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Archive for Friday, January 6, 2012

No dice on casinos in southeast Kansas

January 6, 2012

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— Dilapidated scoreboards, tattered roofing and junk piles at Camptown Greyhound Park epitomize the status of pari-mutuel racing in southeast Kansas.

While locks stiff-arm visitors outside this silent hulk in Crawford County, the venue was briefly a beehive of renovation after the state passed a 2007 law allowing slot machines at dog and horse racetracks. Work abruptly ceased when Camptown owner Phil Ruffin calculated the state's 40 percent cut of slot revenue was untenable during a recession.

"That was the worst time in the last 50 years to OK it," Ruffin said.

Despair about the circus life of gambling in this economically depressed region doesn't end at weed-choked Camptown. A consultant declared seven years ago Galena in neighboring Cherokee County was the best location in the state for a casino. None has been built in the old mining town while gambling edifices emerged in all three other zones formed by the state government.

As if to mock lost opportunity, a tribal casino opened in Oklahoma so close to the border that a parking lot for guests sits in Kansas.

Crawford County Commissioner Linda Grilz said political leaders in Topeka should approve legislation making it more likely commercial gambling takes its place by racetrack in Crawford County and by casino in Cherokee County.

"The state of Kansas had their hands too deep into the pockets of owner-operators," Grilz said. "We want this."

House and Senate Democrats are on Grilz' bandwagon, but Gov. Sam Brownback and his Republican allies are prepared to block a new campaign to magnify gambling.

Conclusions in the 2004 study for gambling locations in the state by Christiansen Capital Advisors, of New Gloucester, Maine, shocked the 3,000 residents of Galena.

"It's out of left field," Galena Chamber of Commerce president Kathy Anderson said at the time.

Most Kansans couldn't find Galena without a map much less comprehend that a casino might generate $240 million in annual revenue from thrill seekers drawn from Springfield, Mo., Tulsa, Okla., or Fayetteville, Ark.

After moderate Republican and Democratic legislators collaborated with Gov. Kathleen Sebelius to light the fuse of new gambling activity, and the law was upheld by the Kansas Supreme Court, developers descended on zones coined for Wyandotte County, Ford County, Sedgwick or Sumner counties, and Cherokee or Crawford counties.

Penn National Gaming, of Wyomissing, Pa., stepped forward with the blueprint for a $295 million casino near Interstate 44 where Kansas, Missouri and Oklahoma converge.

"A reflection of our eagerness to proceed with the tremendous economic development opportunity," said Peter Carlino, Penn National's chairman and chief executive officer.

His enthusiasm vaporized as the economy wilted and formidable competition emerged.

When members of the Kansas Lottery Gaming Facility Review Board voted in 2008 to award a development contract to Penn National, handwriting was on the wall. Quapaw Tribe of Oklahoma was preparing to christen the $300 million Downstream Casino in Oklahoma a short distance from Penn National's site in Kansas.

Penn National retooled its offer to hold initial casino investment to $125 million and layer $100 million into the venture over 12 years. This strategy of building casinos in phases, previously considered contrary to the intent of state law, was endorsed in a legal opinion from then-Attorney General Steve Six.

Eric Schippers, a Penn National vice president, added drama by threatening the company's withdraw from southeast Kansas if the review board didn't also pick Penn National's $340 million bid for a Wellington casino in south-central Kansas. The approach was known as Penn National's "southern strategy."

State regulators handed the south-central contract to a subsidiary of Harrah's Entertainment. Penn National backed out of southeast Kansas amid complaints the Quapaws held an edge because Oklahoma's tax on casinos was lower than Kansas' 22 percent rate.

"The Quapaws have a tremendous revenue advantage that can be used for additional amenities, marketing and promotional giveaways," Schippers said.

Reps. Bob Grant, of Frontenac, and Doug Gatewood, of Columbus, said state officials should acknowledge reality by lowering minimum casino investment benchmarks to make a Kansas casino in the southeast viable.

