24
May
2005
The Isle of Capri's (IOC) final draft of the proposed development agreement to build a casino hotel on Davenport's downtown riverfront was submitted to the city staff and council last Wednesday, May 18, during its regular council meeting. At the same time, the council voted to hold the public hearing relative to this issue on Tuesday, May 31, at 4:30 p.m., and then vote on the proposed agreement the following day, Wednesday, June 1, at 7 p.m.
This is an unprecedented fast track - a mere 15 days - to consider one of the largest commercial developments to ever occur in downtown Davenport. Of grave concern is whether the council is able to filter fact from fiction, especially with the huge amount of political pressure being brought by DavenportOne, which stands to substantially gain financially if the proposal is accepted.
This week, in fact, DavenportOne was awarded $250,000 by the RDA as one of the recipients of this round of grants. Until recently, DavenportOne claimed it had not taken a position on IOC's proposed hotel. But once it had negotiated additional annual payola of $180,400 as part of IOC's agreement, it publicly put on the gas to garner support for the hotel project. It currently receives and will continue to receive $226,356 from the casino operation, plus another $180,400, for a grand total of $406,756 per year.
It is misleading to include this $406,756 as part of the increased revenue the city will receive if the proposal is accepted, because it goes directly to DavenportOne. The city does not control these dollars. Also included in the revenues to the city is the hotel/motel tax. However, 25 percent of this figure automatically goes to the Conventions & Visitors Bureau (CVB), so it should also be excluded from the bottom line. This changes the economic benefit to the city dramatically.
To illustrate: Under the current agreement, the city will receive $1,959,555 ($2,185,734 minus $226,179 to DavenportOne) in the first year. With the proposed agreement, the city will receive $2,316,524 ($2,750,597 minus $406,756 to DavenportOne minus $27,317 to the CVB). The net increase in revenues to the city would be a paltry $356,969. The city spent close to this amount on consultants alone in the past year.
This "economic benefit" is hardly worth dispossessing the community of its prime real estate, and also represents a debilitating business deal for taxpayers. Also, the city currently enjoys a minimum guarantee for revenue from the casino. This is absent in the new agreement.
The average net gain over 10 years is only $579,838 per year. This totals to $5.8 million, not $7.9 million as claimed.
Furthermore, IOC is not investing $43 million in this hotel project. Its investment share is only $25 million. Taxpayers are investing $22 million in the form of $15 million in bonds ($6.1 million for another parking ramp and $5 million for sewer improvements) and a $7 million loan from IOC at 6.9 percent (to move the boat upstream, build an eight-foot berm, construct a sidewalk behind the hotel, and demolish the parking lots and re-sod).
The idea is to pay back the bonds and loan with (1) lease payments from the casino for the parking ramp; (2) a redirection of $5 million (71 percent) from the $7 million the RDA will receive by law for purposes of granting to not-for-profits; and (3) funds from a 50-percent annual tax rebate ($584,852 per year) on property taxes ($1,169,704 per year) IOC would be obligated to pay.
In other words, the annual leases of approximately $140,000 from the parking ramp ($2.8 million over 20 years); plus $5 million of grant money from the RDA; plus $584,852 for the next 20 years ($11,697,040) for a grand total of $19,497,040 that will not benefit the community, but instead will solely benefit IOC.
If this proposal is accepted, and a 50-percent tax rebate is allowed to pay back a loan that directly benefits the for-profit casino, then I want 50 percent of my taxes to finance a loan to improve my operation. In fact, this policy should be applied community-wide. There is no other provision, other than this excessively friendly agreement for IOC, that sanctions such unprecedented city largess. But, hey, if the city can do it for one business, then it can do it for all of us. We all employ people, many of us for far greater wages per capita than IOC intends. The council should demand to see a mean wage for these proposed new jobs rather than an average. Citing average wages does not remotely reflect reality in terms of the true number of low-income wages that will prevail, evidenced by current wages at IOC's Bettendorf hotel.
