Cedar Rapids' big bets

 

Approximate location of proposed new middle school

The Cedar Rapids Community School Board has approved the purchase of land in unincorporated Linn County, which they intend to be the site of a new middle school. As reported by Cindy Hadish in Homegrown Iowan, construction of the school is dependent upon the outcome of a bond referendum in November 2025, and is part of contracting the district's six middle schools down to four. The district argues contraction is necessary because of declining enrollments.

The school district operates under two mandates: to educate K-12 students, and to manage that in the most cost-effective way possible. As with the elementary school shuffle, they have argued that new construction offers the opportunity to keep up with technological developments in education, and that it is less costly to build than to repair. The choice of location is at first blush bizarre, but perhaps the district would argue that they need a lot of land that is relatively inexpensive. It seems relatively inaccessible, too, walkable from hardly anywhere other than the large-lot subdivision to its west. Even biking will be difficult for most students, despite the development of a trail alongside Highway 100. So we're in for a lot of private cars and school buses, with the latter costing district taxpayers maybe more than they're saving on the remote location. (For more on the complicated economics of school closings, see Roza and Dhammani 2024.)

While the district will retain middle schools in Wellington Heights (McKinley) and the near northwest side (Roosevelt), this also continues a trend of moving schools outward. The traditional neighborhoods near the center of town will become less attractive, which is for many reasons not in the city's long-term interest. That may not be one of the school district's mandates, but whose job is it?

Mayor Tiffany O'Donnell speaks at Bridge of Lions dedication,
July 2022

Maybe it's the job of the city government, although in a fragmented system they have no pull with the school district. However, the city is busy pursuing its own risky would-be game-changers: a casino across the river from downtown, and not one but two data centers south of town (one is Google, one is "bigger than Google"). About the casino, I've argued that, arguments about morality and cost distribution notwithstanding, my biggest objection is that it's a terribly unproductive use of primo land. With a less splashy, more incremental approach, we could build a neighborhood that could be an ongoing supply of human energy to core businesses.

The political hype around bagging the data centers makes me suspicious, without a whole lot of personal knowledge of how they operate. Strong Towns lists data centers along with corporate headquarters and big-box stores as the 21st century equivalent of smokestack chasing: a self-defeating contest among localities, "betting big on bad hands" in the words of Strong Towns' John Pattison, in which both the winner and the also-rans wind up sad. (See also Mattera, Tarczynska, and LeRoy 2014.) 

• Are we being overly optimistic about the economic impact of the firms' investments? 
• How much tax revenue is the city foregoing to lure them? 
• How much infrastructure investment and maintenance will be required to prepare the ground for their arrival? 
• How much of our economy is going to be dependent on corporate decisions made far away? 
• Realistically, how many and what type of jobs are these behemoths going to sustain? 
• What about data centers' reputation for sucking up power and water, competing with local residents and existing businesses? 

We shouldn't get carried away with happy talk.

(Free clip art from getdrawings.com)

All of us, including those who currently serve as city or school officials, have a stake in a city that is prosperous, equitable, and sustainable. I'd even include those who are in a position to profit from these investments.

A baseball slugger who constantly swings for the fences may be exciting to watch, particularly when he connects and belt one 500 feet. But the long string of strikeouts between blasts isn't fatal to him or his team. They'll live to play another day. If they decide Biff strikes out too much, they can find a new bopper. But a city that swings for the fences is playing a riskier game. Better to make consistent solid contact, and leave the excitement to the private sector. As such, I'd rather the new middle school be located on the proposed casino site, or some other in-town location; if we must have a casino, it go somewhere on the edge of town; and that we forego data centers altogether unless their impacts are paid for.

SEE ALSO: The latest Strong Towns video, produced by Ben Durham, is "Will a Factory Make This Small Town Rich?" (11 January 2025, 23:06):

10th anniversary post: Our casino, then and now

 

Bellagio Las Vegas:
Will slots ring where pancakes once were served?

Ten years ago this month, I listened to a Strong Towns interview with Steven Shultis of Springfield, Massachusetts. Shultis, then the author of the Rational Urbanism blog, defended a deal that had brought a casino to his city. It led me to compare the features he liked about the Springfield casino with the Cedar Rapids downtown casino proposal. The resulting post, entitled "Their Casino, Our Casino," marveled that Springfield, a down-on-its-luck post-industrial city, got a much better deal both in terms of revenue and design, than Cedar Rapids did. 

