Grand Falls Casino Synergy -- That's What I Said!

Last summer, when Iowa announced it was building its big Grand Falls Casino in Larchwood, right at the northwest corner of the state, various South Dakotans, including the man getting my vote for Governor today, flipped their lids. I suggested some of the concerns about the casino and proposed warlike responses to the project were exaggerated. I said that proper planning and marketing could turn the project into an economic plus for our state. "Think synergy, not scarcity," I said.

Synergy. That's the magic word. And it's already happening:

...Sands Drywall of Sioux Falls has one of the biggest jobs, putting up all the exterior and interior walls.

"This job hit at the perfect time for us. We're going to have containment on the whole project by Thanksgiving is what the schedule is, and it will keep us working inside all winter long," Greg Sands, owner of Sands Drywall, said.

Despite concerns that a 'Buy Iowa' first initiative was going to keep construction crews from other states off the job site, only 55 percent of the contracts that have been awarded have been to Iowa companies. The rest are from outside the state.

...The Sioux Falls companies working on the job site are glad South Dakota is seeing some benefits from the Iowa project.

"Their philosophy was to be compliant with what they had to do, and also to create synergy between them and the Sioux Falls market, and South Dakota. And they've done that. There's a lot of people working from both states. A lot of people working here from both states for me and there's just a lot of synergy," Sands said [Ben Dunsmoor, "Paying out for South Dakota," KELOLand.com, 2010.11.01].

Sioux Falls Mayor Mike Huether says he and his business pals are already thinking down the synergy line as well. We could try to compete, but it may be easier to simply capitalize on the Iowa megacasino. When Iowa gives you rhubarb, make rhubarb pie.

Heidepriem Wrong, Daugaard Thinking on Casino and Scarcity Mindset

Some days it's hard to be a South Dakota Democrat. Our gubernatorial candidate Scott Heidepriem has declared his first priority as governor to be convening a task force to figure out how to build a mega-casino in Sioux Falls to combat the purported economic drain that will be caused by the under-construction Grand Falls casino across the border in Larchwood, Iowa.

South Dakota's first priority: building another casino. I'm having trouble working that into a campaign slogan.

Heidepriem's proposal does tie together a whole mess of potential voting blocs. If you buy his argument, his fight-fire-with-fire proposal wins local Chamber of Commerce types, Sioux Falls event center boosters (Heidepriem says he'd direct casino revenues toward building that grand dream for Sioux Falls), and Native Americans who might run the Sioux Falls-area casino.

But I get a bad vibe from the proposal. If we're making a bigger pie, it's a gambling pie, and I don't care much for that pie as the staple of our economic diet. Much of Heidepriem's own reasoning is that gambling is bad, it causes social problems that we're going to have to pay for, so we might as well cash in on the revenue side, too. I have trouble getting up my ambition to fight to expand an industry that causes addiction and other social problems. (But I eagerly await riffs on this theme from Mr. Newland and activists of other flavors to advocate legalizing marijuana, prostitution, gay marriage....)

And if there's only so much pie (and that seems to be the competitive tenor of Heidepriem's "Don't mess with South Dakota" press release), then we're really gambling that as the two casinos compete, the one on our side of the border will win and drive those darned Iowans out of work. "Screw Iowa!" doesn't sound like a great rallying cry for the troops, either.

Republican gubernatorial candidate Dennis Daugaard is playing Mr. Mellow on this issue. He might also be playing Mr. Logical. He looks at a casino in Lyon County, Iowa, with a population hardly 6% the size of adjoining Minnehaha County. Daugaard may be thinking what I'm thinking, that an Iowa casino might not be a zero-sum game:

1. We're already seeing $7.5 million of the $50 million construction budget go to South Dakota contractors.
2. The casino will hire over 700 people. There are 788 people in Larchwood, and I suspect some of them are already spoken for jobwise. There are 5,595 people looking for work in the Sioux Falls metro area.
   
