Investor group wants to bring casino to Cedar Rapids

But proposal could be an uphill climb

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April 1, 2014 | 1:30 am

Businessman and local investor Steve Gray is leading a group of mostly Cedar Rapids investors who want to build a gambling casino here at a cost of $80 million to $100 million and open it in 2016.

"This is a must-do for Cedar Rapids," says Gray, 54, who is board chairman at ImOn Communications and three other Cedar Rapids firms.

Back in June, it was Gray and his investor group who financed a lengthy, anonymous phone survey that contacted more than 600 Linn County residents to test local attitudes about casino gaming and to ask if they would support a casino in the Cedar Rapids metro area.

Sufficiently promising were those survey results and even more recent ones, Gray said this week, that the group now is beginning the steep uphill climb required in Iowa, home to 18 state-licensed gaming casinos, to turn the idea of a nineteenth casino into reality.

Gray said the casino that his group envisions will be an "urban destination" with restaurants and spaces for meetings and events like weddings, and he emphasized ó in preparation for objections from existing casino operators ó that a Cedar Rapids casino will be distinctly different, in particular, from the Riverside Casino and Golf Resort, which opened out in the country with a golf course south of Iowa City in 2006.

Related: Casino History: Former Gazette articles

Dan Kehl, CEO at the Riverside casino, made it clear when asked in June about the prospect of a Cedar Rapids casino: "It would devastate the Riverside casino. (Cedar Rapids) is a major market for us," he said then.

Asked why a Cedar Rapids area casino, and Gray this week quickly listed four reasons. He said a casino in Cedar Rapids:

  • Will create 360 quality jobs along with 130 short-term construction ones.
  • in the first 10 years, it will generate more than $200 million in tax revenue for the state, city and county and in contributions required to be made to the local non-profit entity, which in Iowa, holds the local gaming license.
  • Will keep gaming money spent by Linn County residents at casinos elsewhere in Iowa and out of state in Linn County.
  • Will give businesses, employees and visitors a new reason to come to Cedar Rapids.

"I think this will be a great, casual, relaxing, lively entertainment destination that will help us recruit and keep people here," Gray said. "Ö And if we create the right product, Ö I think it could make Cedar Rapids a lot more fun."

State and local programs are in place to help problem gamblers, he added, and he said a new casino in a commercial area will drive more development around it, not hurt the area.

Gray and his investor group, which calls itself Cedar Rapids Development Group LLC and which includes Drew Skogman, vice president of Skogman Homes, have been working behind the scenes for months. By the close of the workday on Wednesday, Gray will have met and introduced himself and his groupís plan to the five commissioners of the Iowa Racing and Gaming Commission, which ultimately must approve any new state license for a casino.

Next week, Gray said he expects to appear in front of the Cedar Rapids City Council and the Linn County Board of Supervisors, where he will be seeking a memorandum of understanding from each that is designed to get backing for the project. More specifically, Gray wants the understandings to help protect as much as possible his groupís interests so they donít do all the preparatory work to secure a gaming license only to have someone else surface to compete against them for it.

To date, Gray said he and his investor group have spent "several hundred thousand dollars" to conduct phone surveys and market feasibility and to hire Doug Gross, a Des Moines attorney, former chief of staff of Gov. Terry Branstad and a former candidate for governor, as its legal counsel and project strategist.

The next three steps in pursuit of a casino only get more difficult.

  • Step one: The Gray-led group will need to collect some 12,000 or more signatures on petitions ó state law requires a number at least equal to 10 percent of the Linn County people who will vote in the November presidential election ó which will prompt the Linn County Board of Supervisors to call a referendum on the gambling issue. Gray said the petition drive will start quickly, will include volunteers and a professional firm and will take several months to complete.
  • Step two: Linn County voters must approve casino gambling in the county in a referendum vote, which Gray said most likely will be held on either May 7 or Aug. 6, 2013. Linn County voters defeated a casino measure in November 2003 by a margin of 53 percent to 47 percent.
  • Step three: Grayís group then must convince the five-member Iowa Racing and Gaming Commission to grant a state license for a casino in Linn County.

In May 2010 after a statewide analysis of the existing casino gaming in Iowa, the commission granted the stateís most recent casino license to the Grand Falls Casino Resort at Larchwood in far northwest Iowa, which opened in June 2011.

"All the five commissioners at that stage were asked to make a statement on where they saw things going in the future," Greg Seyfer, a Cedar Rapids attorney and vice chairman of the state commission, said on Wednesday. "And the consensus was that really we shouldnít be looking at any new licenses for three to five years. So that May 2010 obviously puts us into 2013. (And) these guys (Gray and his group) are kind of on the front edge of what the thought process was in 2010."

