Study faults Castle Rock Casino proposal for being too big

The group proposing a $145 million casino in Cherokee County is overestimating revenue and underestimating building costs, according to a recent study sponsored by a convention and visitors bureau in a competing county.

The state is in the final stage of picking a developer for a casino in the southeast part of the state. This would be the fourth and final casino envisioned by the Kansas Legislature when it approved state-owned gaming in 2007.

There are three casino proposals in front of the Kansas Lottery Gaming Facility Review Board, which will pick a single winner. The board is scheduled to hear from the developers – all of whom have Wichita ties – next week. It will then hear from its own consultant on June 10.

The board will forward its selection to the Kansas Racing and Gaming Commission for a final check and approval.

The three proposals are: Castle Rock Casino Resort, Kansas Crossing Casino & Hotel and Emerald City Casino Resort.

Castle Rock Casino Resort is twice as large at the other proposals and would sit a stone’s throw from the Kansas/Oklahoma/Missouri border in Cherokee County. The other two are more modest, although still large, and sit more than 30 miles to the north in Crawford County, near Pittsburg.

Castle Rock backers have said all along that they are the obvious choice because their project will pay the most taxes, employ the most people and take in the most out-of-state dollars. The development group consists largely of Wichita businessmen, led by Brandon and Rodney Steven.

But the study, funded by the Crawford County Convention & Visitors Bureau, concludes that Castle Rock is too big. The three main contentions in the study are:

▪ That Castle Rock has overestimated its gaming revenue. Castle Rock has built its plans around yearly revenue of $82 million, while the study estimates gross revenue would be about $50 million per year.

▪ That Castle Rock has underestimated the project’s cost. Castle Rock said it would build a casino of more than 65,000 square feet, plus a 200-room hotel with meeting space, for $145 million. The study says that, extrapolating from other casinos, the cost would be closer to $260 million.

▪ That Castle Rock has overpromised on hiring. Castle Rock said it would hire the equivalent of 877 employees. The study said it estimates that it would be 467.

The study was written by Jay Sarno & Associates, a market research company that said it has extensive experience with tribal gaming in Oklahoma. It also names PPG, a tribally owned firm in Tulsa that that specializes in gaming studies, as helping research the study.

Brandon Steven, who is leading the Castle Rock bid, said he was unconcerned about the conclusions of the study. The study’s authors are mainly interested in protecting the interests of the tribal casinos, he said.

“They are the marketing analysts for the tribe who are right across the street, who are going to compete with us,” he said. “When we build they stand to lose hundreds of millions of dollars. I expected them to throw more at us.”

One of the main conclusions of the study is that to thrive Castle Rock would have to pull heavily from northeast Oklahoma, which is already filled with dozens of tribal casinos. And, as for Kansas and Missouri residents, the Quapaw Tribe-owned Downstream Casino Resort, less than a mile from the Castle Rock site, has already had years to lock in customers.

B.J. Harris, executive director of the Crawford County Convention and Visitors Bureau, said his group paid $3,000 for the study.

“Obviously we want a casino to happen in Crawford County, but that’s where our bias ends,” he said. “We don’t care which one.”

Kansas Crossing Casino spokeswoman Carrie Tedore said in an e-mailed statement that the study makes perfect sense.

“We looked at that same location and it just didn’t add up for us,” she said. “When the Oklahoma competitor across the street (Downstream) has twice the project and one-third the tax rate, and consultants project $40-50 million in annual gaming revenue, it doesn’t work. A State owned casino in that location, has everything working against it, and would go bankrupt.”

Phil Ruffin Jr., who is part of the team developing the Emerald City proposal, said he had no comment.

Steven said his own group has done its homework – including a number of market studies from top firms that confirm the scope of Castle Rock and its revenue potential.

As for the cost of the project, he said, the estimates were put together by Crossland Construction of Columbus, which is based in Cherokee County and is one of the state’s largest construction firms. The owners are partners in the project.

Reach Dan Voorhis at 316-268-6577 or Follow him on Twitter: @danvoorhis.