Government

Downtown Cedar Rapids casino could still be in the future

City isn't folding yet on finding another location

The site of the proposed Cedar Crossing casino in Cedar Rapids. (The Gazette)
The site of the proposed Cedar Crossing casino in Cedar Rapids. (The Gazette)
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CEDAR RAPIDS — As Cedar Rapids turns the page on land that for years was earmarked for a casino that never came, many say they still want a gambling facility.

And that begs the question — what are the prospects for trying again to have a casino in the city’s future?

Last Tuesday, the Cedar Rapids City Council approved asking developers to propose a master development for 8 acres of vacant city-owned land at First Avenue W and First Street SW, anchored by amenities, to create a new attraction to downtown and a sense of place with architecture, walkability and public space.

However, “we are not closing the door on a downtown casino. There are other sites in the downtown,” said Jennifer Pratt, the city’s community development director. “This location is prime for redevelopment and has received a lot of interest. It is important that we build on the momentum and continue the reinvestment and development in our downtown.”

Whether Cedar Rapids eventually will land a casino, in some form, is impossible to predict. State regulators have already rejected the idea twice.

But a few milestones — potential changes in the state panel that awards gambling licenses, monthly revenue reports from newly legalized sports betting and an expiring Linn County gambling referendum — could bring casino plans back to the forefront in the next several months.

The Iowa Racing and Gaming Commission cited a saturated market and cannibalization of casino revenue from Riverside and Waterloo when it voted 3-2 in 2017 and 4-1 in 2014 against a Cedar Rapids casino.

Casino still wanted

As city officials have engaged members of the public in what they’d like to see on the land, many still come back to the possibility of a casino.

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“Hold out until they allow a casino to be built there,” Debbie Horak urged in response to an online request for ideas. “Big bucks for the city and it’s the best location for advertising along the interstate.”

Gene Baez, in the same thread on Facebook, posted that “the people of Cedar Rapids want a casino.” And, Jade Ryan added, “A casino. That’s what we want, Cedar Rapids.”

Mayor Brad Hart said the City Council — which as of January will have replaced six of the nine members from 2017 — has not discussed its interest or support for a casino, in part because no one has brought forward a project — or even really brought up the topic, he said.

“This does not rule out a casino,” he said. “There’s lots of places to put a casino. ... We would be fine with a casino and we are fine without one.”

While the proposed $165 million Cedar Crossing on the 8 acres at First and First W, as the site now is branded, had generated the initial interest in a casino leading up to the 2014 vote, in 2017 that was one of three applications. Two of them were for smaller casinos at other sites downtown.

The Cedar Rapids Development Group, in partnership with Peninsula Pacific, applied for Cedar Crossing and also for a $105 million Cedar Crossing Central attached to the DoubleTree by Hilton Hotel.

Wild Rose, which has other casino locations in Iowa, applied for a $40 million “boutique” casino on the opposite side of First Avenue, by the Skogman Building.

A new champion

A champion would need to emerge with a casino proposal — as well as someone to lead a campaign to pass another gambling referendum in Linn County, which expires in 2021.

Like before, that likely would be expensive and controversial.

Linn County residents overwhelmingly passed a gambling referendum by a 22-point margin, 61 to 39 percent, in March 2013, after a vitriolic $2.2 million campaign.

This legalized gambling in the county for eight years — provided the state would license it.

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If voters pass two consecutive referendums, the matter would not have to come before voters ever again.

Brian Ohorilko, administrator of the Iowa Racing and Gaming Commission, said the law is ambiguous with respect to whether such a vote would need to occur before March 5, 2021, or just sometime within the 2021 calendar year.

Steve Gray, as leader of the Cedar Rapids Development Group, initially proposed the casino and also led the 2013 referendum. He did not return a message seeking comment last week, and no one else has yet stepped forward with interest in a casino or leading the referendum.

‘for the long haul’

Key players have remained largely silent, but some factors suggests interest remains.

