A rendering of the proposed Kewadin Lansing Casino. Photo courtesy of Sault Ste. Marie Tribe of Chippewa Indians.

Next week, the city council in Lansing, Mich. is expected to vote on a proposal for a $245 million casino for the city’s downtown.

The proposal is just the latest in what’s starting to look like a casino-boom in the Midwest. Both Toledo and Cleveland have new casinos opening in May. The Detroit Free Press reported last week that there are no fewer than 22 casino proposals in Michigan right now. And Chicago mayor Rahm Emanuel is still holding out hope for Illinois leaders to approve gambling in his city.

At first glance, it’s easy to see why casino gambling is such a hot topic right now. Casinos bring hundreds of millions of dollars in new investment, including construction jobs and long-term jobs for dealers, waiters, cooks and others.

Also, research has shown that regions in economic stress are more likely to use gambling as an economic development tool. Here in the Midwest, there’s been plenty of economic stress.

But it’s not exactly a settled issue whether casino gambling actually creates economic development.

So why all the interest?

First, consider the research. Casino gambling can be a contentious issue, and, as with all contentious issues, there is a lot of conflicting information on both sides. But it seems clear that casinos can create economic development. Just look at Las Vegas.

But not every region that gets a casino turns into Las Vegas. Just look at Gary, Ind.

The Federal Reserve Bank of Boston took a look at this issue in 2006, as New England states were considering more casinos. The bank concluded:

In general, whether a casino will benefit or harm a local economy hinges on whether the casino is likely to attract tourists to the region … Casinos that cater to a local market generally do not bring outside money into the economy through the spending of their patrons. In fact, such casinos may have no net ancillary economic impacts. Residents patronizing such casinos may simply substitute gambling for other goods and services.

This is a huge point to consider. If everyone who spends money at a casino would have otherwise spent that money at a local restaurant or movie theater, then there’s no real economic benefit from the casino. It’s just moving entertainment spending – and jobs – from one place to another.

It’s the out-of-towners who make the difference.

So, to really get a sense of whether casinos can improve the Midwest economy, you have to consider not just how much money is being spent at the casinos, but where that money is coming from.

The answer, in many cases, is that the money is just coming from other Midwest cities.

When our own Dan Bobkoff looked into the plans for a new casino in Cleveland, he found that business leaders weren’t hoping to take tourists away from Las Vegas. They were hoping to keep their own residents from going to Detroit and Pittsburg.

And, as partner station WBEZ has reported, Chicago mayor Rahm Emanuel is very clear about why he wants a casino in the Windy City: to keep Chicagoans from spending their gambling dollars in Indiana.

“I can’t continue to afford Chicago to have gambling … in Hammond, Ind. and lose 20-25 million a month,” Emanuel said, according to WBEZ.

This helps explain why you hear mayors talk about casinos a lot more than governors. Thirty years ago, if people in Lansing wanted to gamble, they’d go to Las Vegas or Atlantic City. Now they can go to Detroit or Mt. Pleasant. Chicagoans can go to Indiana.

And it’s a lot more irritating for mayors to see that money going right next door, instead of all the way across the country. Casinos in more cities means more cities want casinos.

The mayors and city council members that are backing casino proposals in the Midwest aren’t really trying to build a tourist empire. They’re just sick of seeing money leave the city.

They’re trying to hold on to what they got.

It doesn’t make a difference if they make it or not.

They’ve got [their own residents] and that’s a lot [for economic development].

They’ll. Give. It. A. Shot.

OHHHHHHHH …


Groupon grows Chicago-based Groupon has acquired a new York company that specializes in gathering data about local consumers. The Chicago Tribune says it could be the “deal of the year.”

Long way to go in Toledo The Toledo area has seen 7,200 new jobs in manufacturing since June of 2009. That’s the second best improvement in the country (Lansing, Mich. is number one). But the Toledo Blade says there are still 36 percent fewer manufacturing jobs than there were in 1998.

Background check The Blade also has a Special Report out this morning. The newspaper hired investigators in China to look into two Chinese investors who’ve invested millions in Toledo. The paper finds that the two investors amassed their fortunes thanks to connections to the ruling Communist Party in China, and after years of service as government bureaucrats. (Our own Dan Bobkoff reported on Toledo’s China connection last summer).

Losing to the Big Easy Indianapolis was in the running for a GE corporate office with 300 high-paying jobs. But the company picked New Orleans instead.

Next in line The New York Times profiles the heir apparent to the CEO office at Ford.

Unpaid fees Detroit decides it’s time to collect.

Media moratorium The Chicago News Cooperative, a non-profit news agency that had been providing content to The New York Times, will suspend its operations on February 26th.


