New casino comes to Grand Falls

By Peter Harriman
Sioux Falls, South Dakota (AP) June 2011

The opulent expanse of the Grand Falls Casino Resort near Larchwood, Iowa, crackled with activity on a recent afternoon. Tilers and carpenters put finishing touches on spa pools and on trim near the gaming floor.

In what eventually will be meeting rooms, computer terminals filled tabletops as new employees learned operating systems.

Racks of worker uniforms stood in rows in the unlikely parking space of the 1,200-seat event center.

In the steakhouse, employees pretended to be customers as a new waiter practiced.

Hair already was being cut by stylists in the spa.

Bartenders worked their stations at the polished stone of the main beverage oasis, learning a liquor dispensing system and fiddling with the fit of black bow ties on white shirts.

Everything here is shiny and new.

Since the Iowa Racing and Gaming Commission last May allowed Kehl Management to open what will be the state's 18th casino, Grand Falls Casino Resort has been shaping up to potentially have an enormous influence on the region in varying ways.

Begin with its cost, $120 million.

Then add in that it employs 700 people and, when it opens, it will be by far the largest gambling venue in the area. In addition to the 900 slots, the casino will have 24 table games and a poker room with eight tables.

The casino could generate as much as $80 million annually in gaming revenue, according to Chief Operating Officer Joe Massa and an Iowa Racing and Gaming Commission report. It could draw 1 million visitors annually.

The 250,000-square foot casino is the epitome of gaming technology, according to Massa. From televisions built into slot machines “so you can play and not miss the Vikings game,” Massa said, to the air-handling system under the banks of table games that completely exchanges air every three minutes, General Manager Sharon Haselhoff said.

By contrast, the Flandreau Santee Sioux Tribe's Royal River Casino in Flandreau has 250 slot machines, 10 table games, and 300 employees.

Video lottery in all of Minnehaha County consists of about 1,500 machines that account for less than $70 million.

Grand Falls also features three restaurants, a 97-room hotel with luxury accommodations, men's and women's spas, an event center anticipated to host national entertainment acts and a show lounge featuring local and regional acts - and in 2013, a Rees Jones-designed golf course will open.

To irrigate the course, provide fire protection to the casino and resort and to serve as an element of one of the largest geothermal heating and cooling systems in the Midwest, an artificial lake has been built on the 207-acre Grand Falls site.

“There are miles of pipe under that lake,” to manage temperatures in the casino and hotel, Massa said.

Grand Falls gets its potable water from Lyon Sioux Rural Water but it has built its own wastewater treatment plant. To meet its needs for nonpotable water, Grand Falls drilled 680 wells, Haselhoff said.

Food and beverage suppliers in the region stand to benefit from Grand Falls.

“We're going to be buying a lot of food,” Haselhoff said.

In addition to the new jobs it created and the economic activity it will bring to the area, Grand Falls will benefit nonprofit and economic development organizations through charitable grants that are required as a condition of being issued a gaming license in Iowa.

“They will do good around the county. That's a big one,” said Stephan Simons, Lyon County economic development director.

Kehl Management, headed by Dan Kehl, built the Riverside Casino and Golf Resort in Riverside, Iowa, in 2004. His father, Robert Kehl, was among the pioneers in Iowa gaming, going back to riverboat gambling two decades ago.

“Their reputation among gaming facility management in Iowa is very good,” Simons said.

For all it might mean in the region, Massa said he thinks Grand Falls will not have a dramatic negative effect on Royal River. He worked at the Flandreau casino in the early `90s and said the natural markets of the two facilities barely overlap, with Sioux Falls being “at the outer edge” of Royal River's market.

“They have a nice casino,” he said. “It's a different size. It's been there a long time, and they do a good job of taking care of people.”

Massa also figures the modest road outside Grand Falls - South Dakota Highway 42 transitions into Iowa 9 - will suffice. During the week, daily visits will total about 2,000, climbing to 4,500 on the weekend. The two-lane road with a new turn lane into the casino can handle that, Massa said. An exception, however, will be the casino opening “when it will be like the start of the rodeo out there.” For that, he predicted congestion.

One uncertainty still hangs over the Grand Falls project, if barely. Iowa Gov. Terry Branstad has proposed cutting corporate taxes. To offset a potential loss of as much as $190 million to the state budget, he wants to raise casino taxes, from 24 percent now to a maximum 36 percent.

Originally, all gambling revenue would be taxed at that rate. But Branstad amended his plan to step up taxes in three tiers. Revenue below $50 million still would be taxed at 24 percent.

Gaming revenue of $50 million to $75 million would be taxed at 30 percent, and revenue of more than $75 million would face the maximum tax.

“If it had gone to 36 percent, it would have threatened our entire entity, period,” Massa said bluntly. At that rate, Grand Falls would pay an additional $8 million in tax. It could not have met financial performance covenants tied to its $100 million loan, he said.

Wes Ehrecke, Iowa Gaming Association president, called Branstad's proposal “devastating” and said the Iowa gaming community is united in opposition to it.

The Iowa General Assembly still is in session, but Ehrecke and Massa said odds are slim of a casino tax bill passing this year.

“There is no support in either the House or Senate to do anything about increasing our taxes,” Ehrecke said. And House Study Bill 223 is stalled in a House Ways and Means subcommittee. But Branstad spokesman Tim Albrecht insists the bill isn't dead.

“Until they adjourn, the governor's proposal is still on the table. We will continue to work through the legislative process,” he says.

Albrecht added that Grand Falls would be subject to the highest tax rate for a relatively small portion of its projected revenue.

“We believe under the governor's plan that casino would still flourish and prosper due to the graduated rates,” he said.

Even if it doesn't pass this year, the bill could be introduced in a future session.

“Every year when the legislature goes into session, we're concerned about our taxes,” Massa said.

One threat Grand Falls won't face is a competing casino in Sioux Falls.

In 2009, Sen. Gene Abdallah, R-Sioux Falls, and Sen. Minority Leader Scott Heidepriem, D-Sioux Falls, co-sponsored a bill that would have allowed voters to decide whether the state constitution should be amended to allow a casino in Sioux Falls. Their idea was the threat of a competing facility would have tempered the Iowa Racing and Gaming Commission's willingness to approve a Lyon County casino and cooled Kehl Management's desire to build just across the Minnehaha County border.

“I'm really disappointed it failed,” Abdallah said.

“It's going to hurt Sioux Falls. It's going to hurt Flandreau,” he predicts of Grand Falls.

But with Grand Falls about to open, there is little point anymore in trying to stop it with the threat of a Sioux Falls casino, Abdallah said.

“So the answer is `no,' “ he said of reviving the bill he and Heidepriem co-sponsored.

For its part, Grand Falls plans to be a good neighbor, Haselhoff said. Grand Falls officials have joined the Sioux Falls Area Chamber of Commerce, and they envision reaching out to others in the tourism industry.

“On busy days, we will partner with area hotels,” to serve overflow customers, Haselhoff said, and she said a busy casino and resort could be a “win-win” for the entire region's tourism and entertainment sector.

A key Sioux Falls tourism official is taking a more restrained view of its imposing new neighbor just across the state line.

Teri Ellis Schmidt of the Sioux Falls Convention and Visitors Bureau said her organization tailors its marketing of the area's gaming opportunities to groups that request it.

“Some groups are very interested in gambling,” she says. “Some groups have no interest whatsoever.

“If a group is working with us and potentially coming to Sioux Falls and they want to know about gambling, we will tell them about Grand Falls casino just as we will Flandreau. But our job is first and foremost to bring people to Sioux Falls and keep them in Sioux Falls to enjoy the community and leave an economic boost.”