Gambling and Casinos

(music) Gambling in Iowa was once limited to riverboats. But now most Iowans can place a bet on a smartphone in every corner of the state. What's next for gambling in Iowa? We sit down with Wes Ehrecke of the Iowa Gaming Association and Brian Ohorilko of the Iowa Racing and Gaming Commission on this edition of Iowa Press. (music)                            Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation. The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. Fuel Iowa is a voice and a resource for Iowa's fuel industry. Our members offer a diverse range of products including fuel, grocery and convenience items. They help keep Iowans on the move in rural and urban communities. Together we Fuel Iowa. Small businesses are the backbone of Iowa's communities and they are backed by Iowa banks. With advice, loans and financial services, banks across Iowa are committed to showing small businesses the way to a stronger tomorrow. Learn more at IowaBankers.com. (music)                      For decades Iowa Press has brought you political leaders and newsmakers from across Iowa and beyond. Celebrating 50 years of broadcast excellence on statewide Iowa PBS, this is the Friday, December 10th edition of Iowa Press. Here is Kay Henderson.  (music) Henderson: Gambling is big business in Iowa and the just concluded state fiscal year, ended on June 30th, the 19 state-licensed casinos had revenue topping $1.5 billion. And you can't watch a football game these days without an ad for that sports betting that is now legal in the state. Our two guests have experience in this industry that goes back years, decades. Joining us today is Wes Ehrecke, President & CEO of the Iowa Gaming Association since the turn of the century, 2000. The Association represents the 19 state-licensed casinos. And the Iowa Racing and Gaming Commission regulates those 19 state-licensed casinos. Brian Ohorilko has been the Commission's Administrator since 2012. You have been working at the Commission I believe since 2004. Ohorilko: That's right. Henderson: Thanks for joining us, gentlemen. Ehrecke: Thank you. Ohorilko: Thank you. Henderson: Also here for the conversation are Erin Murphy, Des Moines Bureau Chief for Lee Enterprises and Clay Masters of Iowa Public Radio. Murphy: So, as Kay mentioned, we've had sports betting in Iowa for a few years now. Brian Ohorilko, let me ask you first. How is that going? How much interest has there been in Iowa in sports wagering? Ohorilko: Yeah, it really has been significant interest in this state and the industry continues to grow. And we kind of have taken a measured, layered approach in opening with in-person registration and then when that went away we really saw things take off. And so every month we continue to see increases in handle. Last year we had approximately $6 million in tax revenue to this state. We anticipate that will grow. We have 17 companies that are licensed to conduct online sports wagering, four more that we expect to be licensed here in the next few months. And so the industry continues to grow. We have had very few regulatory issues. We will continue to provide regulatory oversight. And it has just been a really good story to this point in time. Murphy: So if more companies come in we can expect to hear even more of those ads that Kay was talking about, is that right? Ohorilko: Yeah, that's right. It's a very competitive industry right now. Murphy: Wes, how is this going in the casinos? Because we have the option for people can place bets just on their phone on an app at home. Are they also coming to the casinos to do this as well? Ehrecke: That is certainly an option, the retail versus the online. The online is probably 80% to 90% but still people that are going to the casino perhaps to play Blackjack and other things but will go to the retail to place a bet that way. We really have to applaud the legislature for their visionary efforts to put together a model legislation that Brian alluded to that has made this so successful in this state. It is considered recognized around the country and that has really been good to have both that retail and the mobile for people that love to watch sports and wager on sports in a well-regulated, compliant environment. Henderson: But to put a finer point on it, you say only 20% of the people who are wagering on sports in Iowa are actually going to a casino to wager? Ehrecke: For sports book, that has kind of I think been the average around the state. Some are maybe a little bit more and it depends on certain games that they'll have specials and various things for people to come in and be able to watch it and be able to get a burger and a beverage. And so it's another viable entertainment option, not unlike if they were to wager on their phone and watch it at home or in some other location. Murphy: And did that take away any foot traffic for casinos, the people who are staying home and making bets on their phones? Or is that a different clientele anyways? Ehrecke: I believe it's a different clientele. There is some overlap but I think there's been a lot of folks that just, again, there is a pent up demand in the illegal markets before this that they would want to watch and wager on sports and certainly we're