Cedar Rapids exploring other options for land intended for casino (including, maybe, a casino?)

Monday 25th November 2019

CEDAR RAPIDS -- As Cedar Rapids turns the page on land that, for several years, was earmarked for a casino that never came, a number of residents have reinforced their desire for a gambling facility. That begs the question about prospects for a casino in Cedar Rapids's future.

On Tuesday, Cedar Rapids City Council approved soliciting developers to propose a master development for eight 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.

"We are not closing the door on a downtown casino. There are other sites in the downtown," Jennifer Pratt, Cedar Rapids community development director, said on Friday.

"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 not clear cut, 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 gambling referendum -- could bring casino plans back to the forefront in the next several months, despite two rejections by state regulators in recent years.

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

Casino still wanted

As city officials have engaged the public about what they'd like to see on the eight acres, many come back to a casino.

"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, "The people of Cedar Rapids want a casino." And, Jade Ryan added, "A casino. That's what we want, Cedar Rapids."

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 their interest or support for a casino, in part because no one has brought forward a project or even really brought it up, 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 $165 million Cedar Crossing on the eight 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 it was one of three applications for a casino. Two of them were for other sites in downtown.

The Cedar Rapids Development Group, in partnership with Peninsula Pacific, applied for Cedar Crossing and also the $105 million Cedar Crossing Central attached to the DoubleTree Hotel and replacing the Five Seasons Parking ramp on First Avenue NE.

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 a gambling referendum in Linn County, which expires in 2021 and likely would be expensive and controversial.

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

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

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

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

'In this 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 of Cedar Rapids $75,000 a year as part of a 10-year memorandum of understanding through 2029, such that the city would exclusively support them in a casino license application. It is not tied to a specific physical location.

The group could end the agreement at any time, and the city does not have an option to back out. They have paid $225,000 thus far, and are 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 2019 or 2020 might be the right time to reapply if some key changes had taken place, including 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 that his group still is "very interested" and believes a casino would truly benefit the community.

"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 on Friday official there continue to believe Iowa's second-largest city deserves a casino, but they have no active plans.

"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 on the commission?

The gambling commission could be on the verge of a nearly entirely new cast compared to the 2017 vote.

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 the casino, previously cycled off.

Julie Andres, a Republican from Okoboji, who's term expires in April 2022, and Pennie Gonseth-Cheers, a Democrat from Afton, who's term expires in April 2021, comprise 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 opening the door for casinos in Riverside and Waterloo and now the market is tight.

Gambling revenue figures show flat revenue -- .4 percent down in fiscal 2019 to $1.46 billion after climbing .7 percent to $1.47 billion in fiscal 2018.

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

Ehrecke said that sports betting was added as an amenity for casino patrons and to "bring it out of the shadows," and that a substantial financial boost is unlikely.

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 said. "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, and 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 revenue so far is better than expected. Attendance has been up slightly, and there appeared to be ancillary benefits on table games, he said.

But was this a byproduct of the newness of sport betting and would that continue, he wondered.

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

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 gambling events. Also, the sports wagering market still is maturing.

How online sports betting impacts other 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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