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Developer's gamble on Block E casino dangles prospect of big returns for state, regional economy

Exterior design of a proposed casino on Block E.
Gensler
Exterior design of a proposed casino on Block E.

Another gambling proposal — one seeking a downtown Minneapolis casino — could formally drop at the state Capitol as early as Thursday, and it has at least partial — if tentative — approval from Gov. Mark Dayton.

In addition to bills that would allow slot machines at Minnesota's horseracing tracks and electronic gaming in bars across the state, veteran Sen. Doug Magnus and freshman Rep. John Kriesel today formally announced a proposal that would authorize construction of a casino at the ailing Block E complex.

The ambitious casino project is planned by Minnesota-based Alatus LLC, which purchased the troubled property in July for $14 million, plus debt payments. Block E, which in recent months has shed such tenants as GameWorks and Hooters, was developed in 2002 for $132 million.

Big numbers in play
According to the development company, its proposal, which would include more than $200 million in private investment, could lead to nearly 4,000 jobs, $250 million in biennial state income and 4 million additional downtown visitors a year.

The group also agreed to a one-time $50 million payment to the state if the proposal becomes law.

"The beauty of it," Kriesel said: "It does not cost taxpayers a dime."

When Bob Lux and his partner Phillip Jaffe at Alatus bought Block E, they "did not have a clear vision of what to do with it," Lux said.

In recent months, they quietly met with stakeholders in Minneapolis and traveled to check out casino complexes in other cities.

Today's plan would dramatically update the 213,000-square-foot Block E building to include new gaming, retail and restaurant opportunities, as well as a 60,000-square-foot rooftop terrace.

They've dubbed it "Minnesota Live," after a similar establishment in Los Angeles. The plan calls for it to fully open in 2013.

At first glance, the most striking transformation proposed to the Block E building is the entrance, which would feature a giant glass atrium. Tom Hoskens of Cuningham Group Architecture, which helped design the casino plan, called renderings of the entrance the "money shot."

That was certainly Fine Line Music Cafe owner and Minneapolis Downtown Council member Dario Anselmo's takeaway from the unveiling event. "Block E was a very inward-looking box," Anselmo said. "It would have been a great Circuit City."

Anselmo and other business owners have lined up behind the measure. They say it will serve to "energize" downtown Minneapolis as a tourist hub and also benefit area-businesses with increased traffic and economic activity.

"You could only do so much gambling," Anselmo said. "It actually looks like something we could play off of a little bit."

Groups like the Downtown Council and the city Chamber of Commerce, as well as City Council President Barbara Johnson, are also supportive, saying the proposal would help revitalize Minneapolis and the entire state.

It's important to diversify entertainment options in Minneapolis if it's going to become a regional hub that attracts tourists from throughout the Midwest, they said.

"You're not only thinking about what is good for your community, you're thinking about what's good for the state, you're thinking about what's good for Minneapolis," Downtown Council President and CEO Sam Grabarski told Magnus and Kriesel, the two lawmakers who are carrying the legislation. "That, I think, is enlightened leadership."

Neither Magnus, of Slayton, nor Kriesel, of Cottage Grove, represent Minneapolis.

Interior design of proposed Block E casino
Gensler
Interior design of proposed Block E casino

Mixed bag ahead
Despite the joyful unveiling, the proposal faces several huge hurdles, including limited time, other legislative priorities and stiff opposition at the local and state level and from Indian tribes, which operate all the current casinos in the state.

The Republican majority caucuses remain divided on increased gambling. Magnus said the GOP Senate caucus doesn't have a formal position on the Block E casino legislation.

Adding to its troubles, state and national American Indian groups — including the Minnesota Indian Gaming Association — have sharply criticized any attempt to weaken their hold on casino-style games. Neither the state group nor the National Indian Gaming Association returned calls for comment.

The Block E casino also lacks the support of Minneapolis Mayor R.T. Rybak.

Johnson, City Council president, said she doesn't know other council member's views on the proposal.
"I really can't [say] at this point because the development has been pretty under wraps, and so there hasn't been a lot of talk at the council," Johnson said. "I'm sure the developer right now is going to spend his time at the Capitol, but they'll be meeting with us, too, I suppose."