Casino developers in the northeast, southeast and south-central zones were required by the 2007 law to invest $225 million in a casino and pay the state a $25 million fee. The statute set a baseline for southwest Kansas requiring a $50 million casino and $5.5 million fee.

A House bill introduced by Grant and Gatewood would obligate a southeast Kansas developer to put $100 million in a casino and pay the state $11 million. Both expressed frustration that House Speaker Mike O'Neal, R-Hutchinson, vowed to block the measure.

"That's all I've asked for is to have an honest, open debate — a democratic debate," Gatewood said.

Their bill also would let Camptown keep 58 percent of revenue by trimming the state share to 22 percent. Current law splits 80 percent between tracks and the state. Twenty percent goes to local government and breed industries.

"We voted to have gaming," Grant said. "Why can't we get it? It seems like we've been the unwanted stepchild down here."

House and Senate Democrats endorsed the strategy because it would generate $15.4 million annually by 2015 for cherished state programs, but Republican opposition lingers.

O'Neal remains disenchanted about how casino reforms embodied in Senate Bill 66 were rammed through in 2007.

"Supporters of gambling got the bill they wanted in SB 66, and now need to live with the consequences, both good and bad," the House speaker said. "Those who want a 'redo' need to keep in mind that opponents of gambling may want one, too. The state should not be in the gambling business."

O'Neal said he would enjoy a vote to eliminate the exemption for casinos in Kansas' indoor smoking ban.

Senate President Steve Morris, R-Hugoton, said there was no broad appetite in the Senate to rethink the smoking ban or shrink the state's potential share of racetrack slot revenue. A bill devoted exclusively to casino investment in southeast Kansas may find support, he said.

"If it gets through the House first," Morris said, "it might have some traction in the Senate."

The Republican governor cautioned against a gambling debate in the 2012 legislative session because the agenda was loaded with weighty budget, tax, school finance and Medicaid policy.

"I don't want to address the gaming issue this legislative session," Brownback said.

Dallas businessman Larry Waldrop, part of two casino bids in Kansas, said the $225 million minimum should hold. He said a casino in southeast Kansas would benefit from Downstream, which drew 2.2 million people in 2010.

"A quality facility next to the tribal facility would succeed similar to the restaurant-row theory," Waldrop said. "I would create a gaming destination area."

Doug Lawrence, who represents the Kansas Greyhound Association, is part of a new effort to ask Sedgwick County voters to endorse slot machines at racetracks.

He is interested in influencing political opinion about reopening Wichita Greyhound Park, which closed in 2007 after the county's voters rejected both a casino or track with slots. The Woodlands track in Kansas City, Kan., has steadily fallen into disrepair since it closed in 2008. Camptown hasn't heard the bark of a dog in years.

Lawrence said the state's breeders were gravitating to elsewhere because the business collapsed in Kansas. It may be too late to restore greyhound or horse racing in Kansas.

"Both of those industries have declined in many parts of the country," said Bob Sheldon, general manager of Penn National Gaming's nearly completed Hollywood Casino at Kansas Speedway in Kansas City, Kan.

For some drawn to this debate, racetracks don't deserve a lifeline tied to slot machines.

"Do we bail out a failing typewriter company by giving them slots?" said Dave Heinemann, a former state legislator and lobbyist for the anti-gambling organization Stand Up for Kansas.

Galena Mayor Dale Oglesby said the state's plodding approach to advancing casino and racetrack gambling allowed Oklahoma to usurp Kansas. Hundreds of jobs that could have been secured in Cherokee County have been lost, he said.

"Our government moves too slow," Oglesby said.

Former Baxter Springs Mayor Huey York said political leadership in Topeka should rebound by assigning proper credit to casinos as an economic development tool.

If an aviation company dangled 500 new jobs, York said, the state would eagerly offer incentives at taxpayer expense. For example, the state issued $33 million in bonds to support Bombardier LearJet's expansion in Wichita in exchange for several hundred jobs.

"We would open our economic development suitcase," York said. "We're not going to give up down here."

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