Report: Nearly a quarter of Iowa's casino revenue last year came from Nebraska residents

Iowa's gaming industry relies heavily on Nebraska gamblers for revenue and would lose a lot of business if its western neighbor decided to allow casinos, according to a consultant hired by the state.

Iowa has 18 state-licensed casinos scattered throughout the state, but nearly one-fourth of the industry's revenue comes from Nebraskans, who mostly visit casinos along the Missouri River.

Nebraskans generated nearly $327 million in gross revenue for Iowa casinos last year, according to the consultant's report for the Iowa Racing and Gaming Commission. They also account for nearly a quarter of Iowa's casino customers. Total gross revenue for the casinos was $1.4 billion, but only 53 percent came from Iowa gamblers.

The report by Union Gaming Analytics warns that Iowa's casinos face a long-term risk of competition from nearby states, which would reduce the number of patrons. The consultant predicted that Nebraska would eventually legalize casinos and other states would expand their operations.

"It is not a question of 'if' this will happen but really a question of 'when' because these states are highly incentivized to keep those tax dollars in-state, to create new jobs and stimulate capital investment," the report said.

Nebraska's constitution forbids casino gambling, and recent attempts to place the issue on the ballot have failed in the state Legislature. Nebraska lawmakers who favor casino gambling argue their state is effectively subsidizing Iowa, but acknowledge that a constitutional amendment is unlikely soon.

"It's a tremendous loss that we experience, in terms of taxes," said state Sen. Paul Schumacher, of Columbus.

Nebraska allows keno, horse racing, and a lottery, but voters have resisted video gaming machines. A ballot measure to authorize video keno was defeated in 2006. In 2004, voters rejected two proposals to allow casino gambling — one through a petition backed by Las Vegas casino interests, and the other approved by the Legislature.

In 2012, Schumacher proposed a constitutional amendment that would have allowed Nebraska to build casinos within 60 miles of bordering state unless that state agreed to share its tax revenue. Opponents criticized the measure as a ploy to blackmail Iowa, and it died in a legislative committee.

Another casino supporter, Sen. Russ Karpisek of Wilber, proposed a ballot measure this year to legalize casinos and spend tax revenue on schools, water projects and property tax relief. The proposal was defeated in a committee.

"We sit here (in Nebraska) and complain about property taxes, and this is something that we can do about it," Karpisek said. "But no, we're not even going to look at it. It makes no sense to me."

Some have argued for decades that casinos in Nebraska are inevitable, but voters so far have disagreed, said Pat Loontjer, executive director of Gambling with the Good Life, an anti-casino group. If the industry gains a foothold in Nebraska, she said, casinos will proliferate just as they have in Iowa.

"They always build on the borders, because they want to play one state against another. It's a greed-driven industry, and their strategy is to wear people down," Loontjer said.

Iowa offers one of the widest ranges of legalized gambling choices among 41 states with casinos, including charitable gaming, pari-mutuel wagering, lotteries, commercial casinos, Indian casinos, dog racing casinos and a horse racing casino. The casinos pay taxes on 22 to 24 percent of their adjusted gross gaming revenue, depending on the type of facility, said Brian Ohorilko, administrator of the Iowa Racing and Gaming Commission.

Earlier this month, the commission narrowly approved a 19th state-licensed casino — a $40 million project in Jefferson — but signaled it could be the last for a long time. Commissioners cited the consultant's reports as evidence that Iowa's gambling market is saturated.

A decision by Nebraska to allow casino gambling would probably hurt the three establishments in Council Bluffs, said Mark Nichols, a University of Nevada-Reno economist who studies the gaming industry.

Nichols pointed to a 2009 vote in Ohio that authorized casinos in four major cities. Shortly after a casino opened in Cincinnati, he said, business at nearby Indiana venues began to slump. In Reno, he said, gambling revenues have declined about 30 percent over the last decade because of casinos in Sacramento that attract Californians.

"People want to travel the shortest distance possible, and the product is fairly homogeneous," Nichols said. "If you were to build quality casinos in Omaha, I predict they would do very well."

On the other hand, Nichols said Nebraska may be among those states that shun casinos regardless of what their neighbors do.

"It really depends on the attitudes of the citizens of Nebraska," Nichols said. "Utah will never have gambling. Even though they're surrounded by it, the people of Utah don't want it."