Iowa gaming chair: Cedar Rapids, Jefferson casino plans not 'apples to apples'
Jeff Lamberti says Greene County shouldn't 'read too much into' commission denial of Linn County license
April 18, 2014
The chairman of the Iowa Racing and Gaming Commission Thursday said it would be a mistake to scout tea leaves for the future of a planned Jefferson gaming-and-entertainment complex in the five-member panel's rejection of a license for a proposed casino in downtown Cedar Rapids.
"I would actually say, 'Don't read too much into it," Jeff Lamberti said in an interview with The Daily Times Herald. "I really have no read on where my other commission members would be with respect to Greene County, because quite honestly, if they're like me, they haven't spent a minute thinking about it because we do try to give each of these the attention they're due."
Commissioners, meeting Thursday at Ameristar casino in Council Bluffs, voted 4-1 against the casino license for the planned $165 million casino in Cedar Rapids, Iowa's second-largest city.
"My concern is the impact of the existing operations," said Commissioner Carl Heinrich of Council Bluffs, a former president of Iowa Western Community College.
The big number in the eastern Iowa gaming market decision, said Commissioner Kristine Kramer, a New Hampton auto dealer, is a projected 30 to 46 percent revenue hit the Riverside Casino & Golf Resort would absorb if a casino were built 40 miles away in Cedar Rapids.
Marquette Advisors, an international gaming consultant with an office in Minneapolis, Minn., estimated the 30 percent hit to Riverside. In the same report, Marquette projected that the casino most affected by Wild Rose Entertainment's proposed $40 million Jefferson gaming operation would be Prairie Meadows Racetrack & Casino in Altoona, which Marquette predicts would lose $6 million a year in revenue - or about 3 percent of its annual revenues, an effect 10 times smaller by percentage than the one the consultant says Cedar Rapids would have delivered to Riverside.
Las Vegas-based Union Gaming Analytics, in one of its models on potential cannibalization, projected the 46 percent hit at Riverside from a Cedar Rapids casino. The highest potential impact emerging from either study, using any model, from Jefferson to Prairie Meadows, stood at 8.2 percent, according to Union.
"I'm not sure I would categorize it yet because I haven't thought about it enough," Lamberti said in the interview. "And, unfortunately, when you look at our criteria, that's one of those that each individual member has to decide where does it become moderate? Where does it become high? Clearly, as to the ones today, I felt they were high. But I really haven't formulated a position on Greene County."
Lamberti, an Ankeny attorney, said the commission has been "single-minded" in its assessment of the Cedar Rapids proposal. Lamberti said he was adamant about separating the Greene County and Cedar Rapids decisions so as not to short-change the process either place.
"We'll now turn to Greene County," he said.
The commission has scheduled a site visit in Jefferson for May 29 and is expected to vote on the Greene County license June 12 in Burlington during a regular monthly meeting.
Bottom line, Lamberti said, commission members will have to make individual judgment calls on whether the estimated impact of the Greene County casino will be too much on existing gaming facilities.
"When I looked at the impact on the Linn County facility, on at least two facilities that were above double digits, and one significantly above double digits, when I spoke about a precedent to grant a license, given those numbers on existing specific facilities, that I thought would have been a significant precedence change in policy," Lamberti said. "How people will look at the impact of a Greene County facility, I'm just not convinced today that it's apples to apples. But I don't think we've also studied it in enough detail."
Tom Timmons, president and chief operating officer for West Des Moines-based Wild Rose Entertainment, the Jefferson casino developer, pointed out in an interview that Wild Rose's own facility in Emmetsburg shows up as the one to be the most affected by the Jefferson casino with 9 percent of the Emmetsburg business being cannibalized by Jefferson, according to Marquette. The study, projecting Wild Rose Emmetsburg revenue of $35 million for fiscal year 2017, expects $3.2 million of the revenue in Jefferson to come from Emmetsburg that year.
Wild Rose clearly sees a market for casinos in both Jefferson and Emmetsburg and wouldn't cannibalize its own business, Timmons said, adding that economies of scale his company would bring to bear with the two operations don't pop up in the studies.
"We're not going to open up a casino that's going to be a detriment to our own casino or any other," Timmons said.
In an interview Thursday afternoon, Timmons said the commissioners' observations before the Cedar Rapids vote speak well for the Greene County project.
He said the studies showed that the Jefferson casino would have much less impact on Prairie Meadows than Cedar Rapids would have had on its chief competitor.
"I think they were more concerned with the double-digit effects as it related to the Cedar Rapids casino," Timmons said. "There aren't any double-digit effects to any other one casino with Greene County."
Las Vegas-based Union Gaming Analytics estimates gross gaming revenues of between $23 million and $45 million for the proposed Jefferson casino.
Like the Marquette study, Union forecasts much of the Jefferson casino's annual revenue would come from other gambling facilities in the state: between $10 million and $15 million from Prairie Meadows; and between $3 million and $5 million from Emmetsburg.
Kramer, in voting against the Cedar Rapids license, stressed geography, saying she believed there is a "saturation of casinos in eastern Iowa."
Commissioner Richard Arnold of Russell, a farmer and small-business man, said the commission cannot accept the high level of cannibalization expected in the existing eastern Iowa gaming industry if a Cedar Rapids casino were approved.
The lone supporter on the commission of a gaming license for Cedar Rapids was former state legislator Dolores Mertz of Algona. She said the market, not the commission, should determine the fate of the Cedar Rapids casino and its competitors.
She said the studies focused too much on cannibalization and didn't take into account regional economic development and new revenue for the state as well as local projects.
"I see it as new money, and I have to be conscious of that fact," Mertz said.
Lamberti said he voted against the Cedar Rapids license because of the substantial change to the balance of trade in the casino industry and the instability it would have brought to gaming. The commission has never regulated gambling as a free-market enterprise, he said.
Iowa currently has 18 state-regulated casinos. The closest casino to Jefferson - Prairie Meadows in Altoona, east of Des Moines - is about 75 miles. Wild Rose Casino & Resort in Emmetsburg is 90 miles from Jefferson.
A map of the state's casinos show Jefferson in the middle of what Greene County gaming advocates see as an underserved territory for casinos, a factor local development officials say will create a major draw for a gaming-and-entertainment facility in Greene County.
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