New Developments In Sioux City Battle

In Iowa, a district judge allowed Sioux City to intervene in Argosy's lawsuit against the Iowa Racing and Gaming Commission over granting a license to Hard Rock Sioux City (l.). Also, a hearing was held over the IRGC's denial of Argosy's license renewal due to a lack of a nonprofit partner.

In Iowa, Polk County District Court Judge Eliza Ovrom recently granted Sioux City’s request to intervene in the Argosy Sioux City riverboat casino’s lawsuit against the Iowa Racing and Gaming Commission. The ruling came after Argosy owner Penn National Gaming  voluntarily withdrew its motion opposing the city’s intervention, even though when the lawsuit was filed 18 months ago, Argosy attorneys argued it would be “highly inequitable” and an “affront to the judicial process” to allow it. Final arguments in the case will be heard September 6.

In its January 17 petition, Sioux City noted its interests were not “adequately represented” by other parties in the case. The city borrowed $22 million in a 20-year deal to help fund parking and infrastructure for the Hard Rock. The TIF bonds are continent on increased property tax valuation of the Hard Rock property at Third and Water streets.

Penn National wants the court to vacate or overturn the IRGC’s April 18 vote to award a state gaming license for Woodbury County’s first land casino to Sioux City Entertainment, developer of the $128.5 million Hard Rock Hotel & Casino Sioux City, and its nonprofit partner, Missouri River Historical Development—formerly the nonprofit partner of the Argosy.

Argosy claims the IRGC ignored its own rules and violated state laws and the company’s constitutional rights. The Hard Rock is under construction in downtown Sioux City and scheduled to open in late summer. Penn National had offered two proposals for the gaming license.

The city moved to enter the case after Polk County District Court Judge Robert Hanson on December 10 granted Argosy’s request to suspend the Hard Rock license until the IRGC suit was resolved. The Iowa Supreme Court temporarily stayed Hanson’s ruling and returned the case to the district court. Ovrom, the new trial judge, vacated Hanson’s stay on February 14 and on February 21 she approved SCE’s motion to join the case, naming MRHD as a defendant as well.

In a separate issue, at its monthly meeting, a public hearing regarding the IRGC ‘s denial of a standard one-year license extension carried over into a second day. The state argued that since Argosy no longer works with a nonprofit partner, as required under Iowa law, it no longer has a valid license. MRHD was the Argosy Sioux City’s nonprofit partner until talks stalled after months of negotiations. In frustration, in June 2012, the IRGC opened up bidding for a land-based casino to replace the Argosy. The IRGC has allowed the Argosy to remain open even though its operating agreement with MRHD ended in July 2012.  Last year Penn filed a breach-of-contract lawsuit against MRHD, which claims it still is entitled to 3 percent of the Argosy’s gross revenue.

Attorneys representing Belle of Sioux City, which operates the casino, argued that the license still is valid. When Argosy applied for the renewal of its license in December 2012, representatives of Penn National signed the renewal documents, but MRHD representatives did not. IRGC Administrator Brian Ohorilko said, “That relationship was, quite frankly, a mess.”

Argosy has requested the IRGC approve a substitute local nonprofit group, called Greater Siouxland Improvement Association, as its new nonprofit partner. GSIA President Bob Knowler said his group is ready to partner with Argosy to keep the boat operating, and distribute in the community the charitable funds that Argosy has withheld from MRHD since May.

The IRGC will issue a written decision at a later date. Argosy would have the option to appeal in Iowa District Court.

A study by Marquette Advisors, which also prepared a report for the IRGC regarding new casinos in Iowa, indicated the Hard Rock Sioux City would generate $78.5 million in gross revenue by fiscal 2017—an increase of $22 million from the $56 million in revenues posted by the Argosy Sioux City in the most recent fiscal year ending June 30.

Also at the IRGC meeting, commissioners asked few questions of representatives of two consulting firms the board retained to study the impact of additional casinos on the 18 existing ones in the state. Both studies concluded Iowa’s gaming market is saturated and new casinos would “cannibalize” revenues from the others. The studies were commissioned to help the IRGC decide whether to approve the proposed $165 million Cedar Crossing Casino in Cedar Rapids and a $40 million complex in Jefferson to be developed by Wild Rose Entertainment.

Rich Baldwin, managing director of Union Gaming Analytics, said, “We do not believe there are any underserved counties in Iowa. We believe the state should refrain from issuing any additional casino licenses.” The Union Gaming study estimated the Riverside Casino and Golf Resort in Riverside would lose $30.6 million in annual revenue, and the Meskwaki Casino near Tama would lose $11.8 million per year if the Cedar Rapids casino opens.

Marquette Advisors Vice President Brent Wittenberg said the proposed Cedar Crossing Casino would take customers from the Riverside, Waterloo, Tama and, to a lesser extent, the casinos in the Quad-Cities and Clinton. Specifically, the Isle Casino Hotel Waterloo would lose $10 million in annual revenue. The Marquette Advisors study also predicted a $25 million drop in annual revenue for Riverside and a $10 million decrease annually for Meskwaki.

“The problem is Iowa is not a free-market system. It’s set up to encourage big-dollar investments, so the cannibalization issue is one we have to take into consideration,” said IRGC Chairman Jeff Lamberti.

Chairman Steve Gray said he stands by the results of his group’s own market study by TMG Consulting of New Orleans, which showed Cedar Crossing would have a far less negative impact on surrounding casinos. He also pointed out the city of Dubuque has had two gaming facilities operating in close proximity for decades.

In another area of gambling, Iowa Governor Terry Branstad recently called greyhound racing a “dying industry,” but said any legislation that would close the state’s two dog tracks should require reparations to dog owners.

Although the IRGC ultimately will decide if greyhound racing should end, the House currently is debating a bill that would close Iowa’s two dog racing tracks and provide Iowa dog breeders and kennel owners with $70 million over seven years. Racetrack employees would be guaranteed jobs in the casinos.

Betting on the races has been declining since 1989. When racing started in 1986, bets totaled $186 million; in 2012 that amount was less than $6 million, a 97 percent drop.