Five key questions about the Block E casino plan

  • Updated: May 14, 2011 - 9:42 PM
What's that casino license worth?

As proposed, the winning developer will pay the State Lottery Board a one-time $50 million fee. Some experts say casino licenses are worth many millions more. "Chump change," said Jeffrey Hooke, an investment banker based in Bethesda, Md., who consults on gaming expansions for taxpayer groups. In many cases, states have received $200 million or more for casino licenses. Illinois, for example, received $435 million in 2008 for a casino license in Chicago. Hooke called the $50 million fee "a giveaway" that's unfair to taxpayers.

What's the impact of the 51 percent local requirement?

To qualify to compete for the casino contract, companies would have to be 51 percent based in Minnesota. Some say this could deter top-flight casino operators. "It will be a damper on investments, definitely," said gambling expert William Thompson at the University of Nevada, Las Vegas. David Katz, head of gaming, lodging and leisure equity research at Jefferies & Co., said times have changed. Major casino operators have gotten more creative in forming partnerships. In Ohio, for instance, Caesars Entertainment teamed up with Cleveland Cavaliers owner Dan Gilbert. Would a first-rate casino operator be interested in a minority partnership in Minneapolis? "Absolutely," Katz said -- if the tax structure is right.

Is the 25 percent tax on gambling revenue too high or too low?

Gov. Mark Dayton wants a tax of 40 to 50 percent on revenue from a Minneapolis casino. Gambling tax rates vary from 6.75 percent in Nevada to 60 percent in New York. The Minneapolis casino developers say a 50 percent rate would be too high, given the competition it will face from tribal casinos, which pay no taxes.

Does the battle end if the Legislature approves the plan?

Not likely. The casino proposal will likely be challenged in court. Minnesota's Indian tribes, which own the state's 18 existing casinos, would likely sue, claiming the project violates Minnesota's Constitution. "The tribes believe the Constitution did not authorize the lottery to operate casinos," said John McCarthy, executive director of the Minnesota Indian Gaming Association. "There is no doubt there will be legal challenges to this, but it probably won't only be the tribes."

The casino will attract 5.6 million gamblers a year -- really?

That's the estimate from the casino project's consultant. Though 5.6 million visitors exceeds the state's entire population, the projection includes multiple visits by the same person. The bulk of the visits (4 million) will come from residents within 150 miles of the casino, although most are expected to come from within a 15-to-20 mile radius. A fundamental assumption is that in any U.S. city, about half the people will gamble and do so about 10 times a year -- on average. Other studies suggest the frequency is not that high, said Bill Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno. Eadington estimates that just 1 percent of aggregate personal income in a metro market gets spent on casino gambling.

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