Iowa to consider casino expansion
By Dan Gearino, Journal Des Moines Bureau | Posted: Monday, March 03, 2008
DES MOINES -- Casino gambling in Iowa began with quaint riverboats, grew into gargantuan gambling palaces and may soon grow even more.
On Thursday, the Iowa Racing and Gaming Commission will begin discussing whether to issue more casino licenses. The outcome of those talks will have ramifications across the state, in the 17 licensed casinos, in the five communities that hope to open new casinos and in the minds of Iowans on both sides of the debate over gambling expansion.
"We're never going to make everybody happy," said Kate Cutler of Council Bluffs, the commission's chairwoman.
The most recent expansion was three years ago when the commission approved applications from Emmetsburg, Riverside, Waterloo and Worth County.
Since then, managers of existing casinos have warned that the market is oversaturated, while the unsuccessful applicants from before have clamored for further expansion. All this adds up to tremendous pressure on the five-member board.
"It's not the most pleasant thing you go through," said Mike Mahaffey of Montezuma, who served on the commission from 1999 to 2005.
It was particularly difficult for Mahaffey because he was the commission's lone voice against expansion during the last round.
The result this time may be no licenses, or a resolution for further study, or a decision to set up an application process for new licenses.
Groups in at least five communities are interested in obtaining a license. They are located in Fort Dodge, Ottumwa, Tama, Newton and Franklin County.
Three of the locations -- Fort Dodge, Ottumwa and Franklin County -- had unsuccessful applications in the last round.
Of the two other communities, Tama is a unique case because the area already has an established tribal casino, Meskwaki Bingo Casino Hotel.
Newton, which still needs to pass a local casino referendum scheduled for April, wants to put a casino next to Iowa Speedway.
Looking for a lifeline
Ed Hardon of Tama thinks a state-licensed casino would be an economic lifeline. His enthusiasm is indicative of the high hopes and strong feelings in each of the prospective locations.
Hardon, 67, owns a hardware store and is one of the leaders of Tama's bid. He thinks a casino located near the city center would bring economic vitality to an area that has had decades of slow growth.
Things were better in downtown Tama when he opened his business in the early 1960s. "On Saturday night, it was packed," Hardon recalled. "You had to bring your car down early Saturday afternoon to get a parking spot. It was a social event. We had about nine taverns and five grocery stores and a couple hardware stores and a movie theater."
He said he thinks the presence of a state-licensed casino just a short distance from a tribal casino would make the city an enticing destination for tour groups and other visitors.
Casinos have been a form of economic development since the Legislature legalized riverboat gambling in 1989.
The first riverboat casinos opened in 1991 in two economically depressed cities, Dubuque and Clinton. Other casinos followed along the Mississippi and Missouri rivers.
The Legislature further opened the door in 1994 when it legalized casino gambling at racetracks. There are now racetrack casinos in Council Bluffs, Dubuque and Altoona.
By 2000 the door was wide open.
The casino in Osceola -- now called Terrible's Lakeside Casino -- was built on a man-made lake, the first one that wasn't connected to a racetrack or a river. The Legislature allowed the casino in response to southern Iowa leaders who said their region desperately needed an economic boost.
The most recent casino, the 17th in the state, was the Isle Casino & Hotel in Waterloo, which began operation last June.
In addition to the state-licensed facilities, there are three run by Native American tribes, for a statewide total of 20. The tribal casinos are in Tama, Onawa and Sloan.
Fears of saturation
With just about every gambling expansion, existing casinos have warned that the market is being diluted. The concerns were particularly high after the last round of licenses because the Riverside casino is larger and has more amenities than the nearby casinos along the Mississippi.
Last November the Isle of Capri-Bettendorf casino reported a 10 percent drop in gross gaming revenues for the 2006-07 fiscal year. The Rhythm City Casino Davenport reported a 12 percent drop. Officials at those casinos expected some slippage because customers would sample the new offerings. Now the officials are anxiously monitoring the bottom line in the hope the numbers bounce back.
Any new licenses would compound the concerns of existing license holders.
Creighton University economist Ernie Goss said he thinks the Iowa market is clearly oversaturated. He is a national expert on casino gambling and has done consulting for casino management companies.
Goss said Iowa regulators need to realize how the market has changed since the first casino opened in 1991. Back then, Iowa was one of the first states to issue casino licenses and most customers came from other states.
Casinos were a bonanza for local economies and for the state government, which gets a 22 percent cut of adjusted gross gambling revenue.
The big difference today, he said, is that casinos are almost everywhere. Casino management companies have options all over the country and many gamblers no longer need to drive to Iowa for a product that's available in their home state.
Kansas, for example, is one of several states that have recently legalized casino gambling.
Goss has a simple answer when asked if Iowa should issue new licenses: "No, no, no," he said. "You're going to be undermining the casinos you currently have; you're going to be undermining your retailers; you're going to be undermining your restaurants."
