RIVERBOAT GAMBLING

Image courtesy: Mike Day. Kendall C. Day family collection.

RIVERBOAT GAMBLING. In March 1989 the Excursion Gambling Boat Act was passed by the Iowa Legislature. This law allowed limited, low-stakes casino gambling on Iowa's rivers and lakes beginning April 1, 1991. Iowa became the fourth state to adopt non-Indian, commercial casino gambling preceded by Nevada (1931), New Jersey (1976), and South Dakota (1988) and the first state to introduce riverboat gambling. While the legislation was promoted as economic development, the regulatory nature of the legislation was designed to maintain the wholesome image of Iowa. There was a $5 minimum wager and a $200 loss limit per excursion. Only 30% of the boat's square footage could be devoted to the casino, sailing was mandated rather than dockside gambling, and sections of the boat had to be devoted to persons under 21 years of age and to Iowa arts and crafts. Riverboats were chosen over land-based casinos because it was thought they would provide the greatest economic stimulus for surrounding businesses.

Dubuque interests were quick to capitalize on the new legislation. In 1990 The DUBUQUE RACING ASSOCIATION was first applicant approved to operate a river gambling boat in the state of Iowa. Robert KEHL had the DUBUQUE CASINO BELLE constructed and quickly moved to the ICE HARBOR. The Dubuque Casino Belle made her maiden voyage on April 1st 1991. From April 1, 1991, to March 31, 1992, Dubuque Casino Belle Inc. sold single-price admission tickets to the riverboat that entitled a patron to: (1) admission to the boat; (2) a cruise on the MISSISSIPPI RIVER during cruising season; (3) admission to the gambling casinos on the boat if the patron was more than twenty-one years old; (4) a buffet meal; and (5) admission to any entertainment. Tickets were $39.95 for a dinner cruise and $29.95 for a lunch or brunch cruise. During 1990 season, more than 250,000 people cruised with Roberts River Rides.

In the first year of riverboat operation, the Dubuque Racing Association prepaid, in its entirety, Ice Harbor improvement financing in excess of $4 million. (1) This resulted in the DRA remaining Iowa’s only nonprofit, debt-free pari-mutuel and riverboat licensee.

In 1991, Iowa's riverboats earned $63.8 million from 2.1 million visitors. In 1992 the revenue increased to $70.5 million and 2.2 million guests.

The success of riverboat gambling led to the construction of four new lodging facilities with 350 rooms, new restaurants, shopping facilities and tourist amenities in Dubuque. The DRA also pledged a large portion of its profits from the boat to the city. For the fiscal year ending June 30, 1992 the city received about $333,000. (2) In 1992 the city and county applied money raised from gambling to the general fund rather than target it to specific projects. (3)

The success of Iowa riverboats brought quick competition from surrounding states. In January 1990 the Illinois Legislature passed the Riverboat Gambling Act, and boats began operating from Illinois on September 11, 1991. The first boats at Alton and Peoria were distant enough not to affect the Iowa market, but in 1992 Illinois boats operating with less regulation opened in Rock Island and East Dubuque.

Kehl announced on August 24, 1992 that he had sold the Dubuque Casino Belle. He cited reasons for the sale including gambling restrictions in Iowa, his health, and the attractiveness of the offer which was $5 million more than $12 million he had originally paid for the boat. (4) The sale of the Casino Belle forced hotel operators to contact groups and associations that had booked rooms about other possibilities including the DUBUQUE GREYHOUND PARK AND CASINO or gambling on the Silver Eagle docked in East Dubuque, Illinois. (5) The decision to sell the boat did not surprise gambling regulators. Chuck Patton, riverboat gambling director of the Iowa Racing and Gaming Commission, was quoted as saying gambling operators in other states with no limits soon discovered that it took two years to build a top of the line quality boat. It was easier to buy one. (6)

