DALLAS - The Kansas Supreme Court issued a unanimous ruling Friday upholding an expansion of the state lottery act to allow casinos in designated zones across the state.

SB 66, the lottery expansion act passed by the Kansas Legislature in 2007, allowed the construction of casinos in four areas with approval from local voters. The designated casino zones are Wyandotte County, which includes Kansas City, Cherokee County in southeast Kansas, Sumner County in south-central Kansas, and Ford County in western Kansas, which includes Dodge City.

Attorney General Steve Six filed the friendly lawsuit challenging the constitutionality of the casino act on direction from Gov. Kathleen Sebelius. The governor, who backed the casino gambling act, said developers would be reluctant to invest in casinos in Kansas until the constitutional issues were resolved.

The expanded lottery act was based on a 1986 state constitutional amendment that allowed a state-owned and -operated lottery. In 1994, the Supreme Court said the state lottery could include slot machines and other casino games.

The 2007 act authorized the licensing of casinos built and managed by private developers, with the Kansas Lottery Commission owning the games.

The plaintiff argued that the Kansas Lottery would not own and operate the casinos as required by the state constitution, but only regulate and control the developers. Attorneys for the lottery commission said the act was constitutional because the commission, and therefore the state, owns the games played at the facilities.

The court ruled that the definitions of "own," "ownership," and "control" are sufficiently lax to allow a broad interpretation.

"The words 'own' and 'ownership' are not technical terms or terms of art but are flexible terms, the precise meaning of which depends on the context in which they appear," said Justice Eric S. Rosen, who wrote the court's opinion.

The Lottery Gaming Facility Review Board, which was established to award the casino licenses, is currently scheduled to make its decisions for Cherokee and Sumner counties on Aug. 21 and on Sept. 18-19 for Ford and Wyandotte counties.

Mike Deines, director of communications for the review board, said the board will consider one applicant from Cherokee County, two from Ford County, three from Sumner County, and five from Wyandotte County. All have been approved by local authorities, according to Deines.

"We'll be holding public hearings all summer on these applications," he said. "We've been moving forward on the assumption that the law was constitutional."

The 2007 lottery act stipulates that the state will receive at least 22% of net casino annual revenues, with local governments getting 3% of net revenues.

The enabling legislation restricts the allocation of the revenues to property tax relief, building and repairing public infrastructure, enhancing public safety, and aiding public education.

The state expects to realize more than $200 million a year in gambling revenues when all four casinos are operational.

The gambling measure allocates 1.5% of a casino's net revenues to the county and 1.5% to the city where it is located, but a revenue-sharing arrangement in Wyandotte County will divide the municipal share among Kansas City, Bonner Springs, and Edwardsville.

The city where the casino is built will receive 0.75% of the net revenues, with the other two cities sharing 0.75% of the revenues.

Wyandotte's combined city-county government expects the new gambling venues to generate more than $8 million in new property taxes a year when casino operations begin in 2010. The local government share of net gambling revenues is estimated at $7 million a year.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.