That point became moot the following year, because the Iowa State Racing and Gaming Commission disallowed the Cedar Rapids casino on the grounds that it would pull business from casinos in nearby towns. This is a terrible rationale--what other industry operates with this level of state protection?--but this state government seems to exist mainly to thwart cities' plans, whether those plans are good or bad. 

In 2017, Cedar Rapids saw several more casino proposals, but they too came to naught. "Bill," a commenter on my blog, lamented that "now we are looking at a gaping open space on the west side of the river." Of course, the city had created that gaping open space in order to facilitate construction of the casino, but more importantly, six years later that hole is in the process of being filled! First and First, a high-quality multi-use development, will complement the surrounding area in exactly the way the casino would not have done.

Now, the casino is back yet again. In July, the Cedar Rapids City Council approved an agreement with a private firm to set aside land for casino construction at 1st Street and F Avenue NW, maybe half a mile north of where it was going to go ten years ago (Vaughn 2023; see also "Cedar Rapids Casino" 2022). The city gets credit for persistence, if not wisdom.

Casino benefits (and maybe costs, too?) are oversold. Any positive impact of a casino on either local economic development or state tax revenue is likely to be modest at best. Existing casinos, even protected by the state's anti-competitive policy, are hardly models of revenue generation. In 2017, during the last round of casino proposals, I noted that the well-worn shops on the Bever Block downtown, which have since been demolished, vastly exceeded in taxable-value-per-acre either of the region's two most successful casinos (in Clinton and Riverside). Moreover, neither Clinton nor Riverside is a model of a thriving city.

Economic studies, once you exclude industry-sponsored work, are extremely cautious about the local impacts of casinos. (See the review of research by the Richmond Federal Reserve District (Scavette 2022.)) Mike Walden of North Carolina State University summarizes the reasons for caution (Liotta 2019):

Obviously the economy questions: Will people come to gamble in your small town? For example, [even] if this is going into a small town there are lots of opportunities for gambling, not just going to Las Vegas or Atlantic City, but online, on your phone, et cetera. So that's one question, will new people come?

The spending would need to be new to the local economy, not money currently being spent at other venues ("substitutability"). 

You don't just want to build this off your existing population because what happens generally is if someone is already a resident in your small town, and they're going to spend money gambling, that means they're not spending the money somewhere else [in town]. So the whole point here is to attract people from outside.

Another factor is whether attendant social problems (addiction, crime) counteract the small increase in economic activity.

Will people flock to the casino on 1st Street NW in impactful numbers? Probably not. Nationwide, counties that open gambling venues see only marginal economic improvement compared to neighboring counties without those venues (Lim 2017, Radhakrishnan 2015). Even a gambling destination like Atlantic City "has difficulty keeping a single grocery store open" (Scavette 2022, citing Burch 2021).

Cedar Rapids is not a small town, we already have grocery stores, and our economy is not struggling. So it's safe to say we will not be Vegas on the Cedar, whether that's a good thing or a bad thing. But businesses aren't required to be transformative before they open. Visions of tourism glory set aside, is there any reason to dislike this project? Alas, yes.

The opportunity costs for that land are painfully high. Businesses that get handed nine square blocks in the core of the city had damned well better be transformative. (See the map with the 2022 story for dimensions.)  If the casino was going to land on the edge of town, say by the extension of Highway 100, we would not be having this conversation. But we're going to land it on a huge chunk of the near northwest side that had been planned a few years ago for high-intensity urban development once flood protection was installed:

story board, 2017 Northwest side open house

As with First and First, anyone with imagination can come up with multiple projects for this territory that would blend more with the existing neighborhood and produce more return for the city: missing middle housing, a school, a corner grocery store and pharmacy, a hotel, a park, a downtown-scaled Target like the one just opened in Iowa City... anything really that wouldn't rely so heavily on out-of-town traffic and (gulp!) parking. Imagine Clinton's Wild Rose Casino--appropriately and conveniently located on the outskirts of town--plopped onto a large portion of our town's most valuable land. Make sure you have plenty of antacid before you do this, though.

The deal with Peninsula Pacific Entertainment is less advantageous to the city. In 2013, I thought we'd sold short compared to Springfield, but this version sells even shorter. Compared to the 2013 proposal, the footprint is bigger, the number of competing venues is greater, and the much-touted charitable donations the group has promised are lower. (I'm no movie expert, but I know the difference between net and gross!)

