Data used by two vocal opponents of Davenport’s acquisition of the Rhythm City casino is flawed, a casino consultant for the city has determined.

The financial projections from Don Decker and Chad Lewis, who sit on the Riverboat Development Authority board, found its way into the email inbox of city staff who forwarded it to Gary Buettner, the city’s consultant and former chief financial officer of Jumer’s Casino & Hotel.

Buettner determined the data, which showed a deficit for the casino after three years, used too high a percentage of operating expenses, used a higher interest fee than expected and higher capital costs in the early years of the casino.

The Cummings Report, commissioned by the Davenport City Council, projects revenue of a land-based casino in Davenport ranging from $82.7 million to $102.3 million annually, depending on the type of casino project.

Decker and Lewis each declined to comment on their data sheet, saying only that they would await Buettner’s review of the three land-based casino developments under consideration.

Davenport City Administrator Craig Malin responded to the two men in emails Wednesday, offering to meet with them. He pointed to the operating expenses in their spreadsheet — 57 percent and 65 percent of gross revenue — as being too high in an email to Lewis.

Buettner’s experience with Jumer’s is operating expenses of about 30 percent. For the city’s purposes, Buettner is creating a matrix of expenses and revenue for comparison of the development projects for the city, setting operating expenses at 35 percent. A report by the city’s bonding company, Public Finance Management, uses conservative figures to set operating expenses at more than 40 percent.

“Think in terms of how many nations can afford aircraft carriers, and how happy people are when they sell their boat,” Malin wrote to Lewis. “Operations on water are hideously expensive.

“I understand the subject was ‘no response required’ but I wanted to give you a quick heads up on what appears to be a well-intended effort that just doesn’t take advantage of the expertise the city has assembled for this venture.”

Along with the Cummings report, the city also had Public Finance Management do a financial study on acquiring the casino. The data used by Decker and Lewis came from various parts of that report, according to one of Lewis’ emails to Malin.

In an email to Decker, Malin reiterated the expertise the city has called on in its acquisition of the casino. The Cummings Report was commissioned, and the council sought counsel from Public Finance Management for further financial projections. Also, the city has retained the Des Moines law firm of Ahlers & Cooney and accounting firm of Deloitte LLP.

“Mr. Decker, I’m not a gaming expert, but please consider the city has employed experts as we’ve methodically conducted due diligence,” Malin wrote.

He singled out the addition of Buettner.

“Mr. Buettner’s tenure with Jumer’s included the transition from a riverboat casino to leading the regional market on land,” Malin wrote. “There isn’t anyone available with more direct knowledge about moving from number three to number one in the Quad-City gaming market.”

In his final email to Malin, Lewis conceded their data was likely flawed, but that he still opposed the casino on ideological grounds. He predicted the Iowa Racing and Gaming Commission will oppose the city’s acquisition and wrote that he would prefer a private company take over the casino.

(14) comments

KJ23

LOL. Excuse me "ghetto" should have been they. I have no idea how my phone's auto correct came up with that.

TruthOnlyBeTold
TruthOnlyBeTold

Perhaps your phone's auto correct is intuitive....since it wasn't too far off the mark.

KJ23

Of course the city's "consultant" is going to tell them what ghetto want to hear. Consultants are like "expert witnesses" defense attorneys bring into court. Some of them will testify under oath the earth is flat, if you write them a big enough check.

qctreader61244

Perhaps Mr. Buettner should be asked why Jumer's was sold so quickly after completion, if it was not operating under a deficit for the first 3 years? When it was sold it was still leading the market. It seems to me the city's "consultant" is simply being paid to develop supporting material for Davenport's argument, rather than provide an independent outlook.

iowalittledog

It seems to me that Davenport would build a casino and attached it to some kid of family attraction, like fun city in Burlington on one end and dog racing on the other end. Just make sure you put it someplace where it will not flood. A water park or kids fun center in the day and parents can go to the casino at night. A casino by it self will get old. Might be a hit for a year or so, but it will get old. What about competition? Since illinois is allowing bars to have gambling machines? We already have several basic casino's within one hours drive, it's got to be different, not just a basic casino!

mendelmen

Riverside is by an interstate?

TruthOnlyBeTold
TruthOnlyBeTold

It's within a half mile or so of Hwy. 218 which is part of the Avenue of the Saints....but by no means does that highway get the traffic that I-80 does.

Family man

Will the employees of the casino be considered city employees and fall under those wage guidelines an recieve city health benefits? That would definitely create more operating costs than a privately owned casino would have.

full_disclosure

According to state racing and gaming numbers, the Rhythm City Casino had adjusted gross revenues of $50.5 million in fiscal 2012. How does that square with the city/consultant estimated revenue "from $82.7 million to $102.3 million annually"? Seems more than optimistic in a competitive market if they are indeed projecting a doubling of gross revenue from a new facility.

CorpComm

Not defending the city estimates, but if the new casino is no longer No. 3 in a market of three, but is No. 1, the numbers are probably realistic. Davenport is banking on taking some market share from the other casinos and growing the total gaming market for the area.

JS824

If they shove it downtown like they are planning, it will be # 1 for around a month, until the newness wears off, then slide back down to # 3. It will always beat Wild Rose in Clinton, because it is small and closes at 4 am. Isle of Capri, Jumer's, and Riverside will continue to take customers away. They did it right. Built big resort style casinos along the interstate. Now they get out of town drivers passing through, and lots of bus tours from out of town. A casino in downtown Davenport will just continue to get the problem gamblers, and not families or tourists. Despite what Gluba thinks, no one is planning on making downtown Davenport a vacation destination.

sundance

I've talked to several aldermen who say they favor the interstate location.

iadude

Let's look at this another way. Davenport has this well known 'bridge to nowhere'. Put the ferris wheel on one end and the "Flying Pig Casino" on the other end. Then market it as the 'Biggest Boat Anchor in the World'. Of course Davenport's paid consultant is going to tell them what they want to hear. It will take one city employee the drop the quarter in the slot machine and five city employees the pull the lever.

georgeandersonxyz

Estimates and projections are merely opinions at this time. They can be shown to be wrong only if and when the casino has actually been operated. And in my opinion, based on Davenport's performance, revenues will fall short and operating expenses will increase. Good luck Davenport.

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