So let's recap: IOC's investment is $25 million, not $43 million. Taxpayers' investment is $22 million; therefore taxes are indeed being used.
IOC is not paying for any public greening; taxpayers are footing that bill by demolishing the parking lot and restoring it to greenspace.
It is important to note that the new gain in greenspace we are talking about is from Harrison to Main, south of the railroad tracks. It isn't that much more actual land. The area between Main and Brady south of the railroad tracks was already slated for some greenspace and landscaping because it is the landing for the new sky bridge. The remaining acreage of greenspace will supposedly occur east of Perry Street and is city-controlled. IOC has nothing to do with it. However, greening that space is not in the project cost and will be an additional expense to taxpayers, as will the greening between Harrison and Main. Be clear: The only greenspace IOC will be paying for is the little bit of ground that surrounds its hotel and parking ramp.
IOC is not paying for expanded views, since there are none with an 11-story edifice atop an eight-foot berm. Regardless, IOC is not paying for the public "eagle watch terrace," as we are led to believe in the marketing materials.
IOC is not paying for greater access to the river. Taxpayers are paying for the sidewalk behind the hotel.
Consolidation of casino operations is also marketing spin. Basically, instead of three consecutive parking lots with a barge and boat, we will expand upward into 11 stories of hotel space and five stories of parking ramp, all atop an eight-foot berm. The environmental consequences of such a mammoth structure in a primary floodway have not remotely been addressed, and yes, IOC will have to get a new permit ot move the boat to its proposed location. And be warned: By building in a federal floodway, Davenport is jeopardizing its eligibility for emergency funding from FEMA during flooding, which amounted to more than $300,000 in the past.
There appear to be no previous cost feasibility "studies" of merit to prove that alternative locations are too costly to develop. When specifically asked this question during last week's council workshop, IOC's response was incomplete, and devoid of any supporting evidence.
IOC is paying for its own hotel. That is it. And it begs the question: How much of a hotel will $25 million buy? Historically, IOC casino investment in structures has been unsatisfactory, "carnival-like" in appearance, and nothing in the development agreement suggests anything different. The "design review panel" is comprised of IOC plants, and the language in the agreement is nondescript, consequence-free, and completely without teeth. Add to this that IOC's reputation in the industry relative to investment in structures is that of a low-rent operator.
IOC's first-year Adjusted Gross Revenue with a new hotel is $79 million, of which the city nets $356,969. This ratio of less than half of 1 percent hardly seems fair, when you consider that, according to Davenport City Administrator Craig Malin, IOC is expecting a 20-percent return on investment and gets to dominate our riverfront. What other development might offer a significantly better return given the opportunity? If developers knew the riverfront was available, with a 50-percent tax rebate for any improvements, who knows? At a minimum, we should certainly slow things down to allow for the exploration of such potential.
The true net revenue could be further reduced if IOC is not compelled to renew its lease for the Redstone Ramp, built for it two years ago. Its five-year lease is up three years from now, so that revenue could go away. This would reduce the annual net revenue to the city by approximately $1.8 million over the next 10 years.
There isn't a single benefit that can't be debunked in this deal when examined closely. Unfortunately it appears that Malin, Mayor Charlie Brooke, and most of the city council are not sophisticated or educated enough in finances to discern the real facts. They are being played and are either incapable of such discernment, or simply don't care. The council is risking re-election on this issue, not to mention irreparable loss of respect by supporters and opposition, alike.
It is important to note that 95 percent of the individuals who consistently express support for the hotel on the riverfront have a financial interest in the project, from all the representatives of DavenportOne to IOC employees to hired engineers, contractors, and architects, and the list goes on.
Ninety-five percent of the individuals who speak in opposition to the hotel on the riverfront have zero financial interest should the project be rejected.
