116 3rd St SE
Cedar Rapids, Iowa 52401
Home / News / Government & Politics / Local Government
Cedar Rapids casino backers: Gaming regulators shouldn’t protect competitors expanding in market threatening Iowa
C.R. putting together a third try for a state license

Mar. 7, 2022 6:00 am, Updated: Mar. 7, 2022 12:54 pm
CEDAR RAPIDS — Buoyed by optimism and an increasingly competitive gaming industry landscape in their third go to win a gaming license from state regulators, Cedar Rapids casino backers are poised to make their case against longtime opponents who are expanding their operations in neighboring states where expansions threaten to cut into Iowa revenues.
Twice before, Cedar Rapids has gone down the costly and time-consuming path of seeking a license from state regulators to operate a casino in Iowa’s second-largest city and lost. The outcome could vary this time, local gaming interests hope, as they seek to cast Cedar Rapids as part of the solution to stave off competition mostly from recently approved expansions of gaming at Nebraska’s licensed horse racing tracks.
The Iowa Racing and Gaming Commission decided Thursday it will take applications for a Linn County casino license for a third time since 2014 — potentially opening the door for Cedar Rapids to finally secure permission to open a facility. The five-member panel gave staff the go-ahead to advance the application process.
Advertisement
Armed with a sales pitch in the face of staunch opposition from competitors — and with a casino plan years in the making as well as the capital to bring the vision to fruition — Cedar Rapids believes the third time could be the charm.
But the factor of “cannibalization” of existing casino revenues could again come into play and dash City Hall’s casino dreams — unless Cedar Rapids can quell the influence of opposition from existing license holders, who will put up a fight to shield their jobs, investments in amenities and spending to support nonprofits.
Will ‘cannibalization’ sway panel?
As the knives come out to stop Cedar Rapids in its latest casino pursuit, it appears local backers won’t be shy about fighting against old opponents.
Studies presented to the state regulators in January projected new casinos in Nebraska, Illinois and Wisconsin will take a major slice of Iowa’s overall gaming revenues — varying in their estimates of either a $183 million or $256 million revenue drop.
The Innovation Group’s study showed a Cedar Rapids casino would take $61 million a year from existing Iowa casinos, but have less of a “cannibalizing” impact to facilities in the same market than past studies have shown. The analysis found it would pull $43 million from the Riverside Casino & Golf Resort and the Isle Casino Hotel in Waterloo, both within an hour from Cedar Rapids.
Despite that 21 percent drop in combined revenues for the two facilities, the study predicts a Cedar Rapids casino would result in a net gain of $63.4 million in gaming revenue in the east-central Iowa region.
The other socioeconomic study from Spectrum Gaming said “it appears that Cedar Rapids is well served by casinos in Waterloo and Riverside,” warning that adding a Linn County casino “holds the prospect of cannibalizing these two properties significantly.”
These studies are hypothetical. The state regulators would commission a detailed market study for a Cedar Rapids casino, taking into account the number of gaming devices, size and amenities of a proposed property once applications are submitted.
Dan Kehl, chief executive officer of Elite Casino Resorts, which operates the casino in Riverside, has argued the casinos along state lines need support. Elite executives maintain the recent socioeconomic studies mirror past results showing a large share of revenue from a potential Linn County gaming property would come from existing license holders.
In addition to Riverside, his company operates casinos in Davenport and the northwestern Iowa town of Larchwood. It’s also opening casinos in Grand Island, Neb., west of Omaha, and Carterville, Ill., southeast of St. Louis.
The Gazette’s review of the 11 companies that operate Iowa’s 19 state licensed casinos shows a varied corporate footprint.
The largest operator, Caesars Entertainment, controls four Iowa casinos, including the one in Waterloo, among its more than 50 properties around the nation. Several operators have facilities stretching to states east, west and south of Iowa, but none with a footprint as wide as Caesars. Wild Rose is an Iowa-only company with three casinos, and other casinos such as Prairie Meadows in Altoona are independently owned.
Elite’s Nebraska casino, once complete, will be about 150 miles west of Council Bluffs. Harrah’s, a subsidiary of Caesars, has a casino in the works in Columbus, Neb., about 90 miles west of Council Bluffs.
Cedar Rapids Mayor Tiffany O’Donnell said it is was “interesting” that casino operators the commission has previously protected from revenue loss are building across the border in Nebraska.
“All we can do is make sure we make the strongest case for Cedar Rapids, and a part of that story is asking the question: How can we as a state continue to protect a casino that is preparing to compete against us just across the border?” O’Donnell said.
Donyelle DeVore-Kemp, Elite’s chief marketing officer, said in a statement, “Our company is growing but our projects outside of Iowa are far from the Iowa borders and don’t expect to compete for Iowa revenue.”
The Innovation Group study notes that the six Nebraska racetracks eligible for casino gaming are all in eastern Nebraska and names Columbus Exposition and Racing as well as Grand Island at Fonner Park, but states the three casinos of most concern to Iowa are Horsemen’s Park in Omaha and Lincoln Race Course across from Council Bluffs, and Atokad Park across from Sioux City.