one of the only ones in the Midwest that have this. So you have the surrounding states, they have their pro teams and their collegiate teams and so they come across the borders as well to want to place bets. Masters: So, Brian, do the casinos feel like they're missing out on some of this money then because of the prevalence of sports betting on smartphones? Ohorilko: So we have seen initially there was a little bit of a bump when the in-person registration requirement was in place. What I'm hearing from a number of the operators is that it really is two different types of customers. And so it's not really having an impact one way or the other, except for those in-person events that there's a handful of events whether it's the Super Bowl or March Madness where the facilities will have an event and bring people in. And so at this point in time there isn't a lot of impact. The way the legislation was set up, the facilities have to, the online sports companies have to have an agreement with a casino. And so the casinos are still generating some revenue from the sports betting even if it is occurring online. Masters: So, I'm curious then too, is gambling addiction becoming a bigger problem with the prevalence then of smartphones to be able to place a bet on your phone with sports betting, Wes, now that they don't have to physically go somewhere? Ehrecke: I would say that it has remained very consistent over the last 20 years that I've been involved. And certainly it's unfortunate that people are prone to compulsive behavior. But there's great programs in place and really we've seen it's about 1% to 2% of people that experience that and it hasn't really grown that we've seen with that. But also within the mobile apps, if that is what they're using, there is responsible gaming initiatives that they can take a time out for 3 days, they can indicate the amount they want to wager, the amount of time they want to wager. So actually online is being probably more proactive with that. But if there's people that need help certainly there is help available. Masters: But at the same time too, it's a lot easier to hide an addiction on a phone than physically going to a place. So, what kind of safety precautions are in place there, Brian? Ohorilko: Yeah, and so something that the Commission takes very seriously and so the requirements currently in the rules, and when we helped write this section of the rules it was based on a best practice approach of what we were seeing in other states, each of the online entities are required to have different protocols so that customers can easily access that and set their individual limits. And so that is something that we do see that facilities or that individuals are doing and it's something they can't do in the real casino. And so it has been a good tool to use that in the online casino world, something we can't do in a brick and mortar setting. Masters: And do you know the numbers off the top of your head for if people are experiencing gambling addiction? Ohorilko: So I don't know specific to how many people are taking advantage of the online limits. But what we are seeing with our statewide self-exclusion program we have 9,000 people currently enrolled, 7,000 in the permanent lifetime ban, and 2,000 in the five-year ban. And so we see about 500 a year people coming on and enrolling in those programs, which I believe is fairly consistent. It's a slight increase from what we saw before sports wagering but not material. Masters: And if a friend or a loved one is having concerns about a family member or so on, how do they seek treatment help? Ohorilko: So there are multiple ways. And on the stage, the Racing and Gaming Commission's website we can sign up individuals to participate in that list. But separate from that there are a number of gambling treatment providers across the state and they can call 1-800-BETSOFF so that we can put people in touch with those. Ehrecke: We have ads, every ad that we do mentions the 1-800-BETSOFF. So we were very proactive about responsible gaming support. Henderson: Wes Ehrecke, what is the point of having a brick and mortar casino where people walk in the door when you could gamble online? Is your casino association going to press legislators to let the Iowa licensed casinos have poker games online? Ehrecke: Well, first of all, we're 30 years old now as an industry. 30 years ago is when this all got created with the riverboat gaming. And so we have evolved with the Commission's oversight to be premier entertainment destinations. It's not just gaming, it's the dining, the hotels, the golf courses, the comedy clubs, a variety of things that are within a casino, plus the concerts and conventions and the like that we have really created premier entertainment destinations in 19 places -- Henderson: So you don't want online gaming then? Ehrecke: So I would say though that it's just now in its embryonic stage. There are six states that have currently authorized it, Connecticut, Delaware, Michigan, New Jersey, Pennsylvania and West Virginia, mostly out East. And we're going to watch that with interest. The Gaming Association is going to be neutral on that, that we don't envision any legislation come forward, but if it is we're going to be neutral. We