What Cedar Rapids can learn from Sioux City's urban casino

SIOUX CITY — As the license for the Argosy riverboat casino was expiring a few years ago, Sioux City officials wanted to renew it but move gambling to downtown, which was undergoing a renaissance but still had pockets of blight and missed opportunities.

Officials saw the riverboat as mostly benefiting itself and drawing only gamblers. But they saw wider economic potential in folding a casino into the fabric of the downtown grid. The Hard Rock Hotel and Casino, the winner among three applicants, wooed the community with promises of concerts, restaurants and tourism, and of lifting up the whole area.

Developers built in the rundown southwest edge of the business district on land between Pearl, Fourth and Third streets. The casino, decorated with signed guitars and memorabilia of rock n' roll legends Jimi Hendrix, Slash, Michael Jackson and others, opened in August 2014.

'They promised a lot of things, and they came to fruition,' Tom Padgett, who was serving on the City Council at the time, said looking back three years later.

The council supported having a downtown casino but never endorsed a favorite. The Iowa Racing and Gaming Commission made the decision.

The Hard Rock is Iowa's first and only land-based downtown casino, which is an increasingly popular model in the gaming industry for its ability to drive foot traffic and investment in city cores. Urban casinos have sprung up in large and small cities, including Cleveland, Baltimore and Springfield, Mass.

The Sioux City Hard Rock could serve as a benchmark for what Cedar Rapids might expect if the gaming commission approves a license for the city in November.

Three applications have been submitted, including the $40 to $55 million 'boutique' Wild Rose Cedar Rapids on First Avenue SE adjacent the Skogman building; the $105 to $118 million Cedar Crossing Central in a skydeck tied into the DoubleTree Hotel and U.S. Cellular Center; and the $165 to $187 million Cedar Crossing on the River on First Street SW, which is nearly identical to the project rejected by a 4-1 gaming commission vote in 2014.

Cedar Rapids and Linn County officials, who are backing the Cedar Crossing options, and casino developers promise jobs, tax money to upgrade public facilities including a dated parking ramp, and help filling the city-owned DoubleTree Hotel, U.S. Cellular Center and downtown businesses.

Gaming regulators are slated to tour the three sites Tuesday morning, followed by a public hearing before the commission at 1 p.m. in ballroom BC at the DoubleTree, 350 First Ave. NE.

In Iowa, casinos for years had been restricted to riverboats and Native American reservations. As laws softened, casinos remained confined to the edges of towns and rural areas, so-called 'cornfield casinos.' But as attitudes toward gambling have changed, public officials and business leaders have seen opportunity in adding a casino to their downtowns.

'They say, 'Money is leaving when our residents are going elsewhere to play, and we are not getting any jobs,'' said Jacob Miklojcik of Michigan Consultants, who studies gambling trends. 'Then they said, 'Why not us?' And that is really what happened.'

A 2007 thesis by Luke J. Schray, a graduate student in urban planning at the Massachusetts Institute of Technology, noted, 'As the stigma of gambling fades and governments seek more sources of revenue, the urban casino is becoming more common.'

Andrew M. Klebanow, of Global Market Advisors, wrote a 2015 white paper on 'Casinos and the City.' He pointed out how the Midwest has been slow to acknowledge the potential of urban casinos to contribute to other industries and business in a downtown.

'With each successive generation of casino development, casinos in cities further enhance the economies of their surrounding areas,' he said in an email. 'They remain a work in progress.'

He said the Diamond Joe Dubuque casino is an example of a 'new generation urban casino.' In this case, the casino was built near the city's harbor, which is near but not in the downtown core. The casino was part of a master plan development designed to bring people to the new waterfront district within proximity to a convention center, he said.

Sioux City's Hard Rock developers, which include Bill Warner, of Sioux City Entertainment, and Brent Stevens, of Peninsula Pacific Partnership, which is the lead investor in the two Cedar Crossing concepts, spent $128.4 million building the complex.

The 30,000-square-foot gaming floor includes 28 table games and 883 slot machines. The old Battery Building warehouse was renovated into an attached 54-room Hard Rock hotel, with original wood beams.

The complex includes an upscale restaurant with patio facing the street, a cafe, a buffet, themed bars, an indoor 400-800 capacity theater and an outdoor theater holding up to 5,500 people where Journey, Willie Nelson, Alanis Morissette and others have played. The complex hosts four events a week and about 200 per year.

The Hard Rock is most comparable in scale to Cedar Crossing on the River, the largest of the proposals. It includes 840 slots and 30 table games, four restaurants and bars and a 400-seat entertainment venue.

