Iowa, unlikely gambling pioneer, is expanding industry yet again

Ryan J. Foley

Monday, Feb. 28, 2005 | 9:11 a.m.

DES MOINES, Iowa -- Gamblers who lose money playing the slot machines in this state sure have something to show for their losses.

They have helped foot the bill for a long list of projects, including the largest downtown transformation Des Moines has seen in years. And with the $1 billion state gaming industry set to expand again, Gov. Tom Vilsack wants gambling revenue to fund his $800 million economic development plan.

Across the country, states struggling to balance their budgets and create new jobs are looking to follow the lead of Iowa, an unlikely gambling pioneer.

This session, lawmakers in Massachusetts are debating a plan to add two casinos and slot machines to four racetracks. In Maryland, supporters are reviving a proposal to legalize slot machines to pay for $100 million a year in school construction.

Last year, 28 states, hoping to pump up revenue without raising taxes, debated 50 different proposals to expand gambling. In the largest of nine that passed, Pennsylvania lawmakers agreed to add 61,000 slot machines across the state.

The other states are headed down a path charted by Iowa, a state of 2.9 million people that has 13 casinos, including three run by American Indian tribes. After years of expansion, people here can play the lottery, bet on horse and dog races, pull slot machines, play poker, and visit an Indian casino -- all in the same day.

"Iowa is a leader in gambling," said Mandy Rafool, who tracks gambling policy at the National Conference of State Legislatures. "They were the first riverboat state. Now they're the first with table games at the tracks."

Critics say the state's reliance on gambling has created a generation of gambling addicts and broken families that should serve as a cautionary tale.

"Everybody believes this is free money and that it doesn't come from any specific source. We know that's not true," said Brad Franzwa, a gambling critic who moved out of Washington County after he unsuccessfully fought a casino referendum there last fall. "It's from problematic, pathological gamblers."

Just 16 years ago, Iowa became the first state outside of Nevada and Atlantic City to legalize casinos, offering gambling on riverboats along the Mississippi River as part of a plan to prop up declining river towns.

Over the past 16 years, the state added casinos at racetracks and now have added table games, such as poker and blackjack.

Today, casino and lottery taxes generate $300 million in annual revenue to build schools, pay for health and environmental programs, and even renovate the governor's mansion and the Statehouse.

Supporters, including the governor, say gambling money helps pay for projects that improve the quality of life in Iowa, such as the $217 million Iowa Events Center being built in Des Moines. Besides the 17,000-seat arena, gamblers are helping pay for a new science museum, a public library, and an education building in a one-mile area downtown.

Hooked on the revenue, state regulators are considering proposals from seven more communities that want casinos. The Iowa Racing and Gaming Commission is expected to grant three to five new licenses in May.

Just last month, Vilsack unveiled plans to use gaming revenues for a five-year, $800 million economic development effort.

The plan is reminiscent of an earlier initiative pushed by Vilsack, called Vision Iowa, in which gambling revenue was used to build new recreational and tourist attractions across the state.

Critics say the boom has come at a cost in broken lives. They hope that a $100,000 state study now under way will quantify the socioeconomic problems, including a rising number of bankruptcies, theft, and suicide.

More than 200 people have banned themselves voluntarily from the state's casinos -- agreeing to be arrested for trespassing if caught -- in the first three months of a new state program targeting problem gamblers.

Thousands more have asked that they be banned from individual casinos.

"In my opinion, the biggest gambling addicts we have is the Legislature in Des Moines. I think we've opened the door, and how do you stop it?" said Renee Otto, a gambling critic who helped defeat a casino referendum in Cedar Rapids in 2002. "They see it as easy money and it's not. It's hurting everybody."

A consultant hired by the Iowa Racing and Gaming Commission found in a 2003 study that the market for casinos was quickly becoming saturated, but there still was room to expand.

Putting a casino in every one of Iowa's 99 counties would boost gambling revenues to $1.7 billion from the current $1 billion, the study said.

Wes Ehrecke, president of the Iowa Gaming Association, said areas of the state are still underserved and adding a few more casinos could generate $40 million more for state coffers.