Sioux City Knew Casino Risks

Sioux City wants to support the Iowa Racing and Gaming Commission and Hard Rock Casino developers Sioux City Entertainment in Penn National's lawsuit against them. The city already spent $11 million in TIF funds on the Hard Rock project (l.). But the Iowa gaming industry is the center of controversy in several cities today.

Attorneys for Sioux City, Iowa, recently requested that the city become involved in upcoming court proceedings involving the Hard Rock Casino project, specifically a lawsuit filed by Penn National Gaming against the Iowa Racing and Gaming Commission. Sioux City wants to present evidence supporting the Hard Rock project and the IRGC. But Penn Gaming, owner of the Argosy Sioux City riverboat said the city made a decision to contribute money to the Hard Rock enterprise knowing what was at stake and therefore has no right to be involved in the legal battle.

On January 3 Sioux City made its second payment of TIF funding to Hard Rock developers Sioux City Entertainment, bringing its total investment to date to $11 million, not including the required infrastructure improvements for the casino. Said City Council member Rhonda Capron, “We have skin in the game now. We have millions of dollars sucked into this and we want to see it go forward.”

In response, Penn National Spokesperson Karen Bailey said, “Even after Judge Hanson had issued his stay back in December, the city still went ahead with its second payment of TIF money to SCE in January. So for us this is just the height of irony.” Bailey added, Sioux City officials knew about the pending litigation, which should have caused concern. “They chose to support a TIF project when a non–TIF project was available to them that wouldn’t cost tax payers any money or put their tax dollars at risk,” Bailey said, referring to Penn National’s two proposals to build a land-based Sioux City casino.

But, Capron said, “We were told by the IRGC that everything was a go and that’s exactly what we did. I tell you, it’s such a legal mess it’s hard for us to understand it.” A district court is expected to make a ruling on the matter on or before February 15.

Also in Iowa, the board of Prairie Meadows Racetrack and Casino in Altoona recently granted Chief Executive Officer Gary Palmer a bonus of $153,056 plus a 3 percent raise. Palmer’s total compensation since 2008 has increased 62 percent to $652,747 in the calendar year ending in 2012, the latest year complete tax records are available. That included a 111 percent increase in his annual bonus in that same period. And at Mystique Casino in Dubuque, Chief Executive Jesus Aviles’ total compensation rose by 38 percent to $708,898, including his first bonus and incentive package, which was $241,850, according to tax records. Aviles’ total compensation has grown by 38 percent since 2008 and remains above Palmer’s total compensation, although Mystique’s revenue is one-third that of Prairie Meadows.

The Prairie Meadows board also approved grants to more than 200 charities.

A recent Des Moines Register investigation showed that adjusted revenue for the six fiscal years that ended June 30, 2013, grew 1 percent at Prairie Meadows and fell 20 percent at Mystique Casino in Dubuque. The raises and bonuses have become an issue among advocates for charities and other critics who question whether the payments affect the core mission of the casinos, which is to benefit hundreds of Iowa nonprofits.

Stacey Cargill, a West Des Moines resident who has campaigned against casino expansion, said, “I don’t understand a $150,000 bonus when the whole purpose of Prairie Meadows is to fund nonprofits. That’s the equivalent of 30 different $5,000 grants. That’s a lot of nonprofits that are going without money to fill Gary Palmer’s deep pockets. The Prairie Meadows board has skewed priorities.”

Prairie Meadows board member John Rowen explained, “We set our annual goals and Gary met or exceeded every one of the goals we set out.” Rowen said salary studies previously have indicated Palmer and other executives are underpaid. He said, “I’m not an expert by any means, but we look at studies and we look at comparables. As a board we look at what we think is fair to really maintain the level of leadership that you need to carry out what we do.” Bob Myers, vice chairman of Prairie Meadows’ board, said, “Let’s not kid ourselves. This is a for-profit casino for the benefit of the residents of Polk County, Iowa,” referring to the $10 million in grants and scholarships that the casino distributes in central Iowa. In addition, Prairie Meadows pays nearly $20 million annually in rent and other subsidies to Polk County and Des Moines governments.