The potential financial impact on Dubuque shook the DRA. The contract that existed with the Kehls was researched and in October the DRA and its attorney met to consider legal action. When the Kehls announced the sale of the Casino Belle, they still had a year left on their three year contract to supply a gambling boat in Dubuque. The DRA had sixty days to match the $17 million offer, but chose not to do so. (7) In November the DRA announced that it would hold the Kehls responsible for any financial damages it (the DRA) sustained after the boat left Dubuque. The contract had called for the Kehls to make a minimum payment of $500,000 to the DRA. The admission payment had been eliminated during the second year of the contract, but was to be reinstated in the third year unless the contract was renegotiated. The Kehls, according to the contract, were also to pay the DRA a percentage of the gaming revenue (12.5% of the first $5 million and 15% of revenue exceeding $5 million). (8) Efforts were immediately started to look for a new boat that could be brought to Dubuque.

The Iowa Racing and Gaming Commission chose to consider the issue of the Belle's sale at it meeting in December, 1992. The Commission was required to approve all contracts over $50,000 entered into by its licensees. The primary concern, however, was not about the sale but about the integrity of the boat's buyers. (9) The questions were resolved and on February 3, 1993 the Commission officially approved the sale.

Soon after the Casino Belle sale, the DRA began a search for an alternate boat. By February the choices were reduced to two possibilities: the Greater Dubuque Riverboat Entertainment Company headed by Joseph ZWACK and another composed primarily of Kehl's children. The DRA selected the GDREC as the new boat operator. (10) Zwack stated that his group's proposal was based on a sound business plan and that if it did not purchase its boat, it would have a lease option to purchase. (11)

On March 15, 1993 the DRA received a proposal from Bob Kehl to continue operating a riverboat in Dubuque. According to the offer, the Dubuque Casino Belle would remain in Dubuque after April 1st when it was scheduled to leave. The Belle would be replaced by the Quad City Queen once renovations were complete probably in May. The Queen would continue to operate in Dubuque until April 1, 1994 which would complete the third year of Kehl's contract with the DRA. The offer contained an option to extend the contract for a number of years. DRA officials said that it would not accept the offer because it already had a contract with GDREC. (12)

The GDREC’s boat, the Andrew Fletcher, was a paddle-wheeler berthed in New York City's East River. Refurbishing included removing the paddle-wheel from the 185-foot, three-deck, 800-passenger boat and refitting it with a diesel engine. The boat was to sail to the Gulf Coast where a propulsion engine and gambling equipment would be installed. (13) In June, 1993 a contest was held to rename the boat with 2,000 people submitting names. Joe Mulgrew, of Dubuque, was the first to submit the winning name--"Diamond Jo" won $500. It was also announced at the time that the boat would not arrive as planned by August. (14)

In April of 1993, the Belle departed the Ice Harbor, after being sold to St. Charles Riverfront Station which moved the boat south to eventually start up a Missouri gaming operation. (15)

GDREC began negotiations with the Kehls to buy or lease the Portside building and to purchase the Quad City Queen, a small riverboat casino. GDREC wanted a place to dock the Diamond Jo when it arrived in September and to use the Quad City Queen until the new boat arrived. The Diamond Jo would not be ready for cruises until the end of October. The Kehls notified GDREC that the Queen had been sold and GDREC began negotiations with the DUBUQUE COUNTY HISTORICAL SOCIETY for docking space. (16) The Kehls did not respond to an offer to lease space in The Portside. GDREC approached the historical society about leasing about half of the main floor of the society's portion of the building and some additional space underneath. Another option was to construct a building. (17)

On August 10, 1993 the GDREC gave the DRA $10,000 representing the money it owed for the first eight days the Diamond Jo did not meet its original projected start-up date of August 1. The GDREC was obligated to pay $1,250 for each day the boat was late. The money was to go to the city and county to make up for the lost revenue they would have had from the casino. (18) On August 26th the Iowa Racing and Gaming Commission approved contracts with the GDREC including $1.9 million for renovations of the boat. The organization's boat had been to three different different shipyards in Louisiana before settling at Bollinger Quick Repair Shipyard Inc. The contract stipulated an October 29th arrival in Dubuque with a $3,000 per day bonus, up to ten days, if it arrived early and a similar amount for ten days if it were late. (19)

