Wednesday’s Kansas Lottery Gaming Facility Review Board’s meeting was dominated by two phrases: Downstream Casino and destination casino.
Penn National Gaming came before the board to present its plans for a casino in Cherokee County, just off Interstate 44. That is right in the backyard of the newly opened Downstream Casino, which opened earlier this month in the northeast corner of Oklahoma.
The rise of the Downstream Casino created some changes to Penn National’s original application. Last summer, Penn National did not expect the Downstream Casino to get funding and get operational by this point.
With the Downstream Casino open, Penn National officials said the first phase of the casino would not include a hotel. That meant the initial proposal of a “destination casino” would not include somewhere to stay.
“We would evaluate that as a potential phased-in amenity based on the competition across the street,” said Eric Schippers, Penn National vice president of public affairs and government relations.
Schippers said that despite a hotel at Downstream Casino, that did not mean Penn National felt rushed to build a competing hotel. Part of that is because Penn National has a few roadblocks the Downstream Casino, owned by the Quapaw tribe, does not have.
“The problem is that if we were competing on a level playing field, that’s something we’d consider,” Schippers said. “However, the tribe has significant competitive advantages. We have to pay a corporate income tax, a federal income tax, whereas the tribes don’t have to pay some of those taxes. The tribes can spend that extra money on promotions.
“We’ve got to look at it as it plays out. We’re not going to get into an arms race of sorts when it didn’t make sense given the competitive disadvantages we have.”
That’s not to say a hotel isn’t on the minds of the Penn National leadership. Penn National leaders mentioned negotiations with the property owner to build a hotel and car museum right away. However, no formalized plan or contract has been agreed or put into place.
Matt All, Kansas Lottery Gaming Facility Review Board chairman, said the Downstream Casino affects gaming for both Penn National and the Southeast Kansas Gaming Zone.
“What the Penn National representatives said made a lot of sense,” All said. “It makes the area more difficult and more competitive. I think they’ve adjusted the proposal accordingly.”
As for Penn National’s lack of a defined plan to incorporate a hotel in the casino, All said that was a concern of the board.
“It certainly is an issue we’ll have to discuss as a board,” All said. “We’re going to have to look into what the statutes say. But we will certainly have to address that at some point.”
Penn National’s agreement with Kansas Lottery calls for a $125 million initial investment.
The Kansas Expanded Lottery Act requires casino applicants to put in at least a $225 million investment into the casino. Penn National has already paid a required $25 million privilege fee.
Penn National plans to make up the $100 million difference by phasing in the improvements over the course of 12 years. An initial contract with the Kansas Lottery lasts for 15 years.
The Kansas Expanded Lottery Act does not say if a phase-in is legal.
Ultimately, the proposed $225 million facility would more than double the total assessed value of the county. Cherokee County’s total assessed value is $134 million.
Andrew Nash can be reached at andrew.nash@morningsun.net or by calling 231-2600 ext. 132.
COLUMBUS —
