Casino gambling is back on the ballot. This proposed state constitutional amendment to be decided by voters on November 3 would not only legalize casino gambling, it would grant exclusive rights (for now) to Cavs and Quicken Loans owner Dan Gilbert and Pennsylvania-based Penn National Gaming to develop four casinos, one each in four cities. (Gilbert would develop casinos in Cleveland and Cincinnati. Penn National would have the rights to Columbus and Toledo). How does it stack up to the previous four failed proposals? Not surprisingly, Gilbert says it’s a good deal, creating thousands of jobs and keeping billions of dollars in the state.
Gilbert claims the casinos would create 34,000 jobs, with as many as
9,500 temporary and permanent ones in Cleveland. Locally, he estimates
5,300 would be temporary construction jobs; 2,800 would be casino jobs;
and another 1,300 would develop along the casino’s periphery. It’s hard
to imagine the bulk of the skill positions going to Ohioans: The state
doesn’t have a casino industry, and any kind of big-dollar enterprise
wouldn’t likely trust opening night to rookie dealers and novice pit
bosses. But it’s easy to envision openings for new service jobs and
second-tier management positions.
The gaming licenses will be cheap — $50 million, compared to
the $200-500 million charged by other states. But theoretically at
least, building four brand-new casinos offsets that loss. The plan
would spread taxes from the casinos across all 88 counties
(proportionate to population) and give defined percentages to
law-enforcement training, local schools and the casino’s host county
and city. Gilbert projects a casino would generate $71 million in
annual tax revenue for Cleveland alone, with $29.7 million going to the
city, $18.8 to the county and $22.5 to local school districts.
Gilbert is eying a site opposite his Quicken Loans Arena in the
Flats, between the Sherwin-Williams building and Tower City
Amphitheater and overlooking the Cuyahoga.
This proposal is Gilbert’s first run at the casino business. It’s
also attracting some backers who didn’t support previous initiatives,
including Cleveland Mayor Frank Jackson, the Fraternal Order of Police,
the AFL-CIO and the UAW. — D.X. Ferris
Did you have to run your potential interest in a casino past the
NBA?
We have. There’s precedent. The Sacramento Kings, which are owned by
the Maloof brothers, own the Palms [Casino] in Las Vegas. It’s never
been an issue. There’s not going to be any sports gaming in these
casinos. They don’t even care if there’s sports gaming; they just don’t
want NBA games.
If Issue 3 passes and Cleveland gets a casino, what’s in it for
Akron and Youngstown?
First of all, there’s the tax money they’ll share, based on a
proportion of their counties. Every county will share in this [tax]
money proportionate to the population [they] represent. It’s Ohio; it’s
a regional thing.
When we surveyed Ohio citizens, we asked them, what about eight
[casinos]? What about one in Youngstown, one in Akron, one in Dayton?
From a polling standpoint, [support] was significantly lower.
Why does the casino plan have to be part of the
constitution?
The Ohio constitution has some vagueness as to whether gambling is
legal. All this does, this referendum and amendment, is allow gaming on
these four pieces of property. It doesn’t prevent it anywhere else. If
anybody else wanted to put another campaign and referendum through and
say ‘OK, let’s add three more,’ nothing prevents it from happening.
The very reason we felt we had to go this route [is that] for
anybody to invest a billion-five, it’s so cumbersome and so iffy
[unless gambling’s legality is made] firm and clear in the
constitution. There’s no way gaming’s going to happen in Ohio without
it.
Casinos haven’t fixed downtown Detroit’s problems. How would it
be different for Cleveland?
In Detroit, they didn’t build them downtown downtown. They
built them a mile from downtown, and they built them right next to a
freeway exit so people from the suburbs can come down there and valet
out. And the blocks around it aren’t really walkable, livable blocks.
And it doesn’t really make a lot of sense. [In downtown Cleveland] you
think about medical mart, convention center, a brand-new, full-blown
casino, the Quicken Loans Arena, the Cavaliers booming and the Rock and
Roll Hall of Fame — we’ve got a pretty attractive core here.
Do you have a casino company working with you?
