Riverboat gambling hits 20th anniversary

DES MOINES - Iowa's big-splash gamble to legalize riverboat casinos 20 years ago helped propel a major new wave of gaming nationwide and spurred a billion-dollar industry that far exceeded its founders' expectations.

State-licensed casinos authorized by the 1989 breakthrough legislation now account for nearly $1.4 billion in yearly adjusted gross receipts, employ more than 10,000 people, and attract 23.6 million patrons annually - with roughly two of every three coming from outside of Iowa to visit the state's top tourism draws, according to latest state estimates.

Since their official launch in April 1991, floating casinos have generated more than $2 billion in state gaming tax revenues that, in turn, have funded other major community attractions, environmental upgrades and a host of infrastructure projects across Iowa.

Even with those positives, some early Iowa backers lament that riverboat gambling's building blocks ran aground in the face of outside competition, shifting from their vision of a “Disney experience” with low-stakes wagering and family-friendly amenities that showcased Iowa's waterways to high-stakes Las Vegas-style gambling environments.

“It's morphed into something larger than I ever expected,” said former Rep. Thomas Fey, a Davenport Democrat who played a lead role in an effort that started in 1986 and culminated with Senate passage by a 26-23 vote in March 1989 and House approval 51-47 one month later.

“We started a wildfire across the country in regards to gaming interests,” he said.

National gambling experts agree with that assessment, counting Iowa's riverboat gambling decision in 1989 as a noteworthy marker in America's gaming history.

“It was part of the cracking of the ice that has led to a very substantial melting on prohibition,” said William Eadington, an economics professor who directs the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada-Reno. He noted that casino gambling financial totals have grown nearly fivefold nationally since 1989.

The emergence of floating casinos in Iowa, along with legalized wagering in Deadwood, S.D., and federal rulings that allowed casinos on American Indian land, were the kindling that sparked America's third and most expansive wave of legal gambling, said I. Nelson Rose, a Whittier Law School professor who has written extensively about gaming issues.

“Iowa was right there at the beginning of the third wave,” Rose said.

But Rose said any dreams Iowa lawmakers had of becoming the “third Las Vegas,” joining Nevada and Atlantic City, N.J., as major gambling destinations, were washed away when other states jumped into the riverboat game with unlimited wagering.

“If only the rest of the world had cooperated and given Iowa its monopoly, it would have been fantastically successful,” he said. “But, of course, monopolies are wonderful things. That's why nobody will let you have them.

“When Iowa put in riverboat casinos, legislators in other states said Iowa is not exactly the center of hedonism of this country and, if it's good enough for Iowa, then it's good enough for us, and legislators in every state started looking at expanding gambling.”

The result is that six states have legalized riverboat gambling and at least another six states have cruising boats that offer gambling while they navigate in international waters.

The increased competition caused Iowa lawmakers to gradually lift initial wagering and loss limits at state-licensed casinos, allow slots and casino wagering at the state's three pari-mutuel racetracks, end cruising requirements and do away with any tie between casinos and water.

Part of the evolutionary process for Iowa's excursion into riverboat gambling came about because early features, such as mandatory cruising, were largely symbolic and somewhat eccentric, but not particularly rational in a gaming sense, Eadington said. Those sank in the face of high-stakes competition.

“There was some idealism that was built in there, much that was unrealistic in retrospect,” he said.

Eadington said some irrational elements carried over to Iowa's unique feature of locating slot machines and casino table games at tracks designed for wagering on horse and dog races.

Fey remembers the idea being the object of many jokes when it was first conceived in 1986. But the talk turned serious when Iowa leaders - struggling to shake a downturn in farm implement manufacturing and the farm-credit crisis - began viewing it as a viable development option, and potential investors lined up with real money and lots of it.

“If I had my druthers, I would probably not like to have seen it go as wide open as it has,” Fey said. “And I would like to see it stay on water.”

