Corbett proposes statewide gaming reform stew

CEDAR RAPIDS - There is more wrong with Iowa's gaming industry and its 19 state-licensed casinos than an absence of a Cedar Rapids casino in the state's second largest city, Mayor Ron Corbett insists.

Corbett, a former Speaker of the Iowa House of Representatives, also said there could be a coalition of the willing in the Iowa Legislature who potentially could support a broad 'gaming reform” initiative in the legislative session that begins in January.

Driving this gaming reform idea, of course, is Corbett's push to bring a casino to the riverfront across the Cedar River from downtown Cedar Rapids.

The mayor thinks that the proposed $174 million downtown Cedar Rapids casino will give the city and its downtown a boost. But he said a Cedar Rapids casino also can breathe some new life into Iowa's casino industry.

Business at casinos is down, in part, from stagnation and from a lack of fresh ideas, he said.

His answer to the casino blues is the first piece of his gaming reform proposal, which would create Iowa's first smoke-free casino in Cedar Rapids to see if such a new product could help rejuvenate the state's gaming industry.

'We'll volunteer,” the mayor said. 'We'll be the guinea pig. We'll try it.”

Iowa's casino operators, who have feared a loss of business, have secured an exemption from Iowa lawmakers so customers can smoke in casinos even as smoking is now prohibited in Iowa's bars and restaurants.

However, Corbett said there is a segment of the population - including many younger people who don't smoke - who would visit a non-smoking casino such as the Jumer's Casino and Hotel in Rock Island, Ill., if it was available in Iowa.

'If you're in the gaming industry, don't you want new people to come in and be customers?” he asked.

Corbett's gaming reform proposal, though, includes components to win the legislative backing of more than Cedar Rapids and Linn County legislators, the American Cancer Society, the American Lung Association and wellness proponents across Iowa.

The reform proposal package also will double to $21.8 million a year the amount of state casino tax revenue that goes back to the 84 of 99 Iowa counties without casinos and to their not-for-profit organizations.

In addition, the proposal eliminates the $22 million annual tax that casinos now must pay on free-play promotions that they offer to attract customers. The tax savings will encourage casinos to offer more promotions, which should increase business, while half of the tax break will go to the not-for-profit organizations in casino counties, according to the proposal.

The Corbett proposal also will establish a 10-year moratorium on new casino licenses once a license is granted to a smoke-free casino in Cedar Rapids and perhaps one other spot in the state.

'It doesn't have to pass 100 to nothing in the House and 50 to nothing in the Senate,” said Corbett, who served in the Iowa house from 1987 until 1999, the last five years as House speaker. 'I just need 51 and 26.”

Challenges

In April, the Iowa Racing and Gaming Commission, on a 4-1 vote, turned down a state gaming license for a $174 million casino project in Cedar Rapids, saying that the state's gaming market was all-but saturated and that a Cedar Rapids casino would 'cannibalize” nearby casinos and harm the closest of them, the Riverside Casino and Golf Resort south of Iowa City.

Then on Thursday, the five-member commission said it would not welcome new applications for a state casino license for the next three years - a move Corbett said shut the door on Cedar Rapids and signaled to him that the city should take the discussion to the Iowa Legislature.

'We can't stand around like stooges,” Corbett said of Cedar Rapids and its casino proposal upon hearing of the commission's freeze of sorts on new casino license applications.

Jeff Lamberti, Iowa Racing and Gaming Commission chairman, and Gary Palmer, president and chief executive officer of Prairie Meadows Racetrack and Casino in Altoona outside of Des Moines, both talked this week about the challenges that are confronting Iowa's casino industry from video gaming machines in Illinois bars and restaurants and may face Iowa's casinos from increased gaming options in Nebraska.

According to two market studies conducted for the commission earlier this year, 47 percent of Iowa's gaming revenue comes from out-of-state residents.

Corbett said increased border-state competition is all the more reason why the Iowa Legislature needs to take a broad look at the future of gaming in Iowa and to consider a new casino opportunity in Cedar Rapids away from the competition on Iowa's borders.

'Maybe I'm just fooling myself,” Corbett said - to which two Cedar Rapids metro area lawmakers, Rep. Kraig Paulsen, R-Hiawatha, and Sen. Rob Hogg, D-Cedar Rapids, said they didn't know if he was or wasn't.

Paulsen, Speaker of the Iowa House, said he didn't think 'the likelihood is great” that the Iowa Legislature would take up gambling reform.

He said, too, that he didn't think lawmakers would want to 'get in the middle of passing out individual licenses” for casinos, which is a job that the gaming commission has handled.

'But I encouraged him to pursue it because maybe I'm wrong,” Paulsen said.

‘Pretty complicated'

The Speaker said he didn't know if the state's casino market is saturated or not. But he said he did know this: 'The citizens of Linn County took a vote, and they changed their position from previous years and said this (casino gaming) is something they wanted to pursue. And I think it's regrettable that the license wasn't issued.”

Hogg said gambling issues always are 'pretty complicated” at the Statehouse because of the number of different issues, concerns and geographic interests.

