Lottery OKs all 5 casino proposals

May 28, 2007 -
Kansas Lottery commissioners Tuesday voted unanimously to send all five Wyandotte County casino proposals to the Lottery Gaming Facility Review Board for final review.

Lottery officials had spent the last five months reviewing each proposal on a number of grounds: the proposals must include local endorsement, must have sufficient access to financial resources, must have no less than three consecutive years of experience in Class III gaming and must be current in all tax responsibilities.

Lottery Executive Director Ed Van Petten said the last five months have included a lot of late nights by lottery staff in negotiating the contracts.

“It has been somewhat grueling for the staff,” Van Petten said of the lottery’s work. “I’m very proud of the contracts we put together.”

One sticking point between developers and the lottery on contract negotiations was the percentage of revenues sent to the state. Although the Kansas Expanded Lottery Act called for the state to receive no less than 22 percent of gross gaming revenues, initial negotiations indicated the lottery was seeking a higher percentage, in some instances asking for the state to receive 33 percent of gross gaming revenues after a casino had been in operation for more than six years.

“This has been the most intense thing I’ve ever been involved in,” Lottery Director of Gaming Facilities Keith Kocher said. “We appreciate the good faith efforts of the negotiations.”

The contracts approved Tuesday indicate the lottery backed off those initial figures, though not all five contracts contain the same revenue distributions:

<li> Legends Sun, LLC (Legends Sun proposal): Contract calls for the state to receive 22 percent of annual gaming revenues up to $475 million; 25 percent on revenues between $475-600 million; and 28 percent on revenues in excess of $600 million.

<li> Kansas Entertainment, LLC (Hard Rock Hotel and Casino, Kansas Speedway): Contract calls for the state to receive 22 percent of annual gaming revenues up to $350 million; 25 percent on revenues between $350-400 million; and 28 percent of revenues above $400 million. The contract also includes a “consumer price index” component.

<li> Golden Heartland Casino (Golden Gaming): Contract calls for the state to receive 22 percent of annual gaming revenues up to $250 million; 23 percent between $250-300 million; 24 percent between $300-350 million; 25 percent between $350-400 million; 26 percent between $400-450 million; 27 percent between $450-500 million; and 28 percent on revenues in excess of $500 million.

<li> PNK-Kansas, LLC (Pinnacle Entertainment): Contract calls for the state to receive 22 percent of annual gaming revenues up to $400 million; and 24 percent of revenue in excess of $400 million.

<li> Sands Kansas, LLC (Las Vegas Sands Corp): Contract calls for the state to receive 22 percent of all annual gaming revenues.

For example, $300 million in annual gaming revenue would net the state $66 million for four of the proposals. The Golden Gaming proposal would send $69 million to the state on $300 million in gaming revenue.

All five would send a combined three percent to local governments, which would be distributed via an interlocal revenue sharing agreement signed last year by Kansas City, Kan., Bonner Springs and Edwardsville. An additional two percent would be sent to the problem gambling and addictions fund.

“We are pleased to have finalized the management contract with the Kansas Lottery Commission for the proposed Legends Sun destination resort and casino,” Mohegan Sun president and chief executive officer Mitchell Grossinger Etess said in a statement. Mohegan Sun is partnering with RED Development and Olympia Gaming on the $767 million Legends Sun casino proposal.

“Simply stated, Legends Sun offers the best project in terms of quality, revenue for both city and state and the number of new jobs created.”

Andy Abboud, Las Vegas Sands Corp. vice president of government and community relations, said Sands officials were excited about the opportunity to move forward with the company’s $752 million project in Edwardsville.

“We’re happy to go on to the next stage,” Abboud said. “It was a lengthy process but the negotiations went well.”

Edwardsville has two casino proposals still in the mix, the second from Golden Gaming for a $630 million proposal near the intersection of Interstate 70 and 110th Street.

“We’re happy to have reached an agreement with the Kansas Lottery Commission,” Christopher Abraham, Golden Gaming vice president of marketing, said. “We look forward to working with them throughout the selection process.”

Pinnacle Entertainment, which is proposing a $623 million project, and Hard Rock Hotel and Casino, the $680 million proposal adjacent to the Kansas Speedway, were not immediately available for comment on Tuesday’s actions.

Only two of the five lottery commissioners offered much in the way of a “closing statement” after casting their votes of approval for the contracts.

Commissioner Joni Franklin, from Wichita, had the strongest comments, which were directed toward the developers as they move forward.

“I would implore all of those involved that financial wherewithal and managerial experience be tightened up, more concrete and translucent,” Franklin said, adding that despite her concerns, all contracts approved (the lottery also approved three contracts in Sumner County and two contracts in Ford County) met the minimum stipulations set out in the expanded lottery act.

The proposals are headed into the final stage of review. The Kansas Lottery Gaming Facility Review Board - a seven-member panel consisting of appointees from Gov. Kathleen Sebelius, Speaker of the House Melvin Neufeld and Senate President Stephen Morris - will make the final decision on which developer in each zone is awarded the sole contract.

The review board will take public comment in each zone with casino proposals. The review board tentatively plans to meet August 13-15 in Wyandotte County to receive developer presentations and take public comment. The current timeline requires the board to make its final decision by mid-September.