At a minimum, building a casino there would require legislative approval, the go-ahead from the Minnesota State Lottery Board and Minneapolis land-use permits and liquor licenses.

Dayton, who has remained lukewarm in his support of racino legislation and hostile toward expanded gaming in bars, seemed to take the Block E proposal a little better.

But the governor, who campaigned on adding a casino at the Mall of America, said lawmakers would have to do more to capture his signature.

"The only way I would support these if I do would be if the state is going to get a fair and sizeable portion of the proceeds," Dayton told reporters, according to the Star Tribune. "We certainly ought to get at least half [of the casino's revenues]."

Magnus said he wasn't opposed to working together with racino supporters, but said the issue didn't have the same backing from leadership that his plan does.

"I would view this as not mutually exclusive. I think right now with two and a half weeks left in session that everything's in play," Magnus said. "I personally would not exclude racino. I think we could sit down and talk to the racino folks and see what happens."

But with such little time left in the session, it's easy to imagine that lawmakers don't have time to focus on a Block E casino.

That didn't trouble Magnus too much.

"You never know," Magnus said. "Everything's in play here at the end of the year. I know it's a short time frame, but it's the time frame we have."

What to do with the money?
There's no shortage of ways to spend the state's estimated $250 million share during the state's budget cycle.

Magnus said using the proceeds to fund a Vikings stadium "might be in play" but suggested that the money should go to increased funding for infrastructure improvements, such as the $400 million road rehabilitation proposal Dayton unveiled Tuesday.

The assistant Senate majority leader also seemed resistant to using revenue from a Block E casino to prop up Minnesota's general fund, which is currently $5 billion in the hole.

In the past, Dayton has called for using gambling revenue for education funding, among other things.

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Comments (9)

Just for a reference, Grand Casinos Hinckley and Grand Mille Lacs together employ about 3000 people. So this is contemplating a casino about 1/3 bigger than their combined operations.

The number and variety of gambling proposals at the capitol makes my head spin. Do lawmakers really want to make us into the Las Vegas of the north? Do people really want to hear the "ding, ding, ding" of slot machines in every restaurant and bar? Expanding gambling in MN will not solve our budget problems. But it will destroy the state that we love.

Indian gaming is the "finger in the dike" against a flood of gambling in every corner of the state. If we care about the future of our state we should support Indian gaming and oppose all forms of gambling expansion.

This would certainly spur the pawn shop economy in downtown Minneapolis and possibly a new reality TV show focusing on one of them.

Kinda funny how Mayor Rybak operates. I'm not a casino person. But anybody can see this thing being big for downtown. Kind of like a slimmed down version of Target Field. But 365. RT still disagrees with bringing Target Field to downtown. What makes him tick?

I like what Rita has to say in comment #2. With one addition, I am sold. The tribes negotiate with the Gov and legislature with intent to turn over to the state an X % of revenue. Agreement also includes a 'no expansion of state gambling anywhere or anykind clause'. Agreement good for 5 years. See you in 5.

Gambling consists of nothing more than glitzy confidence games. It only serves to further concentrate wealth in the hands of a few businessmen, regardless of how much the state gleans from its profits. It creates no good, economic or otherwise. I just pray that the fiscal hysteria gripping St. Paul doesn't turn Block E into an even larger black hole than it is already with this proposal.

Now if they can reach an agreement with the tribes to operate the casinos to keep gambling operation in the hands of governments this wouldn't be that bad. It also could return more revenue for the state if operated as that kind of partnership. The fact that all current gaming is in the hands of governments or non profits is important to me. These organizations give everything but operating expenses back to the community, a private owner does not.

How is Minneapolis supposed to pay for added police presence for 4 million tourists? What about added wear on streets downtown? It seems as though the state and out-state legislators keep pushing to turn Minneapolis into the state's venue, while continuing to cut the LGA funding that makes it a nice place to live. How will a casino help with defeating poverty and filling potholes?

These are very nice interior designs for the new casino. Creating an interesting look for each area of a casino is very important. A welcoming and well-designed venue will keep current customers coming, as well as acquire new and potential customers. Thanks for the post.