Riverwalk sponsor says casino on the Des Moines River would force another look at $10 million pledge

Legislative approval of an increase in the number of riverboat casinos in Iowa appears unlikely this session, temporarily beaching efforts of some city leaders who think a floating gaming palace could help revitalize downtown Des Moines.

Senate Majority Leader Stewart Iverson Jr., R-Dows, said a bill that would allow three additional riverboat licenses and bring the total in the state to 13 has so little support in the House that senators won’t waste their time debating it.

But the debate won’t go away and likely will resurface next session, said Sen. Jeff Lamberti, R-Ankeny, who co-sponsored the gambling expansion bill with Senate President Mary Kramer, a Clive Republican. Lawmakers are reluctant to expand gambling until after the U.S. Supreme Court rules on a tax equity issue – under current Iowa law, riverboats are taxed at 20 percent, while land-based casinos pay a graduated tax that eventually will cap at 36 percent.

“It’s almost guaranteed to come back, regardless of the outcome of the lawsuit,” Lamberti said. “I don’t think that will end gambling issues in Iowa.”

Lamberti and Kramer co-sponsored the bill as a way to resolve the issue with racetrack casinos that resulted in a $112 million judgment against the state after the Iowa Supreme Court ruled that the taxing racetrack casinos at a higher rate than riverboat casinos violates the Equal Protection Clause of the Constitution. However, lawmakers’ interest in expanding gambling waned after the solicitor general of the U.S. Department of Justice, so respected by the nation’s high court as to be regarded as the “10th justice,” filed a friend-of-the-court brief supporting Iowa Attorney General Tom Miller’s position that Iowa’s law is constitutional.

“I felt at the time [the legislation was drafted] that we had a risk of losing, but the risk doesn’t seem quite as high, with the solicitor general weighing in with a brief,” Kramer said.

Like Lamberti, Kramer expects the debate to resurface. “We are seeking growth and we need a funding stream to accomplish it,” she said.

In the calendar year ended Dec. 31, 2002, gaming interests in Iowa paid more than $216 million in gaming taxes and admission fees. A study commissioned by the state estimated another $150 million in revenue could be potentially gained in Iowa if gaming were expanded, said Wes Ehrecke, president of the Iowa Gaming Association. That group commissioned the study by RSM McGladrey Inc. and Strategic Economics Group.

Kramer also noted that voters’ overwhelming approval of the November referendum on continuation of slots at Prairie Meadows Racetrack and Casino sent a clear message supporting gambling in Polk County, and that could increase support in the Legislature for gambling expansion.

“Many of my colleagues who are personally opposed to gambling realized in the referendum that the people spoke,” she said.

Technically, legislative action isn’t necessary to expand the number of riverboats in Iowa. The Iowa Racing and Gaming Commission put a moratorium on the licensure of more riverboats in Iowa in the mid-1990s after then Gov. Terry Branstad vetoed legislation to cap the number of riverboat casinos because the bill contained unrelated provisions he didn’t support, said Jack Kettering, the commission’s director.

The commission could rescind the moratorium, but Kettering said it’s not likely to do so. “I think there would have to be a compelling case presented to the commission that there was a referendum passed; business, government and civic leaders were all in favor of it; that there was a non-profit sponsoring organization, as required by the code; and a developer and a site secured,” he said. “We’d also have to look at the competitive aspects of it and how it would affect the revenues of other facilities.

“If those things were accomplished and made part of an application, that would be something the commission would consider.”

INTEREST ACROSS IOWA

A half-dozen Iowa communities – Des Moines, Okoboji, Clear Lake, Cedar Rapids, Cedar Falls and Waterloo – have voiced interest in riverboat gambling.

