Opinion ID: 618830
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Heading Rank: 3

Heading: The Kansas Expanded Lottery Act

Text: In April 2007, the Kansas legislature enacted the Kansas Expanded Lottery Act (KELA), Kan. Stat. Ann. § 74-8733 et seq. KELA, in pertinent part, authorized the establishment of one lottery gaming facility in each of four specified gaming zones, including the southeast gaming zone, which encompasses Cherokee and Crawford counties in the southeast corner of the State. Kan. Stat. Ann. §§ 74-8702(f), 74-8734(a) and (d). KELA anticipated that each lottery gaming facility would be owned and operated by the Kansas Lottery, an independent state agency, but managed by a lottery gaming facility manager whose management terms and conditions would be governed by a lottery gaming facility management contract (management contract). Id. §§ 74-8702(n) and (o), 74-8734(a) and (d). KELA imposes certain requirements for management contracts in the southeast gaming zone, including that (a) the casino must consist of an investment in infrastructure of at least $225 million, (b) the applicant must pay a $25 million privilege fee, and (c) the compensation paid to the lottery gaming facility manager must not exceed 73% of gaming revenues (or, in other words, the tax rate on the casino must not be lower than 27%). Id. § 74-8734(g)(2), (h)(6), (h)(12), (h)(13) and (h)(16). KELA imposes a multi-step approval process for management contracts. The Lottery Commission first approves or disapproves proposed management contracts with the entities who have submitted timely applications to be lottery gaming facility managers for a particular gaming zone. Id. § 74-8734(d). If the Lottery Commission approves a proposed management contract, the executive director of the Kansas Lottery and the prospective lottery gaming facility manager are required to execute the contract.... Id. § 74-8736(a). Upon execution of a ... management contract ..., the executive director [of the Lottery] ... submit[s] such contract ... to the [Review Board], id. § 74-8736(b), which in turn must determine whether the contract is the best possible such contract, id. § 74-8736(a). If the Review Board determines that the management contract is the best possible such contract, id., it then submit[s] the contract to the Kansas racing and gaming commission [KRGC] for approval, id. § 74-8736(e). The KRGC in turn must, after conduct[ing] ... background investigations of prospective lottery gaming facility managers, vote to approve in whole or reject in whole the recommendation of the [Review Board]. Id. The executed management contract must also be endorse[d] by resolution of the city governing body or county commission as required in [Kan. Stat. Ann. § ]74-8734 and amendments thereto. Id. § 74-8736(a). Thus, in sum, an executed management contract becomes binding ... only upon approval by the Review Board and KRGC, and endorsement by the relevant city or county governing body. Id.