Casino verdict: Tried and true or status quo?

CEDAR RAPIDS — Auto repair shop owner Steve Novak is the last guy standing on the eight or so acres of property that is proposed to become the Cedar Crossing Casino across the Cedar River from downtown.

His shop, Novak Automotive Inc., has been a fixture at 220 Second Ave. SW since his dad first opened it in 1963.

Last summer, Novak, 62, had little time to talk about selling his business to make way for a casino, and Steve Gray, the Cedar Rapids businessman heading up the casino investor group, figured the casino could go up with Novak’s little sky-blue shop building nestled beside it.

Back then, it was difficult to figure Novak — who without blinking brought the shop back to life from the Flood of 2008.

Was this under-the-hood specialist in fixing starters and alternators a champion of stability, of the tried and true? Or was this just the status quo, a hanging on, an unwillingness or inability to imagine a better, different future?

The big day looms

Thursday is a big day for the Iowa casino industry and especially so for investors and backers in Cedar Rapids and Linn County of the proposed $174 million Cedar Crossing Casino project and for investors and backers of the existing casinos nearby who have opposed the Cedar Rapids casino project since Gray unveiled plans in October 2012.

At its meeting Thursday morning at the Ameristar Casino Hotel in Council Bluffs, the five-member Iowa Racing and Gaming Commission is scheduled to decide whether it will grant Cedar Crossing Casino a state gaming license, which would make the Cedar Rapids facility it the 19th casino in Iowa.

During the course of the past 18 months, Gray and investor group Cedar Rapids Development Group LLC engineered a campaign to acquire 15,000 signatures quickly for a Linn County referendum, won 61 percent of the vote to allow casino gaming in the county and spent millions of dollars to position the casino project for Thursday’s commission vote.

At the same time, Dan Kehl, chief executive officer of the Riverside Casino & Golf Resort and a member of a pioneering family in Iowa’s casino industry, has been an unflinching and formidable vocal critic of the Cedar Rapids project. A sizable piece of Riverside’s business comes from Cedar Rapids and Linn County, and losing much of it to a Cedar Rapids casino would cripple the Riverside one, Kehl has said.

State-licensed casinos in Waterloo, Dubuque and Altoona and the casino on the Meskwaki Indian Settlement west of Tama have said they will be hurt, too.

Neither Gray nor Kehl had much more to say Friday and Saturday with the commission’s decision just days away.

Kehl pointed to the two market studies conducted for the commission, both of which recommended against additional licenses and both of which said the Riverside casino would lose a lot of business to a Cedar Rapids casino. “Cannibalization” to existing casino business has mattered to the commission in the past and should now, he said.

“I feel like we’ve made our case and that the commission studies agree with our position,” Kehl said. “And we hope they will follow precedent.”

Gray repeatedly has pointed to his investor group’s own market expert, who said Cedar Crossing will not take a significant amount of business from the Riverside casino as the new Cedar Rapids venue increases overall gaming revenue for the state. On Friday, Gray said a Cedar Rapids casino will help revitalize downtown Cedar Rapids, create an “anchor attraction” for the city and serve as a catalyst for additional private investment.

“I am proud of how many people from all walks of life came together over the past three years and helped make our proposed development an awesome project,” Gray said. “We are hopeful and optimistic about the entire process and the vote next Thursday. Cedar Crossing Casino is truly the right project at the right time for our region and the state of Iowa.”

‘Ventured to change’

Four of the five Racing and Gaming Commission members spent a long day in Cedar Rapids on April 3. They visited the proposed casino site, listened to a presentation by casino backers and then took about four hours of comments, pro and con, at a public hearing.

Afterward, Commission Chairman Jeff Lamberti, an Ankeny attorney and former state legislator, said the commission decision would be late in coming. He said getting there was “no fun.”

During the short bus tour that day, Mayor Ron Corbett and other casino backers pointed out damage from the Flood of 2008. They said the casino would help further the city’s recovery and would help generate more investment to fill now-vacant land where flood-ruined businesses and houses once stood.

Jonathan Swain, a former executive of the Dubuque-based entity that owned Diamond Jo Dubuque casino, told the commission that downtown Cedar Rapids after the flood was like downtown Dubuque in amid the recession of several years ago. At the time, downtown Dubuque had a small riverboat casino and a bunch of empty warehouses. Then Diamond Jo Casino decided to get off the river and build a new, larger, land-based casino. The move helped spur a downtown revitalization, he said.

“We ventured to change. … This is what possibility looks like,” Swain, who is an investor in and will help manage Cedar Crossing Casino, told the commission about his experience in Dubuque.

‘Power of status quo’

Corbett on Friday said he has talked with individual commission members since their visit to Cedar Rapids, and he said he has been left with one central thought: “This power of status quo is pretty powerful.”

Corbett, formerly a longtime Iowa legislator who served as speaker of the Iowa House, said it is odd to hear casinos fight against change when he said the entire history of Iowa’s gaming industry has been one chapter after another of casinos seeking change.

