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Archive for Tuesday, September 15, 2009

Regulators question casino’s plans to delay hotel construction until 2014

September 15, 2009, 8:16 a.m. Updated September 15, 2009, 5:21 p.m.

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— A partnership faced questions Tuesday from a state review board about plans to build and operate a casino for the Kansas Lottery at the NASCAR racetrack in the Kansas City area but delay construction on an adjacent hotel until 2014.

Penn National Gaming Inc., of Wyomissing Pa., and Kansas Speedway’s parent company, International Speedway Corp., are proposing a $521 million complex overlooking the track’s second turn.

ISC and Penn previously had competed for the contract with the lottery to build and manage the single casino authorized in Wyandotte County under a 2007 law. But Penn bought out ISC’s former partner, The Cordish Co., of Baltimore, closing the deal Monday and leaving only one proposal for a Kansas City-area casino.

The Lottery Gaming Facility Review Board would have picked among competing applicants and still must approve the remaining proposal. The board had a hearing Tuesday, and Penn’s recent partnership with ISC generated questions.

The partnership’s plans to delay construction of a hotel was an issue for board members because Penn, in pursuing its own proposal, once had offered to build and open a hotel and casino at the same time.

“If we believe the contract we have been given does not maximize the possibility we have been given, then this board is duty bound to turn that contract back,” board Chairman Matt All said. “This board is not going to be a rubber stamp even though we have only one contract.”

Penn and ISC told the board that by its third year in operation, the new casino would generate $225 million in annual revenues, with the state receiving almost $50 million of that.

They also said that with Penn’s involvement, the partnership now has the ability to finance the project with its own cash. Penn had made similar statements about the proposal it previously had pursued, but the ISC-Cordish partnership had planned to borrow $190 million.

“The ability to complete a project like this should be the No. 1 criteria,” said Steve Snyder, Penn’s vice president of corporate development, noting that the sour national economy.

Last year, the review board awarded the contract to the ISC-Cordish partnership, for a $681 million project at the track, and Penn wasn’t a competitor.

But the ISC-Cordish partnership later wanted to restructure its plans — and delay construction of the hotel — because of the economy. The state was forced to reopen the selection process.

Under the latest plan, the casino would open by January 2012. The proposed contract the partnership has negotiated with the lottery says the partnership must start construction on a hotel within two years after the casino’s opening, or pay an additional 1 percent of its revenues a year to the state.

During questioning by board members, partnership officials noted that area hotels are now only from 40 percent to 60 percent full, depending on the time of year.

“We’re committed to building the hotel,” said speedway President Jeff Boerger. “We want the economy to heal before we do that. Don’t want to cannibalize others.”

Later, Tim Wilmott, Penn’s president and chief operating officer, told reporters that Penn once proposed building a hotel immediately because it had been in competition with ISC. Penn’s original casino site was near the speedway.

“The speedway’s a better site,” he said.

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