The only rationale he can see for more licenses is a desire by government officials to increase tax revenue without raising taxes.
The state took in $265 million in gambling taxes in the 2006-07 fiscal year, an increase of about $37 million from the previous year. Casinos also pay taxes to local governments.
Casino politics
Just about any discussion of casino licenses eventually crosses over into partisan politics.
Gov. Chet Culver, a Democrat, has said ever since he was campaigning two years ago that Ottumwa and Fort Dodge should be the first cities to get licenses if new licenses are approved. That decision is in the hands of the Racing and Gaming Commission, but commission members are appointed by the governor and must be confirmed by the Senate.
Culver's office takes great pains to say the governor doesn't support or oppose the idea of new licenses. He has said he trusts the commission to determine whether new casinos would be viable.
Mahaffey, the former commission member and a Republican, said politics are inevitably part of the discussion.
The commission has three Democrats, one Republican and one independent.
"The majority of commission members are Democrats. Ottumwa and Fort Dodge are Democratic strongholds in Iowa. Are those factors? To some extent, sure they are. Does that mean a fix is in? No," Mahaffey said.
Many of the most aggressive opponents of new licenses are Republicans, such as Sen. Brad Zaun, R-Urbandale, who has sponsored a bill that would prevent any expansion. He doesn't expect the bill to pass the Democratic-controlled Senate.
Cutler, a Democrat, said the commission's most important task is to make sure that existing casinos remain viable and that any potential new licensees have sound business plans. She said the commission will act in the best interests of the state, and if the governor or legislators don't like the results, they have the power to appoint different commissioners.
"We know we can be replaced," she said.
Dan Gearino can be reached at 515-243-0138 and dan.gearino@lee.net.
Iowa Casinos by the numbers:
-- 20 -- Total casinos in Iowa, including 17 state-licensed facilities and three run by Native American tribes.
-- 17,485 -- Slot machines in state licensed casinos.
-- $1.3 billion -- Adjusted gross revenue from gaming at state licensed casinos in the most recent fiscal year, which is essentially wagers minus winnings.
-- $265 million -- State taxes paid by state-licensed casinos in the most recent fiscal year.
-- 4 -- Number of states with more state-licensed casinos than Iowa. They are Nevada, Colorado, South Dakota and Mississippi.
-- 1 -- Number of states other than Iowa that have state-licensed casinos, gambling at racetracks and tribal casinos. Louisiana is the other.
Sources: Iowa Racing and Gaming Commission, Iowa Department ofManagement, American Gaming Association
On Thursday, the Iowa Racing and Gaming Commission will begin discussing whether to issue more casino licenses. The outcome of those talks will have ramifications across the state, in the 17 licensed casinos, in the five communities that hope to open new casinos and in the minds of Iowans on both sides of the debate over gambling expansion.
"We're never going to make everybody happy," said Kate Cutler of Council Bluffs, the commission's chairwoman.
The most recent expansion was three years ago when the commission approved applications from Emmetsburg, Riverside, Waterloo and Worth County.
Since then, managers of existing casinos have warned that the market is oversaturated, while the unsuccessful applicants from before have clamored for further expansion. All this adds up to tremendous pressure on the five-member board.
"It's not the most pleasant thing you go through," said Mike Mahaffey of Montezuma, who served on the commission from 1999 to 2005.
It was particularly difficult for Mahaffey because he was the commission's lone voice against expansion during the last round.
The result this time may be no licenses, or a resolution for further study, or a decision to set up an application process for new licenses.
Groups in at least five communities are interested in obtaining a license. They are located in Fort Dodge, Ottumwa, Tama, Newton and Franklin County.
Three of the locations -- Fort Dodge, Ottumwa and Franklin County -- had unsuccessful applications in the last round.
Of the two other communities, Tama is a unique case because the area already has an established tribal casino, Meskwaki Bingo Casino Hotel.
Newton, which still needs to pass a local casino referendum scheduled for April, wants to put a casino next to Iowa Speedway.
Looking for a lifeline
Ed Hardon of Tama thinks a state-licensed casino would be an economic lifeline. His enthusiasm is indicative of the high hopes and strong feelings in each of the prospective locations.
Hardon, 67, owns a hardware store and is one of the leaders of Tama's bid. He thinks a casino located near the city center would bring economic vitality to an area that has had decades of slow growth.
Things were better in downtown Tama when he opened his business in the early 1960s. "On Saturday night, it was packed," Hardon recalled. "You had to bring your car down early Saturday afternoon to get a parking spot. It was a social event. We had about nine taverns and five grocery stores and a couple hardware stores and a movie theater."
He said he thinks the presence of a state-licensed casino just a short distance from a tribal casino would make the city an enticing destination for tour groups and other visitors.
Casinos have been a form of economic development since the Legislature legalized riverboat gambling in 1989.
