Polk County, Iowa, hopes slot machines will help pay debt on troubled racetrack.

CHICAGO -- Polk County, Iowa, is moving ahead with plans to expand gaming at its bond-financed Prairie Meadows racetrack in order to produce more money for debt service, a county official said this week.

Mark Stevens, assistant county manager, said the expansion could cost as much as $20 million and could be financed through the issuance of five-year notes or long-term revenue bonds by the county or by the Racing Association of Central Iowa, which is operating the track.

The county wants to install slot machines at the troubled racetrack to increase revenues to pay debt service on $38.8 million of general obligation bonds the county issued last year to refinance revenue bonds that were sold to build the track.

Annual debt service payments total about $3.3 million, while the racetrack is expected to generate only $500,000 in revenues this year, according to Stevens. He said that by adding slot machines at the track, the county hopes to raise enough revenue to cover payments on the GO bonds and avoid using property tax revenues to pay off the bonds.

The racetrack's consultant, Deloitte & Touche, has estimated that 1,000 slot machines would raise $2.08 million in 1995, increasing to $4.55 million in. 1998, according to a story in the Des Moines Register.

While Stevens would not comment on the report, he said the county believes that slot machines will produce enough money to cover debt service payments on existing and future debt.

"The net income before debt is quite sufficient to cover all current and anticipated debt for this project," he said.

The county originally sold $40 million of revenue bonds in 1984 to build the track. In 1987, the bonds were remarketed under a lease purchase agreement. Four years later, the track went bankrupt after the county declined to appropriate a $5.5 million subsidy.

The bankruptcy allowed the county to issue GO bonds in June 1993 to redeem the outstanding bonds and take control of the track from the racing association, which had owned and operated the track under the lease purchase agreement. The GO bonds are insured by Financial Guaranty Insurance Co.

Stevens said the county has asked nine or 10 investment banking firms to present proposals on how the county can finance the track's expansion to accommodate slot machines. A financing plan and an investment banking firm should be chosen for the project early next month, he said.

The county hopes to have the gaming facility operating by April 1995, Stevens said.

In May, Polk County residents voted in favor of introducing slot machines at the track. In November, voters will be asked about allowing riverboat gambling in the county.

Stevens said the county has been approached by some riverboat gaming companies that have offered money or guarantees on the racetrack bonds in return for exclusive licenses in the county. He said the county is concerned about the impact of riverboat gambling on the racetrack's revenues.

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