3. Suppose 100,000 out-of-staters say, "Hey! Let's go gamble in historic Larchwood, Iowa!" Do you think they're going to fly into Larchwood Metropolitan Airport? No. They're going to fly into Sioux Falls. They're going to rent a car in Sioux Falls. They're going to stop at the Sioux Falls Target to get the toothbrush and swim trunks and whatever else they forgot to pack. They're going to spend a day golfing and gambling in Larchwood, say, "Well, that was fun, now what?" And then they're going to come back to Sioux Falls to see a movie or a show at the Pavilion or whatever other brilliant entertainment a synergy-minded convention and visitors bureau can come up with. And for every visitor who wants to spend the night in tranquil, bucolic Larchwood, I'll bet we can find one or two who'd prefer to end the day with jazz and a martini under the sparkling downtown lights of Sioux Falls.
   

Heidepriem's thinking on casino competition sounds too much like the small-minded thinking of various small towns around South Dakota who think any gain for a nearby town is a loss for them (see Madison's and Hartford's small-minded reaction to Rutland's and Montrose's open enrollment success). Our neighbor's success doesn't mean we have to compete to take that success away. Think Sturgis rally: Deadwood and Custer and Wall and Mitchell don't try to outdo Sturgis with a bigger rally and put that event out of business. We all put up the "Welcome Bikers!" banners and offer drink specials and other events to cash in on the increased flow of visitors.

Once again, I can hear my fellow Dems telling me, "Ah, but this is the good political strategy! South Dakotans will eat this stuff up!" Yeah, maybe they will. Maybe raising a bold middle finger across the Big Sioux toward our dastardly Iowegian neighbors is just the thing to get the typical South Dakota voter fired up and ready to go Dem in November. And if Iowa flipped us the bird first, well, maybe they have a fight coming.

But I don't like it. Instead of trying to drive Larchwood out of business, we should focus on looking for other opportunities to build on the increased economic flow Grand Falls Casino will draw. If Iowa's building better mousetraps, let's fire up the cheese factories.

Think synergy, not scarcity.

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p.s.: There has been some bragging from the Iowa side about how the "vast majority" of Grand Falls Casino's revenue will come from South Dakota. Is it just me, or does anyone else think that building a business model on the promise of drawing lots of big-spending South Dakotans is... overly optimistic?

Guaranteed Lottery Win: Don't Play!

As Misty Young of Madison celebrates her luck in winning the South Dakota lottery, my neighbor Gerry Lange forwards me this article from the Tampa Tribune that shows how state lotteries rely on manipulating the false hopes of the poor and less educated:

[Florida state government] pays millions to probe the thoughts and habits of potential lottery players. Consultants ask what they buy at convenience stores, whether they rent videos, go to theme parks, even how they feel about owning things and belonging to a group.

The results show the lottery relies on the poorest and least educated — "Thrill Seeking Dreamers," it calls them — to spend more than everyone else. Floridians shelled out nearly $4 billion on lottery tickets in 2008-09, with the Thrill Seekers accounting for half of those purchases.

...The Thrill Seekers are the lifeblood of the lottery. They make up 15 percent of the adult population, but they account for 50 percent of the lottery's revenue.

Most of them are women. Their income and education tend to be low or moderately low, though most have full-time jobs, and they "live for the moment," said a 2006 Ipsos Reid marketing study. Last year, about 20 percent of the Thrill Seekers surveyed said they spent more than $100 on the lottery in the most recent month. Four percent spent more than $500 in that month [Lindsay Peterson, "Lottery Pushes Floridians to Spend More Amid Recession," Tampa Tribune, 2010.03.05].

Florida gets 30 cents out of every lottery dollar. So they aren't just shifting tax burden; they're also shifting income straight from the poor to the not-so-poor. How's that for regressive?

State lotteries are essentially a tax on the poor and uneducated. Instead of making the hard political case that we should all pay our fair share for roads, schools, police, and fire departments through taxes, politicians turn to lotteries to get money through marketing and manipulation.

