Iowa commission denies request to pause Cedar Rapids casino license

DES MOINES — Iowa’s Racing and Gaming Commission voted unanimously Monday to deny a request by Riverside Casino & Golf Resort to immediately pause issuance of a gambling license in Linn County.

Riverside Casino & Golf Resort and the Washington County Riverboat Foundation — its nonprofit affiliate and gaming license holder — asked both the IRGC and Iowa court last week to immediately pause approval of the license to build a Cedar Rapids casino.

The casino in Washington County argues state regulators lacked the legal authority to issue the license and ignored their own regulations in granting approval to build the proposed $275 million casino and entertainment center near downtown Cedar Rapids.

The Cedar Rapids Development Group broke ground on the new facility Friday.

Riverside Casino, in court filings, argues the Iowa Racing and Gaming Commission “did not have lawful authority to issue this license under Iowa Code § 99F.7 (11), and its purported issuance was, otherwise, unreasonable, arbitrary, capricious, and an abuse of discretion.”

Under Iowa law, the IRGC may issue a license to conduct gambling games only after voters in the county approve the conduct of gambling games.

The Iowa Racing and Gaming Commission last month declined to decide whether a 2021 Linn County gambling referendum allows a casino to be built in Cedar Rapids.

The referendum ballot language said gambling "may continue."

Riverside Casino & Golf Resort, which a market study suggests could lose more than $30 million of revenue annually if the Cedar Rapids casino is built, contends that the approval for gambling is invalid because gambling had never begun in the county.

It asked the commission to issue a declaratory order that said it lacks the authority to issue a gambling license in Linn County because of the invalid language. The commission voted 4-1 Jan. 23 to refuse the request.

Riverside appealed, filing a petition for judicial review in Washington County District Court, and requested the Iowa Racing and Gaming Commission stay the license.

Commissioners unanimously denied the request on Monday, saying the issue is one for Iowa courts to decide.

“I don't see that the challengers to the license … are deprived of their ability to go to the court for judicial review, if we deny a stay,” Commission member Alan Ostergren, an attorney and Republican from Altoona, said during Monday’s IRGC meeting.

Ostergren last week raised concerns about the validity of the 2021 Linn County gaming referendum and the legal authority of the commission to grant the license. He also cited potential disruption to existing casino operators in the state in voting not to grant a Cedar Rapids casino license.

“The court itself can issue a stay if the court believes the judicial review … would somehow cut off the ability to immediately review the grant of the license. And that's something I think a court is well equipped to deal with,” Ostergren said. “We're not the final question on that. But as a member of this commission sitting here, even though I disagreed with the grant of the license in the first place, I don't believe that the challengers are going to be prevented their day in court if we don't issue a stay today. And they can get that relief from a district court.”

Commission Chair Daryl Olsen, a Republican from Audubon, said at IRGC’s meeting Thursday that after consulting with commission legal counsel and a representative from the Iowa Attorney General’s Office, “a majority of the commissioners are satisfied that we have the authority to move forward and make this decision.”

Riverside petition: Linn County license ‘unlawful and unreasonable’

Riverside Casino and its nonprofit license holder assert commissioners ignored the IRGC’s own regulations that require the commission to consider the economic impact of any newly issued license on existing licensees and the state of Iowa.

Marquette Advisors of Minneapolis estimates a Cedar Rapids casino would result in a loss of $34 million — or about 26 percent — of gambling revenues from Riverside in 2029.

Karlyn Ollendick, chief financial officer of Elite Casino Resorts, which owns and operates Riverside Casino, states in an affidavit filed with the court, such a loss would force Riverside to reduce its workforce by at least 200 people.

“That would have a dramatic impact on the community in Washington County,” according to the affidavit.

Market studies ordered by the commission say a proposed Cedar Rapids casino would largely rely on pulling patrons and revenue from other Iowa casinos, but add approximately $60 million in net new gaming revenues to Iowa annually.

Despite concerns about market saturation and “cannibalization,” commissioners cited the project's economic benefits — including job growth and new tax and gaming revenue — and community support.

“Although the net economic impact of the Linn County Casino on the state of Iowa, especially on rural communities and casino licensees, is negative, a majority of the Commissioners simply ignored this fact, opting instead to focus solely on the positive impact of the Linn County Casino on Linn County, in contravention of legislative intent and administrative rules,” the court petition states.

“The IRGC’s issuance of a license for the Linn County Casino is a gross abuse of authority, unlawful, and unreasonable. The Court should prevent this abuse of power and unlawful act. It should stay the effect of the issuance of the license, and then reverse the issuance of the license.”

Riverside Casino is seeking an immediate pause on the issuance of a gambling license in Linn County and “any and all actions or activities in reliance on the vote to approve of the application for a license” during the judicial review, including construction.

It asked the court for expedited consideration of the motion, based on news reports that Peninsula Pacific Entertainment intends to move quickly on construction.

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Casino backers: No ‘emergency’ requires expedited action

Attorneys for Cedar Rapids Development Group, a subsidiary of casino operator Peninsula Pacific Entertainment, and the Iowa Racing and Gaming Commission filed motions asking the court to deny Riverside’s requests for “ultra-expedited relief.”

A status conference with the Court and attorneys was held Monday morning.

Cedar Rapids Development Group, in court filings, contends “there is no ‘emergency’ present here nor any need for this Court to take ultra-expedited action on a stay request,” and that legal arguments in the case can be “considered on a reasonably prompt timeline.”

“Additionally, Plaintiffs’ claim of the necessity of an ultra-expedited hearing premised upon construction of the facility is wildly exaggerated and misplaced,” attorneys for the casino developer wrote. “While a groundbreaking ceremony did occur, there is a process and timeline to complete the construction.”

In Cedar Rapids on Friday, Brent Stevens, president of Peninsula Pacific Entertainment, told the crowd at the groundbreaking ceremony to mark their calendar for New Year’s Eve 2026, when the facility hopes to open.

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“A stay preserves the status quo while the legal question of whether the IRGC has authority to issue a license is decided by the courts,” Mark Weinhardt, an attorney for Riverside Casino and its nonprofit affiliate, wrote in a court filing Monday. “If the IRGC’s actions were without legal authority and effect, as the Plaintiffs assert, a stay benefits all interests. Further, a Linn County casino proposal has been in the works for a dozen years. A one or two month stay to protect the status quo and determine the threshold legal question is a small ask in the overall scheme of this project.”

Comments: (319) 398-8499; tom.barton@thegazette.com