Even Iowa casinos far away from Cedar Rapids stand to potentially lose some revenue to a local casino, according to this analysis. So it doesn’t seem beyond the realm that these other Nebraska casinos could pose a revenue threat to Iowa properties.
For instance, the group estimates a Cedar Rapids casino would take $3.7 million in revenue from the central Iowa casinos ranging from approximately 110 to 170 miles away in Altoona, Jefferson and Osceola. Still, though those properties are in central Iowa, the Innovation Group projects an even higher revenue loss of $9.5 million from neighboring states’ gaming expansions.
Despite all the talk of a Cedar Rapids casino oversaturating the east central Iowa market, this region wouldn’t be the only part of the state with three casinos.
There are three in Council Bluffs. Other parts of the state also have several casinos within relatively little distance. There are two in the Quad Cities plus one about 80 miles south in Burlington, and two in Dubuque plus one 60 miles north in Marquette.
Since Cedar Rapids’ past bids for a casino, Elite’s ability to diversify and expand its footprint contributes to its competitive edge, said Jonathan Swain, president of Peninsula Pacific Entertainment, the potential Cedar Rapids casino operating company.
The city of Cedar Rapids has an agreement with the Cedar Rapids Development Group, a subsidiary of Peninsula Pacific made up of mostly local investors, guaranteeing the city’s exclusive support through the application process.
“It's not just Riverside anymore — it's Elite,” Swain said. “It's the name of the company and it's not one single asset anymore, and so that gives them the ability to hold against the competition from a potential Cedar Rapids facility better than it did the last time around. That harm that it might cause them as an individual property is lessened by the fact that their base is so broad and they're entering some of the competitive markets that are actually of concern to Iowa.”
‘A new bar’ for Iowa casinos
Cedar Rapids’ gaming interests are seizing upon the Innovation Group’s findings that a Linn County casino could boost state industry revenue by $51.8 million, helping lessen the fiscal blow from out-of-state competition.
In light of the expected revenue threat from neighboring states, O’Donnell said the state will need increased competition.
“I think the commission will rely heavily on data and be impressed with the size, scale and quality of this project,” O’Donnell said. “It will be a state-of-the-art, first-class facility that sets a new bar for gaming in the state.”
Declining to offer details about the location and amenities to be included in the proposal, Swain has said this project would be a significant investment — the “biggest and best” of the proposals his group has put forward, and one that could push other casinos to improve.
Communication with the commission is key, Swain said, and he was hopeful that an entirely new slate of commissioners — free of past Linn County license deniers — would be more receptive to Cedar Rapids’ pitch. So far, he said the Cedar Rapids team has conveyed its understanding of the market and why there is “a great opportunity” for a casino now.
Swain’s company also recently sold control of its Sioux City casino and eight other properties in Virginia and New York to Churchill Downs Inc., the racing, online wagering and gaming company anchored by the iconic Kentucky Derby. The $2.5 billion deal is expected to close by the end of this year.
That would make the Linn County casino the “cornerstone” property of Peninsula Pacific, Swain has said.
Next steps
At Thursday’s meeting, the gaming commission agreed to set a timeline and application details at a future meeting, likely in April or June. It’s likely staff would recommend following an approach consistent with historical processes, commission administrator Brian Ohorilko said.
Steps could include site visits, presentations by applicants on the size and scope of project, another presentation to show financing is lined up, a background presentation by the Iowa Division of Criminal Investigation and meeting for community public comment and for those in support or opposition.
These steps typically occur through the course of the nine scheduled commission meetings a year, he said, so the evaluation process could take anywhere from six to 12 months once applications are received.
Commissioners could weigh a variety of factors in their decision to award or deny a license. They could consider the out-of-state competition, the impact on existing operators, community support, the applicant’s compliance record and the economic boost to state and local communities, among other factors.
“It is up to the individual commissioners to look at those factors and then apply different discretion or different weight based on those factors,” Ohorilko said.
Should the commission support a proposal, Swain thinks the Cedar Rapids Development Group has positioned itself well to ward off competing projects, having spent years drafting a plan.
Ohorilko said Peninsula Pacific Entertainment’ $2.5 billion transaction with Churchill Downs “would put Peninsula in a good position in terms of being able to demonstrate that they have a financial ability to build a project,” plus the backing from the city team helps indicate community support.
The panel decided to take Linn County applications in recognition that voters in the county had approved the gaming referendum twice, allowing cities to try for a license in perpetuity.
When commissioners denied Cedar Rapids a license in 2017 and the cannibalization argument won out again, then-Mayor Ron Corbett told The Gazette the commission “should have told us at the beginning, ‘Hey guys, don't bother because nothing has changed.’”
As the panel set in motion the licensing process once more, the local casino backers left the Lakeside gaming property in Osceola where the meeting was held with renewed optimism that the commissioners wouldn’t head down this path a third time, only to deliver Cedar Rapids the same result.
Comments: (319) 398-8494; marissa.payne@thegazette.com
Balloons float above a table Nov. 2, 2021, during a Linn Wins watch party at the Double Z Bar and Grill in Cedar Rapids. Linn County voters approved a measure allowing gaming in the county, opening the door to future applications for a license to open a local casino. (The Gazette)