Kan. casino board faces tough decisions

    Awarding contracts for state-owned casinos in Sumner and Cherokee counties won’t be easy after the state review board received a wealth of information about applicants, the board’s chairman said Friday.
    “It’s going to be a balancing act with a number of a factors. There are advantages and disadvantages with each proposal and we’ll have to weigh those,” said Matt All, chairman of the seven-member Lottery Gaming Facility Review Board.
    The board spent two days hearing from their consultants and the applicants. The board will finish its work on Aug. 21 and vote Aug. 22 on who gets the single 15-year contract in each county.
    In Sumner County, the applicants are Harrah’s Entertainment Inc., Marvel Gaming and Penn National Gaming Inc. Penn is the only applicant in Cherokee County.
    “The bottom line is: What do the financial numbers say about their proposals and what risks would we take going with one or the other?” All said.
    The board faces the same issues Sept. 2-3, when it considers four applicants for Wyandotte County and two for Ford County. It will award those contracts on Sept. 18-19.
    The successful applicants also must pass a Kansas Racing and Gaming Commission background check, which could take a couple of months.
    The expanded gambling law enacted last year requires casino managers to make a minimum $225 million investment in all areas except Ford County, where its $50 million. Penn would spend $225 million in Cherokee County, but all applicants in Sumner would spend far more than that.
    “We want to make sure the developers can follow through on their promises,” All said. “Those promises only are as good as the dollars behind them.”
    The state hopes to get $200 million a year from its share of gambling proceeds. The law requires the board to consider which applicant will bring the state the most revenue and do the best job to promote tourism. But it also must consider what will be in the “best interest of the state,” which All said is hard to define.
    “There is no way to quantify that. You just have to use your judgment,” he said.
    For two days, the board heard about revenue estimates from its consultants and from the applicants.
    The consultants estimated Harrah’s would generate the most revenue at its Mulvane location near Wichita, followed by Marvel and Penn, both near Wellington. The consultants’ projections were significantly lower than the developers’ numbers, which All attributed to differences of professional opinions.
    The board also heard about such things as debt-to-equity ratios, the ability to pay off debt, cash flow, borrowing money in the current economy, performance records and amenities each would offer, such as luxury hotels, restaurants, bars, golf courses and retail stores.
    For instance, consultants noted Harrah’s is the world’s largest casino company, with some 50 facilities, and has a good track record. But it also has some $25 billion in debt.
    Charles Atwood, vice chairman of the Harrah’s board, said that’s nothing to worry about.
    “We have the most debt, the most assets, the most cash. We’re just big, and all of our numbers are big,” Atwood said. “They shouldn’t worry about debt because we can pay it.”
    The consultants noted Marvel is a new company that includes members of the Binion family in Las Vegas who have been in the casino business there, but it doesn’t operate any other casinos.
    Roger Wagner, Marvel president and chief executive officer, called that a plus. He also said Marvel also would generate more money for the state in the long run.
    “We don’t have any other casinos to drag down the balance sheet. We’re already in a good financial position,” he said. “It’s our only project, and we’re going to be here to do it.”
    Penn is trying to sell the board on the idea of picking it for Sumner and Cherokee counties, creating what it calls a “southern strategy” to offset Oklahoma tribal casinos.
    Penn says that if it doesn’t get a Sumner County contract, it may not move forward in Cherokee County, although that’s a decision to be made by its board of directors.
    One reason Penn is rethinking Cherokee County is because the Quapaw Nation earlier this month opened a nearby tribal casino in Oklahoma, which cuts into Penn’s market.
    Penn said owning casinos in both counties would generate an additional $16.5 million in revenue annually.
    “Common ownership results in greater benefits than just adding the two,” said Penn spokesman Eric Schippers.
    He said that’s because Penn would have a wider market for advertising and could attract more customers.
    ———
    On the Net:
    Kansas Lottery: http://www.kslottery.com
    Kansas Racing and Gaming Commission: http://www.ksracing.org