have some of our members that support looking at it, there are others that are opposed, they have questions and thoughts. And so this is going to need to evolve over the next year or two before any serious legislation or consideration would happen. Henderson: So is sports book the gateway drug to online gambling? Ehrecke: I wouldn't say it's a gateway drug. I don't think that's a fair thing. This is premier entertainment that people enjoy doing with sports wagering and the fact that we have made it a legalized thing for so many people that enjoy watching sports and wagering on sports, so people do it for the fun and entertainment that it is intended to be and that is what our casinos are as well. Murphy: What are the pros and cons that casinos will weigh? You talked about some members may be interested, some aren't. From the casino's perspective, what are the pros and cons to online gaming? Ehrecke: We really haven't gotten into a lot of that because we didn't envision that there would be legislation coming forward this year. But I think they would want to look to see does it impact the brick and mortar revenue? Is it going to be something worthwhile like when we're having our blizzards in the wintertime and things like that. So there's just a variety of things and how to structure it properly. And just where is the appetite of Iowans and the legislators and everyone to want to have this as an option? But it's certainly out there now with six states that have that. But our industry, there needs to be more focus and more of that will come out I think in the upcoming year. Henderson: Brian Ohorilko, as the person who looks at the books, so to speak, how much of every dollar that is wagered at one of the 19 state-licensed casinos actually stays in Iowa? How much of it goes to Vegas or elsewhere? Ohorilko: Yeah, so it's a great question. And currently in Iowa we have a good mix of publicly traded companies and Iowa companies, a greater share of the revenue of the publicly traded companies will leave the state and that is something I don't have specific numbers, but we do see that. And the focus though I will say the Commission has really worked hard, there's been rules in place for years, but there has been a focus lately on buy Iowa and so the casinos are required to submit contracts when they spend over $100,000 on any type of service and the Commission thoroughly vets those contracts to make sure that Iowa vendors are getting an opportunity to bid on that. So, we have the profits and many of those profits if it is a publicly traded company some will leave the state. But we do have Iowa companies they remain. But that is not to factor in the buy Iowa, the tax revenue and then the jobs and all of those -- Ehrecke: Charitable contributions too, we have $90 million in charitable contributions really impacts every citizen in the state as well as what he said, the buy Iowa first. We're a $1 billion annual economic impact when you factor in those four things with wages, buy Iowa, the charitable grants and the taxes. A lot of that stays within the state and it does visionary things with that. Murphy: Gentlemen, I wanted to ask you about the Cedar Rapids area and their debate over whether to add a casino there and whether the state would license such a casino. They recently had another referendum which again passed by a smaller, a more narrow margin than the first time. Brian Ohorilko, my question for you, does that factor into the Commission's decision when they see that yes the community approved it but it was a little closer this time? Is that a factor they weigh? Ohorilko: So community support is a factor. There are a number of criteria. It is important to know when we're looking at new applications it is a very small part of what the Commission does but it is a very important part. And Iowa law, the Commission is to decide the number and locations of licenses. I have been through five of these in different capacities with the Commission, very spirited conversations, very difficult decisions. There are criteria that are listed in the rules. They range from public support, they range from the suitability of the applicant, whether they can build the project that they say they can and then there are economic factors, market impact, if there is out-of-state revenue and the overall increase to the gaming revenue as a whole to the state. And so we are aware of the referendum that passed, we have been informed that there is interest from the community to submit another application. There is a study right now being conducted, it's a socioeconomic study, but there is also some market components. That is due at the end of this calendar year. That will be very helpful to help kind of everyone take a look at the market before we see applications and the time and money that is spent in one of these processes. Masters: Well, and speaking of the market component, I'm curious just how saturated is the Iowa market right now for casinos? That is one of the big discussions that happens in Linn County is if they're ready for a casino or if that takes away from other casinos in the state. How do you weigh that, Wes? Ehrecke: Well, we have the Commission weight that because they do a very thorough job with the criteria