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Arnold M. Knightly

Harrah's wins Kansas casino contract

25 August 2008

LAS VEGAS, Nevada -- A partnership led by Harrah's Entertainment won a contract Friday to develop and manage a state-owned casino in south central Kansas.

The Lottery Gaming Facility Review Board chose Sumner Resorts-Harrah's Kansas by a 4-3 vote over proposals from Penn National Gaming and Marvel Gaming.

A proposal from MGM Mirage was pulled in May.

Harrah's was awarded a 15-year management contract that calls for 22 percent of the casino's revenue to go to the state. Kansas-based Sumner Resorts will develop the project.

Harrah's Vice Chairman Chuck Atwood said Harrah's likes the project because it will add another property to the company's national customer network of 49 casinos.

"One of the hallmarks of our strategy is a distribution strategy, to provide a network of resorts for our customers to visit," Atwood said. "It fills a very nice spot in our distribution network."

The $535 million resort is planned for Mulvane, a small town 15 miles south of Wichita and 150 miles north of Oklahoma City.

The gaming company's nearest property is 211 miles northeast, Harrah's North Kansas City in Missouri.

Plans submitted to the review committee call for a 175-room hotel, restaurants, pools, an outdoor amphitheater, an 18-hole golf course and convention space.

Although the state will own and operate the casino, all the other amenities will be owned by the partnership, of which Harrah's holds a 40 percent stake.

Atwood said the partnership is confident it can get the project financed in time to have the resort open by late 2010 as scheduled.

"The appeal of the project was helpful as we talked to lenders," Atwood said. "They recognize the project has a lot of appeal, so we're confident it can be financed."

Harrah's now must clear a background check by the Kansas Racing and Gaming Commission. Atwood said he didn't know how long that process would take.

"We've still got work to do," Atwood said. "Obviously, they would be anxious to get started and we would be anxious to get started."

Consultants to the review board estimate first-year revenue for the casino will be $186.5 million.

However, Harrah's faces at least one legal challenge to its new casino.

On Tuesday, the Prairie Band Potawatomi Nation filed a lawsuit alleging the company violated a noncompete agreement with the tribe by seeking the contract for a proposed facility.

A hearing is set for Aug. 29 in Shawnee County District Court on the tribe's request for a court order to keep Harrah's from moving forward with the Sumner-Harrah's project.

Harrah's transferred management for the Harrah's Prairie Band Casino-Topeka, 148 miles northeast of Mulvane, to the tribe on July 1, 2007, nine months ahead of the scheduled termination date.

Atwood told the review board Thursday that the company complied with its contract with the tribe.

The Sumners-Harrah's casino is the first project to be approved since last year's passage of the Kansas Expanded Lottery Act.

Voters amended the state constitution in 1986 to allow a state-owned and operated lottery, and the court said in 1994 that the term "lottery" is broad enough to include slot machines and other casino games.

In June, the Kansas Supreme Court ruled that state would truly own and operate the new gambling, ending any constitutional question about the law.

Penn National did not walk away empty-handed Friday. The company was chosen to manage a casino in southeast Kansas.

However, Penn National officials had said if it wasn't awarded the contract with Sumner, it might not proceed in southeast Kansas because that casino will face stiff competition from a nearby $300 million tribal casino opened in July.

"We need to digest it and see where we need to go. It's obviously disappointing," Penn National spokesman Eric Schippers said, adding that the company's board of directors will have to decide how to proceed.

Two more casino managers will be chosen for Wyandotte and Ford counties, and the review board will vote on applicants for those on Sept. 18-19.

Las Vegas-based companies Golden Gaming and Pinnacle Entertainment have submitted competing bids for Wyandotte.

Las Vegas Sands Corp. pulled its Wyandotte application in July, citing the worsening credit markets and a proposal in neighboring Missouri to end current loss limits and raise wager limits.

Las Vegas-based Olympia Gaming also pulled out of Wyandotte earlier this year.

Harrah's wins Kansas casino contract is republished from