On another note, perhaps the ill wind that some attribute to gambling is not so far off. This issue has caused a corruption within our community that has stayed under the radar. Specifically, the number of individuals who oppose the hotel locating on our riverfront, but because they are recipients of RDA grant monies, have remained silent on this profoundly important issue for fear of losing future funding. This financial dependence on RDA funds has turned good people into civic cowards, who but for potential future grants, would absolutely express their opposition.
This is an unprecedented fast track - a mere 15 days - to consider one of the largest commercial developments to ever occur in downtown Davenport. Of grave concern is whether the council is able to filter fact from fiction, especially with the huge amount of political pressure being brought by DavenportOne, which stands to substantially gain financially if the proposal is accepted.
This week, in fact, DavenportOne was awarded $250,000 by the RDA as one of the recipients of this round of grants. Until recently, DavenportOne claimed it had not taken a position on IOC's proposed hotel. But once it had negotiated additional annual payola of $180,400 as part of IOC's agreement, it publicly put on the gas to garner support for the hotel project. It currently receives and will continue to receive $226,356 from the casino operation, plus another $180,400, for a grand total of $406,756 per year.
It is misleading to include this $406,756 as part of the increased revenue the city will receive if the proposal is accepted, because it goes directly to DavenportOne. The city does not control these dollars. Also included in the revenues to the city is the hotel/motel tax. However, 25 percent of this figure automatically goes to the Conventions & Visitors Bureau (CVB), so it should also be excluded from the bottom line. This changes the economic benefit to the city dramatically.
To illustrate: Under the current agreement, the city will receive $1,959,555 ($2,185,734 minus $226,179 to DavenportOne) in the first year. With the proposed agreement, the city will receive $2,316,524 ($2,750,597 minus $406,756 to DavenportOne minus $27,317 to the CVB). The net increase in revenues to the city would be a paltry $356,969. The city spent close to this amount on consultants alone in the past year.
This "economic benefit" is hardly worth dispossessing the community of its prime real estate, and also represents a debilitating business deal for taxpayers. Also, the city currently enjoys a minimum guarantee for revenue from the casino. This is absent in the new agreement.
The average net gain over 10 years is only $579,838 per year. This totals to $5.8 million, not $7.9 million as claimed.
Furthermore, IOC is not investing $43 million in this hotel project. Its investment share is only $25 million. Taxpayers are investing $22 million in the form of $15 million in bonds ($6.1 million for another parking ramp and $5 million for sewer improvements) and a $7 million loan from IOC at 6.9 percent (to move the boat upstream, build an eight-foot berm, construct a sidewalk behind the hotel, and demolish the parking lots and re-sod).
The idea is to pay back the bonds and loan with (1) lease payments from the casino for the parking ramp; (2) a redirection of $5 million (71 percent) from the $7 million the RDA will receive by law for purposes of granting to not-for-profits; and (3) funds from a 50-percent annual tax rebate ($584,852 per year) on property taxes ($1,169,704 per year) IOC would be obligated to pay.
In other words, the annual leases of approximately $140,000 from the parking ramp ($2.8 million over 20 years); plus $5 million of grant money from the RDA; plus $584,852 for the next 20 years ($11,697,040) for a grand total of $19,497,040 that will not benefit the community, but instead will solely benefit IOC.
If this proposal is accepted, and a 50-percent tax rebate is allowed to pay back a loan that directly benefits the for-profit casino, then I want 50 percent of my taxes to finance a loan to improve my operation. In fact, this policy should be applied community-wide. There is no other provision, other than this excessively friendly agreement for IOC, that sanctions such unprecedented city largess. But, hey, if the city can do it for one business, then it can do it for all of us. We all employ people, many of us for far greater wages per capita than IOC intends. The council should demand to see a mean wage for these proposed new jobs rather than an average. Citing average wages does not remotely reflect reality in terms of the true number of low-income wages that will prevail, evidenced by current wages at IOC's Bettendorf hotel.
So let's recap: IOC's investment is $25 million, not $43 million. Taxpayers' investment is $22 million; therefore taxes are indeed being used.
IOC is not paying for any public greening; taxpayers are footing that bill by demolishing the parking lot and restoring it to greenspace.
