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Archive for Saturday, September 1, 2007

Penn National files first casino application in Kansas

Company wants to build $295 million hotel, gambling complex in Cherokee County

September 1, 2007

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— A Pennsylvania company with gambling operations in 12 states is the first applicant for a contract to manage a state-owned casino in Kansas.

Penn National Gaming Inc. is proposing a $295 million hotel-and-casino complex in Cherokee County, in the state's far southeast corner. It filed its application Friday with the Kansas Lottery, which would own the casino under a new law.

The new law permitted a single casino in each of four areas and slot machines at three dog and horse racing tracks. A review board will determine which prospective developer gets the casino management contract in each area, after the lottery has negotiated contracts with one or more of them.

"It's a new market," said former Kansas House Speaker Tim Shallenburger, a banker who's representing Penn National in Cherokee County. "It's a pretty good market that's untapped."

Shallenburger said a casino in southeast Kansas should generate between $150 million and $200 million in gross revenues a year, drawing customers from Tulsa, Okla.; Joplin, Mo., and Bentonville, Ark. Penn National's proposed site is off the only exit for Interstate 44 in Kansas.

The new gambling law, which took effect in April, requires a developer to invest at least $225 million in its complex.

Counties compete

The new law also has Cherokee and neighboring Crawford County competing for the southeast Kansas casino. Tom Moody, chairman of the Crawford County Commission, said it has advantages over Cherokee County.

For example, because it's more populous, it has more homes, schools and businesses and would be better able to handle an influx of casino workers, he said. If Cherokee County is the site, many probably would live in Oklahoma or Missouri, he said.

"The question before the Lottery Commission is what's best for Kansas," Moody said. "It's not a race to see who's first."

No early advantage

Penn National made a point of filing its application before Sept. 7. That was the original application deadline, but two weeks ago the Lottery Commission extended that deadline until Dec. 6.

Lottery Director Ed Van Petten said the early filing won't give Penn National an advantage but added, "It does show they are serious about the whole thing."

"They've been a very serious contender from Day One," Van Petten said.

The commission extended the application deadline to give a potential developer, Heart of the Balkans Gaming Co., more time to complete a proposal for neighboring Crawford County. The law allows the casino in either county, and voters in each have approved.

Shallenburger was skeptical that a second proposal would emerge and said Penn National has the best proposed site.

"We're right in the corner of the state, literally 100 feet from Oklahoma, and it touches the Missouri border," Shallenburger said.

Stephen Joseph, a Wichita attorney representing Heart of the Balkans, wasn't available for comment and didn't return a telephone message.

Questions remain

Penn National filed its application even though questions remain about whether the law is valid under the Kansas Constitution. Attorney General Paul Morrison filed a "friendly" lawsuit last week seeking a ruling from the Kansas Supreme Court.

The constitution allows a state-owned and operated lottery, which is why the new law calls for lottery ownership of the new casinos and racetrack slots. Critics contend the state wouldn't be involved enough in the day-to-day operations of the new gambling to be its true owner.

While 11 other states have commercial casinos, Kansas is the first to allow state-owned resort casinos, according to the American Gaming Association.

"If you look at the way the lottery's handling the application process, clearly they own and operate this thing," Shallenburger said. "The lottery is going to control this stuff from start to finish, so I think it's constitutional."

Hefty process

Penn National's application was more than 1,500 pages and, with supporting documents, it filled 33 boxes. The company delivered those boxes by truck.

The company is based in Wyomissing in southeast Pennsylvania. It reported gross revenues of $2.2 billion in 2006 and $1.84 in earnings per share of stock.

It operates 12 casinos in 10 states, including the Argosy in the Kansas City, Mo., area, as well as a casino in Canada. It has harness racing tracks in New Jersey and Ohio, horse tracks in New Mexico, Pennsylvania and West Virginia, slots parlors in Maine and West Virginia and off-track betting parlors for horse racing in four Pennsylvania cities.

The new Kansas gambling law also allows casinos in Ford and Wyandotte counties and either Sedgwick or Sumner county. However, it also required local voter approval, and on Aug. 7, Sedgwick County rejected a casino, meaning Sumner County has sole claim to one.

Slots also were permitted under the law at Wichita Greyhound Park, Camptown Greyhound Park in Crawford County and The Woodlands dog and horse racing park in Kansas City. However, Sedgwick County voters narrowly rejected slots.

Developers have until Nov. 13 to submit applications for Sumner County, Dec. 26 for Ford County and Dec. 31 for Wyandotte County.

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