Even so, he said the Iowa Legislature may have a 'pretty good appetite” to address gaming in 2015 because of the downturn in gaming revenue in the state. He said lawmakers also might conclude that 'we need a little more legislative oversight” after the state commission awarded a license on a 3-2 vote to Greene County two months after turning down the Cedar Rapids proposal.

Hogg successfully helped carry the legislative load for a Cedar Rapids proposal authored in large part by Corbett that secured for Cedar Rapids $264 million over 20 years for flood protection. The legislation, which allows for a percentage of the growth in state sales tax to be used for flood protection, gained favor because it is available to all Iowa communities recovering from a natural disaster.

It has helped Dubuque and Coralville, among others, for example.

'I think this (gaming reform) is harder to sell than flood protection,” Hogg said. 'Flood protection was pretty clear cut. If you don't have it and something goes wrong, we're in deep trouble.”

Paulsen didn't express any interest in Corbett's proposal for a smoke-free casino, saying the legislature debated that a couple years ago. Hogg, though, said the smoke-free idea will attract 'a lot of interest.”

Hogg said a smoke-free Cedar Rapids casino also 'addresses the cannibalization argument in a significant way.” Iowa's casinos have said smoking is important to their business, so a smoke-free venue 'presumably won't take away” from casinos that don't provide a smoke free venue, Hogg said.

Corbett said all the market studies that say Cedar Rapids will cannibalize too much business from existing casinos, especially the Riverside Casino, are 'basically irrelevant” because the studies assumed that a Cedar Rapids casino would be a smoking one.

'They're not apples and apples,” he said. 'None of the studies' numbers are right.”

The specifics of Corbett's gaming reform proposal include a provision that would waive the $20 million state gaming license fee for the Cedar Rapids casino investor group led by businessman Steve Gray in exchange for the investors taking a risk on a smoke-free casino, Corbett said.

Corbett said ending the state tax on free-play promotions at existing casinos - which brings in about $22 million to the state each year - will be less of a hit to the state's revenue because the change will encourage more free-play promotions, more gaming and additional state gaming revenue.

Corbett said the state commission's market studies both said a new Cedar Rapids casino would increase total state gaming revenue, 22 percent of which goes to the state of Iowa as a gaming tax.

‘Uncharted precedence'

Cedar Rapids City Council member Justin Shields - one of the five members of the not-for-profit Linn County Gaming Association that would hold a state gaming license for a Cedar Rapids casino - said he is eager to lobby legislators on the gaming reform proposal along with Corbett as the two of them successfully did for the city's flood-protection proposal a couple years ago.

'Knowing that people would probably not be crazy about doing something just for Cedar Rapids, we tried to fashion this so that it helps communities across the state and the casinos now in business,” Shields said. 'I think it's a well-thought-out proposal and it should have support once people understand it.”

Wes Ehrecke, president and chief executive officer of the gaming industry's Iowa Gaming Association, has talked to Corbett about the details of Corbett's gaming reform proposal, but he said he is not persuaded.

Ehrecke said the association members believe that casino license decisions should be left to the gaming commission, which he said has a history of conducting thorough analyses of casino license applications.

'It would be an uncharted precedence to usurp their regulatory authority,” Ehrecke said.

He said the commission's authority is designed to maintain a high level of integrity without legislative involvement.

Prairie Meadows's Palmer agreed, saying he didn't think the state should 'supersede” the decisions of the gaming commission - either the decision that denied a license for Cedar Rapids in April or the one that approved a license for Greene County in June.

'The commission has done well through all these years,” Palmer said. 'And I think to change the system would be like Prairie Meadows going up there because Greene County got a license, to ask for another casino for us between them and Prairie Meadows. I just don't think that's the way to do it.”

Corbett's reform proposal stew

'ONE: Cedar Rapids/Linn County grants a casino license for the state's first non-smoking casino.

'WHO COULD SUPPORT: Cedar Rapids/Linn County and its casino-supported not-for-profit organizations; non-smokers, wellness proponents, the American Cancer Society, the American Lung Association; those who think Iowa should experiment with a non-smoking casino; budget balancers attracted to additional casino revenue, 22 percent which goes to the state; casino investors, who would get a $20 million license waiver for taking risk on smoke-free facility.

'WHO MIGHT OPPOSE: Existing casinos, especially those close to Cedar Rapids.

'TWO: Double to $22 million a year the share of state casino revenue that goes to 84 nongaming counties.

'WHO COULD SUPPORT: 84 counties.

'WHO MIGHT OPPOSE: State budget would see an $11 million annual reduction in state revenue.

'THREE: Ten-year moratorium on new casino licenses, except for one or two non-smoking casino test cases.

'WHO COULD SUPPORT: Most existing casinos.

'WHO MIGHT OPPOSE: Casinos close to Cedar Rapids or other non-smoking casino.

'FOUR: Eliminate state tax on free-play promotions at casinos.

'WHO COULD SUPPORT: All casinos.

'WHO MIGHT OPPOSE: State budget would see annual loss of $22 million in state revenue. However, could increase promotions, which may lead to more gaming and an increase in revenue.

'FIVE: Require casinos to share half the tax relief on free play with their local not-for-profit organizations.

'WHO COULD SUPPORT: Existing casino communities.

'WHO MIGHT OPPOSE: Same budget hit as Part 4.