By Roger McKinney

rmckinney@joplinglobe.com

GALENA, Kan. — Penn National Gaming on Thursday laid the blame for its withdrawal from Cherokee County with the Quapaw Tribe’s Downstream Casino Resort.

Company officials previously had said the decision was likely.

Eric Schippers, public affairs vice president for Penn National, said in a news release that the decision was made “following a lengthy and thorough review of our strategic options.” Penn National operated in the state as Kansas Penn Gaming.

Ed Van Petten, executive director of the Kansas Lottery, said the procedure for a state-owned casino in the southeast gaming zone, comprising Cherokee and Crawford counties, would restart. He said proposals would be sought from interested parties.

“Despite our best and continuing efforts to combat what we believe to be several fundamental flaws in the development process for the Quapaw Tribe’s Downstream Casino Resort, the $300 million facility opened on land directly adjacent to our site,” Schippers wrote in the news release. “While Oklahoma gets the economic development, Cherokee County gets to host its surface parking lot.”

Schippers said in a phone conversation that the tribal casino would have a two-year head start in establishing a customer base.

Downstream Casino Resort’s casino opened July 5, with the hotel scheduled to open in early November. It is west of Joplin, Mo., off Interstate 44.

Penn National planned its casino north of there, in Cherokee County. The company’s initial application called for a $295 million investment in a casino and hotel. It later received approval from the Kansas Lottery Commission for a scaled-back and phased-in project, with an initial investment of $125 million in the casino, and investments totaling $100 million in a hotel and other amenities over 12 years of the state contract.

Betrayal

“In the wake of Downstream’s rapid opening, rather than pack our bags and head home, we worked diligently to find a structure that still worked for Southeast Kansas and for our company,” Schippers wrote in the news release. That included a “southern strategy” that would have included a casino and hotel in Sumner County. The strategy didn’t impress the Kansas Lottery Gaming Facility Review Board, which last month approved Harrah’s Entertainment for the Sumner County casino.

State Rep. Doug Gatewood, D-Columbus, said he considers Penn National’s withdrawal as a betrayal.

“I absolutely do think they’ve left us hanging,” Gatewood said. “People in Cherokee County and the southeast zone worked hard on this. They’re turning their back on everything they’ve said. In my mind, it’s breach of contract.”

Gatewood said Penn National’s business decision is a mistake. He said if Penn National were to build a casino next to the tribal casino, they both would benefit. He used the example of casinos flourishing next to one another in Las Vegas, or a Wendy’s restaurant building next to a McDonald’s.

“Unfortunately, that’s not a fair comparison,” Schippers said. He said Penn National, under the Kansas law that allows state-owned casinos, would be paying 27 percent of gross revenues in taxes, while the Quapaw Tribe is required to pay around 6 percent of gross revenues from its casino to the state of Oklahoma.

Gatewood said Penn National also is flush with cash after being paid a settlement for a failed takeover bid.

Downstream response

John Berrey, chairman of the Quapaw Tribe’s business committee and Downstream Development Authority, said in a news release issued in response to Penn National’s announcement that Cherokee County would be included in future plans.

“We want the citizens of Cherokee County to know that our future plans will include building on the economic base that our casino resort has established for the four state region,” Berrey said in the news release. “We are part of the Cherokee County community and remain committed to helping bring viable and sustainable economic development to the county.”

He wrote that many of Downstream Casino Resort’s 1,100 employees are Kansas residents.

“The Quapaw Tribe and Downstream Casino Resort will begin immediately to explore additional ways that can help soften this tremendous loss,” Berrey said.

‘High and dry’

Cherokee County Commissioner Rodney Edmondson said the news was disheartening.

“They’re leaving us high and dry after all that they promised,” he said.

Schippers said in his news release that company officials met this week with Cherokee County officials to explain the decision to withdraw.

Edmondson said he met Monday with Richard Klemp, Penn National’s vice president for government affairs, but Klemp gave him no indication of the forthcoming decision. He said Klemp told him that the company was still trying to find a way to make the project work.

Penn National has a pre-development agreement with Cherokee County. The agreement states that if Penn were to receive final approval of a management contract, it would build the casino in the first phase, and a hotel and entertainment venue in a future phase.

David Cooper, Cherokee County’s attorney for committee matters, in the past has said Penn National’s withdrawal could trigger legal action by the county for alleged breach of contract. Edmondson said the County Commission likely would address the agreement on Monday.





Voter disappointment



Eric Schippers of Penn National Gaming was asked what he could say to the 70 percent of Cherokee County voters who approved a casino referendum in June 2007 because Penn National officials said they would build the casino.

“We recognize the disappointment felt in Cherokee County today after our decision,” Schippers said. “We, too, are disappointed we’re unable to proceed under the existing management contract. The economic realities are clear that we’re unable to be successful with the $300 million facility across the street.”