In South Dakota, three quarters of our lottery revenues have gone to lower property taxes. So three out of four of your lottery dollars don't even go to improve South Dakota's infrastructure or services; they just go to keep someone else from paying taxes. So really, if you own property, the best way to win at the lottery is not to play. You're guranteed a payoff at tax time.

Russell Olson's Greatest Legislative Achievement: Bingo at LAIC

Senator Russell Olson (R-8/Madison) can celebrate his greatest legislative victory yet: yesterday Governor M. Michael Rounds signed into law HB 1095, which allows economic development corporations to conduct bingo and lotteries. Senator Olson was primary sponsor.

Yay.

Since job creation isn't working, the LAIC can turn to gambling to build Madison's economy. Maybe the LAIC will convert the old Wenk's plant across the street into a city bingo parlor. Dwaine Chapel can get an old-time saloon keeper's suit and call the numbers. Julie Gross can line up some Chamber members to dress up as showgirls and serve drinks. We can all go downtown and have more fun on Friday night.

All thanks to the hard work of our state senator.

Legislature Notes: Lange & Kloucek Advocate Income Tax Repeal...

Yes, you read that right. That and more excitement from the South Dakota State Legislature:

• South Dakota has an income tax... but maybe not for long! My neighbor Rep. Gerry Lange wants to repeal South Dakota's income tax on banks and financial corporations. To that end, he and Senator Kloucek have floated HB 1123. They also want to repeal insurance taxes with HB 1124. I think Gerry's messing with us....
  
• Thank you, Reps. Bernie Hunhoff, Marc Feinstein, and Larry Lucas for voting against HB 1095, Senator Russell Olson's silly bill to allow economic development corporations to play bingo. Unfortunately, 10 reps voted yesterday to move this bill forward to the full House.
• Bigger thanks to the House Judiciary Committee, which gave a 41st-day thumping to HB 1068, Rep. Verchio's ill-conceived bill to cap medical malpractice awards at $100,000.
• HB 1133 would ban kids with learners' permits from using cell phones while driving. Funny: we don't apply DUI penalties only to teenagers... but it's o.k. to let adults choose to drive while texting and sextuple their risk of a wreck? I move to amend!
• HB 1135: Some of our legislators don't want a Constitutional Convention. Call off the Tea Party....
• HB 1140 bans red-light cameras and photo radar for law enforcement! Back to the beat, copper!
  

Sen. Olson: Forget Renewable Energy; Let's Play Bingo!

Another note from the "I can't make stuff like this up" department:

Senator Russell Olson (R-8/Madison) has a vision for rural economic development in South Dakota. That vision does not include small renewable energy projects or tax breaks for those who build them. His employer, Heartland Consumer Power District, probably loathes the thought of individuals producing their own power, becoming more energhy independent, and messing up their pretty little grid. Senator Olson voted against Senate Bill 58 in the State Affairs Committee yesterday.

What is Senator Olson's vision for rural economic development? Our man Russ is a prime sponsor of House Bill 1095. This legislation permits local industrial development corporations to conduct bingo games and lotteries.

Bingo. Lotteries.

So that's how Senator Olson's previous employer, the Lake Area Improvement Corporation, is going to fulfill the Forward Madison goals: they're going to hire 400 people to sell lottery tickets and run a bingo hall in the renovated depot. (I assume the LAIC is one of the "industrial development corporations" created by SDCL 5-14-23.)

To review: Olson is a Republican voting against (1) business opportunities and (2) tax breaks, but promoting games of chance as an economic development strategy.

I want to use renewable energy for economic development. Russ wants to use bingo.

Ah, vision.

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Of course, if HB 1103 passes, you'll be able to drive your golf cart to the bingo hall. Say, couldn't we charge those carts with wind turbines?

Another Big-Booze Republican Arguing Against Local Control

Republicans generally advocate local control. It's a logical position to take if you are against big government. Plus, it keeps you from having to think of solutions if you run for high office.

But the more I read, the more I think the only principle Republicans really adhere to is a baser Golden Rule: "Don't make rules; I want more gold!"