Slowing momentum for a riverboat in downtown Des Moines are fears Principal Financial Group Inc. would abandon its pledge to contribute $10 million toward a $25.5 million Riverwalk project spanning the Des Moines River from the Des Moines Botanical Center. If voters were to approve a referendum and a casino were to be located on the portion of the Des Moines River that bisects the downtown area, Principal would re-evaluate its commitment, said Mary O’Keefe, Principal’s senior vice president of human resources and a spokeswoman for the project.

Principal thinks the Riverwalk would stimulate downtown housing, retail and entertainment venues, and help employers recruit workers.

“We would go back again and weigh the new information against our objectives,” O’Keefe said. “Can it succeed with a riverboat? Can it spur housing? We just don’t know that we’re going to find urban professionals or families living downtown will want to live there with a riverboat.”

Though Principal has not taken a position on a new gambling facility in Greater Des Moines, company officials “don’t think the riverboat will enhance the objectives of this project,” she said. In addition to its own research, Principal collected about 5,500 individual comments about how the Riverwalk should be developed, “and we didn’t hear a riverboat or gambling in any of them,” O’Keefe said.

“We have not contemplated it, do not envision it and would not be in favor of it,” she said. “We don’t think it matches well with the objectives of the project or our view for the river.”

Des Moines City Councilman Archie Brooks said he’s not intimidated. “No business owns the community,” he said. “The last I looked, the Riverwalk only gets $10 million from them.”

Brooks thinks the city should explore a riverboat casino as a way to spur growth in the Court Avenue entertainment district and other downtown development projects. “If we put our blinders on, we’re accused of no leadership, and rightly so,” he said. “We have to explore and look at the whole picture and whether it fits into our vision plan.”

Echoing Brooks, Councilwoman Christine Hensley said a riverboat on the Des Moines River could be an economic boon to Des Moines. Iowa cities with casinos have received payments of $9.5 million, $10.7 million and $11.1 million for the fiscal years ending Dec. 31, 2001, 2000 and 1999, respectively, according to the RSM McGladrey report. Lease payments to cities for riverfront access or rent on facilities totaled $16.8 million, $16.2 million and $15.1 million for the years ended Dec. 31, 2001, 2000 and 1999, respectively, according to the report.

“We need to look at it seriously,” Hensley said. “It’s very premature and obviously a lot of discussion needs to take place. We need to be proactive and look at what makes sense and what doesn’t make sense.

“My sense is something is going to happen, and rather than outside parties dictating what they want to do, the city needs to dictate it.”

Three possible sites for a riverboat casiono have been identified: the former Dycos industrial site in the Riverpoint area, the former Pitt-Des Moines Inc. steel site at 921 Murphy St. and land currently leased by MidAmerican Energy Co. near Sec Taylor Stadium. Both the Dycos and Pitt-Des Moines steel sites are eligible for Superfund cleanup money from the U.S. Environmental Protection Agency.

ISLE OF CAPRI INTERESTED

At least one gaming company, Isle of Capri Casinos Inc., which has riverboats in Bettendorf, Marquette and Davenport, has approached city officials about obtaining a license in Des Moines, City Councilman Archie Brooks said.

Tim Hinckley, who will become the president of the publicly traded Isle of Capri on July 1, said the company is “getting to know Des Moines.”

“It’s not every day that a market the size of Des Moines comes along,” he said. “We’re taking a look at the population numbers, possible sites that might be available and getting to know our competition.”

That competition includes the Lakeside Casino Resort in Osceola and Prairie Meadows Racetrack and Casino. The Racing Association of Central Iowa, which holds the gaming license for and operates Prairie Meadows, hasn’t made a formal proposal to expand its presence in Greater Des Moines, but would be interested in operating a riverboat if Polk County voters approved an enabling referendum, Robert Farinella, the casino’s general manager, said.

“It would ensure that all the profits generated would go directly into the community,” he said. “There could be some benefits if that’s what the community wanted. We’re not pushing it, but it would be best [operated] under Prairie Meadows’ non-profit structure.

“We can optimize those profits by having two gaming operations under a common hat so they’re not competing against each other.”