Former Sen. Jim Riordan, a Waukee Democrat who delivered the crucial 26th vote needed for Senate passage, also expressed mixed emotions given that the riverboats have generated positive economic benefits but virtually all the warnings that Iowa would become a gambling mecca came true as well.

“In some ways, I don't think gambling has been a very good thing for us, but in other ways, it hasn't harmed us as much as I feared either,” Riordan said. “I really agonized over whether it was the right thing to do.

“If I were over there (at the Capitol) today and this was coming up for the first time and we were trying to make the decision as to whether or not we were going to put our state in the gambling business, I probably would say no, don't do it. But that's 20 years later that I'm saying that. I would rather see us being prosperous using other means.”

Judy Hoffman, who lobbied for the Ecumenical Ministries of Iowa in 1989, said opponents failed to organize quickly enough to stop gambling interests from establishing a low-stakes beachhead from which they launched runaway expansion to the point where Iowa offers one of the widest arrays of wagering opportunities.

“We said that there would be a big expansion and that, indeed, has happened,” Hoffman said. “We have seen local businesses close as a result of that, and we have seen people get in trouble because of gambling.

“I guess we can say that more money has come into the state, and that's a positive, but there have been downsides, and it's harder to calculate the downsides than it is the upsides.”

Wes Ehrecke, head of Iowa Gaming Association, an umbrella group representing Iowa's 14 riverboats and three racetrack-casinos that hold state licenses, said Iowa's 20-year experiment with riverboat gambling has exceeded all expectations “in an extraordinary way.”

A recent study conducted for the state Racing and Gaming Commission indicated Iowa's state-licensed riverboats and racetrack casinos had an economic impact topping $1 billion in 2008, including $293 million spent buying Iowa-based products. The figures do not include three Iowa casinos operating on American Indian land at Onawa, Sloan and Tama.

Beyond the casinos, Ehrecke said, there are spas, salons, convention and meeting centers, restaurants, bars, golf courses, bowling alleys and comedy clubs that have sprung up as entertainment amenities. The gambling activity also benefited community programs funded through the casinos' nonprofit license holders and provided $130,000 to 85 counties that don't have casino entities.

Before any state gaming license could be requested from the state Racing and Gaming Commission, residents of the county where a riverboat sought to operate had to approve a referendum allowing the gambling activities.

Veteran lawmakers who lived through the 1989 riverboat gambling debate remember it as a period of “hard lobbying” in which backers used whatever strategic ploy they could to gain advantage. Supporters rolled snake eyes in their first attempts at passage in both the Senate and the House but eventually prevailed by the narrowest of margins.

Sen. Dennis Black, D-Grinnell, who described himself as a “neophyte” House member in 1989, initially voted against riverboat gambling but was one of four representatives whose vote swing delivered the concept to then-Gov. Terry Branstad's desk.

Black said he was sold on the limited stakes and the tourism appeal of a nostalgic throwback to the glory days of riverboating on the Mississippi River in agreeing to provide mostly border towns the ability to redevelop their downtown areas.

“It was a big lesson for me,” Black said in hindsight.

“It was nothing but the camel's nose under the tent,” he said. “The next thing you knew, it's on a frog pond just outside of Osceola.”

Sen. Mike Gronstal, D-Council Bluffs, an opponent of riverboat gambling, said Iowa became part of a national strategy for gambling interests that had saturated the available markets in Nevada and Atlantic City and were looking for new expansion venues.

“There was significant fear that we were on our way to being a set of slot machines in every bar in the state of Iowa. People worried about that,” said Gronstal, now the Senate majority leader.

“I think people lobbied hard on it, and it took several twists and turns,” he said, noting that a key benefit that helped sell the concept was the fact that licenses were held by local nonprofit groups that guaranteed a share of the proceeds would be kept in the local communities.

Sen. Wally Horn, D-Cedar Rapids, the bill's floor manger in the Senate, said people embraced “family- friendly gambling” that began a “farm club system” for gaming interests as a better alternative than raising taxes to spur needed revenue.