Cedar Crossing's impact on other casinos is key Gaming Commission focus

Commission will make decision at April 17 meeting in Council Bluffs

Rick Smith
Published: January 9 2014 | 4:30 pm - Updated: 29 March 2014 | 1:53 am in
Print Print

Lead casino investor Steve Gray said a casino would help make Cedar Rapids the "Comeback City." A Cedar Rapids casino could have a community benefit greater than any of 18 other state-licensed casinos in Iowa, Mayor Ron Corbett said.

Some 100 investors and backers of the Cedar Crossing casino project were on hand, too, with more than half identifying themselves as casino investors when Gray asked investors to stand.

A vital piece of the presentation, though, came from the investor groupís market consultant, Suzanne Leckert, director of gaming, feasibility and land-use analysis for TMG Consulting, based in New Orleans.

Leckert emphasized to the commission that she had worked in Iowa for 11 years, the last six for TMG Consulting, and had conducted casino market studies for casinos in Riverside, Waterloo and Dubuque, all of which stand to lose some business if a Cedar Rapids casino is built.

Leckert said her previous projections related to the casinos in the three Eastern Iowa markets were correct within four percent, and, she said, "most significantly, we were right on" in the estimates of how new casinos affect existing ones.

Her new conclusion, in a study completed for the Cedar Rapids casino investor group in July 2013, is that Cedar Crossing will take 9 percent of the current business away from the Riverside Casino and Golf Resort, less than 5 percent from Isle Casino Hotel Waterloo, under 2 percent from the Dubuque casino market and 7 percent from Meskwaki Bingo Casino Hotel, a non-state-licensed facility on the Meskwaki Indian Settlement west of Tama.

The Meskwaki facility would lose the most annual revenue, she said.

Leckert told the commission that the proposed Cedar Crossing casino is a unique "urban" casino in the stateís second-largest urban and tourism center and in an casino market that currently is "underserved." A Cedar Rapids casino would bring in $61 million in new gaming revenue to the state when the revenue effect to other casinos is factored in, she said.

And, she said, the "viability" of none of the existing casinos would be threatened by a Cedar Rapids casino.

One of Leckertís numbers ó her projection that no existing casino would lose more than 9 percent of their existing business to a Cedar Rapids casino ó drew this response from the commissionís Lamberti at meetings end:

"I think if youíre in single digits, it makes it really difficult for a commission member to say, 'I would reject it on that,'" he said of the Cedar Rapids proposal and its impact on other casinos.

But Leckertís study commissioned by the Cedar Rapids investor group, the Cedar Rapids Development Group LLC, is only what it is.

Vital to the commissionís decision-making will be the results of two market studies that the commission is paying for to understand the effect of a Cedar Rapids casino on state casino revenue and on existing casinos. Lamberti called those studies "independent" in contrast to Leckertís study.

At the same time, the study by the casino investor groupís consultant has value, he said.

"We obviously do consider it because we understand that consultants expect to do business in the future and their reputations are on the line," Lamberti said. "We also understand who they are hired by.

"But we donít simply reject that fact that they had their own study done. Itís one piece of everything we will consider."

The commission is likely to take up the results of its two market studies at its March 6 meeting at Prairie Meadows Racetrack and Casino in Altoona. Subsequently, the commission will visit the Cedar Rapids casino site ó across the Cedar River from downtown ó the morning of April 3 and will hold a public comment session that afternoon at the DoubleTree by Hilton hotel and convention complex.

The commission will decide at its April 17 meeting at the Ameristar II casino in Council Bluffs.

Lamberti said the commissionís decision on the Cedar Rapids proposal likely will be "a very difficult call." Just how difficult will be known once the commission learns the results of its two market studies, he said.

He said the problem for the commission is that there isnít "a magic number" of just how great an impact a new casino is allowed to have on existing ones.

"There is no guide, there is nothing in the legislation or rules or anything like that that tells us when an impact is too much," he said. "Ö I wouldnít say we guarantee market share, but the legislation does have an expectation that when people have invested (in existing casinos), this is not just a free for all."

He added that the commission has not had a lot of history in denying a license to a proposed casino because of its effect on an existing casino. A previous commission did deny a license to a Fort Dodge project because of its potential to harm the casino in Emmetsburg, he said.

"But thatís just one isolated case. So I donít think thereís a lot of guidance," Lamberti said.

Leah Rodenberg, a member of the not-for-profit Linn County Gaming Association, and Jonathan Swain ó a casino investor and partner in JNB Gaming LLC, which will manage the Cedar Rapids casino ó also participated in the Cedar Rapids presentation.

"Youíve got strong local support from both local investors and all the community groups ó from the city, county, labor, everybody. Itís well-financed, and we expected that," Lamberti said.

Looked at it on its own, the Cedar Crossing project would be "a great facility," he said.

After the meeting, Drew Skogman, another lead investor in the Cedar Rapids casino project, called Thursdayís presentation "very compelling."

"We told our story," he said.

"I think they were very engaged, listening to what we had to say," Skogman said of the commission.

Mayor Corbett, who was sitting in the first row of the meeting along with Gray and others from the Cedar Rapids delegation, said commission members were taking notes, which is a good sign, he said.

"I know theyíre concerned about cannibalization (of existing casino businesses)," City Council member Pat Shey said.

But he said the casino investorsí consultant made good points about her projections being solid in the past and about Cedar Rapids being a growing market.

Tim Hurley, former Waterloo mayor and president of the not-for-profit Black Hawk County Gaming Association, spoke at length at the start of the meeting about what the Isle Casino Hotel Waterloo has contributed to community causes, adding a seeming reference to the Cedar Rapids proposal when he said, "We want to work hard to preserve our fund stream."

He noted that the Waterloo casino provides the not-for-profit 5.75 percent of adjusted gross receipts, which in the past he has compared to the 3 percent that the Cedar Rapids casino investors will provide in the first years to its nonprofit license holder, the Linn County Gaming Association.

Gray told the commission that the Cedar Rapids casino also will pay the city of Cedar Rapids 1 percent of revenues to help with community revitalization and flood protection.

Also at Thursdayís meeting, Dan Kehl, CEO of the Riverside casino and a vocal opponent of the Cedar Rapids project, told the commission that he and other investors had completed an agreement to purchase the riverboat casino in Davenport. Kehl said his group will take over the casino operation at its existing site along the Mississippi River in February as the group†starts construction later in the year on a new land-based casino on the far north side of Davenport along Interstate 80.

The commission, the city of Davenport and the local nonprofit Riverboat Development Authority had been working on the transition for some time.

Kehl made a point of noting that he was "quite proud" to be paying the nonprofit 5.25 percent of gross adjusted receipts, an amount that will grow to 8.5 percent four years after the takeover.

An investor group in Greene County also is seeking a gaming license, and the commission said it will hear that proposal on March 6, visit the site on May 29 and make a decision on a license on June 12.

In addition, an entity in Sioux City has submitted an application to operate a casino at the present casino site there. A different entity has been granted a state gaming license to build a new casino at a different Sioux City site.


 

Have you found an error or omission in our reporting? Is there other feedback and/or ideas you want to share with us? Tell us here.