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'Impact Fee' Rising Fast for DRA

Racing Association Owes Diamond Jo More Than $700,000
for Taking a Bigger Share of Business

M.D. Kittle

Dubuque Telegraph Herald

June 21, 2006

[Note: This material is copyright by the Dubuque Telegraph Herald, 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 Dubuque Telegraph Herald.]

The Dubuque Racing Association's bill for taking business from Diamond Jo Casino is rapidly rising, and officials so far can't pinpoint when the account will be settled.

DRA board members on Tuesday received an update on the so-called impact fee that the racing association is obliged to pay the riverboat casino under an 11th-hour deal signed last year.

Based on the latest figures, the nonprofit license holder of Dubuque Greyhound Park & Casino owes Diamond Jo $712,000 in impact fees. Through May, the DRA has made about $131,000 in payments, leaving an accrued credit of more than $580,000.

The carryover is by design.

Under the terms of its operating agreement with the racing association, the Diamond Jo sought to protect itself from increased competition at an expanded Dubuque Greyhound Park & Casino, which in May 2005 opened a bigger casino with 1,000 slot machines.

Booming business at the racetrack casino took a big bite out of Diamond Jo's attendance and revenue. Win at the riverboat has declined by more than 17 percent each of
the past three months.

The competition clause mandates that the DRA reimburse the Diamond Jo one-third of lost revenue, capped at 15 percent.

Diamond Jo pays the DRA a so-called head tax, or 50 cents for every person that enters the riverboat casino. The impact fee comes directly from that cash payment.

"We don't pay them any more than what they paid us," said Bruce Wentworth, general manager of Dubuque Greyhound Park & Casino. "So they send us a check, and we send them a check back."

But the Diamond Jo's "head tax" is significantly smaller than the impact fee. In March, the riverboat casino paid $33,637 for the tax, but the impact fee topped $230,000. The DRA paid $33,000 and carried the rest over.

Wentworth said the monthly fees should decline beginning in June and July, when the figures reflect a more "apples to apples" comparison of the casino business. DRA officials say it probably would be the end of 2008 before the Diamond Jo is fully reimbursed the accrued cash it is owed.

But a lot depends on the marketplace and what the riverboat casino decides to do.

After 2008, the "head tax" will be discontinued and the Diamond Jo will be required to pay 3 percent of its adjusted gross revenue to the DRA. That's about $1 million more than it pays in the tax. Should the Diamond Jo convert to a bigger barge, the payment rises to 41/2 percent of adjusted gross revenue.

The accrued impact fee eventually would be drawn from those payments.

The operating agreement also requires the DRA to pick up $250,000 in annual rent payments the Diamond Jo makes to the city, beginning in 2009. If the riverboat casino expands, the payment rises to $500,000.

Wentworth said the agreement was brokered on tradeoffs, and the racing association is expected to come out ahead under the terms of the deal.

Diamond Jo officials could not be reached for comment Tuesday.