Analysis: Kan. casino board would like better hand

Eds: UPDATES with additional background, material from casino applicants, quotes from consultant, board chairman. ADDS editor's at end.

An AP News Analysis

By JOHN HANNA

AP Political Writer

TOPEKA, Kan. (AP) -- Members of a state board in Kansas don't appear to like the hand they've been dealt for proposed casinos in Kansas City and the Wichita area, and they're wondering whether they should fold.

Folding for the Lottery Gaming Facility Review Board would mean rejecting the single casino proposal for either area. The Kansas Lottery would be forced to solicit new proposals from developers to build and operate the casino for the lottery, which will own the new gambling.

Board members have been less than enthusiastic about the Kansas City proposal and the plan to build a casino south of Wichita. During a public hearing last week, the board's consultants suggested both had some limitations in drawing tourists to Kansas, and board members peppered representatives of the companies pushing the proposals with questions.

But the consultants also told the board that the national economy is to blame if either proposal seems short of what the board had hoped for in a casino plan. The consultants said the economy limited competition for contracts with the lottery and led to scaled-back proposals.

Rejecting either proposal could delay a decision on a casino until the economy improves enough to encourage more developers to bid on a contract and applicants to propose more ambitious projects. But consultant William Eadington warned that the economy might not improve quickly enough for those things to happen. And, he said, rejecting a proposal could discourage companies from seeking a contract later.

The board faces a decision that's tougher than picking between two or three competing applicants. Does it accept less than what it wants so that the casinos get built and start generating revenues for the state? Or does it wait for better proposals that would attract more tourists and generate more revenues early on?

"How long will it take for normal to return?" said Eadington, director of an institute on commercial gambling at the University of Nevada, Reno. "It's just a terrible time to go through this process."

The Kansas City proposal calls for a casino overlooking Kansas Speedway, the NASCAR track already at the center of a tourist-drawing area of dining, entertainment and retail shopping venues. The $521 million project is being pushed by the speedway's parent firm, International Speedway Corp., and Penn National Gaming Inc., of Wyomissing, Pa. The two companies had been competitors but joined forces.

The Chisholm Creek casino would be built near Mulvane, about 20 miles south of Wichita. The partnership behind the $225 million venture is another combination of former competitors and includes Lakes Entertainment Inc., of Minnetonka, Minn.

Last year, the lottery had multiple applicants for each casino contract, and developers were proposing larger projects. The board picked developers for each, only to see them back away from their plans when the economy soured and financing became trickier.

Eadington and other consultants told the board that the economy forced prospective developers to scale back amenities, particularly during the first phase of construction. Initially, neither proposal before the board included a hotel in the first phase.

The speedway group has said it expects to start construction on a hotel by 2014, within two years of opening its casino. The Chisholm Creek group announced last week that it had a commitment from Topeka-based Double Down Development LC to build a 100-room hotel by March 2012, or six months after its casino opened.

Board chairman Matt All, of Lawrence, warned Chisholm Creek representatives that the board needed more information about its hotel proposal before meeting Dec. 1 and 2 to decide whether either casino proposal moves forward.

And board members continued to question ISC and Penn officials about why they didn't propose a hotel. The companies said the area already has 1,000 rooms and that bloc, on average, is less than half-full because of the economy. They said they'll provide a shuttle.

Hotels have become a big issue because the legislators who approved the law authorizing casinos in 2007 contemplated each would be part of a "destination" drawing tourists. Consultants told the board that a casino without a hotel simply doesn't have the same tourist-drawing power.

For example, Will Cummings, whose Arlington, Mass., firm reviewed both proposals, projected that the speedway project would draw about 110,000 tourists after its first phase. He said with additional slots from a second phase and a 500-room hotel, it would draw almost an additional 100,000.

Without a hotel, the speedway casino's tourist-drawing reach is 150 miles; with a hotel, 200 miles, Cummings said. The difference would be greater for the Chisholm Creek project: a reach of 120 miles without a hotel and 200 miles, with a hotel.

Chisholm Creek officials responded to such concerns by announcing their plans to build a hotel during the first phase. ISC and Penn officials don't see their lack of a first-phase hotel as so serious a liability, because of the rooms already in the area.

But All said a "central" issue for the board is whether a "destination" casino requires a hotel in the first phase of construction.

Another, of course, is whether it's wise for the board to insist upon one even if that means rejecting a proposal, reopening the application process and hoping for something better.

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EDITOR'S NOTE: Political Writer John Hanna has covered gambling in Kansas, as well as state government and politics, since 1987.