Saturday, November 11, 2006

Riverside's Deeper Gambling Debt

When last we addressed the public-private gambling casino in Riverside (that is, public investment, private profit), we were trying to figure out why on earth the voters would want to impose a hotel-motel tax on a community that, among other things, has no hotel or motel to which it would apply -- since they'd already exempted the Riverside gambling casino from ever having to pay such a tax, and the casino owns and operates the only hotel in town. Especially was this confusing given that, apparently, the tax will ultimately end up going back to the casino. Oh, well. See Nicholas Johnson, "Riverside's Tax to Nowhere," October 31, 2006, with link to supporting story, Rachel Gallegos, "Riverside voters to decide on hotel/motel tax," Iowa City Press-Citizen, October 30, 2006.

The tax proposal was approved. The Press-Citizen explained:

"'The money from future hotels could go a long way,' Riverside city councilor Todd Yahnke said after voting. . . .

"But because of an existing agreement between the city and the Riverside Casino & Golf Resort, owner of the only existing hotel within city limits, the city will not receive any additional funding at this time. . . .

"The city will reimburse the 7 percent hotel/motel tax to the casino. . . .

"Under state law, money from the hotel/motel tax goes first to the state, which distributes it to each city and county that collects the tax."

Now, it turns out, as if that were not enough, the casino is already benefiting from a Washington County TIF (waiver of taxes) -- a TIF power that the county made available to Riverside in order for it to be able to pass it along to benefit the casino.

And the latest official action by the City Council of Riverside is to approve a bond issue that, in total, will give the gambling casino an additional $11.6 million -- at municipal bond rates (paid by the City) -- in order to build the extra water and sewer facilities -- including a new water plant and wastewater treatment plant -- necessitated by the demands of the casino.

Why "give," since the casino makes payments from profits to the City? (1) Because I believe (and am willing to stand corrected rather than do the research right now) the casino is obliged by state law to make those payments, and that (2) the intention of that law is to make those funds available for general community purposes (not for projects primarily necessitated by, and benefiting, a gambling establishment). (3) When my City put additional water lines on my property I accepted what I thought was a quite reasonable assumption that I, rather than the city's taxpayers, should pay the cost. It's not clear why similar reasoning should not apply to a gambling casino. If anything, a commercial operation that is going to be making money from the investment, and has more resources at hand than a private home owner, should have an even greater obligation to pay this cost -- not less.

Mary Zielinski, "Casino money to back bond payoff; Riverside OK's bond sale to finance water, sewer improvements," The Gazette, November 11, 2006.

In short, it looks to me as if the City of Riverside is the full equivalent of an investor in this private, very profitable enterprise, an owner of a gambling casino. We've come a long way from the days when governments used to prosecute gambling operations.

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Anonymous said...

What you have overlooked is the assumption by the locals that a midlevel hotel/motel (Holiday Inn Express??) will so up soon next door to the Mickey D's which is in the planning stages.

As additional development occurs, ie Extreme Water Sports Park, etc, we can probably expect a barebones motel to go up.

All future growth and development is subject to change, of course, but I don't think there's anyone out here who thinks this Casino is going to sit out there on the prairie all by itself forever.

Anonymous said...

I'm wondering what the 7% hotel/motel tax refund (which it appears--in effect--to be) will have on the casino's other tax filings.

Another thought, will the state have use of this money to use in "interest bearing" loans--sort of a reversed bond? Although I don't think there would be enough to make a large loan, even over the span of a year.

Nick said...

Anony: But I don't know; does Iowa law require that the tax must be in place before a hotel is built in order to apply to that hotel? If so, the scheduled vote made sense.

As for future growth, etc., see blog entry, "More on Riverside Gambling Casino," November 14, 2006, paragraph 3 (f).

Impact on tax filings is beyond my knowledge. - Nick

Anonymous said...

A hotel/motel tax does not need to be voted in prior to construction of the facility.

If I recall correctly, Riverside City Council made the decision to put the hotel/motel tax question on the ballot while they were still in consideration for the Earthpark.