State commission approves Cedar Rapids casino

CEDAR RAPIDS — The Iowa Racing and Gaming Commission on Thursday approved an application for a proposed new casino in Cedar Rapids, over the protests of stakeholders at other such facilities but to the celebration of many in Linn County.

The move ended a tumultuous week as a casino moratorium passed by the state house reached the senate, but failed to get a vote on Tuesday when Republican Party leaders abruptly declared that it lacked enough support to pass there, effectively killing the bill in committee.

The outcome took some lawmakers by surprise.

“We really believed wholeheartedly that bill would have made it to the governor’s desk before the commission voted, but it did not, unfortunately,” said Rep. Heather Hora, a Republican from Washington whose district includes the Riverside Casino & Golf Resort.

The IRGC’s decision to grant a license for the proposed casino came Thursday morning, followed swiftly by a groundbreaking ceremony for the building the next day.

“We’ll be moving dirt tomorrow, wasting no time in getting this up and running,” Cedar Rapids Mayor Tiffany O’Donnell told reporters after the vote. “Linn County, Cedar Rapids deserves this. It’s only taken us 12 years to get here. Looking forward to a homecoming this afternoon.”

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The outcome frustrated communities that already have casinos, where locals worry a new competitor in Iowa’s second-largest city would “cannibalize” other casinos by drawing away traffic from the destinations, a shift that’s expected to cut jobs and revenue outside of Linn County.

Locally, many worried about the implications for the Washington County Riverboat Foundation, the Riverside Casino & Golf Resort’s nonprofit extension which has issued over $70 million in grants to local governments, nonprofits and schools since the casino opened in 2006.

Studies suggested a facility in Cedar Rapids would pull $56-$68 million of revenue from other casinos around the state, of which Riverside is among the closest. Specifically, one market study suggested Riverside could lose more than $30 million of annual revenue if the Cedar Rapids casino is built.

Foundation Board President Stephanie Sexton said at an event in December that the proposed new casino up north could tank the nonprofit’s budget.

“The partnership with this stunning venue has contributed significantly to our region’s identity, to our nonprofits and to our communities,” she said, urging audience members to sign a petition opposing the project. “We need our voices heard … so that this foundation and your nonprofits can continue to look forward to a future of possibilities and a future of opportunities.”

Representatives from the casino and WCRF reacted with disappointment to Thursday’s decision. WCRF Executive Director Patty Koller said the move was “devastating” for communities benefited by her organization.

Dan Kehl, the CEO of Elite Casino Resorts which owns casinos in Riverside, Davenport, Grand Falls and Larchwood said he disagreed with the commission’s handling of the application.

“We appreciate the time and effort the commission and staff put into this, but we do have questions and concerns as we still believe the referendum requirement has not been met and are reviewing our next best steps,” he said in a statement emailed to reporters Thursday morning.

Planned casino may face other hurdles

While construction has begun on the new Cedar Rapids Casino, stakeholders say it’s not necessarily a done deal.

Jonathan Swain, president of Cedar Rapids Development Group, said the building would take 18-22 months to construct, which leaves at least that much time for the casinos like Riverside’s — and its nonprofit affiliate — to continue operations as normal.

Riverside Casino & Golf Resort and the Washington County Riverboat Foundation — its nonprofit affiliate and gaming license holder — filed a petition for judicial review Thursday in Washington County District Court challenging the commission’s decision.

The petition states the Iowa Racing and Gaming Commission “did not have lawful authority to issue this license under Iowa Code § 99F.7(11), and its purported issuance was, otherwise, unreasonable, arbitrary, capricious, and an abuse of discretion.”

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Under Iowa law, the IRGC may issue a license to conduct gambling games only after voters in the county approve the conduct of gambling games.

The Iowa Racing and Gaming Commission last month declined to decide whether a 2021 Linn County gambling referendum allows a casino to be built in Cedar Rapids.

The referendum ballot language said gambling "may continue." Riverside Casino & Golf Resort contends that the approval for gambling is invalid because gambling had never begun in the county.

It asked the commission to issue a declaratory order that said it lacks the authority to issue a gambling license in Linn County because of the invalid language. The commission voted 4-1 Jan. 23 to refuse the request. Riverside had 30 days to appeal that refusal to District Court.

“We believe that the 2021 referendum simply asked Linn County voters the wrong question to support the issuance of a gaming license,” Mark Weinhardt, an attorney for Riverside Casino & Golf Resort, told reporters after the IRGC meeting Thursday. “ ... Whether the commission is authorized to issue a gaming license in Linn County is after today a question for the courts; not the commission.”

The petition also asserts commissioners ignored the IRGC’s own regulations that require the commission to consider the economic impact of any newly issued license on existing licensees and the state of Iowa.

“Although the net economic impact of the Linn County Casino on the state of Iowa, especially on rural communities and casino licensees, is negative, a majority of the Commissioners simply ignored this fact, opting instead to focus solely on the positive impact of the Linn County Casino on Linn County, in contravention of legislative intent and administrative rules,” the petition stated.

“The IRGC’s issuance of a license for the Linn County Casino is a gross abuse of authority, unlawful, and unreasonable. The Court should prevent this abuse of power and unlawful act. It should stay the effect of the issuance of the license, and then reverse the issuance of the license.”

