Iowa Gaming Commission places 3-year pause on new casino applications

"We can't stand around like stooges," the mayor says

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JOHNSTON — Cedar Rapids Mayor Ron Corbett has been looking to the Iowa Legislature for help since the moment the Iowa Racing and Gaming Commission in April turned down the proposal to bring a casino to Cedar Rapids’s downtown riverfront.

So on Thursday, Corbett said the five-member commission probably helped the city’s pursuit of a state license for a casino when the commission said it wanted to take a pause for about three years before it accepts any new applications for a state gaming license.

“This opens the door for us to approach the legislature,” Corbett said. “We can’t stand around like stooges and do nothing.”

He said the commission’s freeze of sorts on new license applications — which the commission has been saying to expect for a few months — was nothing short of locking the door on the prospect for a new casino in Cedar Rapids or elsewhere in Iowa and throwing the key to the Iowa Legislature.

“I’ll look at this as a signal to put together a legislative package, one that will address not just Cedar Rapids’s situation but some of the inequities we’ve seen on how gaming revenue is distributed to Iowa’s nongaming counties,” Corbett, who believes Iowa’s casino industry is stagnant but not saturated, said.

“This legislative approach may be a long shot, to use a gambling term,” he continued. “But it might be worth the effort. We might get a better hearing out of a legislative body that has more concerns than actual casino industry regulation.”

Each of the five Iowa Racing and Gaming Commission members spoke in support of taking a pause before they consider any new applications that seek to add a new casino to the state’s lineup of 19 state-licensed casinos.

Jeff Lamberti, who was re-elected as the commission chairman by his commission colleagues, established the time frame of three years when he said he would not favor any new application for a casino license for the remainder of his current commission term, which he said has about three years to run.

That term expires April 30, 2017.

However, Lamberti and the other commissioners stopped short of any absolute moratorium on new applications in the next three years, saying circumstances always could change.

“I want to be very clear,” Lamberti said. “I am encouraging no one to submit an application . And as I sit here today, I simply don’t see a set of circumstances that is likely to change my mind over the next three years.”

At the same time, Lamberti, a former Iowa state senator who has suggested that Cedar Rapids casino supporters look to the Iowa Legislature for help, said one “unique set of circumstances” that could change the commission’s position on new licenses is a change in state law.

“Obviously if the legislature and the governor decide to make any changes, we will, as a commission, take that into account,” he said.

Keep an ‘open mind’

Lamberti said increased gaming competition that is coming from neighboring Illinois and that could be coming from Nebraska also could prompt the commission to look at the state’s gaming landscape in a different light.

“I don’t know that that would necessarily change my thinking about new applications for the next three years, but that is simply an example of some things that might convince me to take another look,” he said.

Commission members Rich Arnold of Russell, Kristine Kramer of New Hampton, Carl Heinrich of Council Bluffs and Lamberti of Ankeny all cited market studies conducted this year for the commission that concluded that Iowa’s casino gaming market is stagnant or all-but stagnant.

Even so, commission member Dolores Mertz of Algona, who was the lone vote in April in favor of the Cedar Rapids casino proposal, said the commission needed to continue to keep an “open mind” about accepting new applications in the event circumstances change.

However, Mertz agreed with the other commissioners that the commission should take a pause and see how three new casinos that are coming on line in Iowa fare and how they might affect the state’s gaming industry.

A new land-based casino in Sioux City, which replaces a riverboat casino there, opens today. The commission awarded a state gaming license to Greene County in May, and a casino there will open in a year.

In addition, the casino in Davenport also is moving from a riverboat to a new land-based casino, construction on which will start soon and with an opening slated for the first half of 2016.

The statement from the commissioners on new applications mirrors one that the commission with a different makeup of members made in 2010.

That year, the commissioners said they would have no interest in accepting new applications for three to five years.

In 2013, Linn County and Greene County each held a successful county referendum and, subsequently, applied for a casino license.

In April of this year, the commission, on a 4-1 vote, turned down a proposal for a Cedar Rapids casino in Linn County, saying it would harm other casinos, especially the one in Riverside south of Iowa City.

In May, the commission, on a 3-2 vote, approved a license for a smaller casino in Greene County west of Ames, saying it was one spot in the state that could handle a new casino without harming others.

Immediately after the commission’s meeting at the Stoney Creek Inn & Conference Center in Johnston on Thursday, Lamberti said the commission historically has looked at how any new casino in Iowa might harm existing ones.

“And the numbers just don’t work (for a Cedar Rapids casino) in that analysis under the current way we do things,” Lamberti said. “And if that is going to change, it’s going to have to come from the legislature.”

‘A good start’

Dan Kehl, chief executive officer of the Riverside Casino & Golf Resort and a vocal opponent of a Cedar Rapids casino, on Thursday said the commission’s decision to hold off on new casino applications for three years “is a good start.”

“But we don’t believe there will be meaningful growth in the Iowa gaming market for the next 10 years,” said Kehl, who also has ownership interest in the Larchwood and Davenport casinos.

Gary Palmer, president and chief executive officer of the Prairie Meadows Racetrack and Casino in Altoona, on Thursday said the commission decision on new applications “makes sense” at a time when casino gaming is down in Iowa and across the nation and when casinos have closed in some states.

A longer “pause” by the commission on applications might have been better, he said.

“Being in the business for many years and reading what is happening in the nation, we have a problem with gaming,” Palmer said. “It’s on the downturn, and I’m not sure that’s going to change.

“Maybe we met our match. Maybe the saturation point has reached the tipping point where we shouldn’t do any more casinos. And are the existing (Iowa) casinos even going to make it? I think that’s questionable.”

Palmer pointed to touch-play machines that are proliferating in Illinois bars and restaurants and proposals to expand gaming in Nebraska — residents from both border states have provided plenty of gaming revenue to Iowa casinos situated on Iowa’s borders — and said, “There’s only so many dollars and so many people.”

Cedar Rapids’s Corbett said state law requires that counties that approve gaming in a first referendum must revote in eight years.

The Linn County referendum that approved gaming in the county took place in March 2013, which leaves a window of less than seven years before a new vote is required.

The mayor didn’t know if casino investors might become skittish about building a Cedar Rapids casino if they must wait for three years on the commission to take a license application, take another year with the commission’s license-approval process and then another year or more to build the casino.

By then, it will almost be time for the required new Linn County referendum, he said.

Steve Gray, the Cedar Rapids businessman who chairs casino investor group Cedar Rapids Development Group LLC, didn’t respond to a request for a comment on Thursday.

Last week, retired Cedar Rapids lawyer Eugene Kopecky sued the Iowa Racing and Gaming Commission, saying it erred in its decision to deny a gaming license for a Cedar Rapids casino.

At that time, Gray said, “We continue to believe that our project has considerable merit for our area and the state and we are hopeful it will become a reality at some point.”

The commission terms of Lamberti and Heinrich run through April 30, 2017, and Arnold’s term expires on April 30, 2016.

Commissioners Kramer and Mertz have current terms that end on April 30, 2015.

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