Is Cedar Rapids a casino cannibal?

Many factors will impact whether state supports Linn County gaming plans

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March 28, 2014 | 11:35 am

Rusty Rogerson hasn’t camped in the parking lot at the Riverside Casino and Golf Resort to count the vehicles with Linn County license plates.

Someone in Riverside might, though, if it comes to that.

Rogerson, the administrator for the city of Riverside, says all eyes at Riverside City Hall in this 993-person town — 15 minutes south of Iowa City and 35 miles south of Cedar Rapids — are focused on the proposal to build and operate a casino in the Cedar Rapids metro area.

"Of course we all are watching. It would have a dramatic impact on us," Rogerson says.

The Riverside casino, which has been open since August 2006, has been "very generous" to area non-profit groups and to the city of Riverside, Rogerson said.

Of the city’s $2.5-million annual budget, $1.7 million of it comes from the casino in the form of revenue from gaming taxes, hotel-motel taxes and the local-option sales tax, Rogerson said. He says he, a retired Iowa prison warden, was hired as an administrator for the city last summer to help keep track of the money.

The city’s property-tax levy of $5.10 per $1,000 of valuation — Cedar Rapids’ is $15.22 — is three dollars lower than it had been before the casino. In June, the city of Riverside will be debt-free, he adds.

This is but a glimpse of what casino operators and communities with casinos in Eastern Iowa think is at stake should Linn County voters on March 5 agree to allow casino gaming in the county.

A win at the polls will send a Cedar Rapids casino investment group — led by businessmen Steve Gray and Drew Skogman along with Cedar Rapids leaders — on to Des Moines to try to convince the Iowa Racing & Gaming Commission that it should grant a new casino license in Linn County. Eighteen other casinos operate in 14 Iowa counties.

Dan Kehl, CEO of the Riverside Casino and Golf Resort, has said in blunt fashion that a Cedar Rapids casino would "devastate" the Riverside operation.

Such sentiment is now apparent in Cedar Rapids and Linn County, where a spending battle between pro- and anti-casino campaigns is pounding away in the run up to Linn County vote on March 5.

The Just Say No Casino campaign publicly acknowledged last week that, in fact, it is being funded largely by the owners of existing casinos in Iowa. In no small way, it turns out.

Casinos in Iowa have to inform the Racing & Gaming Commission on spending of $100,000 or more, and on Friday, the commission released the Riverside casino’s request to the commission to spend up to $1.5 million on the Just Say No Casino campaign.

The Riverside casino’s “bankrolling” of the Just Say No Casino effort, says Gray, is upping what he and his investor group now must spend on the Vote Yes Linn County.

“It’s the ultimate hypocrisy,” adds Skogman, for Cedar Rapids residents of the Just Say No Casino campaign to take money from the Riverside casino while criticizing the Cedar Rapids casino investors. “I’m hopeful that Linn County voters won’t let outside interests dictate our future.”

Don Hoth, who was the citizen force behind bringing a casino to Waterloo in 2007 and who remains a member of the non-profit Black Hawk County Gaming Association there, says the association is, like Rogerson in Riverside, concerned about the loss of revenue should a Cedar Rapids casino become a reality.

The Waterloo casino, on the city’s southeast edge along Interstate 380, is an easy drive from Cedar Rapids, he said.

"Cedar Rapids and Linn County defeated the casino clearly in 2003, and now here we are again," Hoth says.

Waterloo Mayor Buck Clark is equally watchful: "It’s common sense to me. If another casino is that close to Waterloo, it would have a negative impact on traffic at our casino."

It matters, he says, because the revenue coming from the casino has improved the community in a way that couldn’t have come about, or certainly not as quickly.

In truth, the Waterloo casino and a Riverside casino might not exist today if Linn County voters had approved casino gambling in 2003 and a casino had been built in Cedar Rapids. The successful casino projects emerged in both Waterloo and Riverside later.

By 2010, the Iowa Racing & Gaming Commission had conducted two independent studies, issued a new license for a casino in Lyon County in far northwest Iowa and concluded it did not want to consider any new casino licenses for three to five years.

