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No Dice: Commission Rejects Linn Co. Gambling License

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COUNCIL BLUFFS, Iowa - The five-member Iowa Racing & Gaming Commission did what it could to continue the suspense and drama late Thursday morning by allowing the two commissioners whose votes were most expected to speak first.

Carl Heinrich of Council Bluffs, former president of Iowa Western Community College, started by concluding that the proposed Cedar Crossing Casino would harm existing casinos in Eastern Iowa and not be a net benefit to Iowa.

Dolores Mertz of Algona, a former state lawmaker and a farmer, disagreed, saying that 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, Mertz said.

But in quick order, Kristine Kramer of New Hampton and Richard Arnold of Russell repeated Heinrich's reasoning that a Cedar Rapids casino would harm existing casinos, and the matter was closed: the $174-million Cedar Crossing Casino project across the Cedar River from downtown Cedar Rapids was not going to get the needed state gaming license.

Commissioner Chairman Jeff Lamberti made the final vote 4-1.
Lamberti said the commission historically has sought market studies of the state's casino industry, and never once has the commission turned its back on a study in granting a casino license.

He said the two studies conducted for the commission to help it make a decision about the Cedar Rapids casino were ones he said he believed, and both concluded that a Cedar Rapids casino would hurt existing casinos, especially Riverside Casino and Golf Resort.

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

He said investors and backers of the Cedar Rapids casino could not have done anything more to make their case. In the end, though, he said he couldn't "look at it in isolation, though people (backing the Cedar Rapids project) would like us to."

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.

No one in the Cedar Rapids delegation, including lead investors Steve Gray and Drew Skogman and Cedar Rapids Mayor Ron Corbett, expressed any certainty leading up to the vote that it would necessarily go their way.

In fact, Corbett earlier this week said the Cedar Rapids project was still in the hunt for the necessary three commission votes.

In the minutes immediately prior to the commission's decision, Corbett kidded that he intended to vanish if the vote went against the Cedar Rapids project. He left quickly after the vote.

Gray left quickly, too.

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."

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

"Maybe there are options out there. I haven't thought that through," he said.

Keith Rippy, executive director of Area Ambulance Service and president of the non-profit Linn County Gaming Association, said the commission vote caught him by surprise. He said he thought the large community support in Cedar Rapids and Linn County for the project and the quality of the casino proposal would have been enough to secure the state gaming license. The non-profit would have had some $2.5 million from casino revenue to distribute to local programs, and now it won't, he said.

"From the standpoint of the non-profit, I'm just very disappointed," Rippy said. "In my mind, we just lost $2.5 million we could have given back to the community."

Mayor Bill Poch of Riverside, home to Riverside Casino and Golf Resort, said Thursday's commission decision was not a time for celebration for supporters, investors and employees of the Riverside facility.

"We're certainly relieved and happy to maintain the status quo that we've had," Poch said. "But I'm not going to say 'celebration.'"

Poch said he did approach Cedar Rapids'Corbett at the commission meeting to acknowledge that the impending commission decision was stressful" for both communities.

"By no means is this an in-your-face kind of thing," Poch said he told Corbett. "It's kind of like a high-end athletic event. Somebody has to win and somebody has to lose."

He said Cedar Rapids remains "in the driver's seat" in growth and economic development even if the casino vote went against its backers.

Dan Kehl, CEO of the Riverside Casino and Golf Resort, said he was "grateful" for the commission's vote.

"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."

The decision was not a close call, he said.

"The facts were on our side when it comes to the market and cannibalization (of business from existing casinos)," Kehl said. "There is only so much market to go around."

He acknowledged that the Cedar Rapids investor group led by Gray and Skogman had spent some millions of dollars leading up to Thursday's vote, and he 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."

The commission rejection came with lead casino investors Gray and Skogman, Corbett and a few others from a Cedar Rapids delegation sitting in the second row of seats in a conference room at Ameristar Casino Hotel in Council Bluffs. Kehl was in the first row on the other side of the room with his delegation.

Some 50 people, including local contractors and union leaders, were on hand from Cedar Rapids and Linn County to show support for the Cedar Rapids casino proposal. So, too, were representatives and supporters of casinos opposed to the Cedar Rapids proposal.

The commissioners and Gray, Corbett and other Cedar Rapids casino investors and backers have seen each other and talked several times in the last many months as the Cedar Rapids proposal made its way through the commission license-approval process.
So the commission rejection did not come from strangers.

From the outset, Gray called the endeavor to bring casino gaming to Cedar Rapids and Linn County "a climb."

He and Skogman started with a small investor group early in 2012 that grew to about 200. Last summer, three former executives of a company that had owned the Diamond Jo Dubuque and Diamond Worth County casinos in Iowa joined the investment group.

Along the way, the investors spent some millions of dollars -- $2.05 million to buy two privately held properties on the casino site, for instance to arrive at Thursday's announcement that the investment was for naught.

The spending included work on a petition drive to amass 15,000 signatures to prompt a vote to allow gaming in Linn County. Sixty-one percent of voters approved the idea in March 2013, but the campaign leading up to the vote cost casino investors some $2 million to fight off spending led by Kehl and his Riverside Casino and Golf Resort in an effort to defeat the Linn County gaming referendum.

The Cedar Rapids investor group's purchase of about eight acres of city-owned property for the casino was contingent on securing a state gaming license.

The commission denial sends the city of Cedar Rapids back to the start to figure out how it will redevelop land acquired where flood-damaged businesses once stood across the Cedar River from downtown.

Mayor Corbett and others on the City Council have been active backers of the casino project, seeing it as a flood-recovery redevelopment project.

What city official wouldn't be excited about a $174-million investment in the community? the mayor said in the days leading up to Thursday's commission vote.

Thursday's vote ranks as a bump in the road for the city's flood recovery.

It's something akin to a rejection by voters in May 2011 when Corbett was the front man for an effort to extend the city's 1-percent local-option tax for 20 years to help pay for flood protection and to fix streets. Voters turned the plan down.

By November 2013, however, momentum seemed to have returned. Voters that month agreed to an extension of the local-option sales tax for 10 years to fix streets. The next month, the city secured a $264-million grant over 20 years from the Iowa Flood Mitigation Board to help with flood protection in a state program conceived in large part by Corbett, a former longtime Iowa lawmaker and speaker of the Iowa House.

Corbett, a Republican, served in the legislature with three of the five members of the Iowa Racing and Gaming Commission. Only one of the three, Mertz, a Democrat, voted for the Cedar Rapids casino license. Lamberti and Arnold, Republicans, voted against the proposal.

In June, the commission will vote on a request for a new gaming license for a casino proposal in Greene County south of Fort Dodge and west of Boone.

In the past, the commission has imposed formal or informal moratoriums on future gaming-license attempts for a time after making decisions on new casino licenses

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