On October 8, 1993 DRA officials announced that they had voted unanimously to file a breach of contract lawsuit against the Dubuque Casino Belle, Inc. The Association noted that it had a three-year contract (April 1, 1991 to March 31, 1994) with Kehl and the Dubuque Casino Belle and that Kehl had breached the contract by not providing the DRA with a gambling boat during the 1993-94 season. The original contract stated that Kehl guaranteed the DRA at least $1 million annually if the Casino Belle ho competition from floating casinos in Jo Daviess County, Illinois or Grant County, Wisconsin. This was reduced to $83,333 for every month competition was present in those counties (20)

On October 23, 1993 GDREC announced that design changes to their boat would result in arrival delays. Officials stated their hopes that the boat could leave Louisiana the second week of November. In other matters, the GDREC announced that it would lease the Queen of Hearts excursion boat from Moline, Illinois for $10,500 per month as a boarding and ticketing facility. (21)

The announcement in late November, 1993 that the GDREC boat would not be able to leave the Louisiana boatyard in November prompted action from the DRA. The association's board directed staff to investigate the possibility of hiring an expert to report on construction progress. The action resulted in hiring Arthur Darden Inc., a naval architect and marine engineering firm. A company representative would visit the construction site once every two weeks for a day until the GDREC boat was certified. (22)

On January 28, 1994 a judge ruled against the involvement of the city and county in the suit of the DRA against the Kehls. Both governments had tried to support the claim, but the judge ruled they had not been legally damaged. (23)

After months of negotiations, GDREC officials signed a lease with Portside owners, Bob and Ruth Kehl. The two-year lease was to begin March 1, 1994. Certain issues remained unsettled. In its lawsuit against the Kehls, DRA said it should not have to abide by a clause in its operating agreement requiring it to buy Portside. (24)

Despite the poor performance and then closing of three of Iowa's riverboats, legislation to relax gambling regulation repeatedly failed. Riverboat gambling according to many had been successful in promoting tourism and was never intended to become an industry. Despite setbacks, pressure continued from riverboat owners to lift betting/loss limits and space restrictions. These people were joined by parimutuel racetrack owners who wanted slot machines and even Iowans who favored less restriction. Concerns about the effects of gambling eventually led the Iowa House to only approve the new legislation by a 51-49 vote. Before gambling laws could be eased, local approval was required in counties where riverboats and racetracks were operated.

In May 1994 Dubuque County residents had to vote on two important local issues. Voters were to decide whether they wanted riverboat gambling without betting limits and if they wanted slot machines at Dubuque Greyhound Park. The Committee to Save Jobs in Dubuque County estimated that it would spend $90,000 on supporting the measures by the time of the election. (25) The election resulted in passage of both measures. Gambling without betting limits passed unofficially by 80% with slot machines at the track passing by 74%. (26)

The new law passed by the Iowa Legislature gave passengers more time to gamble but less time to cruise the river. The law reduced the number of cruises to a minimum of 100 annually with each at least two hours. The Diamond Jo would be open 9:00 a.m. to 1:00 a.m. Monday through Friday with permission to remain open until 4:00 a.m. The boat would operate twenty-four hours daily on Saturday and Sunday. (27)

Refurbished for a capacity of 700 people, the "Diamond Jo" became operational May 18, 1994. In early October 1995, GDREC replaced the original Diamond Jo with a larger 1,500-passenger, 305-foot vessel, which was placed in operation at Dubuque’s Ice Harbor.

In July 1999 Peninsula Gaming purchased the Diamond Jo Casino. Peninsula Gaming continued to operate the vessel.