There have been betting limits, requirements that casinos be located on water and that they cruise on water, all of which have been set aside at the urging of the casino industry.

“I’m a little perplexed,” he said. “As they have consistently gone back to the Legislature and the Racing and Gaming Commission for ways for them to be more competitive, they have embraced all those changes. But an additional license that would provide additional competition, and they’re against it.”

The mayor pointed out that former Waterloo Mayor Tim Hurley, who is head of the non-profit Black Hawk County Gaming Association, has made the case against a Cedar Rapids casino by saying that Waterloo’s casino, which opened in 2007, was built with the understanding that Cedar Rapids and Linn County gamblers would use the Waterloo facility. The Riverside casino makes a similar argument, Corbett said.

“That may have been what the commission at the time was semi-agreeing to in some informal way,” he said. “But in no way should Waterloo and Riverside feel that they should have the market in Iowa’s second-largest city safeguarded for them in perpetuity.”

‘I think it’s a go’

Most of eight or so acres of land — between A Avenue NW and Second Avenue SW and First and Third streets SW — for the proposed site of the riverfront Cedar Crossing Casino and parking ramp is owned by the city of Cedar Rapids. The city purchased what had been flood-ruined businesses and homes with federal flood recovery dollars.

Upon obtaining a state casino license, casino investors will pay $2.2 million for the city property, money that will return to the state’s flood recovery fund, and an additional $732,730 for city streets and alleys on the site. This money will go into the city budget.

Three properties on the site were owned privately, and the casino investors already have bought two of those at a total cost of $2.05 million.

But then there is Steve Novak and his Novak Automotive Co. shop.

With a smudge of grease on his face last week, Novak seemed to pick $50 out of the air as a fair price to satisfy a customer on a small repair job.

Then he was ready to show off photographs — of the damage to his shop in the flood of 2008; of him repairing cars out in the lot by day; of him mucking out and renovating the shop by night. The high-water mark is memorialized with a sign, at 12 feet.

In the end, what a flood couldn’t do, a casino can.

Novak has agreed to sell his property to casino investors if they obtain a state license, and he predicted the commission will back Cedar Rapids’ request.

“I think it’s a go. I really do,” Novak said.

Sufficiently confident is he of the commission vote that he said he plans to get his dad, Jim, now 86, in the shop for a few last photos.

“I would have liked to have retired here,” he said. “But I guess I have to move on. It’s a good thing for the city. People are counting on the casino. It will help business in this neighborhood and in the city.”


Location: Cedar River riverfront at First Street between First and Second avenues SW across from downtown Cedar Rapids.
Projected cost: $174 million, which includes a $28 million parking ramp with skywalk connection across First Avenue W.
Owners: Cedar Rapids Development Group LLC, a group of about 175 investors led by Cedar Rapids businessmen Steve Gray and Drew Skogman. Shareholders also include Peninsula Pacific Cedar Rapids LLC, which includes three former executives of Dubuque-based Peninsula Gaming LLC — Brent Stevens, Natalie Schramm and Jonathan Swain. Peninsula owned and operated the Diamond Jo Dubuque and Diamond Jo Worth County casinos and three out-of-state gaming venues before selling them in 2012.
Managers: The former Peninsula Gaming executives have helped design and will manage Cedar Crossing Casino as an entity called JNB Gaming LLC.
State license-holder: The not-for-profit Linn County Gaming Association. Its five board members are Keith Rippy, Leah Rodenberg, Linda Seger, Justin Shields and Brent Oleson.
Investor agreement with the Gaming Association: The casino will pay 3 percent of adjusted gross receipts to the not-for-profit for the first 10 years, about $2.4 million a year at the start. The percentage increases after 10 years based on casino revenue.
Development agreement with Cedar Rapids: City property tax revenue generated from the investment in the casino will be used over
20 years to pay off the construction cost of the $28 million, three-story, 1,000-space parking ramp. The casino also will pay the city a one-time $1 million and 1 percent of adjusted gross gaming revenue, about $800,000 a year to start, for 50 years. The city agrees to spend up to $2 million in infrastructure improvements on the site.
Land purchase: Most of the land at the site of the casino and parking ramp from A Avenue NW to Second Avenue SW and from First to Third streets SW is owned by the city. The city acquired it in its flood recovery buyout of flood-damaged property.
Three parcels on the casino site were owned privately. The casino has purchased two of them, for a combined total of $2.05 million, according the City Assessor’s Office website. The casino has an option to buy the third property if it secures a gaming license.
Jobs: 470 new jobs, which is the equivalent of 350 full-time jobs. Payroll of $13.6 million a year.
Casino space: Three floors with a first floor of parking. Thirty table games, 840 slot machines, 400-person banquet and meeting room and three restaurants: Sinclair’s Steak House, Pickle Works Delicatessen and Kingston Market Buffet.
Planned opening date: July 4, 2015.

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