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Harrah’s Out of Kansas Casino Project Picture

Posted on September 10th, 2010

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One of the biggest players in the casino and gambling industry, Harrah’s Entertainment Inc., said it was dropping its plan to construct a casino in the state of Kansas, south of the city of Wichita last Wednesday. This move by Harrah’s leaves the field open for two companies which are smaller and only based in the region to vie for the contract to build a casino with the Kansas Lottery. So far, the gambling giant based in Las Vegas has not specified any reasons as to why it suddenly it withdrew its proposal in the middle of the battle in which their company was clearly in an advantage. Harrah’s originally proposed a construction of a complex to cost around $260 million near the town of Mulvane. The proposal of the company included not just a casino but also a hotel to contain 100 rooms. The decision to withdraw the bid only came after careful consideration, according to Trevor Busche, the vice president for development of the company.

It may be considered a bit coincidental or even expected by some parties, but Harrah’s pronouncement came nearly a month after the company also announced that they have incurred a loss amounting to $274 million for only the second quarter of the year, from April to June. Moreover, the company also reported that although its debts are not due until 2015, the total amount has reached $22 billion. Jacquline Peterson, a spokesperson for the company was quick to point out that a number of factors were considered in arriving at the decision of withdrawal. She added, “The decision was based on many data points,” but did not mention what exactly these data points are. The announcement of Harrah’s also came right on the same day that the Lottery Commission of the state of Kansas is going to have the submitted proposals for the south central Kansas casino undergo initial review.

With Harrah’s announcing their withdrawal and therefore out of the bidding race, the commission was left with no choice but to endorse the proposals by the two remaining companies. One proposal was submitted by a subsidiary of Peninsula Gaming which is based in Dubuque, Iowa. Their proposal includes a 150-room hotel and an indoor horse show arena which would have a 3,000 seating capacity. Meanwhile, a subsidiary of Global Gaming Solutions, a company based in Ada, Oklahoma, was the source of the second proposal. Global Gaming Solutions is owned by a Native American tribe, the Chickasaw Nation. The two proposals, after the endorsement by the Commission, will then be forwarded to the review board of Kansas, which will decide which of the two developers ends up building and managing the casino. If Peninsula does end up with the contract, they would need their plan to be approved by zoning official s of the area. Global Gaming Solution, should they succeed, would be exempted from this step, as they would most likely construct their casino on land subject to a grant for the Chickasaw Nation.

The executive director of the lottery, Ed Van Petten said that his group would like to endorse as many applicants as possible, but given the scenario where only two proposals are left, they do not have a choice as much as they have also found the two remaining plans very qualified. He also added that Harrah’s did not confide with them as well why their company is pulling the plug off their proposal, as even as late as Tuesday afternoon, his group was still in talks with the company to iron out details of their proposal. Kansas Representative Vince Wetta (D-Wellington) said that the withdrawal of Harrah’s was really not a surprise, especially with their financial position known to everyone. He said, “I just had an idea from day one that they didn’t bring their ‘A’ game. They’re in deep trouble.” An analysis by the Lottery concluded that although the company has the ability to fund the construction of the casino, its debt obligations “has essentially left the company working for its debt holders.”

As soon as the new casino will be operational, 22 percent of its revenues will be funneled to the state. Meanwhile the Lottery will own the rights to all equipment and new gambling, down to the dice and cards.