that they have. For a couple of my current members that are in that area, they were expected to have some significant investments, over $100 million each in their properties to have premier entertainment destinations beyond just gaming with lodging and a variety of other things. And so if they're nearby they want to get a good return on their investment as well. So you've got to weigh all of that into that and so this market analysis that Brian alluded to will hopefully be telling in what that might look like. We will stay neutral, as is expected with that particular proposal, and let the Commission do the thorough work on that. Masters: Brian, what do figures show right now as you're looking at that with saturation of the market? Ohorilko: So we haven't seen the studies yet for now. But when the studies were conducted in 2017, the last time we had looked at Linn County, there was a projected significant market impact at that time and it was greater than we had ever seen when going through an application process, still a very close decision, it was 3-2. There are other factors that are involved in these decisions, not just market impact. And so five years later we are interested to see what has changed. The population of Iowa hasn't really grown but we have seen a shift to more urban areas. And so it will be interesting and we are waiting to see what these studies show to get a better idea as to if there are any overserved or underserved markets in this state. Masters: And now you're seeing with like Minnesota eyeing sports betting, Nebraska moving forward with casinos, that certainly plays a factor into this too. Omaha/Council Bluffs going to be a much different state of gambling there. How do you weigh what is going on with other states? Ohorilko: Yeah, exactly. So the Nebraska impact is projected to be fairly material and that is one thing that this study will also look at. It wasn't just focused on Linn County or overserved or underserved markets, it really was to look at the impact of Nebraska. And that is our largest market currently in the state of Iowa with the three casinos there and there is significant revenue that comes from Omaha and Lincoln. And so we are looking at that and that is something that we are paying very close attention to. Henderson: Well, the Sioux City market will also have a competitor eventually in South Sioux City, Nebraska too. Ohorilko: You're exactly right. We will see competition there in Sioux City so it will have an impact there as well. Maybe the difference in Sioux City there, we have a new casino, fresh casino and they have maybe a better ability to compete against the market there. But you're absolutely right, we will see an impact in Sioux City. Henderson: One of the things I covered more than a decade ago was passage of the Iowa Clean Air Act and casinos want an exemption and the argument was that we need to be competitive with other casinos in other states where people can go in and light up and play the games. Advocates for the people who work there say they are being exposed to secondhand smoke and their risk of cancer is enhanced. Wes Ehrecke, why should casinos have a carve out, if you will, in the Clean Air Act? Ehrecke: Casinos probably have some of the best filtration and ventilation systems around. We have to accommodate both smokers and non-smokers in a very acceptable indoor quality environment and we do that per the Ashrae 62 standards. We're bringing in fresh air several times every hour and that has really helped even during COVID as well as part of that. So with the time it was about a 25% to 30% drop in revenue to do away with smoking and compared to other states that did do that. And so we like to say that adults make adult decisions in adult venues. It's still legal in this country, smoking, and so to be able to offer that but we want to be proactive with and we feel we are and even for the employees don't seem to have complaints that I know of because we are doing such a proactive effort with our ventilation and filtration. Henderson: So let's talk about the competitiveness issue. If I go to a casino across the river in Illinois, do I get to smoke? Ehrecke: No. Henderson: So if I go into a casino that is eventually built in Nebraska do I get to smoke? Ehrecke: I don't know the answer to that. Ohorilko: I'm not aware either. Ehrecke: I don't know. Henderson: And so it's not a competitiveness issue now, right, in the Quad Cities market? Ehrecke: But it was a competitive issue where Illinois, they didn't really want that to happen because their revenues dropped precipitously for several years after that. Murphy: Gentlemen, greyhound racing is being phased out, the owner at the Dubuque track says next year is probably their last season. I'm wondering, what is the state of horse racing in Iowa? Brian Ohorilko, we'll start with you. Is that headed down the same path of eventually being phased out? Or is horse racing still strong in Iowa? Ohorilko: I think horse racing is very different than greyhound racing. There is maybe a larger agriculture reach. When you go to the back side of Prairie Meadows, for example, there are a number of other businesses that are taking place back there, selling feed, hay, different supplies. Now, the horse