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Money Source [Foundation's share of casino profits]

How Other Casino Foundations Operate

[Note: This material is copyright by The Gazette, and is reproduced here as a matter of "fair use" for non-commercial, educational purposes only. Any other use may require the prior approval of The Gazette.]

  The most glaring example, they said in interviews, is Riverside Casino & Golf Resort CEO Dan Kehl’s public comments that the foundation might contribute millions of dollars to the controversial Earthpark indoor rain forest project. Casino officials are not to have a say in how the foundation spends its money.

  ‘‘I think that would provide evidence that there is mingling there,’’ said Jim Hussey of Kalona, who campaigned against allowing gambling in Washington County as a member of Communities Against Riverboat Expansion.

  Even an official with the casino foundation, known as the Washington County Riverboat Foundation, is sounding a note of caution.

  ‘‘We want to maintain friendly relations, but believe me, we want the casino to stay on its side of the street, and we’ll stay on ours,’’ foundation attorney Doug Tindal of Washington, Iowa, said.

  Concern about how the foundation will operate is the latest dispute between gambling opponents and the $135 million Riverside Casino & Golf Resort, set to open Aug. 31 about 15 miles south of Iowa City.

  Casino critics worry about what they believe are conflicts of interest that could lead foundation board members into decisions based on what is best for the casino, rather than what is best for the county.

  At least two close ties exist between the foundation and the casino. The casino will bank with the financial institution run by foundation Chairman Timothy Putney. And the husband of foundation Vice Chairwoman Patty Koller is a casino investor and on its board of directors.

  Putney said relatives of other board members, including his own, also are casino investors.

  The Iowa Racing and Gaming Commission’s administrator said those dealings do not violate state law.

  And Kehl said there was nothing inappropriate in his asking the foundation to consider funding the rain forest project because the casino and the foundation are both supposed to spur economic development in the area.

  ‘‘ There’s nothing to be ashamed of,’’ he said.
 
Rain forest a lightning rod

  At the heart of the matter is another controversy: the $155 million Earthpark indoor rain forest project, for which Riverside is a finalist along with Pella. Kehl has said at recent public meetings that the casino foundation might contribute $8 million over 10 years toward $25 million in local funding Earthpark officials are requiring.

  The foundation is a nonprofit organization required by state law to hold the casino’s gambling license. It contracts with the riverboat operator and allows gambling in return for a percentage of gaming revenue. The casino and foundation are to operate separately and the money given to the foundation is the non-profit’s to spend.

  Washington County Riverboat Foundation funding guidelines list four special interest areas: community development and beautification, economic development, education and arts, and human and social needs.

  The foundation expects to have $3.2 million to distribute from the casino’s projected $83 million in first-year gaming revenue.

  Foundation officials already have pledged 25 percent of the allocation to county towns. Based on the $3.2 million estimate, $800,000 a year to the rain forest would represent another 25 percent, meaning that 50 percent of the foundation’s money already would be earmarked if the foundation agrees to Kehl’s suggestion.

  ‘‘That would be upsetting to a lot of people who are banking on the support,’’ Washington County Supervisor Jack Dillon said.

  Dillon of Wellman opposed a gambling referendum that voters approved in August 2004, but said he now supports the casino ‘‘50-50’’ because of the good things its foundation can do. He wants money for schools, libraries and the Washington County Humane Society Shelter.
 
  Finding foundation members

  Kehl said he contacted several community leaders after becoming involved in trying to get the rain forest to Riverside. Because it’s a small county, some also were casino foundation board members, he said. He said the idea of $8 million over 10 years came after the group talked and was ‘‘just a road map to put out on paper.’’

  Foundation officials said they have had no formal talks with Earthpark planners. Grant applications are due to them Oct. 1 and awards will be announced Dec. 15.

  ‘‘We don’t want anybody in the county to think any money is pre-committed,’’ foundation attorney Tindal said.

  Putney of Iowa City said he has talked with the casino foundation board about his role as a member of a local group trying to attract Earthpark to Riverside. He said the project could have a huge economic impact on the area. That, he said, is why he would support the foundation giving it money if project officials apply for a grant.

  Putney said he would abstain from any foundation vote on the project because of his membership in the Riverside Environmental Group, which the casino formed to woo the rain forest project.

  He also defended Kehl.

  ‘‘He’s not committing anybody’s funds other than his own,’’ Putney said. ‘‘I think the word he’s continually used is ‘could,’ or ‘might.’ ’’

  Kehl conceded the casino would benefit if Earthpark comes to Riverside. That’s why his family has committed $2 million toward the $25 million in local money needed, and the casino board of directors has pledged another $10 million over 10 years, he said. The rest of the money could come from taxes from future development, he said.