Three stories making news across the Midwest today:

1. Chicago budget vote tonight. Chicago Mayor Rahm Emanuel’s first city budget will be voted upon by the city council tonight. It is expected to be easily approved. The budget addresses a $635 million deficit through a series of layoffs, library and mental-health clinic cuts and fee increases. Our partner station WBEZ says the only question now is how the city’s 50 aldermen will vote, citing minimal opposition. “It could be six or it could be a unanimous vote,” Ald. Bob Fioretti tells the station. He said he worried Emanuel’s plan to nearly double fees for water and sewer service over four years will hasten an exodus of residents. But, “My yes or no vote isn’t going to mean anything,” he said. “I believe it’s already decided.”

2. Chrysler brings 1,100 jobs to Toledo. Chrysler announced today that it would invest $500 million at a Toledo assembly plant to build its next-generation Jeep SUV. The investment is expected to create more than 1,100 new jobs by 2013, according to the Detroit Free Press. The Toledo North plant will add a second shift. The plant, which opened in 1997, was the only Chrysler plant in North America operating only one shift, according to the newspaper.The investment comes as part of a $1.7 billion move centered around the Jeep SUV. Remaining funds will be invested at other Chrysler plants.

3. Cleveland biomedical companies eye China markets. There’s growing opportunity for Cleveland-area biomedical companies to meet China’s growing demand for advanced health care. The Chinese government has pledged $100 billion to upgrade its healthcare infrastructure, and “it would be insane not to take advantage of that immense growth,” Eddie Zai, founder of the Cleveland International Group, a business investment consulting firm, tells our partner station Ideastream. Zai’s new venture, the Cleveland Bio-Fund, is partnering with Newsummit Pharmaceuticals in Shanghai, to bring $100 million to U.S. medical device companies. The Plain Dealer endorses the developments, calling it, “an example of the kind of commerce that is the path to jobs and wealth.”


Adee Braun

Construction workers at a Detroit refinery. It's being converted to process more Oil Sands crude piped in from Canada

The future of the controversial Keystone XL pipeline won’t be decided until after next year’s Presidential election, the Obama administration announced Thursday. This is the $7 billion, 1,700 mile pipeline that would carry crude from the Canadian Oil Sands (also known as tar sands by its detractors) down to refineries in the US Gulf. TransCanada, the firm hoping to build the pipe, plotted a route through states like South Dakota, Nebraska and Oklahoma, on its way to Texas.

This has been one of those no-win decisions for the President, with critics of the pipeline arguing it will harm the environment and health of those along its path, and the energy industry touting the thousands of jobs that could be generated from the construction and operation of the pipeline. This week, the Obama administration delayed any decision until new routes can be devised—bypassing an environmentally at-risk region of Nebraska.

What does this have to do with the Upper Midwest? As I reported over the summer, pipelines carrying crude from the controversial oil sands come into the Great Lakes region as well. With the oil sands now financially viable, there’s been a frenzy to convert Midwest refineries to process this heavy, tar-like crude. It’s meant more jobs in cities like Toledo and Detroit, but also raised concerns about potential oil spills. Oil sands crude is thought to be more corrosive than conventional crude, and some think it contributed to the Marshall, MI pipeline spill in 2010. Click here to hear our reporting on costs and benefits for our region of this growing energy source.


Three stories making news across the Midwest today:

1. Water playing greater role in Midwest economy? Our partner station WBEZ continues look at the importance of Great Lakes water in the region’s economy. It reports today that the Great Recession dramatically slowed the population exodus from the region, and now, water shortages elsewhere in the U.S. could lead to a population resurgence in the Midwest. In cities across the West, long droughts have taken a toll. Water levels in Lake Mead are at their lowest levels since the lake’s inception in the 1960s. Midwest communities are capitalizing. A marketing campaign for the city of Erie, Pennsylvania notes, “One fifth of the world’s fresh water, potable, not saltwater, is right here in our back yard.”

2. Perils of outsourcing. Replacing government employees with private workers who make less money has become a popular move in recent years for politicians grappling with strained budgets. But such outsourcing comes with hidden costs, says The New York Times, which profiled Michigan’s efforts to deal with that issue today. The state wants to lay off 170 nursing assistants at a veterans’ hospital in Grand Rapids and replace them with workers who make $10 per hour. A legal dispute is under way, and The Times reports that it highlights the pitfalls of such decisions and that taxpayers “end up paying for the cuts in more indirect ways.”

3. Toledo casino will compete with Detroit. In April, the Hollywood Casino will open in Toledo, Ohio, just north of downtown on the Maumee River. It means jobs and a larger tax base for the city. In Detroit, it means competition. The Detroit Free Press reports that Detroit casino operators will not disclose how many of their customers come from northeast Ohio, but they have taken notice of Toledo’s plans. A Lansing-based casino analyst tells the newspaper that gamblers from Ohio and Ontario comprise 20 to 30 percent of the Detroit client base. And the Toledo casino will not only try to draw from its home base, it’s operators are seeking to lure clients from southeast Michigan.


