Lottery says no to SE Kansas casino

11/25/2009 12:00 AM

11/25/2009 12:07 AM

The Kansas Lottery has rejected a proposal from a Wichita-based investment group to build and manage a casino in the southeast corner of the state.

Ozark Trail Gaming, a group that includes former Wichita Mayor Bob Knight, proposed to build and manage a $225 million casino in Cherokee County at U.S. Highway 166/400, one mile north of I-44.

In a letter to the group, the Lottery said it rejected the application because it "provided no information" that shows the group had the required money or experience.

Money was the main issue, Knight said Tuesday.

"We still don't have the financing put together,'' he said. "We had to raise $225 million. As of mid-morning we weren't there.''

That amount is the minimum investment required by state law to get a license for a state-owned casino.

Knight declined to say how close the group came to that target.

The Ozark group includes Wichita attorney Henry Blase, also listed as trustee of the Schultz Family Trust; Knight; and Wichita investment banker Theron Froggatte.

The Lottery's letter also said there was "no evidence that the applicant has any Class III gaming experience." The law requires at least three consecutive years of such experience.

Knight said the group had been negotiating with Penn National Gaming to join its project.

"We were, quite frankly, trying to work out a win-win situation with the landowner, Cherokee County and Penn," Knight said. "Penn National is willing to go along with us if we could raise some money, and they would consider management."

But, he said, "It's kind of irrelevant at this point. It's the money that is at issue. It's not hard to find good management."

Penn National, of Wyomissing, Pa., had applied for the zone last year before pulling out. It also applied to manage a casino in Sumner County last year. It remains a partner in the only application under consideration for the northeast gaming zone.

Knight said his group also had been talking to Penn about helping finance its project, but he wouldn't say where those discussions stood.

"All I can tell you is we're not there yet," Knight said.

The group can appeal the Lottery's decision, and if it gets the financing together it can reapply, he said.

The application process in the southeast zone, which includes Crawford and Cherokee counties, remains open, with a deadline of Jan. 19.

Penn National was the only other applicant for the southeast zone. It withdrew last year in part because of competition from the Downstream Casino Resort just across the border in Oklahoma.

The Downstream has scared off other potential applicants. Knight said the southeast corner of the state could get a casino if lawmakers lower the $225 million requirement to $50 million, as it was in Dodge City.

"I'm not convinced it can't be done yet, but it is a hard deal to do," Knight said.

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