Revenue-hungry Kansas will be owner of new casinos

[September 01, 2009]  TOPEKA, Kan. (AP) -- In Kansas, Carrie Nation battled booze by smashing up saloons, the state school board once approved science guidelines questioning evolution and anti-abortion leaders have made their stiffest stands -- all burnishing the state's conservative credentials.

Now, Kansas is poised for an unlikely distinction: It's about to get into the casino business, not merely by blessing gambling and taxing the profits but by becoming the legal owner of the casinos themselves.

Kansas is believed to be the only state with such an arrangement. It already has four Indian casinos, but its first non-tribal one is set to open in December in Dodge City, the former cowtown and setting of television's "Gunsmoke."

It's all because the state, known for its conservative history and a vibrant right wing within its dominant Republican Party, needs the money.

Lawmakers in recent months have slashed money for schools and other state services, and the current state budget relies on $50 million in casino licensing fees to remain balanced.

"It's terribly ironic, and disappointingly so. I never dreamed that Kansas would be the first to try this experiment," said House Speaker Mike O'Neal, a Hutchinson Republican who fought unsuccessfully to block the 2007 law authorizing the new casinos and slot machines at racetracks.

Developers will build the casinos, install slot machines, set up tables and manage dealers, all under contract with the state lottery. They pay upfront privilege fees: $5.5 million for Dodge City and $25 million each for casinos planned in the Kansas City and Wichita areas.

The state will own the games and control software determining who wins and may overrule management decisions. Contracts spell out how revenues are divided.

"The whole ownership thing -- it always struck me as a little bit squirrely," said Burdett Loomis, a University of Kansas political scientist. "You could imagine Louisiana owning the casinos, or New Jersey."

But Kansas?

Voters here imposed prohibition in 1880 and kept it for nearly 70 years, well after the federal government repealed it. Afterward, the state constitution continued to condemn the "open saloon."

The state school board went back and forth on evolution during the past decade, rewriting science standards four times and making Kansas the target of international ridicule.

The state has been at the center of the national debate over abortion, too. Dr. George Tiller's clinic in Wichita was among a few in the nation that performed late-term abortions, spurring protests and laws designed to restrict his practice until the doctor was shot to death May 31.

All of it would appear to make the turn toward gambling unlikely -- save for the state's troubled finances.

The American Gaming Association says the U.S. already has 179 commercial and 420 tribal casinos outside Nevada, as well as 700 card rooms and 44 racetracks with slot machines.

So, industry officials and analysts say, why not more casinos in Kansas?

David Schwartz, director of the Center for Gaming Research at the University of Nevada-Las Vegas, notes other seemingly conservative states -- Iowa is a frequent example -- are awash in games of chance.

Also, as Loomis noted: "When revenue is a consideration, old-fashioned morality sometimes goes out the window."

Twelve other states have non-tribal casinos and a dozen have racetracks with slots. Several own machines at tracks, but the American Gaming Association says Kansas is the first with the arrangement for an entire casino.

Clark Stewart, chief executive officer of Butler National Corp., the Olathe company building the Dodge City casino, said the real issue is the 27 percent share of revenues for state and local governments.

"We're at the top end, percentage-wise, of what we can do," he said.

The Kansas Constitution once banned any lottery -- a term courts interpreted broadly enough to cover slots and table games -- but resistance to gambling eroded over time. Constitutional amendments in 1986 made exceptions to the ban for the state lottery and betting on dog and horse races. Federal law allowed the Indian casinos to open in the 1990s, whetting some legislators' appetite for commercial ones.

To get any constitutional change on the ballot for a vote, supporters need two-thirds majorities in the Legislature -- something social conservatives have blocked when it comes to commercial casinos.

But state ownership through the lottery didn't require another constitutional change, only a new law approved with simple majorities in both chambers. In 2007, gambling supporters barely obtained the necessary margins.

The state hopes to choose developers for casinos for the Kansas City and Wichita areas before year's end. The Dodge City casino plans to open with 575 slots and 10 tables, then expand within two years.

"I guess it doesn't strike me as particularly odd," said Senate Majority Leader Derek Schmidt, an Independence Republican who voted for the casino-and-slots law. "Every state has its own historical contours."

[Associated Press; By JOHN HANNA]

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