River Towns Take a Risky Gamble

By Jill Smolowe

Mark Twain and Charlie Chaplin look-alikes, trailed by a freckle-faced Huck Finn, greet passengers as they come up the gangplank of the Mississippi River's newest paddle-wheeler, Emerald Lady. A Dixieland band lays down tune after tune, while a jokester on stilts tosses colorful doubloons. Waitresses with feathers jutting from their hair sashay through wood-paneled rooms, offering cocktails. As the riverboat pulls out of Fort Madison, Iowa, and steams up and down the Mississippi on a three-hour excursion into the 19th century, it is easy to get swept up in the hoopla. So easy that one can almost forget what this anachronistic cruise is really about: money and risk.

With the launch of the Emerald Lady last month, Fort Madison became the fourth of Iowa's Mississippi River towns to take a chance on riverboat gambling as a lure for tourism and a cure for economic woes. The others launched floating casinos on April Fools' Day. Now all are praying the joke won't be on them. Iowa's notion of melding nostalgic river travel with America's gambling addiction is already stoking competition up and down the river. Among the potential ventures:

-- Illinois has approved 10 riverboat gambling licenses, good for two vessels each. The first boat could cruise from Alton this summer. Unlike Iowa, where passengers are limited by law to $200 in losses per cruise, those in Illinois will be able to place unlimited bets.

-- Mississippi has also approved unlimited betting on the water but has yet to issue any operating licenses.

-- Missouri will put riverboat gambling to a state vote. As proposed, passengers would have a $500 cap on their daily losses.

-- Louisiana's legislature is considering a bill that would authorize up to 15 paddle-wheel gambling boats. Governor Buddy Roemer supports the idea.

-- Indiana, Pennsylvania and Wisconsin are also considering variations on the same risky business for their rivers.

Why are so many states willing to wager on something as chancy as novelty gambling? In a word: desperation. Towns on the northern reaches of the Mississippi were battered hard in the Rust Belt shake-out of the early '80s, and the oil bust has left Louisiana's coffers depleted. Hit again by the current recession, local governments are eager for any kind of development that will attract tourists and restore sagging tax rolls. Legislators are keenly aware that gambling is among the country's fastest-growing industries -- expected to be worth $278 billion this year alone -- and they want a piece of that action.

& The romantic aura of the mighty Mississippi provides additional appeal. By harking back to the time of frock-coated dandies and hoopskirted belles, the modern riverboats evoke memories of an era at once more daring and less threatening. "A riverboat is nostalgia, Americana," says John Connelly, owner of the gaudy President, a 297-ft. five-decker that docks in Davenport, Iowa. "A gambling casino is something completely different."

So far, Iowa's boats, with low betting limits and small capacities (Emerald Lady can comfortably accommodate only 700 passengers; President, 1,600), pose little threat to Las Vegas and Atlantic City. But as the new industry expands, it could change America's recreation and travel patterns, drawing tourists and gamblers away from the tawdry glitz of traditional gambling towns. To prevent the seediness and crime that often accompany casino gambling, Iowa legislators have capped wagers at $5, and Fort Madison's planning and zoning board is drafting a new ordinance to ban neon signs. "This is a family affair," says Dick Canella, a member of the Iowa Racing and Gaming Commission.

But for how long? Though the paddle wheels have barely started churning, a riverboat race has begun. Illinois is trumpeting the enticements of unlimited wagering and dismissing its Iowa competition as penny-ante stuff for beginners. "The bettor is the loser when you have a limit," says Illinois state senator Denny Jacobs. "There's no way for him to win back his money in a four-hour cruise."

The competitive hype points to a harsh reality: as surely as a flush beats a straight, some of the riverboat ventures are destined to fold. "I am concerned about saturation if every state gets it," admits Bernard Goldstein, owner of Emerald Lady and Diamond Lady, which docks in Bettendorf, Iowa. Michael Jones, director of the Illinois state lottery through the mid-1980s, warns that the potential audience for the novelty cruises may be smaller than boosters imagine. For one thing, he notes, lottery players and higher-stakes gamblers are different animals. While lottery enthusiasts may sample riverboat gambling once or twice, they are unlikely to be repeat clients.

Depressed towns like Fort Madison (pop. 11,200), the original home of the Sheaffer Pen Co., are nevertheless willing to gamble on their future. The town has already known its share of heartbreak. In 1976 lightning struck the local J.C. Penney outlet and burned it down; it was never rebuilt. Through the 1980s, the town's largest employers -- Sheaffer and Chevron -- staged devastating layoffs. Although citizens liked to boast that Fort Madison was "a place where you can raise kids," many drifted away; since 1987 the town's tax base has dwindled 20%. To attract Goldstein and his $10 million Emerald Lady, Fort Madison floated a $2.2 million bond issue that financed a waterside pavilion, a walkway and parking lots. In return, city fathers expect annual revenues of as much as $300,000 -- if the venture succeeds.

So far, so good. More than 500 workers -- mostly waitresses, croupiers and maintenance staff -- were employed for Emerald Lady's launching, and Fort Madison has benefited from the 40% rise in tourist information requests statewide. Local officials trust that their investment will be covered by the ship's dock fees, a 0.5% tax on gross gambling receipts and a 50 cents charge the town levies on each passenger. "The boat is breathing new life and enthusiasm into the town," says Father Robert McAleer of St. Mary's Roman Catholic Church. "There's exuberance over something new."

Yet there are those who doubt the town will be able to meet its annual interest payments of $240,000 on the bond and fear Fort Madison could one day be jilted by the Emerald Lady. "The fact that Illinois has high-stakes gambling could leave us high and dry," says John Hansman, a local historian. "The boat could move to a lucrative market where there isn't a limit on bets."

To avert that danger, should Iowa lift its betting limits? Will the next step for Illinois be casinos on land, as one Chicago-area mayor has already proposed? Will Iowa then have to follow suit? Eventually, the competition to provide more forms of gambling could spawn the very type of blight the floating casinos were designed to prevent: crime, prostitution and sex shops.

The charm of the paddle-wheel ventures also disguises the fact that they are another major step in the American gambling addiction. Every state, save Utah and Hawaii, has legalized lotteries or some other form of betting. Given the myriad opportunities to blow the rent check on games of chance, do states want to offer taxpayers further encouragement to speculate idly rather than invest soundly? "We have a gaming mentality," argues state senator Jacobs. "We're bringing it out of the closet and into the public eye, where it can be taxed." But states are doing more than catering to an existing demand. "This country has been thrown into a love affair with gambling because the states are pushing it hard," argues Durand Jacobs, a psychologist and gambling- industry analyst.

I. Nelson Rose, a law professor at California's Whittier College and an expert on gambling law, calls the riverboat fever "casinos by subterfuge." With betting camouflaged as tourism, more and more people will join in, only to find that it can have painful personal and social costs. "Gambling begets gambling," he says. Eventually, he predicts, wagering will decline, but only after it has become so pervasive and so riddled with corruption that Americans revolt against the trend.

For citizens of small towns like Fort Madison, there is no sign of revolt in sight. They are betting that after the initial excitement dies down, there will still be a demand for their new wares. And they are wagering that when the tourists descend, the influx will not grossly alter the character of their towns. The roll of the dice is enticing. But as any savvy player at a gaming table knows, the odds in the long run are never as good as the initial excitement.

With reporting by Ricardo Chavira/Washington and Tom Curry/Fort Madison