The other two proposals have considerably smaller gaming operations. Cedar Crossing Central has 550 slot and 15 table games, and Wild Rose has proposed a range of 500 to 700 slots and 10 to 20 table games.

While Cedar Crossing Central includes two restaurants and bars, it lacks entertainment venues, although it promises to book at the connected U.S. Cellular Center. Wild Rose has a show lounge area with seating for 358 people, but has touted the fact it has no dining or major amenities besides gaming.

Tom Timmons, Wild Rose president and chief operating officer, explained the concept when the project was introduced last year — that the casino would complement the surrounding restaurants, bars and entertainment venues, not compete with them.

Megan Luedders, advertising manager for the Hard Rock, said the organization has tried to be a good community partner and has 'strategically made sure we have complementary things, our own niche.'

For the Hard Rock, business has been good. Shortly after opening, it began a $6.2 million, nearly 8,000-square-foot expansion to include a high-roller lounge, gaming area and wine bar. It also is contemplating another expansion, although no plans have been announced.

In its first full year, fiscal 2015, the casino generated $78.5 million in adjusted gross revenue and increased to $82.7 million in fiscal 2016, though admissions slipped from 2.1 million in 2015 to 1.8 million in 2016. Taxes paid increased $413,391 each to the city and county, according to the Iowa Racing and Gaming Commission fiscal 2016 report.

'It's made a tremendous difference to the whole area,' said Marty Dougherty, the economic development director for Sioux City. 'The increase in tourism dollars, others who invested capital to improve their properties, more entrepreneurs in the downtown, a growth in market-rate housing — we just didn't see that before.'

Since 2011, the area has seen 30 projects completed — primarily renovations, such as Stoney Creek Hotel and Conference Center, Holiday Inn and several bars and restaurants, resulting in more than $2.3 million in new property value, an 81 percent increase.

The $7 million LaunchPAD Children's Museum has had 130,000 visitors since opening in February 2016. The new Pearl Street Park is currently under construction nearby. Meanwhile, the city pledged $22 million in public works improvements paid for through the new casino tax revenue.

Dozens of new housing units have come online, and a developer has announced plans to convert a towering old brick warehouse marked Bekins Moving and Storage into a 70- to 75-unit apartment complex, Dougherty said.

'It's not all attributable to the Hard Rock, but it's helped draw interest,' Dougherty said.

Mayor Bob Scott added, 'There was no reason to come downtown before. This was a deteriorating neighborhood, and it's turned around. That's for sure. We are seeing a renaissance.'

But not all like having a casino there.

Korey Smith, owner of Albrecht Cycle a block away from the casino, questioned the type of visitors it attracts and said he felt as if the casino tried to take over community events.

'The only thing I've seen is more litter, more cigarette butts, and the smell of smoke blows down the street,' he said.

Like at most casinos, smoke clouds the gaming floor even with special vents designed to push fresh air through.

Smith said he's gotten virtually no business boost from the casino.

Early on skeptics worried the Hard Rock would cannibalize business from other bars, restaurants and entertainment options in Sioux City, and kill other parts of town such as a historic area of Fourth Street. That hasn't happened, local leaders said.

'In my opinion they held up their end of the bargain,' said Rick Bertrand, a Republican state senator and Sioux City developer who pushed for the downtown casino. 'We haven't seen an increase in drugs or prostitution or a downtown stigma. It's been a shot in the arm.'

Bertrand bought five rundown properties on Pearl Street near the casino for $197,000 in 2009 and 2010, and rehabbed them so they are now home to new bars and restaurants. They were assessed at a combined $912,000 this year.

He said the casino has done a good job of not competing directly with merchants and 'leaving meat on the bone.'

On Fourth Street, Liz Mousel bartends at Work & Church, which opened a month before the casino did and faces the property.

'It helps bring people in,' she said. 'When they have events, some nights you can't even get in here it's so busy.'

Mousel credited the casino operators for being good neighbors and sponsoring a variety of fundraisers and community events.

Rick Swanson saw the popularity of the area and opened Crash! Boom! Bang! Whiskey Hole next to Work & Church last spring.

'It benefits everybody because it brings other people in to town,' Swanson said. 'You don't even have to gamble. You could go for dinner at three places, see a show and not put a dime in the machine.'

l Comments: (319) 339-3177; brian.morelli@thegazette.com

HEARING TUESDAY

What: Iowa Racing and Gaming Commission meeting and public hearing on Cedar Rapids casino proposals

When: 1 p.m. Tuesday

Where: Ballroom BC at the DoubleTree Hotel and Convention Center, 350 First Ave. NE