We’re talking to a handful of them. Clearly, we’re going to get
either professional management from some of the big companies or
partnership with some of the big casino companies. It’s not a business
we’re in. Just like anything we do, we’re going to make sure we’ve got
the best people. [But] if we don’t get this passed, nothing
matters.
Isn’t the proposed $50 million for a casino license cheap
compared to the asking price in other states?
It’s cheap if you look at it like this: Those states don’t have
requirements of a billion dollars of infrastructure. So an operator
comes in and says I want to put a casino in your town, and I can afford
$250-$300 million to make these economics work between building and a
licensing fee. Would you rather have it be in the building that’s brand
new and the construction jobs? Or do you rent a building and gut it and
pay Columbus a high licensing fee? And the feedback from the poll was
overwhelming: Require the operators to put a billion in infrastructure
and new buildings, which I think makes sense.
An ad on the front of arena says “Keep $1 billion in Ohio.” Is a
billion is the best we can do?
The billion is an annual number. It’s the Ohio money leaving. These
casinos combined are projected to do over $2 billion in revenue. And
then the jobs that get created and the economic stimulus to the
businesses around it. It’s a billion of the billion-[point]-seven that
currently leaves.
One school of thought says casinos are good for casinos. They
keep people there, and that’s where they spent their money, from drinks
to food — and it doesn’t help the neighboring businesses so
much.
First of all, if we wanted to do that, we’d go get a piece of land
on the outskirts and make that happen, build a bunker. It’s all how you
develop it and where you put it. It’s location and design and
construction. If [we] bunkered it off, you could make that case. I just
encourage people to look at our track record, who we are, what we
invest in, how we look at the long-term, what we’re doing in Detroit
— that’s just not who we are. In the long term, we think building
more investments, there’s more opportunities for us as investors by
doing what’s right for the city, by creating this very exciting core
and being part of this and getting others involved.
The other thing is, we’re not going to have a hotel, because the
hotels here are 50 percent occupied — that would make it more of
what you just mentioned. We’re not doing that. There probably will be a
handful of restaurants, and certainly we’re going to work with the
local restaurateurs. We want them to put the restaurants in there. But
most of the traffic, some people will eat in there, and a lot of [them]
won’t.
The way the amendment is written, the games offered are dictated
by what’s available in neighboring states.
We went back and forth on this piece a bit. What we didn’t want to
do is, because it’s done by amendment, say ‘Let’s have this game and
this game.’ And then another game becomes hugely popular, and now
you’ve got to go back to the voters in the state of Ohio to approve a
certain game. And so we thought, let the marketplace dictate. So if we
have to compete with all these neighboring states that have these kinds
of games, let that be the dictator of whether or not we’re allowed to
have those kinds of games.
What’s a potential downside of it? Say, if you’re not doing that
much business?
If it’s not doing that much business, it’s a downside to the
investors. We’re going to lose a lot of money. But if we don’t do
stupid things and make dumb mistakes that aren’t recoverable, that
shouldn’t be the case.
Does the revenue at any point filter into what you can do with
the Cavaliers? Is this in any way —
— the LeBron strategy? When LeBron was drafted, which was a
couple years before we got here, he said he wanted to light up this
town like Las Vegas. We’re just trying to do our part here. Either way,
we’re committed to the Cavaliers, to continue to build a world-class
franchise.
But can the casino money affect Cavaliers business?
There’s common ownership. So certainly, if you look at it as one
business, and the casino’s profitable and thriving, it makes you more
apt to do certain things.
A longer version of this interview can be found at clevescene.com.
This article appears in Oct 14-20, 2009.
In an email Roldo Bartimole asks:
The question of the monopoly revenue to come to Dan Gilbert via a casino and whether it would help the Cavaliers shouldn’t be the question.
The question should be “Will it help the Cleveland Schools?”
Since the Quicken Arena doesn’t pay any property taxes – most of which goes
to the Cleveland school system – Gilbert should offer to pay the taxes due
on the arena. Right now he gets a free ride.
Gilbert has done a lot of great things for Detroit. He started a school called Bizdom U for young urban entrepreneurs and he is involved in getting a rail system in downtown Detroit. I don’t sense he is in this for the money (he has enough). I think he wants to help people and cities thrive. I can’t speak for Penn National, but Gilbert seems to be the kind of guy that will do good things with the money.