The first riverboat casinos opened in 1991 in two economically depressed cities, Dubuque and Clinton. Other casinos followed along the Mississippi and Missouri rivers.
The Legislature further opened the door in 1994 when it legalized casino gambling at racetracks. There are now racetrack casinos in Council Bluffs, Dubuque and Altoona.
By 2000 the door was wide open.
The casino in Osceola -- now called Terrible's Lakeside Casino -- was built on a man-made lake, the first one that wasn't connected to a racetrack or a river. The Legislature allowed the casino in response to southern Iowa leaders who said their region desperately needed an economic boost.
The most recent casino, the 17th in the state, was the Isle Casino & Hotel in Waterloo, which began operation last June.
In addition to the state-licensed facilities, there are three run by Native American tribes, for a statewide total of 20. The tribal casinos are in Tama, Onawa and Sloan.
Fears of saturation
With just about every gambling expansion, existing casinos have warned that the market is being diluted. The concerns were particularly high after the last round of licenses because the Riverside casino is larger and has more amenities than the nearby casinos along the Mississippi.
Last November the Isle of Capri-Bettendorf casino reported a 10 percent drop in gross gaming revenues for the 2006-07 fiscal year. The Rhythm City Casino Davenport reported a 12 percent drop. Officials at those casinos expected some slippage because customers would sample the new offerings. Now the officials are anxiously monitoring the bottom line in the hope the numbers bounce back.
Any new licenses would compound the concerns of existing license holders.
Creighton University economist Ernie Goss said he thinks the Iowa market is clearly oversaturated. He is a national expert on casino gambling and has done consulting for casino management companies.
Goss said Iowa regulators need to realize how the market has changed since the first casino opened in 1991. Back then, Iowa was one of the first states to issue casino licenses and most customers came from other states.
Casinos were a bonanza for local economies and for the state government, which gets a 22 percent cut of adjusted gross gambling revenue.
The big difference today, he said, is that casinos are almost everywhere. Casino management companies have options all over the country and many gamblers no longer need to drive to Iowa for a product that's available in their home state.
Kansas, for example, is one of several states that have recently legalized casino gambling.
Goss has a simple answer when asked if Iowa should issue new licenses: "No, no, no," he said. "You're going to be undermining the casinos you currently have; you're going to be undermining your retailers; you're going to be undermining your restaurants."
The only rationale he can see for more licenses is a desire by government officials to increase tax revenue without raising taxes.
The state took in $265 million in gambling taxes in the 2006-07 fiscal year, an increase of about $37 million from the previous year. Casinos also pay taxes to local governments.
Casino politics
Just about any discussion of casino licenses eventually crosses over into partisan politics.
Gov. Chet Culver, a Democrat, has said ever since he was campaigning two years ago that Ottumwa and Fort Dodge should be the first cities to get licenses if new licenses are approved. That decision is in the hands of the Racing and Gaming Commission, but commission members are appointed by the governor and must be confirmed by the Senate.
Culver's office takes great pains to say the governor doesn't support or oppose the idea of new licenses. He has said he trusts the commission to determine whether new casinos would be viable.
Mahaffey, the former commission member and a Republican, said politics are inevitably part of the discussion.
The commission has three Democrats, one Republican and one independent.
"The majority of commission members are Democrats. Ottumwa and Fort Dodge are Democratic strongholds in Iowa. Are those factors? To some extent, sure they are. Does that mean a fix is in? No," Mahaffey said.
Many of the most aggressive opponents of new licenses are Republicans, such as Sen. Brad Zaun, R-Urbandale, who has sponsored a bill that would prevent any expansion. He doesn't expect the bill to pass the Democratic-controlled Senate.
Cutler, a Democrat, said the commission's most important task is to make sure that existing casinos remain viable and that any potential new licensees have sound business plans. She said the commission will act in the best interests of the state, and if the governor or legislators don't like the results, they have the power to appoint different commissioners.
"We know we can be replaced," she said.
Dan Gearino can be reached at 515-243-0138 and dan.gearino@lee.net.
Iowa Casinos by the numbers:
-- 20 -- Total casinos in Iowa, including 17 state-licensed facilities and three run by Native American tribes.
-- 17,485 -- Slot machines in state licensed casinos.
-- $1.3 billion -- Adjusted gross revenue from gaming at state licensed casinos in the most recent fiscal year, which is essentially wagers minus winnings.
-- $265 million -- State taxes paid by state-licensed casinos in the most recent fiscal year.
-- 4 -- Number of states with more state-licensed casinos than Iowa. They are Nevada, Colorado, South Dakota and Mississippi.
-- 1 -- Number of states other than Iowa that have state-licensed casinos, gambling at racetracks and tribal casinos. Louisiana is the other.
Sources: Iowa Racing and Gaming Commission, Iowa Department ofManagement, American Gaming Association
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