Three stories making news across the Midwest today:

1. Report: Indiana sets sights on luring CME headquarters. Indiana is aiming to land another Illinois company with a tax-incentive package. This time, a big one. Crain’s Chicago Business reports today that Indiana has offered CME Group Inc. $150 million per year to move its headquarters to the Hoosier State. CME CEO Terry Duffy did not comment on the report, but earlier this week, said he expects the headquarters issue “to be resolved by year end.” Indiana’s top economic development official, Dan Hasler, neither confirmed nor denied the report when reached.

2. Kasich begins official SB5 defense. On Thursday night, Ohio Gov. John Kasich made his first official campaign appearance to support Issue 2, a state ballot measure that could repeal Senate Bill 5, a controversial law that limits collective-bargaining rights of public employees. Appearing in Toledo with Mayor Mike Bell, Kasich outlined his defense of SB5 – that it helps local governments control spiraling costs. “I believe in unions, I believe they have a place,” Kasich told The Columbus Dispatch. “I am not out, in any way shape or form, to go after and target anybody.”

3. Michigan airport authority announces cuts. The Wayne County Airport Authority said Thursday it would cut costs and raise fees as part of a plan to reduce its expenses by $20 million over the next 12 to 15 months. The Authority, which runs operations at Detroit Metro and Willow Run airports, approved a budget of $292 million for fiscal 2012 that includes wage and benefit changes for employees. Airport World reports at least 100 employees will lose their jobs. “It’s imperative that we re-engineer Detroit Metro and Willow Run Airports so that they become the most competitive in North America,” said Turkia Awada Mullin, the WCAA’s new chief executive officer, who has drawn attention this week for taking a $200,000 buyout from her previous job as Wayne County’s chief development officer to accept the head position at the airport authority.


Dan Bobkoff

Downtown Toledo

CLEVELAND — Should other Midwest cities be looking to the Chinese to revitalize vacant property? It’s working out pretty well so far in Toledo, as I report this week. That city has been really aggressive in courting investment from China, and they’ve created some strong relationships there that seem to be bearing fruit.

Not every deal goes so well, though. Just ask the Cleveland Cavaliers. In 2009, the team announced it was selling a 15% stake to a Chinese investor. A year later, it fell apart.

I asked Tom Waltermire how much time his team spends trying to get Chinese business interested in the Greater Cleveland market. He heads Team NEO, this region’s business attraction and marketing organization. He wasn’t dismissive Chinese investment, but it’s clearly not a priority. This part of Ohio has a long track record or trade with Europe. (Especially The Netherlands, as you’ll hear in the second audio file here.) Team NEO got funding last year to try and get more foreign investment, but Waltermire says Europe is the better bet for getting a return on that investment.

Waltermire says the emphasis should be on creating jobs, not just having the Chinese own land. The Chinese investors in Toledo say they intend to develop the Marina District, but it’s unclear how many local jobs will be created. Obviously, it will generate construction work, but lasting employment?

While Team NEO is focusing on Europe, it’s not ignoring China, and…Canada: another country with a long track record of investment in the Midwest. (Hey, it’s an easy commute.) And, while he’s not flying to China often like his counterparts in Toledo, Waltermire says the Cleveland area has seen its fair share of Chinese delegations in the past year.

Do you think more Midwest cities should be putting time and effort into getting investment in China? Let us know in comments.

 


TOLEDO, OH –Toledo Mayor Michael Bell is serious about Chinese investment in his city. When he gives you his business card, one side is in Chinese. His office is adorned with Chinese screens and other gifts from his travels there.

Mayor Michael Bell's office is adorned with Chinese gifts like this screen.

“America is always waiting for people to come to them,” says Mayor Bell. “Well, we’re on the other side now and we have to be able to reach out and market ourselves.”

A year and a half in office, the independent Mayor’s efforts are paying off. His first trip to China was in September. Five months later, he sold a struggling city-owned restaurant complex to two Chinese investors for more than $2 million. Bell and economic development folks in Toledo say these deals are all about relationships. They’ve worked hard to make those connections and pitch the Chinese on the many opportunities in this unfamiliar city.

These first Chinese investors were so enamored with Toledo and its available real estate that they decided to make a bigger deal.

Along Toledo’s waterfront is an area called the Marina District. Right now, it’s just weeds and a road to nowhere.

Marina District: Not much to see here yet..

“We’ve got undeveloped land that’s been about ten years right now in the making,” says Dean Monske, who heads an economic development group called the Regional Growth Partnership. Right now, it’s more than a hundred acres of prime real estate. It has a skyline view, easy access to the Maumee River, but nothing there.

The city spent millions cleaning up the site to get it ready for someone to develop, and had plenty of false starts. Monske says there were about eight ceremonial groundbreakings over the years, but local investors just couldn’t get the financing together to build something.