FEATURE	SPRINGFIELD	CR 2013	CR 2023
Street Position	Multiple pods within existing street grid	One pod on one megablock	One pod on even bigger megablock
Housing feature	54 market-rate apartments	None	None
Additional amenities	Bowling alley, movie theater (won’t compete with existing venues)	Restaurants, event center (competing with existing venues)	Bars, restaurants, event center, “foodertainment” center (competing with existing venues)
Annual taxation	$26 million	·       $1.2 million + 1 percent of gross receipts ·       charitable donation of 3 percent of gross receipts	·       Wagering tax information not found and may not have been decided ·       Charitable donation of 8 percent of net receipts
Legal status	Provisions fixed by voter-approved measure	Provisions evolving	Provisions evolving
Transportation	Casino workers can take bus to work, close to transit center	Limited bus service, not close to transit center	Limited bus service, far from transit center

I conclude this retrospective the same way I concluded the 2013 piece:

I expect the Linn County Casino is going to be built, and the results will not be all bad. However, despite its primo location the casino won't enhance the emerging urbanism of downtown Cedar Rapids, nor will it provide much needed connectedness between downtown and the near west side neighborhoods. How did Springfield, which is clearly in more desperate shape than Cedar Rapids, manage to swing such a favorable, far-sighted deal? How did Cedar Rapids manage to miss this opportunity?

SEE ALSO: Jim Kinney, "Taking Stock of MGM Springfield, Five Years Later," MassLive, 20 August 2023 

Why casinos?

Is a casino what this block needs?

The required cooling-off period has passed since Cedar Rapids's casino proposal was denied by the Iowa Racing and Gaming Commission in April 2014, and three proposals have emerged to try it again (Morelli). The Cedar Crossing group led by Steve Gray, who created the 2013-14 proposal for a casino that would have straddled 1st Avenue West near the Cedar River, has resubmitted that version along with a smaller casino concept on 1st Avenue where it currently intersects with 4th Street NE, the railroad tracks and the Cedar River Trail. Wild Rose, which operates large-scale casinos in Clinton and Dubuque, has proposed a small casino on the second floor of a four-story building proposed in the 400 block of 1st Avenue SE.

Of the three I prefer the look of Wild Rose's proposal. It's an unpretentious building that works well with the rest of the block and doesn't impede walkability. My main beefs against the original Cedar Crossing proposal were that it was a gaudy building that wouldn't work with the street; that it was a self-contained pod of attractions that not only would provide no spillover benefits to nearby businesses but would actively compete against them; and that, compared to a contemporaneous proposal by MGM to Springfield, Massachusetts, the City of Cedar Rapids seemed to be getting very little out of the deal. I haven't seen the financial details of the current proposals, so can't compare them or assess their sufficiency.

I remain curious as to why a casino plays such a central role in our city's discussions of economic development. Some people enjoy them, some don't; I get that. And whether big- or modestly-sized, a new casino will make a noticeable splash when it opens. But as economic drivers casinos seem less effective than incremental urbanism. This admittedly is a pretty slap-dash way of demonstrating this, but let's look at the 400 block of 1st Avenue SE, where the Wild Rose hopes to build. The venerable Bever building, built in 1923, is pretty, but this is far from the hoppin'-est block in town. Using the Urban Three model of property tax comparison...

NAME	ADDRESS	CITY	CTY	LAND VALUE	IMPROVE MENT VALUE	TOTAL TAX VALUE	ACRES	VALUE PER ACRE
Albert Auto	421 1st Av SE	Cedar Rapids	Linn	154,600	155,800	310,400	0.296	1,048,649
Bever Bldg	417 1st Av SE	Cedar Rapids	Linn	80,600	549,400	630,000	0.154	4,090,909
Skogman Bldg	411 1st Av SE	Cedar Rapids	Linn	168,000	860,000	1,028,000	0.321	3,202,492
Vacant Land		Cedar Rapids	Linn	100,800	6,700	107,500	0.193	556,994
TOTAL BLOCK				504,000	1,571,900	2,075,900	0.964	2,153,423
Wild Rose Casino	777 Wild Rose Dr	Clinton	Clinton	2,935,000	21,065,000	24,000,000	28.6	839,161
Riverside Casino & Golf Resort	3184 Hwy 22	Riverside	Wash ington	5,343,500	65,930,100	71,273,600	381.23	186,957

...we find that the taxable value per acre on this block vastly exceeds either of the region's most successful casinos. The taxable value per acre of the vacant lot where Wild Rose hopes to build is more than three times that of the Riverside Casino and Golf Resort!

