A Tale of Two States and Two Lines of Thought

In Chicago, Illinois on April 16th, the state gaming commission held a hearing on two proposed casino expansion bills. One would allow for an additional casino in Chicago with up to 10,000 gaming positions; the other bill proposal would authorize five more casinos in the state, including one in Chicago and slot machines at racetracks. Casino expansion comes up in the legislature every year in Illinois. Chicago would like its own casino, the racetracks need slot machines to remain viable, several other communities would like a casino and there are always would-be operators who would like a shot at running a casino in the state. This year’s proposals are redesigns of last year’s proposals to account for criticisms of previous proposals. According to press reports, the Chicago casino received very positive responses, the other ideas not so much. Of course, one hearing is a long way from a bill passed by both houses and signed by the governor. Especially considering the governor has been very reluctant to support any previous casino expansion.

In Council Bluffs, Iowa on April 17th, the state gaming commission met to review a proposal for a new casino in Cedar Rapids. If approved, the new casino would represent an expansion of gaming in Iowa, which is something the commission has been reluctant to do for the last four years. The license for Cedar Rapids was denied by a 4-1 vote. The Iowa Gaming Commission has expressed concern over the size of the gaming market in the state for several years and has taken a wait and see attitude. This year in preparation for the Cedar Rapids discussion, a market study was commissioned. The study found that any new casino in Iowa would cannibalize existing casinos and not tap any underserved market. The report did not recommend any additional licenses in the state and opined some of the existing casinos would fail if a new casino were to open.

Iowa and Illinois are two sides of the same coin; both states have had gaming for over 20 years. The casino industry in each is mature and probably saturated; the gaming industry in each state has suffered any time new casinos appear along its borders. And each has considered expanding gaming numerous times. For whatever reason, cooler heads seem to prevail in Iowa. They consider the evidence and the current state of the gaming industry in Iowa and move to protect the existing industry rather than allow any further expansion.

On the other hand, enthusiasm for new projects carries the day in Illinois and if the governor were not against expansion, casino gaming expansion would have passed last year. The lack of new casinos does not mean there has been no gaming expansion in the state. Illinois is in its second year of expanding slot machines into bars and fraternal halls around the state. As of February, there were 16,000 slot machines outside of casinos in Illinois. In February, those slot machines generated $23 million in gaming revenue. At the same time, casino revenue dropped 7 percent in March and is down 18 percent from 2006. It might be said, even without a report like the one in Iowa, that the Illinois gaming market has reached the point of obvious saturation and this is not the time for more casinos or more slot machines.

Iowa and Illinois represent a dilemma for me. Should the gaming industry be driven by market forces or should regulators step in to protect the existing casinos and stabilize the gaming market? In any other industry where licenses are not so heavily regulated, controlled and taxed, we always let the market forces determine the winners and losers. Over the last 50 years, almost every small, family-owned grocery, clothing, book and furniture store in the country has disappeared. They were replaced by big box, chain stores, which in turn are currently being replaced by online sales – it is the way of capitalism, right? But in gaming, the investments, fees and taxes are so high and the licenses so difficult to obtain, shouldn’t there be some protection? Every jurisdiction in the casino industry has reached a level of maturity that creates a dilemma. Should we to trust the free market system or impose regulatory protections?

There is no right answer or one single way to solve the problem that each state should follow. But it is a question that every state should consider as it embarks on discussions of expansion. Personally, I applaud the action of the Iowa Gaming Commission and shudder at the thought of the havoc more slot machines and casinos would bring to the industry in Illinois. However, that is just my personal opinion and there are many, many others that take the opposite point of view. The debate is certain to be heated and contentious every time it occurs, but it is necessary to have the debate.

A proposal for a state-owned Chicago casino won praise Wednesday from business groups and a warmer reception from a state regulatory board than past attempts to expand gambling, but the plan also drew criticism from downstate officials and the horse racing industry who said it would cheat them out of needed revenues and jobs. The hearing in Chicago, which wasn’t heated like public exchanges in other parts of Illinois, was the latest attempt to bolster gambling, but questions were also raised about support for the legislation in an election year where other major fiscal issues are pending. Previous bills approved by legislators were twice rejected by Gov. Pat Quinn largely over ethical concerns about corruption, and last year’s bill calling for five casinos fizzled out after the Illinois Gaming Board scrutinized plans that would have allowed Chicago to have authority over a casino. State Rep. Bob Rita, a Blue Island Democrat sponsoring the plans, said he wanted to gauge interest in a Chicago-only plan and give lawmakers options. Two proposals are on the table: One adds five casinos, including in Chicago, plus slots at racetracks. The other calls for a mega-casino in Chicago. Sophia Tareen, Associated Press, 4-17-14

The Iowa Racing and Gaming Commission rejected a proposed $164 million Cedar Rapids casino Thursday, saying it would hurt existing casinos. Supporters of the Cedar Crossing Casino development have said it would give an economic boost to Cedar Rapids and the region. They also argued it would be a catalyst for development in an area ravaged by a 2008 flood, create jobs and generate millions for tax revenue and charities. But representatives of casinos in Riverside, Dubuque and Waterloo fought the plan, saying it would take business away from them. The five-member commission voted 4 to 1 against the new casino during a meeting in Council Bluffs, with more than 300 people attending. The panel hasn’t approved a new casino license since 2010, when it called for a three- to five-year moratorium due to concerns about market saturation. – Margery A. Beck, Associated Press, 4-17-14


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