a license.
Although Mr. Gray has become the public face of the casino campaign, he said the venture isn’t designed to make money for him or his investor group.
“This is not the best investment I’ve ever made,” he said.
“I think it’s important to note, those of us that are spending time on this and investing money have plenty to do and we genuinely like living here,” he said. “We’ve been fairly successful financially, we’ve been generous philanthropically. Our motivation is not making a lot of money; it’s really something meaningful for Cedar Rapids and Linn County.
Mr. Gray sat down with the Corridor Business Journal to provide more details on the study that led to his projections, as well as respond to criticisms.
Where did the job projections come from?
TMG Consulting, based in New Orleans, conducted a study of the socioeconomic impact of a potential Casino in July 2012. Mr. Gray said the 362 permanent jobs estimate came from the 2008 Regional Input Output Modeling System II (RIMS II), modified with the Iowa direct multiplier and industry code. RIMS II is a nationally used modeling system for economic development, used in both the public and private sectors.
Mr. Gray said they then compared this employment data to similar-sized casinos across the state. According to the same TMG study, the casino could earn $82 million in adjusted gross revenue in the first year of operation. The Isle Casino Hotel in Waterloo made $83.5 million and employed 556 people in 2012 according to the IRGC website, and a slightly smaller casino, the Isle of Capri in Bettendorf, brought in $75.7 million and employed 594 people.
The 137 short-term construction jobs were based on the cost of construction. Mr. Gray said the group asked Ryan Companies to verify this number. Ryan recently worked on similar large projects, including the new Federal Courthouse and Cedar Rapids Convention Complex in Cedar Rapids, and Mr. Gray said Ryan found the projection to be reasonable to conservative.
TMG’s study also included a market assessment, study of surrounding market impact, location analysis and five-year projections.
What kind of jobs would these be?
The average wages and benefits for the 362 permanent positions has been estimated at $42,000 per year. The full range, however, could be from the low $30,000 range (Mr. Gray said he did not know what the lowest compensation would be) to six-figure salaries for management staff.
Marcia Rogers, spokesperson for the Vote Yes campaign and a board member of Kirkwood Community College responded to the criticism that many of the jobs could be low-paying food-service jobs.
“There are people in the restaurant business who take offense to the comment, as did I, about food-service jobs being not the kind of jobs we want,” she said. “In actual fact, we have a world-class culinary training program right here in our community and those jobs are highly sought after, and there are opportunities for advancement in those jobs. They aren’t what you would consider low-end jobs, they are important jobs.”
Where would the casino be located?
In the initial TMG study, five locations were proposed: one in Hiawatha and in Cedar Rapids, one on the northeast side near Blairs Ferry Road and Edgewood Road, one near Westdale Mall and two in the greater downtown area.
Since then, the Vote Yes Linn County group has hired Ryan Companies and OPN Architects to consider possible locations.
The group said the ideal location would be within 1,500 feet and sight lines of Interstate-380, somewhere between Boyson Road to the north and 33rd Street to the south. A matrix of 40 weighted criteria is being used to further narrow possibilities.
“Regardless of what Steve and Marcia would like to do, we’re not experts. These folks have designed complex projects, Ryan has actually designed several casinos,” Mr. Gray said.
He said ideally, the location would be narrowed to two or three options before the March 5 vote.
However, Mr. Gray said because of the complicated process of purchasing land, it is unlikely that the exact location will be proposed before the election. Acquiring a single piece of land large enough for a casino could involve negotiating with three to four sellers.
“It’s going to be difficult to understand the seller characteristics over these next 35 days. We’re going to move as quickly and aggressively as we can, but there are a few things that are outside our control,” Mr. Gray said.
Who would operate the casino?
“Would it really matter if I said Donald Trump was going to manage it? We will hire a professional casino firm or personnel to manage it,” Mr. Gray said.
He said the investor group is actively interviewing for management positions. The group could potentially hire individual managers, an out-of-state casino operator, or some hybrid of the two. He said it is difficult to find people who are interested in managing the casino before they even know if it will get a license.
Where would the $80 million go?
Of the $82.85 million in revenue projected for the first year of casino operation (list does not add up to $82.85 million):
- $17 million: wagering tax paid to state treasurer
- $15.2 million: payroll and benefits (based on 362 employees at an average compensation package of $42,000)
- $4 million: first-year payments for initial gaming license fee (the total $20 million fee would be paid over 5 years)
- $3.8 million: State general fund tax
- $3.45 million: estimated property taxes in fiscal year 2019
- $2.4 million: Annual payment to Linn County Gaming Association for distribution to local nonprofits
- $761,000: local infrastructure 1 percent sales tax for casinos
- $761,000: local option sales tax
Other costs include land, building and other expenses
Why have the names of the casino backers not be made public?
Mr. Gray, a prominent investor, said of all his previous ventures, this is the first time he has been asked to reveal the names of all the investors.
By law, the only ones required to disclose their investment are those who would own more than 5 percent. Mr. Gray and Drew Skogman are the only two of the casino group that fall into that category.
No elected officials have invested, he said, and there has been no private equity or venture capital involved. Since all the investors are private citizens, he said many of them have personal reasons for not wanting to make their involvement public.
However, after facing criticism, Mr. Gray said the group is considering releasing the list of investors.
Who’s investing in Say No?
(One more question for Mr. King)
Frank King said his main reason for opposing the casino proposal is a lack of transparency – specifically, that the names of the investors have not been made public.
“My take on it is, you’re asking for my signature to put a casino in my town, don’t you think I deserve to know who’s running it,” he said.
However, when it comes to his own campaign, Mr. King said he does not deal with the bookkeeping and does not know who is funding it. The Vote No Casino campaign hired Link Strategies, a Des Moines-based research and campaign firm with a history in gaming referenda, to manage their financials and campaign.
It has been speculated that other casinos, including Riverside, the Isle at Waterloo, and the Meskwaki Casino in Tama, have been bankrolling the Vote No campaign out of fear that a Linn county casino would “cannibalize” their markets.
“If they think it’s a risk to their business, they have every reason to,” said Mr. King.