By Gigi Wood
CEDAR RAPIDS – April 17 is right around the corner for the Cedar Rapids Development Group.
That’s the day the Iowa Racing and Gaming Commission announces its decision on whether it will grant a gaming license to the proposed Cedar Crossing Casino in Cedar Rapids. That’s after the commission visits Cedar Rapids April 3 to see the site and surrounding area.
Before that, investors will make their final presentation to the commission Jan. 9 in Waterloo.
“When you think about it, with holidays, it’s not that many business days away,” Steve Gray, chairman of the Cedar Rapids Development Group, said last week.
Mr. Gray said the investors have only briefly discussed the “what if” the license is denied.
“We’ll re-huddle and talk about what, if anything, we would do next,” he said.
If the license is approved, shovels will go in the ground April 18 with an expected opening of July 2015. The casino would be located on a 10-acre site in the Kingston Village neighborhood, at the intersection of First Avenue and First Street SW, on the west side of Cedar Rapids’ downtown, just off Interstate 380 and near the Cedar River.
Iowa Racing and Gaming Commission
The Cedar Crossing Casino’s fate is in the results of two market studies the state is conducting on the impact the proposed casino will have on Riverside Casino & Golf Resort in Riverside, just south of Iowa City, and Isle of Capri in Waterloo.
Unlike some past casino license awards, the process for the proposed Cedar Rapids license is not competitive.
“In previous rounds, the commission would give some indication, we’re interested in new applications, we’re going to consider them, so the last time they went they had four or five. It’s not so much a competition between them as trying to figure out, do any of these make sense,” said Jeff Lamberti, former Republican Iowa Senate leader from Ankeny and member of the Iowa Racing and Gaming Commission. “In this case, the folks there kind of proceeded on their own without an indication from the commission that we were interested in new applications or anything like that. So it did start off a little different.”
There are not an allotted number of licenses to be given out. Instead, the state will be determining whether any should be awarded at all.
“One of the things we’re going through and we’ll have our information back in February or March, are the market studies,” Mr. Lamberti said. “Obviously, we will hone in on Linn County and Greene County (central Iowa), two places where we’ve had a recent (gaming license) referendum pass. But we’ll study the market as a whole, we’ll study the entire state because I think most people assume there’s not a heck of a lot of room left in the state. So we may look at the studies and beyond these two, we’re not interested in any more, or the studies may identify potential in certain areas.”
When reviewing the Cedar Crossing application, there will be a number of factors the commission will consider, he said.
“With all applications, you look at the quality of the facility, you look at the number of jobs, you look at the amenities they’re including, such as restaurants and entertainment venues and the overall economic impact, as well as the arrangement they have with their nonprofit partner,” Mr. Lamberti said.
A major factor will also be how much the proposed casino would cut into existing casinos’ market share.
“When we’re looking at a facility like this, the overriding issue is, what is the impact on the current facilities,” he said. “I think a lot of people in Iowa don’t understand, we don’t have an open-competition system. That’s not what was created by the Legislature and governor way back when. Part of our system is, we’ve been able to get companies to make significant investments in their (casino) facilities on the promise that they won’t be cannibalized by another facility coming in. So there’s no doubt in my mind that the results of the market studies are going to be the single most critical element in us making a decision. And that’s going to focus solely on, what is the overall impact if this facility was built, on our current facilities. The applicant came in and I believe their study said 9 percent. We’ve obviously heard from Waterloo and Riverside and Dubuque, where they obviously don’t agree with that study. So the commission has engaged two firms to do studies for us. And that is part of our effort to get the best information we can.”
Iowa law does not outline how many casinos the state should license, or how many is too many.
“There’s nothing in Iowa law that says if a new facility would impact an existing facility by a certain percent of their adjusted gross receipts, that we wouldn’t allow it,” Mr. Lamberti said. “So it’s really up to the discretion of the commission. If you look at what these folks have done in terms of the facility they’re proposing, the number of jobs, the amenities, that would meet anybody on the commission’s requirements. Certainly it would be a first-class facility but none of that overcomes, what’s the impact going to be on our existing facilities?”
