Davenport’s casino consultant fielded questions today about revenue, risk, bond ratings and public-versus-private ownership from members of the Riverboat Development Authority board.
Gary Buettner, who previously served as chief financial officer for Jumer’s Casino and Hotel, already had briefed several members of the board about the proposal. The RDA is considering an operating agreement with the Davenport Community Improvement Corp. The RDA took no action at its meeting.
The nonprofit corporation would operate a land-based casino after the city acquires the Rhythm City from the Isle of Capri for at least $46 million. Tonight, the Davenport City Council will consider whether to open negotiations with Ingenus Management and Consulting and Financial District Properties that proposes an interstate casino and smaller downtown casino.
Buettner explained that the net revenue to the city for an interstate casino proposed by Ingenus Management and Consulting and Financial District Properties would be $11 million after debt service, while a downtown casino proposed by Restoration St. Louis would have a net revenue of $10.5 million, but that is before debt service.
Gross gaming revenue for the interstate casino would jump to an estimated $91.3 million, from $50.5 million by the Rhythm City in fiscal year 2012, Buettner reported.
“I think if this board is thinking, ‘How do we get more money?’ there is more money on the interstate,” Buettner said.
The consultant’s analysis wasn’t enough to sway ardent opposition on the RDA board.
“This is geared up to be a gigantic financial disaster,” board member Don Decker said.
Decker and fellow board member Chad Lewis oppose the project for putting taxpayer money at risk. Decker said four gaming companies want to come in and develop an interstate casino.
“We are putting a $150 million burden on the taxpayer,” Lewis said.
Buettner said the competitive Quad-Cities gaming market makes it unattractive to gaming companies that demand profit margins of 22 percent to 29 percent, while the city is willing to accept the same amount of revenue because it is increasing the amount of money it receives through the casino.
Lewis also raised the issue of Moody’s Investors Services latest rating for the city of Davenport. The company left the city’s rating at Aa2 but revised its outlook to “negative.”
Although Moody’s saw the city’s large and stable tax base as a strength, it raised concerns about the city’s limited cash position and “new risks posed by expected future ownership of a casino.”
Alderman Jeff Justin said the rating agency also raises concerns about a lack of revenue diversity and the casino would help remedy that.
“I wouldn’t risk taxpayer money if I thought there was a risk,” Justin said.
City Administrator Craig Malin said the city has explored the risk through “considerable due diligence.” He noted for the RDA that Polk County and the city of Dubuque both own casinos and have a better bond rating than Davenport.