Uphill climb

Step 1: Have spent "several hundred thousand dollars" on a market feasibility study, phone surveys and consultants, and have hired Doug Gross, a Des Moines attorney, former chief of staff for Gov. Terry Branstad and former gubernatorial candidate, as legal counsel and strategist.
Step 2: Will begin a petition drive soon to collect some 12,000 signatures to prompt a Linn County referendum on casino gambling. State law requires a number of signatures at least equal to 10 percent of those who vote in the November presidential election. In 2008, 113,721 voted in Linn County.
Step 3: Must win approval by voters in Linn County. A referendum on the casino issue is slated for either May 7 or Aug. 6, 2013. Linn County voters turned down casino gaming in November 2003 by a margin of 53-47 percent.
Step 4: If the vote is successful, will ask the five-member Iowa Racing & Gaming Commission to grant a license for a casino in Linn County, a process that could take a year. In May 2010, commission members said they should wait three to five years before looking at granting a casino license at a new Iowa location.
Step 5: If a license is granted, construction could start in mid-2014 and take 18 to 24 months, with opening by mid-2016.

Seyfer said the stateís administrative code spells out more than a dozen criteria that the commission must consider before granting a gaming license, criteria that include the local and statewide impact of a casino and the impact a new venue will have on existing state-licensed casinos.

He noted, for instance, that the commission decided not to grant a license to a Fort Dodge group because it would have harmed the operation of the Wild Rose Casino and Resorts in Emmetsburg, which opened in 2006.

The composition of the state commission will change by the time any Cedar Rapids proposal reaches it, and Seyfer noted that his term ends in April and he doesnít expect that he will reapply to be a member.

In any event, casino developer Gray said he is armed with answers on how he intends to persuade both Linn County voters and the state commission to get behind a casino in the Cedar Rapids area.

For the Linn County voters, Gray said he, too, did not like the 2003 plan to open a casino in Cedar Rapids. He noted that Iowa law back then required casinos to be on riverboats that could leave the dock, and he didnít think a riverboat on the Cedar River at the former Sinclair meatpacking site south of downtown made sense.

"I was not struck by a smoky, small boat that was primarily oriented toward gaming," Gray said. "I see what weíre talking about as being dramatically different."

He said his groupís casino will be 110,000 to 120,000 square feet in size with restaurants and meeting spaces and other amenities as a part of it. Twenty-five to 30 percent of those who go to todayís casinos donít gamble, he said.

"I see this being a really nice venue that people will be proud of and can enjoy doing things other than just gaming," he said.

As for the Racing and Gaming Commission, Gray said his group has hired a top national gaming analysis firm that he said has concluded that a Linn County casino will be profitable and will have some impact on other state-licensed casinos, but will not "devastate" any of them.

Gray added that his group will not be in front of the commission until later in 2013 at the soonest, and he noted that the most recent market analysis conducted by the commission itself will be four or five years old by then.

He also said the commission in the last couple of years did not close the door to the opening of another casino in the Des Moines metro area, which has one casino with another casino south of Des Moines in Osceola. The number of casinos for that population area is no different from having a casino in Cedar Rapids between casinos in Riverside and Waterloo, Gray argued.

"So the Steve Gray math in all this says, if the Des Moines logic was true then, the same logic should apply to Cedar Rapids," he said.

In its May 2009 gaming market analysis report to the Iowa Racing and Gaming Commission, GVA Marquette Advisors, with offices in Minneapolis, Seattle and Las Vegas, Nev., noted three points about a Cedar Rapids casino:

  • It would have "limited potential to capture revenues from out-of-state residents."
  • Cedar Rapids is a "key feeder market" for casinos in Riverside, Waterloo, Dubuque, Clinton and the Quad Cities as well as the casino on the Meskwaki settlement west of Tama.
  • A new casino in Cedar Rapids likely would create "strong cannibalization" from existing casinos.

Gray said his investor groupís phone surveys and market feasibility research has convinced them to all but rule out two possible Cedar Rapids locations for a new casino ó the Westdale Mall area and a commercial area near Blairs Ferry Road NE and Edgewood Road NE.

He said, too, that his investor group is not about to buy up 100 acres south of Cedar Rapids ó putting it closer to the six-year-old casino in Riverside ó for a casino and golf course.

The site options remain open, he said, but he said the "greater downtown" Cedar Rapids area is one possible spot. He said that area he has in mind is bordered by Third Street on the west side of the river and 10th Street on the east side and Interstate 380 and the former Sinclair site in New Bohemia. Another casino site could be along Interstate 380 north of Hiawatha, he said.

In the next 60 to 90 days, Gray said he expected other local investors to join the existing group of investors, and then he anticipated a series of public meetings and meetings with investors and elected officials before any final decision is made on the casino site.

"We genuinely want to have a very broad dialogue to pick the optimal location," he said. The site, he added, needs to be easily accessible for visitors and local residents.

Gray said financing for the construction of a new casino will start with the local investor group. He said he expects Linn County residents also to be able to buy shares in the casino, in a plan he compared to one in place for the Green Bay Packers football team. Institutional investors will be asked to invest if they are needed, Gray said.

Experienced casino operators would be hired to run the facility, he added.

He said Cedar Rapids City Council member Justin Shields, Linn County Supervisor Brent Oleson, Linda Seger, a Cedar Rapids neighborhood leader, and Keith Rippy, executive director of the Area Ambulance Service, are among those who will sit on the non-profit organization that would hold a Cedar Rapids area casino license.

Gray said Shields, who has called on the Cedar Rapids community in recent years to take a new look at having a casino, and council member Monica Vernon first talked to him about the casino idea in March 2011.

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