  Nicholas Johnson, a University of Iowa law professor and Earthpark critic, said funding the rain forest would take money away from more worthy projects. He also accused Kehl of misleading the public by making it sound like the local funding for the project is all secured.

  ‘‘People assume that that’s locked down, contracts are signed, the money’s on the way,’’ Johnson said.
 
  Picking foundation directors

  The foundation’s volunteer 12-member board of directors will determine how to spend its money. A 13th member has been approved by the board but is awaiting the results of a criminal background check.

  The foundation formed soon after casino officials came to Riverside in the summer of 2004 expressing an interest in bringing a casino to the area. A few people who attended an initial meeting became board members, and the group set out to achieve geographic representation from throughout the county.

  Edward Raber, a board member from Washington, Iowa, said the casino did not handpick board members or ‘‘stack the deck.’’

  ‘‘Everybody is committed to doing great things for Washington County with this money,’’ said Raber, executive director of the Washington Economic Development Group.

  However, one man, Dale Torpey, a Washington, Iowa, banker, was told he could not be on the board because he opposed the casino. ‘‘We felt the point was to get this referendum passed, otherwise there would be no foundation,’’ said the foundation’s Koller, a teacher at Washington Junior High.

  Torpey said now that the casino is a reality, he wants to work with board members to ensure the foundation gets what’s best for Washington County. To do that, he said, the board members need to ‘‘dissociate themselves from the casino.’’

  Koller’s husband, Robert Koller, is secretary of the casino’s board of directors and one of about 800 local casino investors. Foundation board members decided they would not invest in the casino, but their family members can. Critics said that does not prevent conflicts of interest.

  ‘‘If my wife invests in something, I’m as mixed up in it as anyone else,’’ Torpey said.

  Koller said she and her husband asked casino and state officials several times if their relationship was a problem and always were told no.

  Jack Ketterer, administrator of the Iowa Racing and Gaming Commission, said state law does not prohibit non-profit officials from investing in their partner casinos.

  ‘‘I’m not seeing a conflict,’’ he said. ‘‘They would want the casino to do well because not only would it benefit them as an investor, but it would also benefit the nonprofit.’’

  Casino foundation Chairman Putney also is president and CEO of Peoples Trust and Savings Bank. Kehl said that because it is the only bank in town, the casino will do its banking with Peoples Trust. The casino and resort’s projected total revenue for its first year is $93 million.

  Putney said his bank likely also would be the primary bank for the casino foundation, though that has yet to be approved by the board.

  ‘‘We would hope any business that would come to town would do business with us,’’ Putney said. ‘‘No, there is no conflict of interest there.’’

  He said he would resign either from the foundation or the bank should the state ever say there is a conflict but declined to speculate which he would leave.

  Kehl said there’s no conflict and the casino has not tried to hide anything.

  ‘‘Basically, it’s a small county and a lot of the movers and shakers are involved,’’ he said. ‘‘At the end of the day, it’s a totally autonomous group,’’ he said of the foundation.

  Board members said their focus is on helping fund numerous projects in the county with money they get from the casino.
‘‘The possibilities are endless what we could do for Washington County with $3 million a year,’’ Koller said.
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 • The Washington County Riverboat Foundation will receive 4.5 percent of the first $20 million in casino revenue, 4.75 percent of the next $10 million and 5 percent beyond $30 million.
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  ‘‘We’re kind of a partner with them,’’ he said.

  The Black Hawk County Gaming Association has yet to write its conflict-of-interest policy, but President Don Hoth said he sees no reason why association members should be barred from investing in the Waterloo casino set to open in the spring.

  Dubuque Greyhound Park & Casino is city-owned, so there are no investors, Dubuque Racing Association General Manager Bruce Wentworth said. But with city officials on the association board, he said some are certainly stakeholders.

  Jerry Mathiasen, a spokesman for Iowa West Racing Association, which holds the license for two Council Bluffs casinos, said he knows of no association members who do business with the casinos. The association’s conflict-ofinterest policy, like most other gaming non-profits, comes into play most often when a member has a relationship with a grant applicant.
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[picture]

Brian Ray/ The Gazette

 Washington County Riverboat Foundation Chairman Timothy Putney of Iowa City stands in front of the Riverside Casino & Golf Resort on Wednesday in Riverside. Casino critics say the foundation has conflicts of interest that could affect how it distributes money, but foundation officials say they ' re focusing on funding numerous projects within the community.