By Roger McKinney

rmckinney@joplinglobe.com

COLUMBUS, Kan. — The decision for a contract for a state-owned casino in Sumner County has taken on additional importance for residents of Cherokee County who are hoping a casino in that county will result in economic benefits.

The Kansas Lottery Gaming Facility Review Board will make its decision on contracts in both counties when it meets Aug. 21 and 22. Penn National Gaming had the only proposal in Cherokee County. When the review board met July 9 in Cherokee County, Steve Snyder, Penn National’s senior vice president for corporate development, said the company wouldn’t commit to building a casino in Cherokee County unless it also gets the Sumner County contract.

“We are committed in a southern Kansas strategy” involving both counties, Snyder said.

But Penn National has competition for its contract in Sumner County, from casino giant Harrah’s Entertainment and start-up Marvel Gaming.

Unexpected competition

The casino for the Quapaw Tribe’s $301 million Downstream Casino Resort opened July 5 and had 109,000 visitors in its first week. It’s located off Interstate 44 where Oklahoma, Kansas and Missouri meet. A 222-room hotel is scheduled to open in the fall.

Penn National has proposed building its Hollywood Casino in Cherokee County just north of the tribal casino. Competition from the casino project of the Quapaw Tribe is the reason Penn National officials give for scaling back and phasing in its Cherokee County project, and the reason for switching to a “southern strategy.”

Penn National initially applied with the state to build a $295 million casino and hotel, but later decided to invest $125 million in a casino initially and phase in investments totaling $100 million over the next 12 years.

The Quapaw Tribe of Oklahoma announced its plan for a casino and hotel on May 14, 2007, a few weeks before Cherokee County conducted a required referendum election June 5 on a state-owned casino. At that time, the tribal project’s price tag was $200 million.

Eric Schippers, public affairs vice president with Penn National, said that even after the tribe made the announcement, his company didn’t think the tribe could obtain financing for its project. He said that in today’s economic environment, the deal would not have been possible.

Schippers said legal questions about the tribe’s project remain.

Cherokee County has filed an amended complaint in U.S. District Court in the District of Columbia against the U.S. Interior Department. It alleges that the federal agency failed to act to comply with the Indian Gaming Regulatory Act by requiring that Indian gambling take place only on Indian lands. It seeks an injunction requiring the National Indian Gaming Commission to notify the Quapaw Tribe that the land on which its casino was built is ineligible for gambling under federal law.

The fees for David Cooper, Cherokee County’s attorney for casino issues, are being paid by Penn National.

Cooper said at the review board meeting that if Penn National doesn’t build a casino in Cherokee County, the county could take legal action against Penn National.

Competing proposals

In Sumner County, Penn National is proposing investing $340 million in a Hollywood Casino near Wellington. The project would include a casino, a 350-room resort hotel, restaurants, a conference center, and a health and beauty spa. It would hire 1,100 employees.

Marvel Gaming is proposing spending $368 million, also near Wellington. That project would include a casino, 16-story hotel with 304 rooms, restaurants, an entertainment and convention center, and a health club. Employment would total 1,765 part-time and full-time workers.

Harrah’s Entertainment is proposing a $490 million investment at Mulvane. It would have a casino, a 175-room hotel, restaurants, an event center, an outdoor amphitheater and a retail store. It would hire 1,187 people.

The most recent study by Christiansen Capital Advisors found that a destination casino near Wellington could generate annual gross gambling revenues of $166.5 million, while a Mulvane location could generate annual gambling revenues of $213.5 million.

Representatives of Harrah’s Entertainment and of Marvel Gaming were reluctant to publicly criticize Penn National’s southern strategy.

“Although we cannot comment specifically on competitors’ practices, we can tell you that Sumner Resorts Harrah’s Kansas is excited about the opportunity in Sumner County,” wrote Jacqueline Peterson, corporate spokeswoman for Harrah’s, in an e-mail response to a question about Penn National’s strategy. “We do not need two casinos in Kansas in order to be successful and offer more than half-a-billion dollar investment to the state. We have proven that we have the best plan by every measure.”

Roger Wagner, president of Marvel Gaming, said he thinks Penn National’s decision in Kansas was influenced by the company’s new president and chief executive officer, Tim Wilmott.

“He’s a very astute guy,” Wagner said of Wilmott. “He decided with the Downstream Casino, the Cherokee County deal wasn’t going to pencil out.”

Wagner said he thinks Wilmott decided that tying the Cherokee and Sumner county casinos together was the only financially viable option.

“I don’t see anybody out there who’s in a conniving mode,” Wagner said.

He said Marvel has the best proposal in Sumner County. Marvel Gaming was formed specifically for the project.

“We’re a small, upstart company, and all of our focus is going to be on Kansas,” Wagner said. “Our owners will be present almost 24/7, while our competitors would have corporate jets flying over.”

He noted that the Marvel proposal projects the largest work force of any of the three.

Making the case

Schippers made his case for why he thinks Penn National is the best bet in Sumner County.

“We’ll actually attract more patrons from out of state with our higher number of hotel rooms,” he said. “It’s a gateway to downtown Wellington and will serve as an economic engine for additional development.”

Though Penn National’s proposed investment in Sumner County is the smallest of the three, Schippers said its tentative contract would give more money back to the state and to Sumner and Sedgwick counties than would its competitors’ proposals. Penn National’s plan would provide 30 percent of annual gambling revenues up to $250 million to the state, Sumner and Sedgwick counties, and a problem-gambling fund. That would increase to 32 percent if gambling revenues are $250 million to $300 million. If gambling revenues exceed $300 million, the amount would increase to 37 percent.

Harrah’s tentative contract would give the state, Sumner and Sedgwick counties, the city of Mulvane and the problem-gambling fund 27 percent of gambling revenues up to $300 million. Harrah’s top rate of revenue sharing is 35 percent for revenues above $500 million.

Marvel Gaming’s tentative contract would provide 27 percent of casino revenues up to $250 million to state and local entities; 32 percent of revenues of $250 million to $300 million; and 37 percent of revenues above $300 million

Schippers returned to the southern strategy when discussing the Sumner County proposal.

“Our proposal to operate casinos in both Sumner and Cherokee counties would result in an approximately $600 million investment in the state, and would maximize revenues for the state and local communities in which they’re located,” Schippers said. “If combined, the facilities would generate more revenue for the state than any competing proposal. The two facilities would be able to run coordinated proposals. Two Hollywood-themed facilities would create brand loyalty and a critical mass to compete against the tribal casinos.”

Schippers said he realizes that the Lottery Gaming Facility Review Board must make its decision based on the merits of the individual proposals, but said he hopes the board also considers Penn’s southern strategy idea.

Mike Deines, spokesman for the Kansas Racing and Gaming Commission, said members of the review board must remain neutral until they make a decision, and they cannot discuss individual proposals. He said it would be up to the board to determine if Penn National or one of the competing companies has the best proposal.





Privilege fee



Penn National Gaming, Marvel Gaming and Harrah’s Entertainment each has paid the state a nonrefundable $25 million privilege fee to be considered for building and managing a state-owned casino in Sumner County. Penn National also paid a $25 million fee in connection with its Cherokee County proposal.