Minorities getting new shot at casino ownership

Rick Alm

Tuesday, May 16, 2000 | 11:05 a.m.

KANSAS CITY, Mo. -- Minority and women investors are being given a new shot at owning a small piece of Kansas City's casinos.

Pledges made to the city years ago by Station Casinos Inc. and Hilton Hotels Corp. were never fulfilled, in large part because the casinos struggled early on and investors willing to take the personal financial risk couldn't be found.

Under new guidelines made public Monday, Isle of Capri Casinos Inc., which is buying the Flamingo Hilton Casino, has agreed to an ownership formula that sets aside 10 percent of the local casino's preferred stock for both minority and women investors, beginning in mid-2002.

If the full 10 percent is not sold by the latter half of 2003, Isle will contribute up to $1 million over five years to a special grant fund to be independently administered to assist local minority and women entrepreneurs. Details of how and to whom those grants might be awarded are not yet developed.

Under terms of Isle's proposal, approved Monday by the Kansas City Port Authority, up to 10 individual investors will be required to finance 50 percent of their purchase with cash. Isle will finance the other half over 10 years at an annual interest rate 1 percent over prime.

The purchase price will depend on a 2002 audit of the property's value. Isle executives estimated Monday that the amount of the stock set aside will probably fall around $5 million, meaning each investor will be required to put up $250,000 in cash.

Station Casino officials said their new minority ownership guidelines will be proposed to the Authority later this spring.

Both Kansas City casinos also are operating under recently rewritten goals for increased hiring of women and minorities and more purchases from minority- and women-owned vendors.

Under the original agreements, Station was to commit a combined 35 percent of its purchasing dollars to disadvantaged firms, with 45 percent for the Flamingo.

The new goals for minority-firm purchasing have been equalized at 23.9 percent for each casino, down from 25 percent for Station and 35 percent for Isle, and 9.9 percent from women-owned firms, down from 10 percent for both.

A compliance audit for 1999 made public Monday showed Flamingo at 8.2 percent of its qualified purchases from minority-owned vendors and 11.2 from women-owned firms.

Station concluded the year at 3.4 percent from minorities and 6 percent from women.

Port Authority officials said the revised goals are based in part on the formula used by City Hall in its purchasing decisions. The lowered goals also reflect unique casino needs - such as slot machines or dice - that are not commonly available from most vendors.

Both casinos annually have surpassed their hiring goals for minorities and women.