Riverside, Waterloo casinos take but don’t give to Linn County, Cedar Rapids casino backer says

Crucial Iowa Racing and Gaming Commission vote coming March 6

Rick Smith
Published: February 2 2014 | 6:04 am - Updated: 29 March 2014 | 3:02 am in
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It’s one year ago all over again.

Last February in Cedar Rapids and in the nearby casino cities of Riverside and Waterloo, temperatures were rising and oodles of money was being spent on media ad campaigns — some $3.43 million in total — to support or oppose the building of a casino in Cedar Rapids.

Voters in Linn County overwhelmingly endorsed the idea on March 5, 2013.

Now the campaigns are heating up again as a crucial March 6 date approaches when the Iowa Racing & Gaming Commission will meet at Prairie Meadows Racetrack and Casino in Altoona to hear about the current state of gaming in Iowa from two independent market analysts. Their studies are expected to address the all-important question for the commission: Will granting a state gaming license to the proposed Cedar Crossing casino directly across the Cedar River from downtown Cedar Rapids cannibalize too much business from the Riverside Casino & Golf Resort, in particular, and from the Isle Casino Hotel Waterloo?

Steve Gray, chairman of the Cedar Rapids casino investor group, and Leah Rodenberg, a member of the non-profit Linn County Gaming Association, said again late Friday afternoon that Eastern Iowa has plenty of room for another casino — for the Cedar Crossing casino.

However, Gray and Rodenberg made the case anew for a Cedar Rapids casino by focusing on what the Riverside and Waterloo casinos have failed to do.

They said Iowa’s gaming industry of 18 casinos is set up so local gaming associations, which hold most of the casino licenses, get a share of a casino’s profits to distribute to local non-profit groups and other organizations that make the community better.

One the one hand, Gray and Rodenberg said the Riverside and Waterloo casinos continue to argue that a Cedar Rapids casino will steal a vital part of their business that comes from Cedar Rapids and Linn County patrons. But on the other hand, they said gaming associations in those two counties have turned their backs on Cedar Rapids and Linn County when time has come to distribute money to community organizations.

"We haven’t seen any," Gray said. Or hardly any.

According to the Cedar Rapids casino group's review, from 2010 through 2012, the Washington County Riverboat Foundation has distributed $5.4 million of gaming proceeds into the community, and of that, a total of $5,500 has gone to the American Red Cross in Cedar Rapids and a group called Families Helping Families in Cedar Rapids. Together, the money coming to Cedar Rapids is one-tenth of 1 percent of the total. Another $40,000 has gone to the Hawkeye Area Community Action Agency with a headquarters in Cedar Rapids, but with an office and programming in Washington County.

In the same three-year period, the Black Hawk County Gaming Association has received $13.4 million in revenue from the Isle Casino Hotel Waterloo, of which only $4,050 has been distributed inside Linn County to an organization in Coggon.

In fact, Keith Rippy, president of the Linn County Gaming Association and executive director of the local Area Ambulance Service, applied for funding from the Black Hawk County Gaming Association for a new ambulance in 2009 or 2010 without any luck, he said.

A review of 2013 grants did not look as if any additional grant money came into Linn County from the two casinos.

"So if Riverside and the Isle (in Waterloo) care about Cedar Rapids and it’s that important to their business, why haven’t they done more in Cedar Rapids and Linn County?" Gray asked. "And there have been numerous requests for them to do more."

Gray and the Cedar Rapids casino investors and Dan Kehl, CEO of the Riverside casino, have presented the Iowa Racing & Gaming Commission with competing analyses of Iowa’s gaming industry from consultants each has hired. Gray’s expert says a Cedar Rapids casino will take 9 percent of Riverside’s business, while Kehl’s expert says it’s 39 percent of business generated locally.

For argument’s sake, Gray said, if Kehl’s numbers are correct, that means the Riverside casino has taken in about $150 million in revenue from Cedar Rapids and Linn County in the last six years with hardly anything coming back to Cedar Rapids and Linn County community organizations.

Gray, a Cedar Rapids businessman, and Kehl — who also has ownership interests in Iowa’s newest casino in far northwest Iowa at Larchwood and in the Davenport casino, which will be moving to a new land-based site — have been the poster boys for the fight over the proposed Cedar Rapids casino for a year now. And they know it.

"Mr. Kehl says that a lot of his revenue comes from Cedar Rapids and Linn County, but he and the (Washington County) non-profit have done remarkably little for one of his largest customers," Gray said.

Kehl on Saturday said it was nice to hear that "Steve" acknowledges that a significant and crucial amount of revenue for the Riverside casino and other surrounding casinos comes from Cedar Rapids and Linn County, which Kehl has said repeatedly is the crucial question for the Racing & Gaming Commission.

Kehl also said he wondered why Gray and the Cedar Rapids investor group have decided to pay the Linn County Gaming Association so little of the profits from a Cedar Rapids casino.

"How can he say he’s concerned about area non-profits when he negotiated to pay the Cedar Rapids non-profit (gaming association) the bare minimum and one of the lowest rates in the state?" Kehl asked.

Taking business away from casinos that pay their non-profits more, he said, will mean less going to non-profits in Eastern Iowa.

"Those non-profits are very concerned," Kehl said. "They have done an outstanding job of dispersing moneys throughout Eastern Iowa."

He estimated that Riverside's  gaming assocation could lose $2.5 million from its $4 million in annual proceeds from the Riverside casino's receipts with a Cedar Rapids casino.

The Waterloo casino provides its local gaming association with 5.75 percent of adjusted gross revenue and the Riverside casino, 4.5 to 5 percent, while the Cedar Rapids gaming association will get 3 percent for the first 10 years and more on a sliding scale after that. Three percent is the state minimum for the local gaming association, and the Cedar Rapids investors aren’t the only casino at 3 percent.

Rodenberg said the Cedar Rapids casino actually will be paying 4 percent not 3 percent, because it will pay an additional 1 percent of adjusted gross revenue to the city of Cedar Rapids. A share of what some other casinos pay to their gaming associations goes directly to local government, she said.

Rodenberg said she understands that casinos in Riverside and Waterloo may be opposed to a Cedar Rapids casino. In fact, she said a member of the Black Hawk County Gaming Association, whom she knows well and likes, has promised that she would be opposing the Cedar Rapids casino proposal.

"I think from our perspective and from the (Cedar Rapids and Linn County) non-profits that I talk to, it’s one of those things," Rodenberg said. "… Why can’t our non-profits have a share of this? Why should these two counties (Washington and Black Hawk) get all the funds (from Cedar Rapids/Linn County gamblers)."

She said Cedar Rapids is Iowa’s second largest city with many non-profit groups that have a regional reach and could benefit from funding support from gaming revenue.

"After the flood (of 2008), most of them suffered great losses, and they had to rebuild, and they’ve done that without additional revenue sources," she said. "… But if we could get some additional support each year, through our (gaming association) foundation, it would really make a big difference."

It’s been a busy 10 days or so as the debate over a Cedar Rapids casino heats up.

Kehl dropped off his expert’s market analysis to the state commission a week ago to take on the expert’s report from Gray group, which the commission received earlier in the month. Riverside officials last week publicly expressed worry over the loss of local funds if a Cedar Rapids casino opens. And the non-profit Black Hawk County Gaming Association said publicly it was planning to protect Waterloo casino revenue from an opposing the Cedar Rapids casino.

The Racing & Gaming Commission will meet in Cedar Rapids on April 3 to visit the proposed site of the Cedar Crossing casino and to hold a public hearing. The commission is slated to make a decision on a Cedar Rapids casino at its meeting in Council Bluffs on April 17.

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