China, though, is full of the newly rich looking for places to put their cash. Land in China can be expensive, and the state can take it away whenever it wants. So, smart investors want a piece of stable countries with a lot of land: Australia, Canada, and increasingly the US.

Dean Monske stands in Toledo's Marina District.

“When they actually come here and see it for themselves and say ‘you’ve got to be kidding me, there’s empty land right across from your main downtown right on the water,’ that’s simply unheard of,” Monske says.

Toledo’s city council recently approved the sale of the Marina District to the Chinese investors. They paid $3.8 million in cash—more than the appraised value. For a mayor like Mike Bell, this is the dream deal: no abatements, no loans or tax breaks. The Chinese, he says, just wanted the city to accept the cash and get out of the way.

The Mayor says the Chinese plan to build housing and shops on the site. It’s supposed to be a kind of international village, and they want to attract more foreigners to the apartments. He estimates the total investment could be more than $200 million. That would make it among the largest Chinese real estate investments in the country if it goes as planned, but that’s a big if.

“If you have a lot of expectations about what’s going to happen next, that’s where you have to be careful, says Derek Scissors, an Asian scholar at the Heritage Foundation in Washington. He thinks the Toledo plan looks like a good deal with savory investors. The city was also smart enough to give itself the option to buy the land back for the same price if nothing happens there in five years. But Scissors warns that the Chinese are new to American real estate.

“We haven’t seen any sign that the Chinese know anything about property development in the US. What they’ve done is bought assets that they want in their portfolios. When this idea that they’re going to come in and they could be a big factor in the Great Lakes region, the money could be there, but if they’re involved in the decisions, there’s no sign they know what they’re doing,” Scissors says.

Scissors estimates that Chinese businesses will invest $6 billion in the US this year. That’s tiny compared to how much China owns in US bonds. Real estate is an even smaller part of that, but it’s grown from just about nothing less than a decade ago.

Scissors thinks there are real opportunities here for Midwest cities looking for investment, as long as they do their due diligence on the investors.

Critics like Ohio Democratic Congresswoman Marcy Kaptur raised concerns about potential communist money being involved in deals like this. She’s been a big supporter of labor and some unions worried they wouldn’t get much work from a foreign investment. Add Julie Slota in a Toledo suburb to those wishing it were local money.

“I think it should be the local investors and keep the Chinese out of it,” she said.

Nearly everyone you talk to near the Marina District, though, expressed relief that someone has finally taken over this land. Stan Sagan owns a shop across the street selling board games.

Stan Sagan

“ We’ve had so many hopes as far as having a development anchor for this part of the downtown Toledo that I think it’s a relief that something is going to happen, and everyone is just crossing their fingers,” he said.

The Mayor and the economic development companies are hoping these first Chinese deals are just the beginning. Northwest Ohio’s Regional Growth Partnership has opened two offices in China. Officials hint there could be more deals announced in the coming months: maybe a Chinese company opening a factory or headquarters. If any of that happens, it could be a role reversal of globalization: a Midwestern city gaining jobs and money from China.


Five must-read stories on the Midwest economy

1) GM Tech Center Investment: General Motors said today it is investing $130 million in its technical center in Warren, Mich., and expects to add 25 jobs.

GM joined Ford and Chrysler with a good first quarter in 2011. Photo by Chris via Flickr.

The automaker will build an enterprise data center, and remodel an administrative building on the tech center campus. The move comes after the Warren City Council approved tax credits. GM also is getting a credit from the state of Michigan.

 

2) Union Law Before WI High Court: The Wisconsin Supreme Court is hearing an appeal today of a decision by a lower court to void a controversial new state law. The law stripped most unionized state employees of their collective bargaining rights. The lower court said Republicans in the state legislature didn’t obey open meeting requirements. Both union supporters and lawmakers want a quick decision so they can plot their next moves.

3) Wilkommen, Bienvenue, Welcome: With summer in full swing, foreign tourists are showing up in Chicago and across the region. Cities are happy to have them visit, but they say the U.S. is losing out to countries that make tourist entry easier. Our partner station WBEZ looked at how foreign tourists could help boost the local economy.

4) Another Big Win For Indianapolis: Indianapolis has had its share of major sports events through the years, including the annual Indy 500 and the NCAA basketball playoffs. Now, Indianapolis will get to hold the Big Ten championship football game through 2015, beating out a bid by Chicago. Indianapolis already was tapped to hold the first championship game this year, on Dec. 3. Cities vie for these games because of hotel, restaurant and concessions revenue, as well as international exposure.

5) Casino Closer in Toledo Towns all over Ohio are going ahead with plans to build casinos. In Toledo, construction is about half finished, and developers say they’re on track to open in the second quarter of 2012. If it meets the deadline, it would be the first of the new crop to launch.