Commission rejects Cedar Rapids casino proposal

Members cite impact on existing casinos

Doug Gross (from left), strategic adviser, Investor Steve Gray, Cedar Rapids Mayor Ron Corbett, Cedar Rapids City Counci
Doug Gross (from left), strategic adviser, Investor Steve Gray, Cedar Rapids Mayor Ron Corbett, Cedar Rapids City Council Member Ann Poe, Cedar Rapids City Council Member Susie Weinacht, Investor Drew Skogman, and Cedar Rapids City Council Member Ralph Russell sit dejected as it becomes clear that the Linn County gambling license wouldn't be approved during a meeting of the Iowa Racing and Gaming Commission at the Ameristar Casino Hotel Council Bluffs in Council Bluffs on Thursday, April 17, 2014. (Stephen Mally/The Gazette)

COUNCIL BLUFFS – Rejection hurts, and the Iowa Racing and Gaming Commission's clear-cut, 4-1 vote to deny a state gaming license to the proposed Cedar Crossing Casino on Thursday stung a disheartened Mayor Ron Corbett, who had pushed hard for what he saw as a $174 million flood recovery redevelopment project.

Corbett vanished as the commission ended its meeting in Council Bluffs with its verdict against the Cedar Rapids casino project, and he later said that lingering afterward would not have accomplished anything.

About three hours after the vote, Corbett faulted the commission for leading on the Cedar Rapids and Linn County communities, the casino investors and local government officials with the idea that it was possible to obtain a state gaming license.

“We felt all along that they were encouraging us,” Corbett said. “Now we have a little bit of a feeling that we were misled.”

He said the commission should have told the leaders of the Cedar Rapids investor group, Steve Gray and Drew Skogman, two years ago not to pursue a license for a Cedar Rapids casino if its mindset really had been to “keep the status quo.”

The commission majority, led by Chairman Jeff Lamberti of Ankeny, was unequivocal Thursday in its denial, saying that the commission never in the past ignored
its gaming market studies and it wasn't going to now. The two studies conducted earlier this year concluded that a Cedar Rapids casino would significantly “cannibalize” business from existing casinos, particularly the Riverside Casino and Golf Resort.

Lamberti said Iowa's casino industry never has been a free-market affair, but instead has been a state-regulated industry with the “overarching goal”of creating a “stable and predictable gaming environment” that is “free of significant disruption.”

To grant the Cedar Rapids proposal a license would represent a “substantial change” in the way the commission has worked historically, it would have too large an impact on existing casinos and would put the state's gaming industry at risk of destabilization, Lamberti said.

Before the commission meeting Thursday at the Ameristar Casino Hotel next to the Missouri River in Council Bluffs, Dan Kehl, CEO of Riverside Casino and Golf Resort and a vocal opponent of the Cedar Rapids casino proposal, said that the Cedar Rapids investor group made a last-minute offer to share revenue from a Cedar Rapids casino with the Riverside Casino based on what the Cedar Rapids casino would have brought in and what Riverside would have lost as a result.

Kehl said it was deficient offer and a non-starter. He said Brent Stevens — a member of the Cedar Rapids investor group and a former executive at the Diamond Jo Dubuque and Diamond Jo Worth County — made a similar offer in 2010 to the casino in Emmetsburg as he tried to secure a license for a Diamond Jo Fort Dodge casino. The state commission denied the license.

Before the vote, Brian Ohorilko, administrator for the Racing and Gaming Commission, said that the commissioners were aware of the Cedar Rapids offer to Kehl, but he said the commission could not impose any such agreement on the parties.

After the commission vote, Kehl said he was “grateful.”

“We're glad to get this behind us,” Kehl said. “We're hopeful for our future and looking forward to reinvesting in our facility and our employees and maintaining our status as Iowa's premier Midwest destination casino.”

He acknowledged that the Cedar Rapids investor group led by Gray and Skogman had spent millions of dollars leading up to Thursday's vote, and said, “They would have been more prudent to wait for the (commission's) market studies to come out before launching on their endeavor. But they opted to go the other way.”

Kehl wasn't sure what options the Cedar Rapids group had left, saying the commission's decision was pretty clear.

“I don't think anything is going to change,” he said. “Will they make a legislative push? The Legislature and the governor put this commission in place to keep it out of the Legislature. I don't see that as an option. But they certainly could try.”

In his explanation for voting against the Cedar Rapids proposal, Lamberti said that the Legislature might have a different view than the commission on the saturation of gaming in the state and on the need for more casinos.

Corbett later called the suggestion “a red herring.” He said the 18 state-licensed casinos in Iowa would be even more formidable to take on in the Legislature than at the commission.

Like Corbett, Gray left soon after the end of the commission's meeting. However, Skogman remained to say he was “disappointed and shocked.”

“I knew that the commission was going to have a lot of pressure on them from the surrounding casino facilities, and it showed,” Skogman said. 

He continued: “I'm extremely proud of Linn County and how everybody worked together. I hope it's a great model going forward for projects, whether it is this one or something else. It shows we can all work together — labor, management, business and government.”

Gray later issued a statement with similar sentiments.

Skogman said it was too soon to know what options for the casino project still might be possible in the future.

“Maybe there are options out there. I haven't thought that through,” he said.
Ohorilko said counties that pass a gaming referendum a first time must vote again in eight years to keep the ability to seek a state gaming license in place. After a second successful vote, there is no need for a third, he said.

Corbett noted that Lamberti and Carl Heinrich of Council Bluffs have just had their terms extended until April 30, 2017, and the term of member Richard Arnold of Russell runs until April 30, 2016. The terms of Dolores Mertz of Algona and Kristine Kramer of New Hampton expire next April.

Mertz, a farmer, cast the lone vote in favor of the Cedar Rapids casino proposal. She said the state would see a revenue boost from a new Cedar Rapids casino and that the new competition would be good for Iowa's casino industry. 

Iowa's casino industry, like farming, always comes with a risk, she said.

Corbett said the denial of a casino license was a “setback” for Cedar Rapids and the redevelopment of its west side, but he said it amounted to nothing compared with the $7 billion in damage that the city endured in the Flood of 2008.

“We were able to rebuild Cedar Rapids bigger and better after the flood ... and there will be some silver linings that come now, too,” he said.

Check out today's LIVE coverage of the commission's vote below:

Map of how Linn County community members voted regarding the casino in March of 2013

Green precincts voted in favor of building a casino, while red precincts voted in opposition.

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