State-owned casinos and slot machines at dog- and horse-racing track are allowed by an expanded gambling law passed last year in hopes of eventually generating $200 million a year for the state.

But two prospective developers have pulled out of the competition for casino contracts, and a third's position may leave one area, southeast Kansas, without any proposal. Both tracks allowed to have slots failed to negotiate a deal with the Kansas Lottery and neither expects to be operating by next month.

State and industry officials and consultants say they aren't alarmed because developments reflect decisions made by individual developers for various reasons. But the economy underlies them all.

"The economic downturn and the credit crisis is affecting everyone and the casino operators are re-evaluating their proposals," said Nick Danna, senior gaming analyst for Sterne, Agee and Leach Inc., based in Birmingham, Ala.

The Lottery Gaming Facility Review Board began a two-day meeting Thursday to review reports from its consultants and applicants on potential revenues from casinos proposed for Sumner and Cherokee counties. The board plans to decide Aug. 21-22 who gets the contracts for each.

It plans a similar review Sept. 2-3 for casino proposals for Ford and Wyandotte counties, selecting their developers Sept. 17-18.

For Sumner County, the average total revenue projected by the review board's consultants in 2011 was $186.5 million for a project proposed at Mulvane by Harrah's Entertainment Inc. The average for Marvel Gaming was $132.6 million and $123 million for Penn National Gaming Inc., both near Wellington.

In Cherokee County, where Penn is the sole bidder, the average revenue projection was $30.2 million.

Those projections were significantly lower than the developers' numbers, but board Chairman Matt All said he's not bothered by the competing estimates.

"These are differences of professional opinions. They have a difference of opinion in how distance will affect consumer behavior," he said.

On Tuesday, Las Vegas Sands Corp. dropped its Wyandotte County application, leaving four other casino companies vying for the contract there.

The same day, the Woodlands in Kansas City, Kan., said it will close next month because it couldn't reach agreement on a contract with the Lottery for 800 slots at its horse and dog track. But it also said it remains hopeful of reaching and agreement and will retains its state license.

The Woodlands' announcement came less than three months after the long-closed Camptown Greyhound Park outside Frontenac ended negotiations with the Lottery over slots.

In May, a partnership involving MGM Mirage Inc. and Foxwoods Development Co. dropped out of the running in Sumner County.

Now, Penn says that if it doesn't get a Sumner County contract, it may not move forward in Cherokee County. It would face competition from a nearby $300 million tribal casino opened July 5 by the Quapaw Nation in Oklahoma.

Penn spokesman Eric Schippers told the board that the company, which would phase in its development, isn't making an ultimatum but addressing the realities of the market.

"We want to find a way to make Cherokee County work. The only way we feel Cherokee County can work is with the phase-in and with both counties," Schippers said. "We don't want to leave Cherokee County high and dry."

In Wyandotte County, Sands said its decision resulted from increased borrowing costs and prospects that Missouri voters may repeal a law limiting gamblers to losing $500 every two hours. The loss limit in Missouri was seen as a competitive advantage for the Wyandotte County casino.

"We decided after evaluation that the marketplace isn't right for us," said Sands spokesman Ron Reese. "I don't think we're saying it's a bad market. For us, it wasn't the right opportunity."

Sands opened a casino in 2004 and a $2.4 billion resort last year in the Chinese enclave of Macau and is building additional facilities there. Macau said its gambling revenues increased 48 percent during the year's second quarter, making it the world's largest gambling center.

Also, last week, Moody's Investors Service placed credit ratings for Sands and a subsidiary under review because of Las Vegas' softening market.

Danna said the cost of financing projects is much higher than six months or a year ago.

"If you expected to get 15 percent return and get money at 8 percent, that is a good return," he said. "Today it would be 12 to 14 percent to borrow money, if you can get it at all, and that makes the return much less attractive."

But, Danna added, "The Midwest is stronger than the rest of the country. The Midwest casinos have held up better generally than Las Vegas and Atlantic City."

Ed Van Petten, Lottery executive director, said economic problems aren't limited to Kansas.

"The gaming market worldwide isn't as lucrative as it was two years ago. It's not just Kansas, but we are in the development phase and it will effect us more," he said.

Still, Doug Lawrence, a lobbyist who played a leading role in gambling legislation over the past decade, remains optimistic the casinos will open and generate $200 million a year.

"In the long term number, that is a good number and I don't think the market has changed dramatically," he said. "You have to expect the economy will do better. This is a good business and it is still a good market."