The market studies presented by Cedar Crossing and Riverside Casino show significantly different impacts, he said.
Cedar Crossing updates
The 171,000-square-foot casino is now expected to cost $150 million, up from initial estimates of $110 million. The $150 million in financing has been secured through the group’s more than 180 local investors, including PPCR, Credit Suisse and Bankers Trust have provided financing, as well.
The cost estimate went up for a couple of reasons. First, the for flood mitigation purposes, the ground floor will be mostly open space. That puts the gaming and restaurants on the second floor. The facility, Mr. Gray said, will be 15 feet above grade level. The site will tie into a nearby floodwall for additional protection. Also, because the site is relatively small compared to others — such as the Isle of Capri in Waterloo, which is on 40 acres and the 320-acre Riverside Casino site, which includes an 18-hole golf course –Cedar Crossing will be developed vertically, another cost increase. Despite those challenges, Mr. Gray said it’s a valuable site.
“It’s a unique way to leverage the community’s investment in the hotel, convention center, new arena, amphitheater and do something meaningful for the downtown redevelopment,” he said. “There were over 1,000 homes lost on the west side of the river and hundreds of businesses. This is a compelling opportunity to revitalize that area and do something meaningful.”
Some of the money raised by the casino through tax proceeds or charitable contributions to its fundraising arm, could be used to cover the cost of much of the outstanding flood mitigation work in Cedar Rapids, Mr. Gray said. The casino could also increase the value of the land, thereby potentially making the area eligible for more federal flood recovery money, he said.
The third floor will include the City Lights Event Center, a 400-seat venue, which Mr. Gray said will not necessarily be used for music concerts, but instead is expected to be popular for weddings, private parties and corporate meetings. The casino will also house Sinclair’s Steakhouse Lounge, its name a nod to the Sinclair meatpacking plant in Cedar Rapids; The Rock Bar, a shout out to the large rock in the Cedar River near the casino location and Kingston Market Buffet, which is expected to use many local food sources and is named after the historic Kingston Village neighborhood. The area was the city of Kingston until it was annexed by Cedar Rapids in 1870. There will also be a 24-hour deli called Pickle Works, named after the historic Cedar Rapids Pickle Works Factory.
Cedar Crossing expects to employ 360 people, Mr. Gray said last week. The five-year gaming, tax, fees and other non-profit revenue impact of a Cedar Rapids casino is expected to be $97 million.
Casino background
Mr. Gray said the casino idea started in March 2011, when he was approached by Cedar Rapids city councilors. He began to explore the feasibility of a casino and hired a few people to look into the idea.
“We did a lot of work, talking to the surrounding area market operators about potential partnerships. When that was to no avail, we ended up in May 2012, hiring our team,” Mr. Gray said.
The team included Doug Gross of Des Moines as the strategic legal advisor, David Hill of Houston to help with research and campaign planning and TMG Consulting of New Orleans to complete the market studies.
“Over the next five months, we got comfortable with the work the team did,” Mr. Gray said.
In November 2012, a petition was launched to collect signatures to create a special election to approve a referendum to proceed with a gambling license for the county. The petition received 16,192 signatures, about 1,000 more than was required for a special election. The issue was put on the ballot and voters approved it last March 5.
Since March, the group selected its partners, JNB Gaming, the former principals and managers of Peninsula Gaming that operated five casinos in the country. It was sold last year to Boyd Gaming.
The Cedar Rapids Development Group is led by several prominent, local businessmen, including Chairman Steve Gray, of Gray Ventures, ImOn and other local companies; Drew Skogman, of Skogman Homes; John Smith, of CRST; Barry Boyer, retired from Van Meter; as well as Brent Stevens, Natalie Schramm and Jonathan Swain, of JNB Gaming, who will operate and own part of the proposed casino.
During the past year, the group has also entered a developer’s agreement to buy the parcels of the proposed casino land from the city of Cedar Rapids. The development group owns seven; the city owns the remaining seven on the site. The agreement is contingent upon approval of the gaming license. The development group has also conducted site reviews and environmental assessments on the site.
The group presented its financials to the Iowa Racing and Gaming Commission two weeks ago in Dubuque.
