Horse, dog racing enthusiasts seek adjustment of Kansas state gambling law

Champions of a return to Kansas of gambling facilities featuring horse or dog racing Wednesday attempted to gain traction with legislation changing state law to shift a greater percentage of revenue from the state to track operators.

Lobbyists and attorneys for rival factions flooded the House Appropriations Committee meeting room and delivered conflicting testimony that alternately declared revision of revenue sharing perfectly legal or a breach of contract that could cost the state more than $100 million by refunding fees to three casinos operating in the state.

The competing interests said House Bill 2537 would either generate 4,000 new jobs or destroy hundreds of existing jobs. Clearing a path to a new public vote on slot machines in Sedgwick County — voters defeated the measure in 2007 — would break a promise to voters.

“Legislation to reverse the 2007 election outcome sends a signal to companies here and elsewhere that doing business in Kansas is unstable and insecure regardless of elections, contracts or existing commitments,” said Topeka attorney John Frieden.

Frieden, representing Kansas Star Casino in Mulvane, about 20 miles south of Wichita, said circumventing the existing structure of state-sanctioned casino gambling in Kansas before 2032 would enable Kansas Star to seek recovery of a $25 million privilege fee paid to the state, as well as 10 percent interest compounded annually. Litigation could follow for loss of anticipated profits and undermining viability of the Sumner County casino run by Kansas Star.

“I’m taken aback by what I’d call the scare tactics,” said Scott Beeler, an Overland Park attorney representing the closed Woodlands in Wyandotte County, held by businessman Phil Ruffin.

“Opposition to this legislation is not from any true concern over a potential repayment of privilege fee by the state. The facts are that there is an entity prepared to invest tens of millions of dollars into a facility which has sat idle for over a decade,” Beeler said.

With lack of clarity on these points despite a flurry of testimony, the House budget committee took no action on the bill.

Campaign finance records, however, were clear that Ruffin, owner of the defunct Woodlands, Wichita Greyhound Park and Camptown Greyhound Park in Kansas, and the Greater Kansas Racing Alliance, which supports pro-racing revision of state law, separately contributed $35,000 to about 75 incumbent members of the Legislature.

The collaborating interests cut checks to 21 of the 23 House budget committee members — Republicans and Democrats — in amounts ranging from $250 to $1,000. In December, the GKRA sent $2,000 to Gov. Sam Brownback.

The two committee members who didn’t participate in the spending binge were die-hard gambling opponents Reps. Mark Kahrs and Dan Hawkins, both Wichita Republicans.

“I turned it down,” Hawkins said. “They came in and said, ‘We have a gaming check.’ I said, ‘Who is it from?’ They said, ‘Ruffin.’ I said, ‘You can have it back.’ ”

“I have a personal opposition to gambling,” said Kahrs, who was chairman of the No Casino organization in Wichita. “I think it’s very harmful to our state and our citizens.”

Under the proposed bill, Kansas’ casino gambling statutes adopted in 2007 would be amended to reduce from 40 percent to 22 percent the share of revenue that operators of horse or dog tracks with slot machines would forward to the state treasury.

The state’s casinos in Mulvane, Dodge City and Kansas City, Kan., are required to share 22 percent, but a distinction between casinos and racetracks was written into state law because legislators thought construction and operational costs of casinos far exceeded requirements of racing facilities.

Whitney Damron, a lobbyist retained by Kansas Entertainment, which operates the Hollywood Casino at Kansas Speedway, said Ruffin was aware of state gaming rules adopted by the Legislature and signed by Gov. Kathleen Sebelius in 2007.

“What is taking place right now is akin to the house changing the rules of blackjack or poker in the middle of the deck and simply telling their customers to accept such actions,” Damron said.

Objections to the House bill have been raised by individuals who contend overhauling this benchmark could lead operators of the three casinos to demand repayment of $25 million paid by each developer for the privilege of building a casino in one of four exclusive gaming zones. There is potential a rewrite of state gambling law could force payment of principal, interest and more — if the casino owners filed lawsuits seeking damages.

In addition, the bill would authorize another vote in Sedgwick County on whether to place slots at a Wichita dog racing park.

Rep. John Barker, an Abilene Republican who sponsored the new bill, said a provision could be inserted into the legislation requiring the Kansas Supreme Court to certify whether the repayment provision was applicable.

“We’re going to get a ruling from the Supreme Court,” Barker said. “I don’t want to put the state at risk.”

Kansas Attorney General Derek Schmidt, at the request of Barker and Kahrs, is working on a nonbinding legal option on whether legislation altering the slot machine revenue stream at racetracks would trigger repayment clauses.

In a memorandum, Schmidt said the Kansas Lottery, which is party to contracts with casino managers, indicated that allowing installation of slot machines at the track in Wichita would violate a contract prohibiting until 2032 opening of a competing gaming facility in Sedgwick or Sumner counties.