Why Iowa’s casino model has worked

Across the nation, the gaming industry is facing challenges. As a result of increased competition among casinos and less consumer demand, revenues are shrinking and many facilities are being forced to shutter their doors or cut back on staff and services.

Here in Iowa, the market has remained strong because of the Iowa Racing and Gaming Commission's (IRGC) precedent of carefully analyzing demand and current capacity before approving additional licenses. In the past two decades, for example, the IRGC considered six applications in Pottawattamie County and granted two licenses; considered 10 applications after legislative reform in 2004 and granted four licenses; and considered four applications in 2010 and granted one license.

Recently, Bloomberg BusinessWeek highlighted the changing landscape of casino gaming across the nation in an article titled 'Local casinos are a losing bet.” Across the country, from Las Vegas to Illinois, casino revenue is falling. In New Jersey, a state where gambling revenue has fallen 44 percent since its peak, the former Atlantic City Hilton shut its doors. In Ohio, the newly opened Hollywood Casino has cut 17 percent of its total slot machines because of low demand.

In Tunica, Miss., a casino featuring a spa, three pools and a golf course is closing its doors this year because of a drop in revenue - placing 1,300 employees out of work. According to the casino's president, 'There's just too much supply in that market.”

Iowa is not immune to a downturn, but we are better prepared than many other states. During my 24 years as the administrator of the IRGC, I watched the commission deny many applicants with solid financing, experienced management and detailed plans because of the impact they would have on the overall market in Iowa. The commission acted in the face of pressure from well-meaning community leaders and politicians, ultimately deciding what was best for the state of Iowa.

The IRGC precedent is long and it is clear on the issue of market saturation and cannibalization from existing facilities.

In 1995, the IRGC declined to pursue a 'Nevada model” or 'free market” approach that would have provided a license to all six applicants in Pottawattamie County that year. That same year, Eugene Christiansen of Christiansen and Cummings, the firm that was commissioned by the IRGC to conduct a market study in Iowa, said that additional competition in saturated markets would 'wipe out a casino's ability to invest in hotels, theme parks, convention centers.” In 2004, when the Legislature relaxed water and cruise requirements to allow inland communities to be licensed, the IRGC carefully granted four non-competing licenses among 10 applicants.

In 2010, the IRGC once again took a diligent look at the market for gaming in Iowa, granting a license to one of the four applicants that year. The market studies that year pointed out that a facility in Lyon County, which received a license, was attractive because 80 percent of the expected revenue was from out-of-state visitors, causing minimal cannibalization.

The precedent here in Iowa and the national challenges to the gaming industry are clear and unavoidable.

With the IRGC set to make a determination on new licenses for Cedar Rapids and Jefferson on Thursday, it is worth asking the question: Will Iowa continue the long-standing model that has been successful, or adopt an open-market approach that has been favored in Mississippi, Nevada, New Jersey and other states?

l Jack Ketterer of Des Moines is former administrator of the Iowa Racing and Gaming Commission Comments: jkett21@aol.com