How ten words helped kill a Cedar Rapids casino in 2014

CEDAR RAPIDS, Iowa (KCRG-TV9) -- Ten words in a rulebook may have killed a $164-million dollar casino, three years ago.

A look at all three Cedar Rapids casino proposals for 2017.

The casino was a proposal for Cedar Rapids. And the rulebook belongs to the Iowa Racing and Gaming Commission.

It all happened in April 2014. Cedar Rapids was abuzz with excitement. A casino could be coming to town, the promises of an economic boost and jobs were to follow for Iowa's second-largest city.

Town officials and investors wanted it, willing to work together to construct a large facility in a vacant lot. The county overall wanted it, voting 61% in favor during a required referendum the year before. But, after betting on winning big, it wasn't in the cards.

The Iowa Racing and Gaming Commission said no in a four to one decision, denying a Linn County gaming license over concerns the $164 million dollar proposal would take too much revenue away from other casinos nearby, what's called "cannibalism."

"The commission has never granted a new license where the impact on an existing facility was even the low double-digits," said Jeff Lamberti, the commission's chair at the time. "We're talking about an impact, potentially, on Riverside (casino), that was in the 30-40%."

It was then, local casino advocates started asking the question, "why not?" Why not allow casinos to compete against one another? Why does the commission discourage it, to a degree?

To find out, you have to go all the way back to Iowa's gaming roots, 1983.

The state was in the midst of the farm crisis. Lawmakers were looking for ways to earn new revenue.

They passed Senate File 92. It allowed betting on racing and created what would become the Racing and Gaming Commission. A group of five, appointed by the governor, approved by the Iowa Senate to serve three-year terms.

"We wanted to control prostitution, crime, mafia, everything you can think of," said Sen. Wally Horn, Linn County (D).

Horn was a supporter of the original bill, having served in the legislature since '73. He said the commission’s original focus was on integrity in gambling.

"We wanted Iowa to stay clean, to be as pure as can be," said Horn. "That was their job, to do that."

The goal endured as Iowa's gambling law evolved. Lawmakers allowed gaming boats in '89, they relaxed restrictions in the mid-90s, and then came full-blown casinos, in later years.

Meanwhile, as the legislature changed gaming, commissioners changed rules.

The administrative guidelines for the group have grown, reaching 179 pages in the latest edition. Within the book, the regulators have created their own regulations that cover everything from how to properly move poker chips from table to table, to rules on how they can make new rules.

"Determining the number and locations of licenses, truly, is a small portion of their duties," said Brian Ohorilko, administrator of the gaming commission.

With contracts to review and approve, standards to uphold, licensing may take up a small amount of overall commissioner responsibility. But, it's arguably their most powerful ability.

A section in the rulebook, only about a page in length, lists the criteria commissioners are to take into account when considering a new license. It's the heart of why casinos are spread out as they are in Iowa and also why competition gets capped.

"On one hand, we do take into account the existing facilities-- the investment that's been made," said the former chair, Lamberti, in a recent interview with TV9. "But, we're also charged with doing the best job we can to maximize revenue to the state."

The commissioner said he his colleagues have to consider a bunch of economic factors when reviewing license applications. Will the proposal support tourism? The sale of Iowa products? What's the net benefit to the overall gaming industry?

Also, ten words covering cannibalism: "Percent of projected adjusted gross revenue from existing Iowa operators."

It was that sentence fragment that likely played a major role in Cedar Rapids' original casino bid.

"None of these decisions are easy," said Lamberti. "Everybody has got to arrive at their own decision."

Ultimately, it all comes down to that, discretion. It's the first rule commissioners are given when studying a license application, "...applicable criteria need only be considered."

It's hard to argue with the gaming commission's results, at least financially. The state consistently makes more than $280-million dollars each year in tax revenue from gaming.

"What's happened, the Racing and Gaming Commission has gotten involved politically as far as I'm concerned," said Horn, "and said, 'no' Cedar Rapids can't have it."

Some, like the Senator, believe the commission has started acting outside of its original scope. Horn has tried to go another route to get a Cedar Rapids casino. For at least three years he's worked to pass legislation that would grant a gaming license to a nonsmoking casino in Linn County.

It hasn't happened. Horn thinks too many lawmakers are worried about casinos in their district having to compete.

"You build one there, you build one there," said Horn. "It's competition, that's what Iowa's all about."

But, it's not necessarily what the Racing and Gaming Commission is all about. And, as long as commissioners hold the cards for licensing-- depending on the factors they deem most important, a Cedar Rapids casino may again be a bust.

The gaming commission meets a week from Thursday to determine which, if any, of three new Cedar Rapids casino proposals should have a gaming license. Market studies again showed all options would take about 20% or more of the Riverside casino's revenue.

The meeting begins at 8:30 a.m. at Diamond Jo Casino in Dubuque.

An artist's drawing of the proposed Wild Rose Casino in downtown Cedar Rapids on 1st Ave. SE between 5th St. SE and the railroad tracks. (Courtesy: Wild Rose Entertainment)
Cedar Crossing on the River (left) Cedar Crossing Central (right)