High court hears gaming arguments

Kansas Supreme Court justices lost little time Wednesday getting to the key question of whether what the Legislature calls state-owned and state-operated casinos really are that.
    The state’s highest court will decide whether last year’s expanded gambling law is constitutional — upholding Shawnee County District Judge Charles Andrews’ ruling in February — or whether it should be struck down.
    Millions of dollars in profits for casino managers and revenue for the state are in the balance. The state hopes to eventually collect some $200 million a year from the new gambling.
    The court’s next scheduled date for issuing opinions is June 27.
    If the court says the law is constitutional, plans for casinos in Wyandotte, Cherokee, Sumner and Ford counties and slot machines at racetracks in Kansas City and Frontenac can move forward. If not, it could end the fledgling resort casino industry in Kansas.
    The law creates casinos that are owned and operated by the Kansas Lottery. The state Constitution allows a state-owned and operated lottery, and the Supreme Court said in 1994 the term “lottery” is broad enough to include slot machines and other casino games.
    Under the law, the Lottery contracts with developers to build and operate casinos, but it makes clear the facilities are state-owned and operated. Twelve other states have nontribal resort casinos, but only Kansas would have state-owned facilities, according to the American Gaming Association.
    Arguing against the law was Deputy Attorney General Michael Leitch. Overland Park attorney Dan Biles, representing the Lottery, said it should be upheld.
    “The terms of this law are constitutional on its face and it should be viewed that way,” Biles said.
    Gov. Kathleen Sebelius, believing the law is constitutional, asked the attorney general’s office to challenge it to get a ruling from the state’s highest court. She said developers would be reluctant to invest unless the law was upheld.
    Leitch said the Lottery would regulate and control — but not own and operate — the casinos. He said the real ownership lies with the developers who buy the land and construct the buildings.
    “Why isn’t this owned and operated by the state? You envision state employees at the cashier stand, as cocktail waitresses? Serving the customers, they have to be employees of the state? Is that your contention,” asked Justice Robert E. Davis.
    Leitch replied that he sees state employees handling important functions for the games but, “I certainly don’t envision state employees as cocktail waitresses.”
    Justice Lee A. Johnson wondered what effect a ruling might have on other areas of the law such as those dealing with industrial revenue bonds, noting, “There are other instances where ownership is not as dictionary literal as you are arguing.”
    And Justice Lawton Nuss said, “You’re going to have to convince me that the ownership right, the control right, was transferred outside the state because that is where it initially resided, did it not?”
    Leitch replied that under the Constitution, the Legislature provides for a state-owned and operated Lottery and, “Ownership has to be acquired in some way, not merely by legislative decree.”
    But Biles said the Lottery owns the games and has control over the operation of the casinos.
    “The state controls what games are going to be played. The state determines the rules and the odds,” Biles said. “This is a creature of the state. The Legislature decided to create a lottery enterprise.”
    The question surrounding the law’s legitimacy hasn’t kept the Lottery from moving forward.
    On May 5, the Lottery Commission approved its first contract with a developer. It unanimously approved a 15-year agreement with Penn National Gaming Inc., the only applicant to operate a hotel-and-casino complex in Cherokee County.
    It forwarded the contract to the Kansas Lottery Gaming Facility Review Board, which will make the final selections for the four casino developers.
    A law enacted last year requires developers in all but Ford County to invest at least $225 million plus pay a $25 million privilege fee. In Ford County, the investment is $50 million with a $5 million privilege fee because it’s a smaller market.
    The commission has been negotiating with the other 11 applicants — five in Wyandotte County, four in Sumner County and two in Ford County. It meets next week to decide which contracts to accept and can endorse as many as it wants.