However, as dubious a use of valuable real estate as I believe a downtown casino to be, I am done with the Iowa Racing and Gaming Commission. I would rather have the city make its own decisions, even if I disagree with them, about its future. The State of Iowa has shown an unbridled willingness to intervene in and overrule local decisions--from casino location to minimum wage to labor agreements to plastic bags to rental regulations, and now taking down the Des Moines Water Works--without any notable talent for doing it. Unless someone's rights are being violated, the governor and legislature should butt out. We can handle this. Do something you're good at, like ensuring gun rights for robots.

SOURCES
B.A. Morelli, "3 Cedar Rapids Casino Choices Meet Application Deadline," Cedar Rapids Gazette, 13 February 2017
Strong Towns, "The Walmart Index: Results of Our Big Box Data Collection Are In," Strong Towns, 3 August 2016
"G.O.P. Statehouse Shows the Locals Who's Boss," New York Times, 21 February 2017, A22

SEE ALSO:
Ben Seigel and Brooks Rainwater, "Preemption Prevents Innovation," US News and World Report, 
"Value Capture and the Property Tax," Lincoln Institute of Land Policy, n.d.

EARLIER POSTS:
"No CR Casino... Now, What?" 17 April 2014
"Their Casino, Our Casino," 5 September 2013

No CR casino... now, what?

The Iowa Racing and Gaming Commission today voted to deny the application of Steve Gray's group to open a casino on 1st Avenue West in Cedar Rapids. The proposal had been given decisive approval in a referendum last year.

I have mixed feelings about this. I didn't like the location, straddling 1st Avenue between downtown and the Taylor Area. I didn't like the large and splashy building, which didn't blend with its surroundings and which would have been difficult to convert to any other use should the casino fail. I didn't like the plans to duplicate the restaurants and entertainment venues which already exist downtown. And the economic benefits of the casino were probably oversold. (Not to deny there would be some, but one commenter on Facebook today compared the adverse effects of the negative decision to those of the 2008 flood.)

At the same time, I am morally outraged [DISCLAIMER: shameless attempt at drama] at the commission's decision process. While I could only have approved had the commission used any or all of the above rationales in making their decision, they did not. The Gray group's application was rejected because studies show the Cedar Rapids casino would have drawn away ("cannibalized") customers from casinos in Riverside and Tama. Well, maybe it would have--Gray and Cedar Rapids city officials dispute those findings--but WHAT BUSINESS IS THAT OF THE STATE? Sorry, I'm yelling, but do businesses in any other line get this level of protection from competition? Restaurants don't. Colleges don't. Convenience stores don't. What is so special about casinos that they get this protection?

Now there's a big vacant area on the west side of the river. What happens now? I'm nobody's visionary, and certainly no entrepreneur, but I hope that whatever it is:
 (a) is something. A gaping hole west of downtown is not good.
 (b) serves to connect the Taylor Area to downtown.
 (c) is not gargantuan. It should fit into and contribute to a quality place.
 (d) creates economic opportunities for working class people.
 (e) is flood-proof.

Any ideas?

Their casino, our casino

(The casino at Cedar Crossing, from KWWL)

Steven Shultis, who thinks about urban issues on the Rational Urbanism blog, recently appeared on the "Strong Towns" podcast to talk about a casino proposal for his hometown of Springfield, Massachusetts. Shultis, seemingly to his own surprise, supports the casino, and seemed at some pains to explain why an urbanist would do such a thing. His description of the Springfield proposal has some resonance for what's coming to Cedar Rapids. He points up some advantageous aspects which the two share, but also some ways in which Cedar Rapids--despite being in far better shape than Springfield--falls far short in vision.

Springfield is a city of about 150,000 in southwestern Massachusetts. Like many northeastern cities, it has suffered from the loss of industry, and in 2011 a tornado caused extensive damage. Shultis, who lives about a block from where the casino would be built, describes the downtown as a "walkable traditional neighborhood" but with a lot of poverty. The casino, proposed by MGM, was approved by local voters, and is now competing against two other proposals for the approval of the Massachusetts gaming commission. Shultis describes the other two proposals, one for suburban Springfield and one for a nearby small town, as "huge pods off the interstate... isolated from the city." So, some similarities in city size, community support, and recent natural disaster, and the fate of both currently rests in the hands of state commissions. Differences are Springfield is poorer and used to be bigger, and the state decision in Iowa is straight up-or-down without competing proposals.

