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LAS VEGAS, Nevada -- Kansas is emerging as the next gaming battleground.
Both houses of the state's Legislature this week approved a bill authorizing the Kansas to license four stand-alone casinos and three slot machine-only casinos at racetracks. Gov. Kathleen Sebelius has suggested she would sign the measure into law. The measure will still need to be approved through local referendums in the cities and counties were the casinos are.
"In the past, gaming referendums to open up a new market have not done well," Wachovia Capital Markets gaming analyst Brian McGill said in a note to investors Thursday. "It is typically much easier to defeat a gaming referendum than it is to secure its passage."
The news could bring a financial lift for slot machine makers and casino equipment providers that have had revenues stagnate in past few years due to a slowing in new American gambling jurisdictions.
Pennsylvania, now adding some 65,000 slot machines, became the first new gaming state of any consequence since the late 1990s. Florida is adding slot machines while Kansas provides another boost.
"This event is clearly a positive for gaming equipment manufacturers," Deutsche Bank gaming analyst Bill Lerner said in a note to investors. "These incremental slots are not in current expectations or guidance (future financial predictions provided to investors by the companies). It is currently unclear if there will be a cap on the number of machines allowed at casinos."
McGill estimated Kansas could be home to 10,600 slot machines if the casinos come to fruition.
"This is a positive for the equipment industry, as it opens up another market," McGill said. "While 10,600 slots is not a huge market, it does help to add growth over the next several years.
Shuffle Master Gaming Chief Financial Officer Richard Baldwin said the company views Kansas an unexpected surprise that could be a lucrative location for all its casino products, including automated card shufflers, electronic table games and live table games.
"From our perspective, over time we believe that gaming expansion would continue across the U.S.," Baldwin said. "Kansas wasn't on our immediate radar and its could be a perfect market for what we offer. The company's expectation is that more and more states, over time and given the success in other states, will expand into gaming."
There are now nine American Indian casinos in Kansas. The most prominent is a 297-room hotel-casino operated by Harrah's Entertainment for the Prairie Band Indian Nation outside Topeka.
Under the proposed legislation, full-fledged casinos owned by the state, would open in Kansas City, Kan., Wichita, Dodge City and southwestern casinos. It is unclear how if there will be a cap on the number of slot machines or table games.
Three slot machine-only casinos will be allowed to operate a three racetracks, one near Kansas City, one near Wichita, and one near Dodge City. The racetracks will divide 2,200 games.
Gaming revenues at the casinos would be taxed at 22 percent in addition a $25 million fee to the state. The casino's would also pay additional taxes of 1.5 percent to the city in which they operate and another 1.5 percent to their home county. The casinos would also pay another 2 percent tax on revenues to fund problem gambling initiatives.
Gaming companies interested in opening one of the four casinos will be required to spend a minimum investment of $225 million for their facilities.
The slot revenue from the racetrack casinos would be taxed at a rate 40 percent with a $2,500 fee per sot machine.
"When you're looking at a tax rate of 53 percent in Pennsylvania, (Kansas' tax rate) is not a deterrent to entry," Lerner said.
Analysts said the only negative in the Kansas potential is the effect casinos in Kansas City would have on casinos now operating Kansas City, Mo., just across the border. The neighboring cities are separated by the Missouri River. Harrah's, Isle of Capri, Penn National Gaming and Ameristar Casinos all have properties in that market.
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