Today's case in point: Rick Law of Worldwide Holdings, Inc., is suing to overturn the Sioux Falls ordinance that allows the City Council to prohibit placing any new video lottery machines within 2000 feet of schools, parks, or existing video lottery machines. (Dang, even sexual offenders are allowed to get closer than that to schools, aren't they?)

Mr. Law, who already owns two "VIP Gaming Lounges" in Sioux Falls and Sioux City, is next in line for a $155K city liquor license, but he whines that there are no locations left in the city and that "The way the ordinance is written, the licenses are basically worthless." He thus turns to the courts, arguing that the city is usurping constitutional authority that can only be exercised by the higher powers in Pierre.

According to OpenSecrets.org, Mr. Law also contributed $1000 to Republican John McCain in 2008.

Local control is great for big-money Republicans... until the locals try to control their businesses.

Lottery Winner Neal Wanless Immortalized in Song

Among the burdens of wealth and fame: you end up in People Magazine next to all those bikini ladies, and crazy musicians from New York City start writing songs about you.

Neal Wanless, who took possession of his $88.5 million in Powerball winnings this week, earns this musical shout-out from Jaime Garamella and his Brooklyn-based band The Spanish Channel. "The Biggest Loser" doesn't pretend to be biographical, just some passable poetry and good guitar-pickin' about irony and luck. Enjoy.

Powerball Winner in Winner: Wiken to Save Schools?

I usually don't pay attention to the lottery, but holy cow! Someone in Winner bought the lone winning ticket for last night's Powerball. Jackpot: $232.1 million!

I'm betting it's Doug Wiken—he hasn't posted all morning! He's probably deciding whether he wants to give his first lottery payment to the Winner School District to make up for this year's failed opt-outs.

Lange Proposes Increasing State Share of Video Lottery Revenue

Governor Mike Rounds is challenging legislators to find sources of revenue to address the state's dire budget shortfall. District 8 Representative (and my neighbor!) Gerald Lange answers that challenge by proposing the state increase its chunk of video lottery revenue from 50% to 70%.

My blogospheric neighbor Pat Powers lambastes the idea... but then Pat Powers would lambaste Gerry for voting to send flowers to your grandmother. Powers says taking more money from video lottery will either increase our dependence on it or drive down revenues. Industry lobbyist Larry Mann agrees with the latter, telling that Sioux Falls paper that increasing the state's share would decrease revenue... although I fail to see the connection between the share the state takes and the motivation of video lottery players to keep chunking their money into the machines.

70% may sound like a high share (especially if you're one of the kind folks making profits off addictive behavior). That Sioux Falls paper notes that Montana only takes 15%, while Oregon has a sliding scale that takes 89% from the top earning establishments.

I mentioned over at the War College that lottery may be a recession-proof business. New York saw lottery revenues increase over the first three quarters of 2008; however, many states are showing declines as the recession wears on. Some Oregon establishments have seen a drop in video lottery revenue, but the cause is more likely the economy and a new smoking ban.

Casual gamblers may cut back, but problem gamblers may hit the machines even harder. That dynamic may be all the more reason to increase the state's share, to reflect, as Rep. Lange says, the social cost gambling imposes on the state.

Perhaps the two reasons Mr. Powers gives for criticizing Lange's proposal are actually reasons to embrace it. Gambling, like smoking, is bad for society. Taxing it more helps cover the externalities Rep. Lange mentions. If those taxes rise high enough to drive some of that activity out of business, well, maybe the state still comes out ahead.

Rep. Lange says the 70% number is negotiable; he wants to "spur debate"—and that's one more reason we should be glad to have Gerry back in Pierre. You want ideas? Gerry Lange has 'em. He won't just play shell games with existing funds: he'll challenge the legislature and us to make hard choices and pay our way.

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Update 10:30 CST: Representative Lange is also planning to introduce legislation to create a full veterinarian program at SDSU. Now that's serious legislating!