CEDAR RAPIDS — A new development group’s plan for a downtown “boutique” casino could get stymied by deals between a previous casino investment group and the city of Cedar Rapids and Linn County.
Two memorandums of understanding — still in effect — forbid local government from backing any third-party casino bids not approved by the Cedar Rapids Development Group, which is made up of investors of the proposed Cedar Crossing Casino, and the Linn County Gaming Association, a non-profit group formed to apply for the gaming license.
The Iowa Racing and Gaming Commission denied a casino license for Cedar Crossing in 2014, but the deals live on.
“The city will not enter into negotiations or execute or approve any agreement with any other person, firm or organization or operator, nor will the city make application to or otherwise support an application for a gaming license before the Iowa Racing and Gaming Commission within Linn County, Iowa with any third party other than in cooperation with company and non-profit,” a memorandum states.
Linn County’s agreement expires in October 2017, while Cedar Rapids amended its deal to extend to October 2019.
“It exists for a reason,” said Brent Oleson, a Linn County supervisor and member of the Linn County Gaming Association. “A lot of people put risk, capital, time and energy to put together a proposal, engage engineers, architects and construction companies, required to put forward an excellent big project.”
Alan Kemp, executive director of the Iowa League of Cities, said while ordinances, for example, can be changed by future incarnations of governing boards, contracts typically are binding and this memorandum likely is, too.
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“There are contracts that cities enter into and parties rely upon them, and that ends up binding what a future council can do,” he said.
The $40 million “boutique” casino is being proposed by local developers and executives from Wild Rose Entertainment, which has casinos in Emmetsburg, Clinton and Jefferson.
It would be a tenant in a four-story building on First Avenue E across the street from the DoubleTree Hotel and Convention Center.
Tom Timmons, president and chief operations officer of Wild Rose, said he heard about the memorandum while meeting with stakeholders this week and learned more about it in news coverage of the casino plans. He noted such agreements aren’t unusual.
The agreements are intended to protect investors who pour millions into public referendums to allow gaming and project costs such as design, engineering and site work. The deals prevent another party from swooping in to take advantage after some of the heavy lifting already has been done.
Timmons didn’t downplay the importance of the memorandums and the need to reach an agreement with the earlier investors.
“We don’t know what they’ve spent,” Timmons said. “We are not going to go on the record with some offer. Some players involved weren’t even in town when we met with stakeholders.” He said everyone involved need to discuss ways “we can work this out.”
The developers on the project — Steve Emerson and Hunter Parks — said this week they know many of the investors and plan to reach out to try to get their support.
Timmons said ultimately they want the support of the city and county, and he doesn’t foresee some end run that causes bad blood.
“Wild Rose isn’t going to go anywhere that we’re not wanted,” Timmons said. “If it can’t be worked out, it can’t be worked out. But we hope people will look at the end result. If we have a chance to bring a casino here — and I don’t think that same plan is going to work — what way do you go if it would mean it’s for the best of the city?”
Cedar Crossing was a proposed $174 million hotel and casino complex on the west side of the Cedar River in downtown Cedar Rapids. It promised $80 million in annual revenue.
The Wild Rose proposal would be significantly smaller, without the hotel and restaurants.
A who’s who of local executives and community leaders were the investors who formed the Cedar Rapids Development Group. They spent $2 million on a referendum alone to gain public support and fight off an opposing campaign from other casinos.
No new plans have come before the Linn County Gaming Association and as recently as June, Steve Gray, chairman of the Cedar Rapids Development Group, said there was nothing further to discuss about the casino at that point.
Gray this week said he would have no comment on the Wild Rose plans until after meeting with various stakeholders.
One of the investors, Tami Culver, of Marion, said simply “it was a big surprise” to hear of the new proposal.
“There was no communication,” Culver said. “That would have been respectful to have some kind of knowledge about it.”
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She said investors have a lot to think about. The larger complex with restaurants, hotel and event space was appealing because it was more than gambling, she said, while the new proposal is a different concept.
“I want to do what is right for the city,” she said.
Jeff Lamberti, chairman of the Iowa Racing and Gaming Commission, which grants casino licenses — or not in the case of Cedar Crossing — said city or county support isn’t required, but lack of local support would be factored in.
“Technically, the thing that has to happen is the referendum by the voters,” he said. “Legally, that’s the only requirement that it has passed. There doesn’t have to be formal support from a city and county, but it’s unusual not to have it, and it is something we take into account when determining local support.”
Lamberti noted that if a lack of support from a city or county restricted project needs such as tax incentives or construction permits, that, too, would undermine the viability of the project.
Officials with Linn County and Cedar Rapids said they don’t intend to try to find a way out of the memorandums of understanding.
“The only way for us to come out and unanimously support the new agreement is if they reach some kind of agreement,” Cedar Rapids Mayor Ron Corbett said.
He said he has encouraged the Wild Rose team to contact the original development group.
“There are several ways to solve this problem,” Corbett said. “Give them a piece of the ownership going forward, maybe not a big percentage. The other would be to offer compensation to reimburse the investor group, specifically the cost of the referendum they incurred. If there’s a will there’s a way.”