By vote of 9-1, the Davenport City Council agreed Wednesday to move forward with the city’s $46 million purchase of the Rhythm City casino.
Alderman Mike Matson, 8th Ward, was the lone vote against approving the purchase term sheet, saying he had concerns about an interstate premium and the effect on the city’s bonding capacity. He also moved that a $5 million premium should the city locate a land-based outside of downtown be removed, but that failed for lack of a second.
For the most part, aldermen saw the casino acquisition as gaining control over a revenue stream. The city received $1.65 million in debt service casino tax and leases in fiscal year 2012. The Rhythm City earned $10.48 million before interest, taxes, depreciation and amortization in fiscal year 2012.
“This is an opportunity to capture a revenue stream that is leaving the city of Davenport,” Alderman Barney Barnhill, 7th Ward, said.
Watching larger revenue from the Isle of Capri in Bettendorf go to that city’s coffers has long rankled city officials, bringing the council to Wednesday’s vote.
“If we were happy, we wouldn’t be here,” Alderman Nathan Brown, 1st Ward said.
Alderman Jeff Justin, 6th Ward, said, “the status quo is unacceptable.”
Following the latest budget vote, which included an increase to the city’s tax levy, the possibility of buying the Rhythm City became attractive, Alderman Jason Gordon, at large said.
“I couldn’t stand that I voted in January to raise the levy,” he said. “I’m in favor of the first of several steps to be able to do this.”
The council vote came after a lengthy discussion that included 12 people addressing the council and former alderman Keith Meyer being called out of order and peacefully removed from the council chamber. Several residents expressed concern about the haste of the purchase, the immorality of gaming, the threat of Internet gaming and the possible cost to build a casino.
Dave Haase of Davenport worried the city couldn’t afford another bond sale, considering the price to build Jumer’s Casino & Hotel in Rock Island was about $150 million.
“I think the city needs to reconsider the purchase of the casino,” he said. “I don’t think it is a good idea for the city to get into the gaming business.”
The city plans to pay for the casino purchase through the sale of general obligation bonds, with an annual debt payment of $3.5 million that will be paid for through casino revenue.
Doris Unterzuber of Davenport worried the city would lose money on the transaction, given the threats of Internet gaming and casino expansion in Illinois.
“I’m not sure this is the best bet,” she said. “If we can make more for the city, I’m for it. But please, please look ahead at what is coming.”
The council has asked that possible threats be considered in revenue projections.
“In discussions about modeling, we urged our staff and others to add these things into it,” Gordon said. “We are aware of that. We can’t be Pollyanna.”
Aldermen took note of the concerns about the city moving too quickly, offering reassurances that numbers had been crunched, including possible downward pressures to revenue like Internet gaming and casino expansion. They also vowed that the city would look at each proposal closely.
The city will release a request for proposals for a land-based casino next week. Two developers have publicly acknowledged their interest, and city administrator Craig Malin said he is aware of a third one.
Malin provided an estimated timeline with agreement on a final purchase agreement in November or December, with possible approval by the Iowa Racing and Gaming Commission in March. A land-based casino is six to 24 months away.
“The amount of risk the council is willing to take — that is a long way down the road,” Alderman Ray Ambrose, 4th Ward said.
Brown also tried to assure people that the process would provide ample opportunity for public comment.
“There will be more ward meetings, there will be more public discussions,” he said.
Matson opposed the $5 million premium the city would have to pay if the city located a casino anywhere but downtown, saying it dictated where the casino would go.
“If you put a number on where it should go, then you have determined where it will go,” he said.
Joyce Wright, who lives downtown, told the council she would prefer a casino could stay downtown because seniors such as herself don’t have transportation. The city would be taking away entertainment by moving it elsewhere. She suggested the Union Arcade building and the former Howard Johnson’s as possible locations.
“All we have to do is walk two blocks down the street to have fun,” she said.
The Union Arcade was sold to developer Rodney Blackwell earlier this month. Blackwell, who has expressed interest in an interstate corridor casino project, plans to turn the Union Arcade into apartments and retail.
Amrit and Amy Gill of Restoration St. Louis, which developed the Hotel Blackhawk, expressed interest in a downtown casino.
How they voted
Yes: Aldermen Nathan Brown, 1st Ward; Bill Edmond, 2nd Ward; Bill Boom, 3rd Ward; Ray Ambrose, 4th Ward; Sheilia Burrage, 5th Ward; Jeff Justin, 6th Ward; Barney Barnhill, 7th Ward; Jason Gordon, at large; Gene Meeker, at large
No: Alderman Mike Matson, 8th Ward.