The president of an economic development group in Sioux Falls, South Dakota says it’s clear a new casino just across the border in Lyon County, Iowa would prompt South Dakotans to consider countering with a casino of their own.

Earlier this month the Iowa Racing and Gaming Commission said it would accept applications for new casinos and a Lyon County group plans to ask for an operating license. Slater Barr of the Sioux Falls Development Foundation says his community would be "galvanized" by a Lyon County casino.

"The proposed Lyon County casino…is very good for the state of Iowa," Barr says. "The problem is for South Dakota that it transfers wealth just directly across the state line."

A study commissioned by a South Dakota tribe that runs a casino suggests South Dakotans will spend $55 million a year at a casino near Larchwood, Iowa. In addition, the study suggests the state of South Dakota would lose $18 million a year in revenue from its video lottery.

"And I think the Iowa Gaming Commission studies very clearly (say) that the market is Sioux Falls, so essentially the implication is that if Sioux Falls is the market and is the majority of the revenues for the Iowa casino, then essentially you’re transferring those taxing dollars from our own video lottery machines over to the state of Iowa," Barr says. "So that’s a concern to us from an economic standpoint."

According to Barr, South Dakota and his city of Sioux Falls have few options if a casino is built in Larchwood.

"We have no control over what Iowa does. We have no control over what Lyon County does or what they permit. All we have control over is what we do," he says, "so I think our options are more limited to allowing a countering facility or just saying, you know, ‘We’ll make the best of it.’"

A 2004 study found residents in the Sioux Falls area spend more at casinos in Iowa and Minnesota than they spend in two nearby South Dakota casinos. The tribe the operates a casino about 40 miles north of Sioux Falls is embroiled in a legal dispute with the state over adding more slot machines on its gaming floor.