Shultis makes some points in favor of the MGM proposal that apply also to the casino in Cedar Rapids. By building within the city, infrastructure will not need to be created from scratch (though it will of course need to be improved). The increase in auto traffic will be negligible over what's there already, and anyway we want more people coming downtown. The jobs created, while not appealing to professionals like me, could be a step up for people in poverty. ($20,000 a year, with benefits, says Shultis, is "about $6000 more than the median family income in my neighborhood.") Locating the casinos in their respective cities downtowns puts those jobs within easy reach of those who want them. And the land will surely more be productive (measured, for example, by tax revenue) than it is now.

So far, so good. Shultis goes on to make the following favorable points about the Springfield casino:

1. The casino would be broken up into the existing street grid. Instead of one pod there would be several buildings, totaling 140,000 square feet of retail space including a bowling alley and a 12-plex movie theater (which downtown Springfield, like downtown Cedar Rapids, currently lacks). To get from one piece to another visitors will need to "step out of the stores into the public realm" and walk the streets of Springfield.
2. MGM will also build 54 market-rate apartments as part of the project.
3. MGM will not build a new entertainment venue or arena. Springfield already has an arena, symphony hall, and theater in the area. MGM will bring Cirque de Soleil and their other featured attractions to the city facilities, again enriching the urban area with pedestrians.
4. MGM will pay a flat tax of $26 million a year on their property, regardless of income.
5. The voters approved the host agreement between the city and MGM. If MGM is awarded the right to build the casino by the State of Massachusetts, it is obligated to honor all their promises. They can't, for example, decide not to build the bowling alley.
6. Casino employees can take the bus to work. The hub for the bus system is two blocks away.

All these features gladden Shultis's urbanist heart. The casino could, he concludes, be the catalyst to make a struggling town successful, and he hopes the state takes that into account.

From an urbanist perspective, the Cedar Rapids casino is less alluring.

1. The casino would be one pod, with a three-story parking garage across 1st Avenue connected by a skywalk. No movie theater, no bowling alley, and in fact, no need for a casino-goer to touch a street or even go outside.
2. No apartments. This isn't a big issue for me, since there are several residential projects underway or planned for downtown, but it might have helped the Taylor Area.
3. The casino will include restaurants and an event center, which downtown already has. This map, from the KWWL website, shows the proximity of the casino to the convention center which opened this summer. (Lady Antebellum was the opening act.) It's not a tough walk from the casino to the convention center or downtown restaurants, but no reason to expect casino voters will be making that walk, or any walk.
4. The casino will pay a flat wagering tax of $1.2 million a year to the city and county, plus 1 percent of gross receipts. It's a smaller casino, but not that much smaller! It will also donate 3 percent of its gross receipts to a non-profit which will make grants to local charities.
5. Nothing about Cedar Crossing appears to be written in stone. Last month, for example, the proposed size of the casino increased from 142,000 square feet to 171,000 square feet. City Manager Jeff Pomeranz enthused, "It's gotten even better and more beautiful than before." No telling how much more beautiful it will get before it's built. The city voters bought a pig in a poke, albeit with considerable enthusiasm judging from the 61-39 percent winning margin.
6. Our bus system goes to bed by 7 p.m. on weekdays, and doesn't run at all on Sundays. Employees not within walking distance will need to get and drive a car to work at times when the casino is busiest. If you're busing, Route 1 goes right by the proposed site, but the rebuilt Ground Transportation Center downtown is a bit of a hike.

I expect the Linn County Casino is going to be built, and the results will not be all bad. However, despite its primo location the casino won't enhance the emerging urbanism of downtown Cedar Rapids, nor will it provide much needed connectedness between downtown and the near west side neighborhoods. How did Springfield, which is clearly in more desperate shape than Cedar Rapids, manage to swing such a favorable, far-sighted deal? How did Cedar Rapids manage to miss this opportunity?

SOURCES

Most of this essay was based on "Strong Towns" podcast #147, "The Springfield Casino," available at http://www.strongtowns.org/strong-towns-podcast/2013/8/1/show-147-the-springfield-casino.html; and ongoing coverage of the Linn County casino by The Cedar Rapids Gazette, at http://thegazette.com/linn-county-casino/. Rick Smith's article, "Investors, City Plan for Larger Casino," appeared in the Sunday, August 25, 2013 issue of the Gazette, and is online at http://thegazette.com/2013/08/25/investors-city-plan-for-larger-casino/.

Steven Shultis's blog, Rational Urbanism, is at http://rationalurbanism.com/blog/.