Prairie Meadows, County Agree on Eight-Year Lease
Updated: Thursday, May 23, 2002 9:25 AM
by Dan Johnson
Posted: Thursday, May 23, 2002 9:25 AM
After more false endings than "Die Hard," the Prairie Meadows lease agreement between Polk County and the Racing Association of Central Iowa is finally official. RACI, which operates Prairie Meadows, on May 22 unanimously approved an amendment that extends a five-year lease with Polk County by three years, to 2010.
The county, which owns the Prairie Meadows property, would receive $147 million during the next eight years. It's the third version of the lease, which has been regularly tweaked during the past two months.
"It's finally final, at least as far as I'm concerned," RACI chairman Jim Rasmussen said.
The first five years of the lease, approved earlier in May by the county and track boards, call for the county to receive $15.6 million in rent and $4.4 million in profits each year. The amendment approved by the county and RACI calls for $15.6 million in rent, with no additional profits for the county in years six through eight. The county has also earmarked most of its rent to go toward building the $212 million Iowa Events Center in order to get a $50 million grant from Vision Iowa.
If Thoroughbred and Quarter Horse purses rise above $15 million per year at any time during the eight years, an amount equal to that increase will be paid to Polk County starting in 2006.
Prairie Meadows is also negotiating a purse agreement for harness racing, but that amount will not be part of the $15 million ceiling for Thoroughbred and Quarter Horse purses. Prairie Meadows will pay $1.3 million for Standardbred purses this year.
Now the question becomes whether Prairie Meadows will generate enough money to fulfill its obligations from 2003 to 2010. The track is counting on business to grow to meet all of its obligations. Ron Morden, Prairie Meadows' vice-president of finance, said the growth is not a sure bet because the state tax rises by 2 percentage points per year through 2004.
"With the increasing tax rate, $20 million will take a fair amount of business," Morden said. "The tax will take an additional $3 million next year and $6 million in 2004. We're only able to give $18 million (for the county) this year.
The tax increase will be offset in 2003 by a $5-million drop in Thoroughbred and Quarter Horse purses.
When asked how confident he was that Prairie Meadows could meet all its obligations, Rasmussen said "100%."
"It's a little safer the last three years," he said. "I'm very confident that we can perform and meet the commitments."
Ted Lodden, who represents the Polk Des Moines Taxpayers Association on the RACI board, was more wary. He said he remains concerned that Prairie Meadows is guaranteeing too much money to the county and purses for the first five years.
"The taxpayer's association still feels that the right way to go about this would be to have base amounts for the horsemen and base amounts for Polk County," Lodden said. "Then, whatever net revenue beyond that would be shared on a percentage basis.
"I find it very difficult to think that in the past couple years, where we've been getting a half-percent increase, that we're going to get a 2.5% increase. What changed that was the casino opening south of here (in Osceola)."
For now, RACI members said they were glad the lease has been finalized well advance of the November referendum that will determine whether the track can continue to offer slot-machine gaming. When the last lease was negotiated in 1997, the track and county clashed all year, and Prairie Meadows nearly had its license revoked by the Iowa Racing and Gaming commission.
"It was a horrible mess in '97," RACI member Shirley Kleywegt said. "This is done enough in advance of the referendum that there won't be this constant bickering back and forth about contracts with the horsemen and county."
The May 22 agreement also allows Prairie Meadows to start campaigning for passage of the referendum. The track in June will start an ad campaign that will focus on the money that has been returned to the community.
"We needed to get this behind us," said Daryl Lewis, Prairie Meadows' director of community relations. "We can have a positive message saying, 'Here's what we've done up to now, and here's what our plans are for the next eight years with the county,' which we couldn't say before."
A Des Moines Register poll reported that 65% of likely Polk County voters favored a plan to continue gaming at the racetrack, and 60% supported continuation of horse racing.
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