Potential Cedar Rapids casino developer pursues deal with city to buy land for gaming facility – The Gazette
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Home / News / Government & Politics / Local Government
Agreement to be considered by City Council would only take effect if Iowa Racing and Gaming Commission awards license
Jun. 27, 2023 5:37 pm, Updated: Jun. 27, 2023 6:46 pm
CEDAR RAPIDS — Making good on a vision announced more than a year ago, a swath of land in northwest Cedar Rapids near downtown may soon be earmarked for a potential casino — should a state panel ever award a license to operate a gaming facility here.
The Cedar Rapids City Council next month will consider an option-to-purchase agreement through Dec. 31, 2025, with the Cedar Rapids Development Group, the city’s preferred casino developer, as well as preliminary terms of the potential facility.
If approved, this deal would set aside city-owned property between F and I Avenue NW and First and Fifth Streets NW to be purchased and redeveloped into a casino and entertainment complex.
The developer would pay $165,000 for the option to purchase the property, under the proposed terms of the deal. If the Iowa Racing and Gaming Commission is actively considering an application to operate a casino, the developer may extend the option to Dec. 31, 2026, and pay the city another $55,000.
The city-owned property would be sold at its fair market value as determined by an appraiser. The developer also has made offers to buy private properties near the site.
“I’m perpetually optimistic both about the commission and the Legislature,” said Jonathan Swain, president of Peninsula Pacific Entertainment, the city’s preferred casino operator. “All we ask for is the opportunity to present our case before both bodies and make this opportunity for Cedar Rapids come to life.”
The council set a public hearing date to consider the agreement for its noon July 11 meeting at Cedar Rapids City Hall, 101 First St. SE.
Five of the nine council members approved the public hearing date. Council member Ashley Vanorny voted against it. Council members Scott Overland and Marty Hoeger were absent. Council member Tyler Olson recused himself because of a potential financial interest.
State lawmakers last year enacted a two-year moratorium blocking new casino licenses until June 2024, thwarting for now Cedar Rapids gaming interests’ hopes for a gaming facility at the site of now-demolished Cooper’s Mill.
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The Cedar Rapids Development Group, an entity of mostly local investors, and Linn County Gaming Association, the nonprofit that would allocate a slice of revenue to local nonprofits, plan to jointly apply for a gaming license with the Iowa Racing and Gaming Commission after the state moratorium on new licenses ends in June 2024. They have a deal guaranteeing the city’s support in the license application process through October 2029.
When the moratorium took effect last summer, state regulators indicated they would set a timeline for taking applications for a Linn County gaming license, after voters in November 2021 again passed a referendum that allows gaming interests to seek a license in perpetuity.
The local investors, the gaming association and Peninsula Pacific Entertainment unveiled plans for a $250 million, 160,000 square-foot entertainment and cultural arts complex dubbed the Cedar Crossing casino.
With the license application process halted, gaming commission members expressed concerns the legislative moratorium would introduce politics into gaming operations.
The proposed terms of the casino call for a minimum $150 million, 125,000 square-foot, one-story complex including a 45,000 square-foot gaming facility, 11,000 square-foot restaurant space, 12,000 square-foot event space and 1,500 parking spaces.
Under the proposed city agreement, the city would establish a Community Betterment Fund to support economic development, affordable housing, trails and infrastructure, amenities or other activities.
The developer would make monthly payments to this fund starting one year after the facility opens in perpetuity while it operates a casino. That payment would be 2.25 percent of the Adjusted Net Gaming Win — or gross revenue less applicable taxes.
This fund is in addition to the operator’s commitment to contributing 8 percent of Cedar Crossing’s annual net gaming revenue to fund local not-for-profits — the highest revenue share in the state. Iowa requires that licensed casinos set aside a minimum percentage of revenue to fund not-for-profit organizations.
To execute the agreement, the developer must hold at least two public open house meetings. The developer also would fund any increased costs tied to modifying the segment of permanent flood control — a flood wall — planned near the site.
The city and developer also would agree on the design and funding of any off-site improvements needed to accommodate the project, including connections to the road network.
Additionally, the developer or third-party tenants must employ no less than 300 full time employees on or after the one-year anniversary of the facility’s opening for 10 years. If required certification shows the average monthly employment falls below 250, the developer would pay the city $1,000 per employee below that count.
Since last year, casino backers launched a political action committee to donate to the political campaigns of key state leaders and candidates. Still, their political contributions didn’t rival those of Dan Kehl, whose company operates casinos in Riverside and other cities.
Kehl, a staunch opponent of a Cedar Rapids casino, has long bankrolled political campaigns. He has argued a gaming facility here would “cannibalize” revenue from existing properties.
The makeup of the five-member panel that awards licenses has changed again. Casino backers were optimistic new members may be more open to a Linn County casino than in 2014 and 2017, when regulators rejected Cedar Rapids’ bids for a gaming license.
The commission’s newest member is Alan Ostergren, a former Muscatine County prosecutor. Ostergren is president and chief counsel for the Kirkwood Institute in Des Moines, a conservative public-interest law firm focusing on economic and property rights, constitutional governance and separation of powers.
He represented Cedar Rapids man Kevin Wymore in his lawsuit against the city and Mayor Tiffany O’Donnell asserting an ordinance that requires five of the nine-member police Citizens Review Board to be people of color is racially discriminatory.
Asked about the shifting commission membership and how that might affect Cedar Rapids’ odds to receive a license, Swain said, “I’m always optimistic, it’s my nature. I think that really all we want is a fair opportunity to present our case for people who are open-minded. I hope that all commission members are open to the idea.”
Gaming panel-commissioned studies have showed the threat Nebraska gaming expansions pose to Iowa gaming revenues, and found a net revenue gain of more than $50 million from a Linn County casino. Swain said the development team still sees an opportunity to capture gaming revenue in Iowa.
“Long term, we still think this is a great project for the state,” Swain said.
Comments: (319) 398-8494; marissa.payne@thegazette.com
Cedar Rapids government reporter, The Gazette
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