When the Wizard of Oz warns, “Pay no attention to that man behind the curtain.” Dorothy is right on the money with, “Toto, I’ve a feeling we’re not in Kansas any more.” Back in the real world it’s all the wrong way round.
Have you been following the casino news in Kansas? The powers-that-be over there are about to award the licenses for operating state-owned casinos in Sumner and Cherokee Counties (decision due later this month) and Ford and Wyandotte Counties (decision due in September).
Why all the excitement?
Well, the doom-and-gloom mongers say an economic recession is coming. Whether it hits in its full glory, state tax revenues are already falling along with property values. So Kansas is making a speculative grab for $200m a year from projected gambling proceeds to help pay the bills. Speculative because if a recession does come, no-one knows how many people will keep gambling with their hard-earned cash. My money says all real world casino revenues will fall so Kansas won’t get what it expects. But, hey, apart from the math teachers to show the next generation how to work out statistics and probabilities to make them better gamblers, who needs teachers, police officers, firemen, etc. Tax increases anyone? Now you would think political and economic fear would push Kansas into fast action. But it’s turned into a year-long contest, making it as exciting as watching paint dry (or not, depending on your point of view).
In Sumner County, we’re into the final straight and down to a three-horse race between Harrah’s Entertainment Inc., Marvel Gaming and Penn National Gaming Inc. Penn is now the sole bidder in Cherokee County which could mean Penn is the winner, but as always, it’s more complicated than that. MGM Mirage withdrew because of problems with its proposal to build in Mulvane. Lawyers got in on the act (now there’s a surprise). Wellington is competing for the casinos to be built in their fair town. It sued Mulvane alleging improper annexation of land for use as casinos. Las Vegas Sands also recently withdrew from the contest giving two reasons:
- Missouri is changing its loss-limit law which may keep more customers “at home”; and
- over the July 4th weekend, the Quapaw Tribe of Oklahoma opened the Downstream Casino Resort just off I44 on the intersection of the borders between Oklahoma, Kansas and Missouri — this has increased the competition.
Penn agrees the Quapaw development has tilted the “playing field” in the tribe’s favor. First off, their casino is already open, whereas the Kansas development is at least two years away. Worse, the tribe doesn’t have to pay all the corporate and federal income taxes (it’s good being in the tribe business these days). All this extra money promotes the site and builds customer loyalty. So Penn says it will only proceed if it gets both licenses. As good a case of economic strong-arming (that’s a legal form of blackmail) as you can get.
The Lottery Gaming Facility Review Board decides August 21-22 who gets the single 15-year contract in each county, so how about a little gambling. In Cherokee County it’s a 50:50 bet between Penn the winner and Penn withdrawing/no contract awarded. In Sumner County it’s three possible winners and no award.
So what’s the form of the other two bidders?
Harrah’s is the biggest casino operator in the world (even though it didn’t win the bidding in Singapore). It has a good track record, but a lot of debt which isn’t quite so good if the U.S. does head into a recession. More importantly, it was planning to build in Mulvane, so is caught up in the litigation by Wellington (doncha just love those lawyers).
Marvel Gaming is a new company but with money in the bank. It’s owned by the Binion family which had casino holdings in Las Vegas and across the country until it sold out to Harrah’s for $1.5 billion in 2004. Now it’s looking to reinvest a part of the sale price in new casinos. So small is nimble (ironically using Harrah’s money against Harrah’s).
You pays your money and takes your chance. What say you all? Who’s going to win? I’m waiting for the wizard tipster to give me the inside dope, but feel free to use the comment slot below to make your bets.
August 16th, 2008 | Tags: land casinos
