Future of Cedar Rapids Casino Hinges on Market Study Proposals

By Rick Smith, Reporter

RIVERSIDE, Iowa — Gaming analysis firms on Thursday submitted three proposals to the Iowa Racing and Gaming Commission to help it decide next year if it should grant a state license for a Cedar Rapids casino and one in Greene County west of Ames.

The commission will decide at its Oct. 10 meeting on the firm or firms it will hire.

After the commission meeting at the Riverside Casino & Golf Resort south of Iowa City, Brian Ohorilko, the commission's administrator, said the commission may select two of the proposals much as it did when it last analyzed the state's casino industry in 2008-2009.

The firm or firms will analyze the statewide industry and also will focus on the Cedar Rapids casino market and the ramifications to existing casinos if a Cedar Rapids casino in Linn County joins the state's list of 15 licensed casinos and three licensed casino/racetracks.

Ohorilko said the analysis also will take a special look at Greene County, which is west of Ames and Boone and south of Fort Dodge and where voters this month approved a referendum to allow casino gaming in the county.

Linn County passed a similar measure on March 5.

Commission member Carl Heinrich, who chaired Thursday's commission meeting with commission chairman Jeff Lamberti joining the meeting via video from Florida, told each of the firms submitting proposals that he and the five-member commission wanted to know the effect any proposed new casinos would have on existing casinos and if there were any areas in the state that are underserved and can support a casino without harming others.

The three proposals came from:

Marquette Advisors Inc., Minneapolis, Minn., which was one of two gaming analysis firms that worked for the commission the last time the commission analyzed the state casino industry in 2008-2009.

Spectrum Gaming Group, Linwood, N.J., and Cummins Associates, Arlington, Mass., the latter of which provided analysis for the commission in 2003 and 2005, Will Cummins, company president, noted in comments to the commission on Thursday.

Union Gaming Analytics, Las Vegas, Nev.

After Thursday's meeting, the commission's Ohorilko noted that the commission's request for proposals required that submissions come from firms that had not worked with any of the state's 15 licensed casinos and three licensed casino/racetracks in the last year.

Ohorilko said Spectrum had provided help to the Cedar Rapids casino investor group, Cedar Rapids Development Group LLC, in the last year, and for that reason Spectrum had teamed with Cummins Associates so Cummins handles the part of the project related to the Cedar Rapids project, Ohorilko said he understood.

Lou Frillman, president of Marquette Advisors Inc., told the commission that it had a "difficult task" in front of it and would "need great advice" as it tries to determine if the state should add any new casinos.

In its report to the commission in 2009, Marquette Advisors concluded that Cedar Rapids was "a key feeder market" for several casinos — those in Riverside, Waterloo, the Meskwaki Indian Settlement, Dubuque and Clinton — and that a new casino in Cedar Rapids was "likely to create strong cannibalization from existing casinos." At the time, no entity in Cedar Rapids was pursuing a casino license.

In May 2010, using the Marquette report and another one, granted just one new casino license — for the Grand Falls Casino Resort at Larchwood in far northwest Iowa. At the same time, the commission said it did not want to consider any other licenses for three to five years, noting that the research indicated a lack of demand for additional casinos.

Will Cummins' report to the commission in 2005 concluded that the state could benefit from casinos in seven communities seeking casinos at the time, Riverside, Waterloo, Emmetsburg, rural Worth County, rural Franklin County, Fort Dodge and Ottumwa. The first four of those seven now have casinos.

Thursday's state commission meeting took place at the Riverside Casino and Golf Resort, which spent money earlier this year to try to defeat without success the gaming referendum in Linn County.

Dan Kehl, president and CEO of the Riverside venue, has said that a Cedar Rapids casino would take 30 percent of the Riverside casino's business.

At the same time, Steve Gray, the lead investor in the Cedar Rapids casino investor group, has said that the market analysis done for his group indicated that no state-licensed casino in Iowa would be significantly harmed by a Cedar Rapids casino.

Gray has said the research done for his investor group concluded that a Cedar Rapids casino would take away $18 million a year in business from existing casinos, with half of the amount coming from the casino on the Meskwaki Indian Settlement west of Tama, which is not licensed by the state.

A contingent of Cedar Rapids city officials, led by Mayor Ron Corbett, as well as Drew Skogman, a lead investor with the Cedar Rapids casino group, members of the non-profit Linn County Gaming Association, local union members and others attended Thursday's commission meeting.

Greene County also had a contingent of casino supporters in the audience.

Corbett and Skogman both said that the Cedar Rapids City Council is slated to approve a development agreement with the casino investor group at the council's Aug. 27 meeting. The agreement will spell out the details of the city's sale to the investor group of about seven acres of now-vacant, city-owned property across the Cedar River from downtown. The city acquired the property in its flood recovery buyout program. Only the casino investor group submitted a proposal for the land.

The group plans to build a $110-million casino with a first-floor of parking and two gaming floors above it if it secures a license from the state commission.

The group has said the casino will be anywhere from 140,000 to 175,000 square feet in size, will have 800 to 1,000 slot machines and 25 to 30 table games. The number of slots and tables is similar to casinos in Waterloo and Dubuque, though the Riverside casino has 1,144 slots and 46 table games, according to state figures.

The Cedar Rapids investor group must submit its application for a state gaming license with the commission by Sept. 3, and the investor group will meet the deadline, Skogman said after Thursday's commission meeting.

He said he expected the commission to make its decision on a Cedar Rapids casino in April 2014.

Dan Franz, the Riverside casino's general manager, welcomed the commission to the casino with some figures: $100 million in wages and $19 million in benefits for the casino's 740 employees in the seven years since the casino opened; $190 million paid in state and local taxes in that time; and more than $23 million that has gone to the casino's local non-profit association to support projects in the community.

Patricia Koller, president of the non-profit Washington County Riverboat Association, told the commission that the association had directed $19.7 million to local groups and another $5.5 million to local governments in seven years. The casino, she noted, is the county's biggest employer.

"We need the casino to be here and to be strong," Koller told the commission.
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