The Cedar Rapids Development Group, which is made up of many mostly local investors, is paying the city $75,000 a year as part of a 10-year memorandum of understanding through 2029. Under the agreement, the city would exclusively support the group in a casino license application. It is not tied to a specific location.

The group could end the agreement at any time but the city does not have an option to back out. The group has paid $225,000 so far and is paid up through June 2020, Pratt said.

“We are in this for the long haul,” Jonathan Swain, of Peninsula Pacific, said immediately after the vote in 2017.

He added that 2019 or 2020 might be the right time to reapply if some key changes took place, including having new members on the commission, a new financial outlook for the state and changes in the casino industry.

On Friday, he said in a statement his group still is “very interested” and believes a casino would benefit the community.

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“As an Iowa-based company, we appreciate our relationship with Cedar Rapids through our exclusive memorandum of understanding agreement,” he said. “We will continue to review our options and are supportive of passing the referendum in 2021.

Jamie Buelt, a spokesperson for Wild Rose, said Friday that officials there continue to believe Iowa’s second-largest city deserves a casino — but they have no active plans to seek one.

“Nothing has changed since the last time applications were taken,” Buelt said. “There are three ‘no’ votes on the commission, and it doesn’t make sense financially or regulatorily to launch another campaign for a license until there is something different.”

New perspective?

The gambling commission could be on the verge of a nearly entirely new cast, compared with the 2017 lineup.

The terms of Jeff Lamberti of Ankeny and Carl Heinrich of Council Bluffs expire on April 30, 2020. Lamberti and Heinrich opposed a gambling license for Cedar Rapids in 2014 and 2017.

Unless they are reappointed, this would leave only Kristine Kramer of New Hampton, the current chairwoman who also opposed the plans both times, as the only holdover. Her term expires in April 2021.

Richard Arnold of Russell and Dolores Mertz of Algona, who both favored a Cedar Rapids license, previously cycled off the board.

Julie Andres, a Republican from Okoboji whose term expires in April 2022, and Pennie Gonseth-Cheers, a Democrat from Afton whose term expires in April 2021, make up the rest of the commission.

Another new factor could be legalized sports wagering in Iowa.

Wes Ehrecke, president of Iowa Gaming Association, said Linn County residents rejected a gambling referendum in 2003, thereby opening the door for casinos in Riverside and Waterloo. And now the market is tight.

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Gambling revenue figures show flat revenue — fractional ups and downs over the last two years for a total of about $1.46 billion in fiscal 2019.

Some question whether sports gambling, which became legal in Iowa in August, could increase casino revenue and potentially ease market saturation.

Ehrecke said sports betting was added by lawmakers as an amenity for casino patrons and to “bring it out of the shadows” of illegal activity. A substantial financial boost from it is unlikely, he said.

The state never conducted a market forecast for sport betting, but a study of sports betting impact on casinos in Las Vegas showed only a 2 percent revenue jump.

“Is that enough of a bump?” Ehrecke asked. “Many would contend not.”

Sports gambling in Iowa saw $46.5 million in wagers in October, up from $38.5 million in September. During this time, the number of Iowa’s 19 state-regulated casinos offering sports betting increased from 15 to 18, but only seven offered online sports betting.

At its meeting Thursday, the Racing and Gaming Commission authorized a sports wagering license for a 19th casino, Casino Queen Marquette Inc.

Ohorilko said informal feedback suggests the sport betting revenue so far is better than expected. Attendance at the casinos is up slightly, and there appears to be ancillary benefits on table games, he said.

But, he wondered, is this a byproduct of the newness of sport betting and would it continue?

Ohorilko and Ehrecke said it could take a few years to get an accurate baseline for sports wagering revenue.

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They have yet to see what happens to revenue after the end of football season and NCAA’s March Madness, two of the most popular sports gambling events. Also, the sports wagering market still is maturing.

How online sports betting impacts in-house slot and table games is another question.

“This is not necessarily a case where it would generate a lot of money for the state,” Ohorilko said. “This is a low-margin business.”

Comments: (319) 398-8310; brian.morelli@thegazette.com

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