WATERLOO — Cedar Crossing, the $165 million casino and dining complex proposed for Cedar Rapids, very well may secure a necessary state gaming license in April if the project investors’ analysis of the Iowa casino market is on target.
That was the thought that Jeff Lamberti, chairman of the five-member Iowa Racing & Commission, provided on Thursday at the end of the commission’s meeting at the Isle Casino Hotel Waterloo.
The centerpiece of the Thursday meeting was a 45-minute presentation by investors and backers of the Cedar Crossing project.
In it, legendary Iowa sportscaster Frosty Mitchell narrated a poignant video about Cedar Rapids, its Flood of 2008 and the recovery from it.
Video courtesy of MVP Video Production and Cedar Rapids Development Group, LLC.
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 group’s 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 state’s 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 Leckert’s numbers — her projection that no existing casino would lose more than 9 percent of their existing business to a Cedar Rapids casino — drew this response from the commission’s Lamberti at meetings end:
“I think if you’re 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 Leckert’s study commissioned by the Cedar Rapids investor group, the Cedar Rapids Development Group LLC, is only what it is.
Vital to the commission’s 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 Leckert’s study.
At the same time, the study by the casino investor group’s 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 don’t simply reject that fact that they had their own study done. It’s 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 — across the Cedar River from downtown — 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 commission’s 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 isn’t “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. “… I wouldn’t 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 that’s just one isolated case. So I don’t think there’s a lot of guidance,” Lamberti said.
Leah Rodenberg, a member of the not-for-profit Linn County Gaming Association, and Jonathan Swain — a casino investor and partner in JNB Gaming LLC, which will manage the Cedar Rapids casino — also participated in the Cedar Rapids presentation.
“You’ve got strong local support from both local investors and all the community groups — from the city, county, labor, everybody. It’s 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 Thursday’s 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 they’re concerned about cannibalization (of existing casino businesses),” City Council member Pat Shey said.
But he said the casino investors’ 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 Thursday’s 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.