Riverside Casino also filed a separate motion seeking an immediate pause on the issuance of a gambling license in Linn County and “any and all actions or activities in reliance on the vote to approve of the application for a license” during the judicial review, including construction.

It asked the court for expedited consideration of the motion, based on news reports that Peninsula Pacific Entertainment intends to move quickly on construction.

On top of any potential courtroom showdown, Rep. Hora said she wouldn’t rule out another legislative push to stop the casino’s development before construction goes much further.

She said it was still possible for lawmakers in Des Moines to pass a retroactive moratorium, though she wasn’t sure how likely such a move might be this session.

“I’m never going to say, ‘Never,’” she said. “The legislature spoke loudly, especially in the house. We passed that (moratorium) twice in a year’s time, bipartisan, overwhelming majority that we believed we don’t need any more casinos in Iowa … we are probably going to try to find other options and look at things we can do, because right now, the decision that they made, obviously did not make sense.”

Others, meanwhile, are bracing for a possible future where WCRF simply won’t have as much cash to funnel toward local projects like new pool buildings, baseball field upgrades, library expansions, emergency response equipment purchases and historic preservation efforts.

“While this outcome is not what we had hoped for, we remain committed to pursuing opportunities that will enhance the quality of life and economic prosperity of Washington County,” Washington Economic Development Group Executive Director Mary Audia said in a statement. “We appreciate the support of our community throughout this process and assure our residents that we will continue to advocate for projects and initiatives that benefit Washington County.“

IRGC: Iowa gambling market has capacity to support ‘unique’ project

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The Iowa Racing and Gaming Commission had twice rejected proposals — in 2014 and 2017 — to bring a casino to Cedar Rapids. At the time, commissioners cited concerns that a new facility would siphon off existing customers from current casino properties in Eastern Iowa.

Two market studies ordered by the commission say a proposed Cedar Rapids casino would largely rely on pulling patrons and revenue from other Iowa casinos, but add approximately $60 million in net new gaming revenues to Iowa annually.

The state’s existing casinos have supported a moratorium, saying Iowa’s market — with 19 commercial casinos and four tribal casinos — is saturated and that a new facility would “cannibalize” revenues from them.

Despite concerns about market saturation and cannibalization, commissioners cited the project's economic benefits — including job growth and new tax and gaming revenue — and community support.

Commissioner Julie Andres, a Republican from Okoboji, said the proposed Cedar Rapids casino provides “a unique and differentiated project in the market, and provides a net gain of revenues to our state.”

IRGC member Amy Burkhart, an independent from Burlington, echoed the comments.

“All I see is net gain. I see net gain in terms of tax revenues for our state,” she said, noting state gaming tax revenue would otherwise decline “due to competition in our border states.”

Commissioner Mark Campbell, a Democrat from Otho, said some questioned whether awarding a Cedar Rapids license would "open Pandora's box for gaming in Iowa."

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He said he was assured by data presented to the commission that Iowa’s gambling market has the capacity to support the project and that temporary shifts in market share are expected.

“It's important to note that every gaming license issued in Iowa has experienced some degree of cannibalization or market share redistribution, yet the industry continues to thrive," Campbell said. "It's a reality that many licensees were aware of when they applied, fully understanding that temporary shifts might occur. Despite these shifts, Iowa gaming has remained robust and successful.”

Commission member Alan Ostergren, a Republican from Altoona, raised concerns about the validity of the 2021 Linn County gaming referendum and the legal authority of the commission to grant the license. While a “high-quality” project that has garnered community support, Ostergren also cited potential disruption to existing casino operators in the state.

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“I personally come down on not disrupting our existing operators to that extent based on that negligible increase in revenue to the state as a whole,” Ostergren said.

Supporters tout expected economic benefits for state

Backers of the Cedar Rapids casino said the state’s second-largest city should be allowed to benefit from gaming, the same as other communities, and that growth in Iowa’s gaming industry and competition from neighboring states would make the proposed casino more relevant.

Cedar Rapids business and nonprofit leaders and representatives from Iowa State Building and Construction Trades Council, North Central States Regional Council of Carpenters, Master Builders of Iowa and affiliated local unions have said the proposed casino would boost the local economy, create jobs, support community projects and enhance the quality of life by attracting more tourists and providing more entertainment options.

An economic impact study commissioned by the casino developer projects a Cedar Rapids casino would support 792 construction jobs and employ 365 workers once open. The study also projects an economic impact of $257 million during the construction phase and $183 million in the first year of operations. In total, from construction and the first 10 years of operations, it projects more than $2.25 billion in economic impact.

Casino developer Peninsula Pacific Entertainment and the Linn County Gaming Association also have committed to distributing 8 percent of net adjusted gross revenue, or about $6 million annually, to nonprofit organizations — more than twice the state-mandated minimum. Of that, 10 percent would be distributed to nonprofits in adjacent counties.

An influx of funding from a casino would help nonprofits meet needs and expand services in areas like foster care, homelessness, food insecurity and health care, said Linn County Gaming Association President Anne Parmley.

LGA is the nonprofit affiliate and charitable arm that jointly applied for a casino license with P2E.

Comments: Kalen.McCain@southeastiowaunion.com