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.
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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.