Iowa lawmakers put brakes on Cedar Rapids casino license

DES MOINES — With Cedar Rapids casino backers on the cusp of applying again for a state license, the Iowa Legislature with scant notice Monday approved a moratorium on issuing any new approvals for casinos for two years.

The moratorium, a new topic that came up in what appears to be the last days of the 2022 legislative session, is part of House File 2497, a broader law on gaming and regulations. The bill was passed 35-11 in the Iowa Senate and later 60-23 in the Iowa House. The measure needs Gov. Kim Reynolds’ approval to become law.

If it becomes law, the hiatus would thwart Cedar Rapids’ third try for a casino until July 2024. State regulators previously denied a gaming license to Linn County in 2014 and 2017.

“It’s incredibly disappointing that this can happen seemingly in the dark of night without the city to even have the opportunity to respond,” Cedar Rapids Mayor Tiffany O’Donnell said after the vote. “It’s disappointing knowing the voters wanted the casino, the amount of time money and effort from investors as well as from the governor’s appointed Racing and Gaming Commission, that something like this can happen so quickly without any of us knowing about it.”

Jonathan Swain, president of Peninsula Pacific Entertainment, the potential Cedar Rapids casino operating company, said local investors in the project believe that as long as they are patient, the outcome will be positive.

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 until 2029.

“Whenever that opportunity is given to us, we will make sure we take full advantage of it and bring one of the best casinos in the state of Iowa to Linn County,” Swain said. “Obviously, today's events came as a surprise to us, and we still will keep that commitment to Linn County and remain focused on the future and the opportunity when it arises.”

Wes Ehrecke, president and chief executive officer of the Iowa Gaming Association, which represents Iowa’s 19 state-licensed casinos, said the group is supportive of the moratorium.

Rep. Bobby Kaufmann, a Republican from Wilton who chairs the committee through which the bigger gambling bill passed, said he is concerned that at 19 state-licensed casinos — and 23 total — Iowa’s gambling market is saturated. Kaufmann said he is concerned about the potential impact market saturation could have on the casinos’ donations to local nonprofits.

“It’s pretty much at its equilibrium point of where anything beyond what we have is cannibalization,” Kaufmann said.

Market saturation is one of the factors the Iowa Racing and Gaming Commission considers when it reviews casino license applications.

Rep. Steve Hansen, D-Sioux City, said the amendment was “reactive instead of proactive,” and that the move could give Nebraska more of a lead in growing gaming — threatening casinos in Western Iowa especially. He said it was unfair to shut the door on some communities having casinos while allowing others to operate them.

“I think we're going to end up wanting to increase licenses elsewhere in the state of Iowa to pick up that revenue that we're going to lose,” Hansen said. “So I think this amendment as far as the moratorium, part of it is very shortsighted.”

Linn County casino

The gaming commission in March announced it would again take applications for a Linn County casino.

Commissioners indicated they were advancing the process to explore a potential gambling facility after Linn County voters last November for the second time passed a gaming referendum allowing the county to seek a license from regulators in perpetuity.

Brian Ohorilko, the commission administrator, said the commission anticipated having an item on its June 2 agenda setting an application due date for a Linn County casino. But the moratorium would take effect June 1 if signed into law.

“The commission will be closely monitoring any of the action steps taken by the Legislature and that can certainly have an impact on those conversations next week,” Ohorilko said.

Sen. Roby Smith, a Republican from Davenport, ran the amendment for the moratorium.

Rhythm City Casino Resort, one of the Elite Casino Resorts properties operated by Chief Executive Officer Dan Kehl, is located in Davenport. Kehl has been a staunch opponent of a Linn County casino, arguing it would “cannibalize” existing facilities, including an Elite casino in Riverside.

O’Donnell did not name Kehl, but said, “I have to wonder that there are those who also saw things going our way and decided to step in at the eleventh hour to eliminate even the potential of us applying for a license. This 11th-hour action tells me that there are those who also believed we were close to getting this done and they wanted to stop at nothing to make sure it didn’t happen.”

Cedar Rapids officials have argued “the time is now” to encourage competition in the gaming industry as Nebraska and Illinois expand gambling, and hoped the state would opt not to protect companies such as Elite that are expanding their business across state lines.

The investor team had not yet shared its location for a Cedar Rapids casino. City Manager Jeff Pomeranz said the city will not give up on a gaming facility, but the city team and investors would have to further discuss whether to earmark a location for a casino, as it previously did with the city-owned land along First Street SW and First Avenue W that’s now instead becoming a project with restaurants, housing, hotel rooms and a brewery

“We’re very committed to a downtown or adjacent to downtown location, and so we don’t plan on making any quick decisions,” Pomeranz said. “We will evaluate that over time working with Jonathan Swain and the Peninsula Pacific Entertainment team before any such decision is made. We’re not abandoning this plan.”

Commission’s role questioned

Iowa Code states the gaming commission “shall decide the number, location, and type of gambling structures” licensed in Iowa. If that were to change, Ohorilko said the panel would administer gaming in accordance with the law.

Swain said “it’s always been the commission’s ability to review and grant licenses” and that should remain under the panel’s purview.

“We’ll continue to strengthen our resolve to make sure this happens not only for our company but for the citizens of Linn County,” Swain said.

Rep. Kirsten Running-Marquardt, a Democrat from Cedar Rapids, called the proposed moratorium “unfair and unjust,” and said lawmakers should defer to the Racing and Gaming Commission’s process for considering new casinos rather than dictating whether the commission can grant any new licenses.

But Kaufmann said it is up to commission to enforce the laws that the Legislature passes. “We passed sports wagering with the caveat that we told the Racing and Gaming Commission how to enforce sports wagering. So (now) we’re telling them, ‘Continue to do your job of monitoring the current environment, but that the state legislature wishes to cap that environment for two years.’”

Comments: (515) 355-1300, erin.murphy@thegazette.com

James Q. Lynch of The Gazette’s Des Moines Bureau contributed.