Would a Linn County casino ‘cannibalize’ Iowa’s gaming industry? State panel asks to study market

ALTOONA — State regulators said Monday they would commission a market study and soon consider a timeline to take applications for a Linn County gaming license after a two-year state pause on new licenses recently expired, opening the door for Cedar Rapids to try again for a casino.

The five-member regulatory commission met Monday at Prairie Meadows Casino and Hotel, where the panel directed staff to seek a vendor to conduct a study on how a Linn County casino would impact Iowa’s gaming industry.

The Iowa Racing and Gaming Commission, which oversees Iowa’s 19 state-licensed casinos, also set a special virtual meeting for Friday morning to discuss details about the application for a Linn County gaming license.

Commissioner Alan Ostergren said it would be important for the panel to be “deliberate” in making a decision.

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“The licensing process, it’s not a scoring rubric in the administrative code,” Ostergren said. “We’re not going to assign points in different categories. It will be important for us to get as much information as we can” from potential applicants and the community, he said, to do “what’s in the best interest of the gaming industry, the community, the state.”

In directing a market study, commissioner Daryl Olsen said the study should look specifically at Linn County and statewide effects of a casino there. That would explore whether a market is over- or underserved by casinos and how it might affect existing gaming revenue.

“It’s something that we stay focused, deliberate … that we don’t rush things but we don’t drag it out,” Olsen said.

Planning underway during pause

Iowa lawmakers in 2022 passed a two-year moratorium halting new licenses, but failed to extend the pause when the legislative session adjourned in April. The moratorium put the brakes on Cedar Rapids’ third attempt, as the commission in 2022 had decided to take applications for a Linn County license when the legislative pause took effect.

The regulators moved to consider applications again after Linn County voters in 2021 passed a public referendum authorizing gaming in the county on a second-consecutive vote. That allowed casino backers to seek a license in perpetuity, so the measure won’t have to come to voters again.

Peninsula Pacific Entertainment, a national gaming operator and the city’s preferred developer, and the nonprofit Linn County Gaming Association plan to jointly apply for a gaming license with the commission within a month. It’s unknown if other developers will submit a proposal.

Still, Cedar Rapids casino backers have to clear a tall hurdle to receive a license. The panel rejected licenses in 2014 and 2017. Regulators said in part that a Cedar Rapids site would threaten other casinos in the region, including the Riverside Casino & Golf Resort, and “cannibalize” their revenue.

But an entirely new panel will consider awarding Linn County’s license. All five members of the panel have cycled off since the Cedar Rapids application last went before the commission for a vote.

In 2022, the commission unveiled market studies showing Nebraska’s gaming facility growth along Iowa’s western border would eat into industry revenue in Iowa, which Cedar Rapids gaming interests have argued should lead to regulators approving a casino in Iowa’s second-largest city.

They’ve downplayed the risk of “cannibalization” of the market that encompasses the casinos in Waterloo and Riverside, instead pitching a Cedar Rapids casino as a solution for Iowa to stave off competition from Nebraska’s gaming facilities.

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“I think every time someone looks at something that’s such a close situation, they have an opportunity to evaluate it objectively, look at it. That’s all we ask,” said Jonathan Swain, a Peninsula Pacific Entertainment board member. “I think that this commission, this time, this application — we’ve gotten so close in the past and I think this is the time we hopefully push it over the line.”

What’s in the proposal?

Hoping the moratorium would expire this year, the Cedar Rapids City Council last year signed off on a deal to set aside land in the northwest quadrant near downtown for a potential casino, should state regulators award a license. The agreement lasts through Dec. 31, 2025, but could be extended if the commission is actively considering issuing a Linn County license.

The option-to-purchase agreement with the Cedar Rapids Development Group — an entity of mostly local investors — set aside city-owned property between F and I Avenue NW and First and Fifth Streets NW to be purchased and redeveloped into the Cedar Crossing Casino. This was the site of Cooper’s Mill, home to a motel and restaurant, before it was destroyed in the 2008 flood and later demolished.

Peninsula Pacific Entertainment previously shared plans to build a $250 million, 160,000 square-foot gaming and entertainment complex at the site. The developer paid the city $165,000 for the option to purchase the property. The plans call for flood protection infrastructure along the west side of the Cedar River.

Swain said the development team has continued to acquire real estate and tweak the proposal throughout the pause on new licenses. That included the former Diamond V facility on G Avenue NW that caught fire last week, and at which another fire was extinguished Monday morning. The building was placarded June 26, and will have to be demolished, Swain said. In the meantime, he said the facility will be secured “to make sure that something that happened last week doesn’t occur again.”

The development team plans to put forward a similar casino proposal, he said, with all original planned partners still involved.

“I think that just shows a lot of resilience on everyone's part to have the patience that’s needed in a process like this,” Swain said.

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But he said more specific details will be kept “close to the vest for the actual final reveal” once the commission decides on a timeline and the group submits an application.

Developer promises ‘game changer’ casino

If granted a license, gaming interests say the casino would support local nonprofits by contributing 8 percent of its annual gaming revenue to the Linn County Gaming Association to divvy up. Iowa requires that licensed casinos donate at least 3 percent of revenue to nonprofits each year. This would be the highest percentage of nonprofit allocations in the state.

Linn County Gaming Association President Anne Parmley has said Cedar Crossing would be able to commit $5 million to $7 million of its revenue to nonprofits annually.

She said Monday the application process will involve “where our commitments will be to the community,” but didn’t identify specific causes.

“In broad terms, it’s going to be about supporting our nonprofits … that are there to support people in need, to make the community more vibrant, to help people with a hand up in the world,” Parmley said. “I think we’ll be able to help tremendously in the underserved populations of both Cedar Rapids and across Linn County.”

The Cedar Rapids Development Group’s deal with the city doesn’t preclude others from applying for a gaming license, but gives the group a boost in the process as the commission factors local support into its decision.

“Our commitment to Cedar Rapids was to do a project that was really inspiring to them and have the size and the types of amenities that are going to be a game changer is still our commitment,” Swain said. “Number one nonprofit (revenue) share in the state, still our commitment. All of our revenue shares with the city, still our commitment.”

Comments: (319) 398-8494; marissa.payne@thegazette.com