By Roger McKinney
rmckinney@joplinglobe.com
The Kansas Lottery Gaming Facility Review Board will meet Thursday and Friday in Topeka to give final consideration to contracts for the Southeast and South Central Gaming Zones.
Penn National Gaming has the only proposal in the Southeast Zone, in Cherokee County. The company has one of three proposals in the South-Central Zone, but company officials have said that if their contract in the South-Central Zone isn’t approved, they may not go forward with a Cherokee County casino. The company has labeled it a “southern strategy,” which officials say will result in more revenue for the state than other options.
Peter Carlino, Penn National’s chairman and chief executive officer, referred to the situation on July 24, during a conference call about the company’s second-quarter financial results. Someone with investment banking firm of Bear Stearns asked him whether the situation in Kansas was two casinos or zero.
“It is two or zero,” Carlino said. “The economic returns on Galena on a stand-alone basis don’t make sense.”
He said he didn’t want his comment to sound like an ultimatum, but that if the company didn’t get the contract for Sumner County in the South-Central Zone, it would pull out of the state altogether.
Penn National initially applied with the state to build a $295 million casino and hotel, but later scaled back the initial investment to $125 million in a casino and phase-in investments totaling $100 million over 12 years.
The reason Penn National officials give for scaling back the investment and the “southern strategy” is the $301 million Downstream Casino Resort. That operation, owned by the Quapaw Tribe of Oklahoma, opened July 5 off Interstate 44, just south of the property on which Penn National would build a casino. A 222-room hotel planned by the tribe is scheduled to open in a few months.
Members of the review board appear to be at least considering Penn National’s strategy. In an Aug. 5 meeting by conference call, members said they would like consultants to comment on the idea. Members also said they would also like to hear the thoughts of other applicants in the South-Central Zone about Penn National’s idea.
Still, Penn National’s handling of the situation isn’t sitting well with members.
“I’ve felt from the beginning they were trying to hold us up hostage on two or nothing,” said review board member Bob Boaldin on the conference call.
Another member asked whether Carlino’s statement could be considered a formal withdrawal.
Penn National has proposed a $340 million casino and hotel near Wellington in Sumner County. Marvel Gaming has proposed a $368 million casino and hotel, also near Wellington. Harrah’s Entertainment has proposed a $490 million casino and hotel in Mulvane.
Review board members expressed concerns about Harrah’s Kansas business partners and about Marvel Gaming’s finances. Chairman Matt All said the board has a responsibility to the state.
“I’m going to have a hard time voting for a proposal that I’m not absolutely confident is going to be funded fully,” All said. He said he didn’t necessarily trust officials with the companies to tell the unvarnished truth.
“There’s a lot of sort of cheerleading going on about their financial status or financial wherewithal,” All said.
There was some discussion in the Aug. 5 telephone meeting about what would happen if Penn National were to abandon its Cherokee County plan.
“It’s conceivable that the lottery would then go out for bid again,” All said.
Agenda
The Kansas Lottery Gaming Facility Review Board will hear from consultants and a brief statement from applicants on Thursday, and plans to discuss the proposals and make a decision on Friday.
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