This editorial appeared in The Des Moines Register on May 22, 2016. The Iowa Freedom of Information Council shares the Register’s concern over the secrecy that Prairie Meadows Racetrack and Casino has thrown up over the Internal Revenue Service’s objections to Prairie Meadows’ status as a nonprofit organization.
In justifying its status as a tax-exempt, nonprofit organization, Prairie Meadows Racetrack and Casino has for years told the Internal Revenue Service that it is “operated exclusively for the promotion of social welfare.”
And for years, the IRS has accepted that line of reasoning. Now, however, the federal agency has sent a letter to Prairie Meadows arguing that the Altoona casino is run more like a commercial enterprise than a social welfare organization, and its tax-exempt status is in jeopardy.
It’s not clear how the IRS reached that conclusion. Is it the 2,000 slot machines? The betting on horses? The fact that it competes for business in an industry that includes heavily taxed casinos?
That’s anyone’s guess. Casino officials aren’t talking. They won’t release the IRS letter or the audit on which it was based.
So the public, in whose interest Prairie Meadows claims to be acting, has no idea who is at fault or how best to proceed.
Of course, the people who run the casino and those who depend on it for revenue aren’t shy about detailing the potential impact of the IRS decision.
The city of Des Moines says it could be forced to raise property taxes if it were to lose the $6 million it collects each year for street and bridge repairs. Polk County could lose $16 million in annual revenue. Local nonprofits could lose millions in grants doled out each year by the casino.
Clearly, the IRS action could have far-reaching, billion-dollar consequences. With so much at stake, you’d think Prairie Meadows officials would be going out of their way to keep the public fully informed.
Unfortunately, that’s not the case. Top officials there are largely unresponsive to requests for information, and have been for years.
There’s a certain irony here that needs to be recognized: While attempting to persuade the IRS and others that it shouldn’t be treated like a private, for-profit enterprise, Prairie Meadows is behaving like a private, for-profit enterprise.
In late March, the Prairie Meadows board of directors met behind closed doors to discuss the IRS audit of the organization. Another meeting was held in early April, and again, the public was shut out of the discussion.
In closing the two meetings, the board cited a law that allows for closed meetings only to discuss legal strategy in cases where litigation is “imminent.”
But Prairie Meadows CEO Gary Palmer later said the board didn’t discuss legal strategy, as the law requires, and that litigation was not imminent at the time, which the law also requires.
He said the staff simply wanted to keep the board informed about the audit but “really didn’t want that out in the public.”
Now the casino is refusing to make public the IRS letter and audit, at least until the board can meet and talk it over — in closed session, no doubt.
All of this is made possible by Iowa’s so-called Open Records Law, which is now riddled with so many exemptions — 67 of them and counting — as to render it all but useless.
The law treats Prairie Meadows as a governmental body whose records are open to public inspection only during those periods when its “facilities or indebtedness are supported in whole or in part with property tax revenue.”
Prairie Meadows, with annual revenue of more than $2 billion, doesn’t currently rely on taxpayers for support. But when it opened in 1989, it was financed by Polk County. Taxpayers also supported the operation when it went bankrupt in 1991.
While Prairie Meadows eventually repaid its $100 million debt, that was possible only because of a shift in public policy represented by the Iowa Legislature’s authorization of slot machines in the casino. In essence, the state bailed out Prairie Meadows by legalizing an enormous expansion of its gambling operations.
Casino officials say it appears the IRS believes the operation is now run more like a commercial enterprise than a nonprofit, tax-exempt entity. They say that executive compensation — such as Palmer’s $710,000 annual pay package — isn’t even referenced in the audit, but they acknowledge that the IRS recently posed several questions about executive pay.
Prairie Meadows has hired attorney Marcus Owens, the former head of the IRS’ nonprofits division, to handle its appeal of the ruling, but the dispute could take years to resolve.
In the meantime, Palmer and the board of directors at Prairie Meadows need to rethink their stance on public access to information.
After all, if they ever hope to persuade the IRS that this billion-dollar gambling operation exists for the welfare and betterment of the public, they’ll first need to demonstrate some level of public accountability.