It is important to note that the new gain in greenspace we are talking about is from Harrison to Main, south of the railroad tracks. It isn't that much more actual land. The area between Main and Brady south of the railroad tracks was already slated for some greenspace and landscaping because it is the landing for the new sky bridge. The remaining acreage of greenspace will supposedly occur east of Perry Street and is city-controlled. IOC has nothing to do with it. However, greening that space is not in the project cost and will be an additional expense to taxpayers, as will the greening between Harrison and Main. Be clear: The only greenspace IOC will be paying for is the little bit of ground that surrounds its hotel and parking ramp.
IOC is not paying for expanded views, since there are none with an 11-story edifice atop an eight-foot berm. Regardless, IOC is not paying for the public "eagle watch terrace," as we are led to believe in the marketing materials.
IOC is not paying for greater access to the river. Taxpayers are paying for the sidewalk behind the hotel.
Consolidation of casino operations is also marketing spin. Basically, instead of three consecutive parking lots with a barge and boat, we will expand upward into 11 stories of hotel space and five stories of parking ramp, all atop an eight-foot berm. The environmental consequences of such a mammoth structure in a primary floodway have not remotely been addressed, and yes, IOC will have to get a new permit ot move the boat to its proposed location. And be warned: By building in a federal floodway, Davenport is jeopardizing its eligibility for emergency funding from FEMA during flooding, which amounted to more than $300,000 in the past.
There appear to be no previous cost feasibility "studies" of merit to prove that alternative locations are too costly to develop. When specifically asked this question during last week's council workshop, IOC's response was incomplete, and devoid of any supporting evidence.
IOC is paying for its own hotel. That is it. And it begs the question: How much of a hotel will $25 million buy? Historically, IOC casino investment in structures has been unsatisfactory, "carnival-like" in appearance, and nothing in the development agreement suggests anything different. The "design review panel" is comprised of IOC plants, and the language in the agreement is nondescript, consequence-free, and completely without teeth. Add to this that IOC's reputation in the industry relative to investment in structures is that of a low-rent operator.
IOC's first-year Adjusted Gross Revenue with a new hotel is $79 million, of which the city nets $356,969. This ratio of less than half of 1 percent hardly seems fair, when you consider that, according to Davenport City Administrator Craig Malin, IOC is expecting a 20-percent return on investment and gets to dominate our riverfront. What other development might offer a significantly better return given the opportunity? If developers knew the riverfront was available, with a 50-percent tax rebate for any improvements, who knows? At a minimum, we should certainly slow things down to allow for the exploration of such potential.
The true net revenue could be further reduced if IOC is not compelled to renew its lease for the Redstone Ramp, built for it two years ago. Its five-year lease is up three years from now, so that revenue could go away. This would reduce the annual net revenue to the city by approximately $1.8 million over the next 10 years.
There isn't a single benefit that can't be debunked in this deal when examined closely. Unfortunately it appears that Malin, Mayor Charlie Brooke, and most of the city council are not sophisticated or educated enough in finances to discern the real facts. They are being played and are either incapable of such discernment, or simply don't care. The council is risking re-election on this issue, not to mention irreparable loss of respect by supporters and opposition, alike.
It is important to note that 95 percent of the individuals who consistently express support for the hotel on the riverfront have a financial interest in the project, from all the representatives of DavenportOne to IOC employees to hired engineers, contractors, and architects, and the list goes on.
Ninety-five percent of the individuals who speak in opposition to the hotel on the riverfront have zero financial interest should the project be rejected.
On another note, perhaps the ill wind that some attribute to gambling is not so far off. This issue has caused a corruption within our community that has stayed under the radar. Specifically, the number of individuals who oppose the hotel locating on our riverfront, but because they are recipients of RDA grant monies, have remained silent on this profoundly important issue for fear of losing future funding. This financial dependence on RDA funds has turned good people into civic cowards, who but for potential future grants, would absolutely express their opposition.