racing industry is seeing right now some significant federal legislation that is being implemented and it deals with medication reform. And so there will be a significant shift in how racing is regulated. In Iowa we believe that we have very high standards and we don't believe there will be much to change in the Iowa industry. But in the Midwest there could be. And that would impact racing opportunities and the amount of racing participants that are in these races. And what customers want is field size, they want to have horses, higher field size in their races to wager and we have seen that decline in the past few years. And so it is something that we're watching. Murphy: So, you stole my follow-up question. So before I go over to Wes, let me ask you real quick on that. And we just saw there was a national headline because the horse that won the Kentucky Derby died after a recent workout. So what is the assurance that in Iowa the horses are well taken care of and protected in every way that advocates would say they should be? Ohorilko: Yes, so it is a layered approach. And the best tool we have is drug testing and medication testing and we test, spend a lot of money testing animals pre-race, post-race, we do out of competition testing, hair testing, really to make sure that we understand what trainers are putting into the horses. In addition to that, we have veterinarians on staff, they do pre-race exams, the check every horse that runs in every race at Prairie Meadows. If they note that there is maybe some potential lameness, those horses will be required to scratch. And so there is significant regulation to ensure that the animals here in Iowa are safe. We do still see accidents from time to time. But our numbers in Iowa are much better than what we see across the country. Murphy: And Wes, to circle back, what is the status of horse racing? Do you agree that it has got a little longer shelf life here in Iowa? Ehrecke: Yeah, I believe so. It has certainly had three different options of racing, you have the Thoroughbreds, the Quarters and the Standardbreds and so they are located throughout the state which has a strong agricultural base that Brian alluded to and they seem to be thriving. Prairie Meadows I think does an exceptional job with their racing product, if you will, and fan base and the like. So it's got to be subsidized though, not unlike the greyhounds. So at some point in time, do you have enough horses to race? And I think that is what it really would come down to at some point but not in the next few years I wouldn't anticipate. Henderson: Brian Ohorilko, what happens to the Iowa Greyhound Park once it closes? It is owned by an association now. Ohorilko: Yeah, so the license is owned by the association. The property is actually owned by the City of Dubuque but it is leased by Q Casino there. So we have not seen any formal plans, but I expect that that area will be developed at some point in the near future. Henderson: And would the Racing and Gaming Commission have any role in determining what could be built there? Do you have thumbs up or thumbs down on that since it was part of the regulatory framework of your organization? Ohorilko: So, the Commission would ultimately have to approve or reject any type of capital improvement project. And at this point I know there are discussions and I expect that we probably will see some plans in the next year or two. Masters: In the remaining 30 seconds or so that we have here, I'm just curious what has been the long-term impact of the ongoing coronavirus pandemic on your industry? Brian, we'll start with you. Ohorilko: Yeah, it has really been the impact of all of these amenities. Gaming in Iowa is something where we've had destination type facilities, we've seen a number of amenities close and at this point I'm not sure if we'll ever see buffets again in all of the casinos, there still are some. But we're seeing these amenities closing and they're still not opened at this point. Henderson: Wes, how much did foot traffic go down percentage wise? Ehrecke: I think it was about 20% or 30% with admissions for a while. But certainly our labor shortage too, you can't ignore that just to get people there. Henderson: And I can't ignore the clock. We are out of time, gentlemen. Thanks for joining us for this conversation. And thanks for watching this edition of Iowa Press. You can watch it anytime on iowapbs.org or you can watch it when it is broadcast on Friday nights at 7:30 and Noon on Sunday. For everyone here at Iowa PBS, thanks for joining us today. (music) Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation. The Associated General Contractors of Iowa, the public's partner in building Iowa's highway, bridge and municipal utility infrastructure. Fuel Iowa is a voice and a resource for Iowa's fuel industry. Our members offer a diverse range of products including fuel, grocery and convenience items. They help keep Iowans on the move in rural and urban communities. Together we Fuel Iowa. Small businesses are the backbone of Iowa's communities and they are backed by Iowa banks. With advice, loans and financial services, banks across Iowa are committed to showing small businesses the way to a stronger tomorrow. Learn more at IowaBankers.com.