Iowa County Hits Jackpot With Casino

When May Woolsoncroft takes the loser’s walk out from the Prairie Meadows casino several nights a week, she leaves with one consolation for the rolls of quarters she feeds into the slot machines. At Prairie Meadows, the nation’s only government-owned casino, the $25 in pin money she loses each week is a community asset.

Controlled by the public administration of Polk County, Iowa, Prairie Meadows is an improbable success story, a thriving casino and horse-racing track that has enriched the Des Moines area by $164 million over two years and flouted the traditional barriers that dissuade elected officials from meddling in the high-stakes gambling industry.

Almost overnight, the casino’s profits have turned Polk County’s government into a funding juggernaut. Officials have paid back Prairie Meadows’ $90-million debt and are laying ambitious plans to build a new jail, jump-start an overdue state highway project, bolster school finances, cut property taxes and salt away millions more--all while providing daily services to this central Iowa county of 340,000 people.

“At least I know my money’s not going out of town to the fat cats in Las Vegas or somewhere else,” Woolsoncroft said after another tough night at the slots. “It’s coming back to me, sort of, one way or another.”

For the past decade, local governments’ willingness to allow private casino firms to make staggering profits in return for a small slice of the take has been the trade-off that spread gambling into middle America. In a sense, Polk County’s operating stake in Prairie Meadows signals the next logical step in government’s pursuit of gambling dollars: the first voter-supported attempt to seize all the action by going directly into the casino business.

Still No Guarantee of Easy Money

But Polk County’s millions do not assure other local governments that there is easy money to be made by owning their own casinos. The county’s takeover of Prairie Meadows was a lurching, gradual process, a reluctant assumption of control that threatened to saddle taxpayers with decades of debt. Only now that Polk County is on the verge of exploiting its good fortune are fundamental questions being raised about its involvement in the casino business.

County officials are not immersed in the casino’s daily operations. That is left to 350 workers and executives who report to a nonprofit board licensed by the state. But the county has paid the casino’s debt, oversees its budget, buys its supplies and holds title to its 1,100 slot machines--a business arrangement unique in the nation’s booming casino industry.

The only other government intrusion into a gaming operation is in Southern California, where federal authorities are selling off a one-third interest in the Bicycle Club in Bell Gardens. U.S. marshals seized an ownership share in the poker club in the early 1990s after learning it had been financed partly from narcotics profits.

But the almost monolithic control Polk County maintains over Prairie Meadows’ finances has led Iowa’s political power brokers to demand a say in who gets the profits. A simmering rivalry between county officials and Iowa’s powerful Racing and Gaming Commission has grown so bitter that negotiations coming to a head this week could lead either to a settlement or a costly court battle--and, in either case, jeopardize Polk County’s cash flood and its dominance over the casino.

“There aren’t too many rags-to-riches stories like this in government circles,” said Norman G. Jesse, Polk County’s development director. “That’s why everybody’s got their hands out.”

State gaming commissioners complain that the nonprofit board they licensed to run the casino remains powerless so long as the county controls Prairie Meadows’ purse strings. State racing officials want to see millions more in casino profits subsidize Prairie Meadows’ racing, which has foundered while the slot machines draw more and more patrons.

“The whole reason we allowed Prairie Meadows to have slots was to prop up horse racing in Iowa,” said Harold White, a gaming commissioner from the north Iowa town of Estherville. “That’s not happening to our satisfaction.”

Yet the fact that central Iowans reap the benefits of their own casino appears to be a crucial factor in Prairie Meadows’ popularity.

“People kind of see it as their place,” said Diane Beery, a Des Moines resident who stops by the casino several nights a week. One slow Monday night, Beery hopped from machine to machine in the neon-swept grandstands, idly pumping in quarters at the rate of 15 a minute.

Still, Beery was among the 40% minority of Polk County residents who opposed county-backed gambling when it was put on a ballot referendum in 1994. “Too much Big Brother,” she said. “Like that guy,” she added, eyeing a beefy casino security man.

But both the doubters and the 60% majority who approved slot machines have voted with their feet since the casino’s 1995 opening. An average of 10,000 bettors stream into Prairie Meadows each day. License plate surveys of visitors suggest that as many as 80% of the patrons come from central Iowa.

May Woolsoncroft, who also opposed gambling at first, likes the idea that the money she loses comes back to her in county services. But she worries that Polk County’s elected officials are indirectly “encouraging me and [daughter] Debby” to gamble. “We get a lot out of it, but I still wonder if we’d be better off leaving gambling to private industry.”

That central question about governmental overreach has been long settled. These days officials are more preoccupied over which agencies should get the money than whether government should be involved at all.

At the heart of that struggle is the peculiar path by which Iowa racetracks were allowed to add slot machines. After lobbying by horse-breeding interests, the Legislature voted in 1994 to allow nonprofit racetrack boards to add slot machines to boost sagging revenues.

But Polk County’s involvement with Prairie Meadows dates back to 1983, when it was first proposed as a private racetrack. Built in 1989 with county backing after developers were unable to secure financing, the track teetered on insolvency throughout the early 1990s, forcing county officials to guarantee its debts.

“Nobody raised a peep about what we were doing when Prairie Meadows was going bankrupt,” said Jack Bishop, a longtime Polk County supervisor who champions retaining the casino. “It’s only now that we’re making tons of money that people say we shouldn’t have got involved.”

The county took over the track’s finances and nonprofit board when racing faltered at Prairie Meadows and the track declared bankruptcy in 1991. By 1994, Prairie Meadows’ debts had soared to $90 million.

Tom Timmons, now the casino’s vice president, was among a team of county auditors sent over to right Prairie Meadows’ finances in 1989. “It was clear from the very beginning that the track couldn’t make it on racing alone,” Timmons said.

While they lobbied the Legislature for approval to add slots, workers struggled to keep the track solvent. Executives shoveled manure in the stables. When horses were idled, the track hosted craft shows and weddings.

“We scraped enough money together to pay our operating expenses,” Timmons said. “But we still had $3 million a year in bonds to pay off. Slots were the only obvious way out.”

As soon as the track’s grandstands were fitted with slot machines in April 1995, revenues exploded. Even after the casino’s nonprofit board took out operating expenses, the county netted $4 million a month.

County’s Future Involvement in Doubt

Polk County officials had hoped to use casino revenues to fund capital investments long discarded as pipe dreams. But the state Racing and Gaming Commission insists that the county must turn over much of its millions to increase horse-racing purses. And Republican Gov. Terry E. Branstad wants the county to sell its interest in the casino and turn over the profit to state schools.

Weary of jousting with the state, some Polk County officials are considering selling off the casino. The county has had feelers from Circus Circus Enterprises Inc. and several other gaming firms. Offers have reportedly neared $200 million.

But any sale must be approved by the state. Even if it is, Bishop says, the new owner would likely be “one of those cutthroat Las Vegas-style management firms that send all the money back to Vegas. We’d have the profits from the sale, but from then on, every dollar the casino made would leave town.”

In the end, Bishop and his fellow supervisors may well lose much of their authority over the casino. But Polk County would likely retain a generous multimillion-dollar lease to Prairie Meadows--less than it gets now but enough to justify its casino ownership for years to come.