It’s now been about three years.

Jeff Lamberti, an Ankeny attorney and chairman of the state commission, noted that the five-member commission has had substantial turnover since 2010, adding that even back then the commission did not put a moratorium in place to block new casino licenses.

The Des Moines metro area, too, is now talking about a new casino, he says, and he says he also has gotten calls from Fort Dodge.

"We’ve kind of sat back and said, ‘If we get something that’s ripe, we’ll do what commissions have done in the past — we’ll study it, we’ll do those kind of things," Lamberti said. "But I don’t think there’s necessarily a strong position one way or the other at this point to, ‘No, we’re never going to do it,’ or ‘Yes, we want to grow additional casinos in Iowa.’ "

Yes, Lamberti said, he expects the commission will hear from existing casino operators and communities with casinos, and he says that one of the criteria that the commission must consider in granting a new license is the harm it might do to existing casinos.

The commission doesn’t expect its existing casinos not to profit, he said.

Greg Seyfer, an attorney at Bradley & Riley in Cedar Rapids and eight-year member of the state commission, said he understands that casino investors in Cedar Rapids have conducted their own market studies, but he recommends that the commission hire two firms to conduct separate studies like it did in 2009.

At Seyfer’s request, one of the two studies completed for the commission in 2009 came with a brief analysis of the market for a Cedar Rapids casino.

In short, the report, from GVA Marquette Advisors, found that Cedar Rapids is "a key feeder market" for several casinos — those in Riverside, Waterloo, the Meskwaki Indian Settlement, Dubuque and Clinton — and that a new casino in Cedar Rapids was "likely to create strong cannibalization from existing casinos."

Time passes and the marketplace changes, says Seyfer, who will leave the commission on April 30, and he notes that Iowa’s casino industry is now starting to see an uptick in business following the national economic downturn of a few years ago.

Cedar Rapids casino investors Gray and Skogman say their consultants found that a Cedar Rapids casino would bring in $80 million in adjusted gross receipts a year, but would take away only $18 million in business from existing casinos, with half of the amount coming from the non-state-licensed Indian casino in Tama County.

Casino cannibalization, says Seyfer, is one of 17 different criteria that the commission must consider as it weighs whether or not to grant a new gaming license.

In 2010, he notes, the commission denied a license for a Fort Dodge casino because of the impact it would have on the Emmetsburg casino.

"It’s kind of a gut call," Seyfer says. "And we felt that Fort Dodge would have been the end of Emmetsburg."

In regard to cannibalization, Seyfer suggests that the location of the proposed Cedar Rapids casino will be a factor in whether it will hurt neighboring casinos.

He says, too, that the size of community support for a project is another of the criteria considered by the state commission. A large victory for the casino proposal on March 5 would matter more to the commission than a tiny victory, he says. The matter dies with a loss.

No matter what, the Iowa Racing & Gaming Commission is likely to have to sort out a new request for a casino license in the Des Moines metro area where the county-owned Prairie Meadows Casino and Racetrack is operating on the metro area’s eastern edge. Casino proposals have been floated in Ankeny and Urbandale in recent months, and most recently, on the metro area’s southern reach into Warren County.

Tom Hockensmith, chairman of the Polk County Board of Supervisors, says he’s ready to tell the Iowa Racing & Gaming Commission that another casino in the Des Moines metro area doesn’t make sense, particularly a privately owned one that would take business away from the publicly owned Prairie Meadows operation. Another casino would cripple the casino south of Des Moines in Osceola, too, he says.

Jason White, executive director of the Warren County Economic Development Corp., says his board members and other leaders in Warren County aren’t afraid of any Prairie Meadows opposition.

"We have a right to succeed as well," White says. "And so the stronger we are, the stronger the entire metro is. So we’re part of this, too. It’s not just Polk County.’

Warren County would have to approve a referendum on casino gaming much like Linn County must do, White says. Warren County, like Linn, also defeated a casino measure in the last decade, he adds.

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