Moratorium

In July of 1995, the Racing and Gaming Commission denied an application for a license to operate gambling games on a riverboat on West Lake in Clarke County near Osceola in rural southern Iowa. This application was the first the Commission had received for an excursion boat on inland waters. All previous applications were for sites on the Mississippi and Missouri Rivers.

Although the license was denied for other reasons, the application raised concerns among members of the Commission. The concerns revolved around whether similar applications would be submitted by many small rural counties with small bodies of water seeking economic development and growth for their communities. The Commission wondered if Iowa had reached a saturation point in the number of gambling facilities in the state.

The Commission engaged Cummings Associates to conduct a study. The study showed there was still unmet demand for casino games in the Des Moines and Cedar Rapids/Iowa City metropolitan areas and marginally in the northwest quadrant of the state.

In 1997 the Commission expressed concern to the governor and the legislature about the number of additional licenses Iowa could accommodate.

In the 1998 General Assembly, the legislature passed Senate File 2320 – A bill for an act relating to gambling by imposing a moratorium on new licenses to conduct gambling on excursion gambling boats and at pari-mutuel racetracks with gambling games, limiting the location of future excursion gambling boats, prohibiting gambling licensees from allowing the loaning of money by credit card or other electronic means for gambling purposes, and imposing a scheduled fine for gambling by persons under twenty-one years of age. (Formerly SSB 2168).

On May 20, 1998, then Governor Terry Branstad vetoed Senate File 2320. The Governor disagreed with language in the bill unrelated to the moratorium.

On May 21, 1998, due to the failed legislation, the Iowa Racing and Gaming Commission noticed for intended action the following administrative rules, essentially the same language addressing the moratorium issue contained in the bill.

491--1.6(99D, 99F) Limitation on location and number of racetracks and excursion gambling boats.

1.6(1) The number of licenses to conduct horseracing shall be one for a racetrack located in Polk County. The number of licenses to conduct dog racing shall be two, one for a racetrack located in Dubuque County and one for a racetrack located in Pottawattamie County. The total number of licenses issued to conduct gambling games on excursion boats shall not exceed ten and shall be restricted to the counties where such boats were operating (or licensed to operate in the future) as of May 1, 1998.

1.6(2) Notwithstanding sub rule 1.6(1), with the approval of the commission:

a. A licensed facility may be sold and a new license may be issued for operation in the same county.

c. If a license is surrendered, not renewed, or revoked, a new license may be issued for operation in the same county.

On June 12, 2002, the Iowa Supreme Court reversed a district court decision and held that different gaming tax rates for excursion boats and racetracks was in violation of the equal protection clause of the Constitution and was therefore unconstitutional. The tax rate for the racetracks reverted from 32% to 20%.

In December of 2002, Governor Tom Vilsack appointed a task force to study ways to recoup the $40 million in lost revenue to the state due to the Supreme Court decision.

During task force hearings, the Iowa Gaming Association suggested lifting the moratorium on new licenses as an alternative to raising gaming taxes for excursion boats and racetracks to 24-25% as a means of recapturing lost revenue to the state.

Legislation was introduced in the 2003 General Assembly calling for three additional gaming licenses. Several Iowa communities began mobilizing efforts to secure one of the licenses. Even though the bill was never brought to a vote or even debated, several Iowa counties scheduled referenda to approve excursion boat gambling.

At a July 18, 2003 meeting, the Commission considered the issue of whether or not to lift the moratorium on new licenses. This followed referenda in two counties approving excursion boat gambling. The Commission voted to engage Cummings Associates to perform a study. The study would not be for the purpose of making a decision for the Commission. The study would look at areas of unmet demand for casino gambling, areas currently interested in licenses, and the impact on existing licensees if licenses were issued in those areas. These are not the only areas that will be considered when the Commission makes their decision, but will provide some information on the relative benefits versus risks of removing the moratorium.

Will Cummings appeared at the October 9 Commission meeting in Dubuque to review the study and answer questions. Copies of the study are available in the Commission office and can be downloaded from the Commission website.

On November 20, the Commission met at the Foxboro Business and Conference Center in Johnston. After listening to interested parties for two hours, the Commission members expressed their views on the moratorium issues. Subsequently, the Commission passed the following motion on a 5-0 vote: Commissioner Hamilton moved to leave the moratorium in effect, with the stipulation that the Commission may be willing to reconsider this position if the legislature provides the Commission with additional guidance and direction in the areas of the cruising requirement, defining lakes and reservoirs for the purpose of accommodating excursion boats, a maximum number of excursion boats and how the Gamblers Treatment Program will be funded. Commissioner Jarding seconded the motion.

The Iowa General Assemble passed House File 2302 in May 2004. This comprehensive bill reformed gambling laws in Iowa. The bill addressed those areas in which the Commission sought guidance and direction, except for the maximum number of excursion boats. House File 2302 was silent on this issue.

The Commission met on June 10^th and entertained public comment for approximately two hours on the issue of the moratorium on new licenses. The Commission subsequently discussed the matter and voted 4-1 to initiate the administrative rules process by giving notice of intended action on Rule 1.6. The action is the first step in the process to rescind the rule which established the moratorium on new licenses.

The public hearing was held on July 27 at the Commission Office in Des Moines. Nine individuals offered comments on behalf of various organizations and submitted their remarks in written form to the Commission as requested by the staff. The written comments were sent to the Commission members and the members of the Legislative Rules Review Committee.

On August 10, the Legislative Rules Review Committee held its regular monthly meeting. The Commission rules were on the agenda for review by the Committee. No questions pertaining to the “moratorium” rule were offered.

On September 2, the Commission met in Johnston at the Stoney Creek Inn and final adoption of the rules was approved, including the “moratorium” rule. These rules became effective November 3.

On November 10, the Commission received ten applications for new excursion gambling boat licenses and at the November 19 Commission meeting a timetable for a review and evaluation process was announced.

On July 14, 2005, the Commission discussed the possibility of reinstating the moratorium rule on additional excursion gambling boat licenses and racetrack enclosure licenses. It was the feeling of the Commission that they did not want to reinstate a moratorium rule, however, each Commissioner expressed their opinion that while not wanting to reinstate a moratorium rule, they were not inclined to issue any additional licenses until the four new licensees were built and operating results could be evaluated.