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Tough Obstacles Pose Challenges to Block E Casino Project

Posted on May 13th, 2011

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Plans to revive Minneapolis’ Block E through the establishment of a state-run casino may encounter several serious problems. As initially pitched by developers and proponents, the proposal, dubbed as Minnesota Live, will turn the former Block E area into a gambling hub that will attract millions of visitors and tourists. It shall feature highly competitive gambling facilities, retail stores and food establishments. When it was presented at the Legislature, the project’s major advantage was that it will not require public funding but will rely in private investors to raise the projected $200 million construction cost. The latter argument impressed several government officials as the state is currently suffering from dire financial constraints. Suffice to say that due to economic recession, government has greatly considered gambling taxes as a way to fortify an ailing budget.

Other arguments made by Cottage Grove Republican Rep. John Kriesel, who authored the bill that would provide the needed legislation for the project, was that the project will be able to provide employment opportunities for construction and hospitality industries that are currently suffering from major setbacks. However, gaming analysts are concerned that the current situation may not work in favor of the project, and may in fact cause efforts to go down the drain, costing the government and developers major financial troubles. One such concern is that US gaming revenues have been on a downward trend for the last several years. Although many are optimistic that the economy is showing signs of recovery, the industry market remains crowded as more and more gambling establishments have been popping up. Nowadays, big companies are diverting their investments to international markets to secure a better chance for survival.

Another factor that may affect Block E’s success is that several gambling facilities are already in play. Block E supporters have predicted that once the casino is operational, they expect 5.6 million visitors to arrive and spend their money in the establishment. However, according to Keith Whyte, executive director of the Washington-based National Council on Problem Gambling in Washington, casino-goers will not bother to travel greater distances to play in casinos when several ones are located nearby. Furthermore, the Block E project shall pose threats to the current status being enjoyed by American Indian-operated casinos. In Minnesota, there are 18 casinos that are tax-exempt. These casinos are able to earn an annual amount of $1.5 billion. A new competitor will obviously be considered as unfavorable by the tribal casinos who have maintained their monopoly of the industry for the last twenty years.

James McComb, a Minneapolis-based real estate consultant, said that once lawmakers approve of expanded commercial gambling, tribal casinos may resort to various strategies and approaches in order to keep drawing gamblers in, like serving alcoholic beverages. McComb explained that such is possible because tribes have no worries about paying taxes. Critics have also questioned the practicality of making the Block E project a state-run casino. They believe that this shall cause an unwanted rift between the government and the American Indian tribes.

In addition, they also question the capability of the Minnesota State Lottery Board to manage the casino, and its revenues. It was projected that once the casino opens in 2012, will bring in an additional $100-1$150 million of state tax revenues for the first year alone, apart from a one-time fee of $50 million. After which, the casino shall generate an estimated $250 million for the ensuing two-year budget periods. However, gaming analysts say that if the government is really serious about getting the most out of the casino in terms of tax revenue, then Block E should be managed and operated by private entities.

Other previously aired concerns involved the social ills that may result once casino operations begin. For instance, Minnesota Indian Gaming Association executive director John McCarthy expressed his apprehension that a downtown casino like the one project proposes will have serious repercussions on the crime rate and on Indian casino employment. With the lack of a co-sponsor for the bill which is indicative of low legislative support, it truly seems that much still needs to be done to iron out the wrinkles of the Block E project.