Mystique board member Michael Van Milligen, Dubuque’s city manager, said, “We made a determination that we wanted to be competitive with the for-profit casinos so that we would get some of the top talent in the country to compete.”

Also raising eyebrows is the trip to the Global Gaming Expo in Las Vegas taken by eight Prairie Meadows board members last fall. The Des Moines Register asked how much money was spent to send the board members to the convention but attorney Tom Flynn said the board considers information on spending to be confidential. Although Iowa law defines a nonprofit casino as a “government body” subject to the state’s open-records law, Flynn said he believes a provision in the law exempts the board from providing spending information because the facility does not currently owe debt to taxpayers.

According to the Register story, about 40 people, including board members’ spouses and guests, attended the conference. Polk County Supervisor Bob Brownell said, “These trips like this are always controversial because the public wonders what we’re getting out of it. You can make the obvious one-to-one argument that every dollar spent somewhere else would conceivably go to a nonprofit charity, and that’s what it’s supposed to be about.”

Prairie Meadows board member, Des Moines attorney Mark Hedberg, said he attended the conference and spent most of the time there in seminars. “The bottom line is that I went, I learned a lot and it wasn’t a party,” Hedberg said.

Mystique also is in the news as combined betting there and at Bluffs Run Greyhound Park in Council Bluffs has dropped from $186 million in 1986 to $5.9 million in 2012—a 97 percent fall. They are the last two dog racing tracks in the state, which is one of only seven that still have legal dog racing tracks. The greyhound racing operations depend on $14 million in annual subsidies from Iowa casino profits, as mandated by the legislature.

Senate President Pam Jochum aid, “This simply isn’t working any more. If this were any other business in the private sector, it would have been shut down a long time ago.” Added Senate Majority Leader Michael Gronstal, “I continue to have real concerns about people whose livelihoods come from this.” But the Iowa greyhound industry says it supports hundreds of jobs and generates millions of dollars for agriculture through greyhound breeding farms and kennel operations.

State Senator Jeff Danielson, chairman of the Senate State Government Committee, said his panel only would consider a bill to end dog racing if officials of both the greyhound and casino industries could reach an agreement. As a result, greyhound breeders and owners potentially could receive millions of dollars in compensation paid by Mystique Casino, which operates the Dubuque track that is owned by the city, and Horseshoe Casino, which operates the Bluffs Run track, owned by Caesar’s Entertainment.

Casino lobbyists say an offer is on the table to the greyhound industry to end racing. State Rep. Pat Murphy said, “This is a big industry in the state. It is my understanding there are roughly about 1,100 or 1,200 or 1,300 people who make their living off of this, whether they own greyhounds, whether they work on a farm or whether they work at the tracks. I want to make sure that we address their concerns instead of just shutting them down.” Casino lobbyists contend the number of greyhound industry jobs is grossly inflated.

Danielson noted, “If we can work out the differences and get people to say ‘yes’ in phasing out greyhound racing in Iowa, I am open to that. What I am encouraged by is that I understand the stakeholders are communicating, which is a change from past years.”

Mystique General Manager Jesus Aviles said about $4.5 million was spent in Dubuque last year to subsidize greyhound racing. Overall, racing has been responsible for the diversion of more than $55 million from charitable organizations and public capital projects over the past three decades. “It is a heavy burden and the subsidies have done nothing to keep the greyhound industry viable,” Aviles said. Des Moines attorney Jim Carney said his client Caesar’s Entertainment spends about $10 million annually to subsidize greyhound racing.

Jerry Crawford of Des Moines, attorney for the Iowa Greyhound Association, noted, “The city of Dubuque and the city of Council Bluffs were both in a really downtrodden way when they got racetracks. People have forgotten that greyhound racing led to a revitalization of both of those towns.” But attorney Doug Struyk, a former Iowa legislator who is now a lobbyist for Caesar’s Entertainment, said only 38 percent of Iowa’s racing purse money goes to out-of-state dog owners, and 95 percent of what’s left goes to just 25 Iowans.