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Source:

1. Webber, Steve. "Kehl Writes Another Chapter," Telegraph Herald, August 24, 1992, p. 1

2. Hanson, Lynn and Webber, Steve. "City Officials Find Belle Rumors True," Telegraph Herald, August 24, 1992, p. 10A

3. Arnold, Bill and Japsen, Bruce. "Wanted: 1 Revenue Riverboat," Telegraph Herald, August 26, 1992, p. 1.

4. Bergstrom, Kathy. "DRA Offer Could Keep Boat Here," Telegraph Herald, August 24, 1992, p. 1

5. Bergstrom, Kathy. "Belle Decision Leaves Rough Wake," Telegraph Herald, August 25, 1992, p. 1

6. Webber, Steve and Bergstrom, Kathy. "Gambling Regulators Not Shocked by Kehl Announcement," Telegraph Herald, August 25, 1992, p. 4A.

7. Bergstrom, Kathy. "Belle Suit Discussed by DRA," Telegraph Herald, October 30, 1992, p. 1

8. Bergstrom, Kathy. "DRA: Belle Responsible for Damages," Telegraph Herald, November 18, 1992, p. 1

9. Bergstrom, Kathy. "Gaming Panel to Consider Casino Belle Sale," Telegraph Herald, December 12, 1992, p. 3A

10. Bergstrom, Kathy. "Kehl Family Bypassed for Casino Newcomers," Telegraph Herald, February 4, 1993, p. 1

11. Bergstrom, Kathy. "Zwack: Plan Sound," Telegraph Herald, February 5, 1993, p. 3A

12. Bergstrom, Kathy. "DRA Rejects Boat Proposal by Kehl," Telegraph Herald, March 18, 1993, p. 1

13. Webber, Steve. "Casino License Approved--With Strings," Telegraph Herald, March 19, 1993, p. 1

14. Bergstrom, Kathy. "Casino to Arrive Late," Telegraph Herald, June 7, 1993, p. 1

15. Bergstrom, Kathy. "DRA Reviews Contract," Telegraph Herald, August 25, 1992, p. 1

16. Dickel, Dean. "Zwack Group Can't Use Queen as Interim Boat," Telegraph Herald, June 28, 1993, p. 3A

17. Bergstrom, Kathy. "Riverboat Group Seeks Ticketing Facility," Telegraph Herald, September 22, 1993, p. 2

18. "Diamond Jo Pays No-Show Penalty," Telegraph Herald, August 11, 1993, p. 1

19. "Racing Panel OKs Diamond Jo Contracts," Telegraph Herald, August 27, 1993, p. 3A

20. Webber, Steve. "DRA Votes to Sue Casino Belle," Telegraph Herald, October 8, 1993, p. 1

21. "Diamond Jo Cruises Pushed to December," Telegraph Herald, October 22, 1993, p. 1

22. Bergstrom, Kathy. "Racing Group Hires Monitor for Riverboat," Telegraph Herald, December 1, 1993, p. 3A

23. Bergstrom, Kathy. "City, County Won't Appeal Belle Ruling," Telegraph Herald, February 22, 1994, p. 2A

24. Bergstrom, Kathy. "Diamond Jo Group to Lease Portside," Telegraph Herald, December 15, 1993, p. 2A

25. Bergstrom, Kathy "Casino Backers to Spend $90,000," Telegraph Herald, May 12, 1994, p. 1

26. Bergstrom, Kathy. "Yes/Yes," Telegraph Herald, May 18, 1994, p. 1

27. Bergstrom, Kathy, "Less on River, More at Dock," Telegraph Herald, May 20, 1994, p. 1

Dubuque Greyhound Park and Casino, http://cicotello.com/Pictures%20and%20Information/USA/States/Iowa/Cities/D-L/Dubuque/Dubuque%20Greyhound%20Park%20&%20Casino/Dubuque%20Greyhound%20Park%20and%20Casino.htm

Iowa Tax Law Library Document 03300031

Nichols, Mark W. "History and Deregulation of Riverboat Gambling in Iowa and Illinois," Journal of Gambling Studies, online:www.business.unr.edu/faculty/.../cross%20border%20substitution.pdf