Win or lose, Polk County in awkward position as it fights Prairie Meadows tax challenge

In an odd legal fight, Polk County leaders are opposing cutting the government's own tax burden.

The county, which owns the land and buildings where Prairie Meadows Racetrack and Casino operates in Altoona, is disputing an appeal from the casino to lower its property appraisal. In a review of the property last year, the county assessor's office valued Prairie Meadows around $181 million, a $75 million increase from the prior assessment.

That would increase the property's annual tax bill about two-thirds to $6 million, Prairie Meadows CEO Gary Palmer told the Des Moines Register. The casino's lawyers have argued that the county's assessment is "significantly" too high, and a Polk County District Court judge has scheduled a trial on the challenge for June 17.

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If Polk County wins, Polk County stands to lose.

As part of the casino's current, five-year lease agreement starting in 2019, the county supervisors agreed to cover the first $4.5 million in annual property tax payments. Last year, the county covered the entire $3.6 million bill.

If the judge upholds the county's increased assessment, Prairie Meadows would have to pay about $1.5 million. But the county would have to pay the full $4.5 million it pledged, a $900,000 increase.

In addition to arguing that the most recent appraisal was too high, the casino's lawyers told a judge in a June 2023 legal filing that the property should actually be exempt from taxes. The lawyers pointed to state laws that say publicly owned land used for athletic events, conventions and charitable purposes is not subject to property taxes.

Prairie Meadows is a nonprofit and donates to local social, cultural and charitable organizations. In 2022, the casino issued $27 million in grants, according to tax filings. The property also hosts meetings and conventions.

Polk County must stand by assessor, county administrator says

The court case puts Polk County officials in an odd position. If a judge rules that the property is exempt from taxes, the county will save the tax payments it currently makes to Altoona, the Southeast Polk Community School District, Des Moines Area Community College and Broadlawns Medical Center.

In an interview with the Register on Wednesday, Polk County Administrator John Norris rejected the idea of intentionally losing the case. He said county leaders need to support appraisals made by the county assessor's office.

"We're not going to interject ourselves to a decision about market value," Norris said. "If we did, we're politicizing market value. That is something government shouldn't do."

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He added: "(Losing) would save us money. But it reduces revenue for us and everyone else."

Norris said the relationship between the county and Prairie Meadows is a "one-off," an odd pairing that doesn't exist anywhere else in the region.

The county took over the racetrack in 1993, when the supervisors issued bonds to pay off Prairie Meadows' debts after the nonprofit Racing Association of Central Iowa filed for bankruptcy two years after the track's opening. The county leases the property to the casino operator, receiving rent and a percentage of revenue.

At times, the arrangement has made for strange bedfellows. Casino board members, county supervisors and state regulators have argued about how much control the county can exert.

In the early years of the agreement, the county received a larger share of casino revenues. County supervisors doled out some of that money to local school districts, giving the county influence over education officials.

In 1997, Altoona and Southeast Polk leaders exerted some control by lobbying the Legislature to pass a bill that forced the county to pay property taxes on the casino property.

"To my knowledge, (that law) has not been tested," said Tom Flynn, the casino's longtime attorney. "If we wanted to hang our hat and make that the primary point of our appeal, it may get tested."

The county attorney's office recused itself from the case, and the private firm of Dickinson, Bradshaw, Fowler & Hagen is representing the government.

Prairie Meadows says lease terms cut into casino and track's value

Under the current lease, Prairie Meadows pays $15.9 million in annual rent. The casino also gives the county 5% of its first $225 million of annual adjusted gross receipts, as well as 1% of revenue above that mark. In 2022, that came out to about $11.9 million.

Of the property taxes Polk County paid on the Prairie Meadows property in the most recent year, $1.4 million went to Altoona, $1.3 million went to the Southeast Polk school district, $205,000 went to Broadlawns and $58,000 went to DMACC.

Polk County retained about $538,000 of those taxes. Smaller amounts went to Des Moines Area Regional Transit, the county assessor's office and the local Iowa State University Extension and Outreach Office.

The casino received the county's latest appraisal last April. Prairie Meadows officials appealed the $75 million increase to the Polk County Board of Review, arguing that the property value should not have increased at all.

Flynn said Prairie Meadows' lease and its obligation to give a cut of revenue to the county deflates the property's value. The Board of Review agreed last June to cut the valuation by about $240,000.

The casino, seeking a deeper cut in the property's valuation, appealed the case to Polk County District Court last July.

"Polk County's appraiser, we're quite certain, did not take the lease into account," Flynn said.

Polk County backed off previous attempt at assessment hike

The casino also appealed in 2019, when the county assessor increased the appraisal of the Prairie Meadows property to about $147 million, up from about $105 million. As with the current assessment, the casino's attorneys argued that Prairie Meadows' property should be tax exempt.

However, the casino dismissed the case in April 2021 before a scheduled trial. Flynn said the county had agreed to decrease the valuation to its prior level without a court hearing.

The county made that decision one year into the COVID-19 pandemic, when many people were staying home as much as possible, a damper on the casino business . Norris said the county assessor also agreed at the time to decrease the assessed value of many hospitality businesses, like hotels and restaurants, due to plummeting revenue.

Asked whether Polk County would benefit by supporting Prairie Meadows' argument that the land should be tax exempt, Flynn declined to speculate.

"If the county wants to pay taxes, the county can pay taxes," he said. "If the taxes stay under $4.5 million (the amount the county has agreed to pay each year), it's really academic, as far as we're concerned."

Palmer, the casino's CEO, declined to say whether the county would benefit from a Prairie Meadows court victory. He said the casino would rather issue that money to charities than give it to the government.

He added that he simply thinks the current appraisal is too high.

"We would not be very good businessmen if we just said, ‘Oh. OK. We'll send you more money because you said so,'" he told the Register.

Tyler Jett is an investigative reporter for the Des Moines Register. Reach him at tjett@registermedia.com , 515-284-8215, or on Twitter at @LetsJett. He also accepts encrypted messages at tjett@proton.me.

This article originally appeared on Des Moines Register: Win or lose, Polk County in awkward position as it fights Prairie Meadows tax challenge