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A week ago, a group of Wichita casino investors liked their odds of winning a bid to build and manage Dodge City's state-owned casino.

 

But the odds flipped during the week as Olathe-based rival Butler National Service Corp. produced enough evidence of its financing capabilities to convince five of the seven members of the state's casino review board to give it the nod instead.

 

"I still think it's the right project, the right time, the right size, and the right financing," Steve Joseph, a Wichita attorney who was president of Dodge City Resort and Gaming, said after Friday's vote. "But five members of the board disagree."

 

The board had postponed its vote for a week due to financing concerns in the wake of turmoil in the financial markets.

 

Most of its worries centered on Butler National's ability to secure equity and debt financing for both phases of its $85.7 million project.

 

Joseph said he thought his group had offered enough proof that it could pay for its more conservative $70.3 million project in cash if required. Investors had committed $30 million of their own money, he said.

 

But Butler National this week produced a letter from Wall Street investment firm Merrill Lynch expressing high confidence that it could arrange $45 million for the Butler casino, along with a commitment letter from Kaw Valley State Bank to provide another $20 million. The rest would come from investors.

 

Merrill Lynch recently agreed to be acquired by Bank of America after being pressured into a deal by federal regulators to avoid bankruptcy.

 

Joseph said the review board wanted a commitment from his investors that they could put up the entire $70.3 million for their project in cash.

 

"Although we certainly could do that, in terms of an investment, that's bad," he said. "You just can't do all-cash deals.

 

"We weren't willing to say we were going to do something we weren't going to do," he said.

 

They would've had no problem securing debt financing, he said. The group offered the board a new letter of confidence from Equity Bank of Wichita, which had financed $6.4 million of the project so far, including the state-mandated $5.5 million privilege fee. The fee will be refunded.

 

The investors had spent about $1 million on the yearlong effort, Joseph said. They included former Wichita Mayor Bob Knight; media owner Larry Steckline and his wife, former Kansas Attorney General Carla Stovall Steckline; and a host of Wichita entrepreneurs and business owners.

 

The winners were more than pleased.

 

"There's a certain moment of euphoria," said Doug Smith, project director for Boot Hill Gaming, a Dodge City organization affiliated with Butler National, "but then there's a casino we have to open in 12 months. So there's a new set of tasks in front of you. I guess I'd rather have that set of tasks than not have it."

 

Butler plans a first phase that will include 575 slots and 10 tables. That will open 10 months after the Kansas Racing and Gaming Commission approves a background check of the company. The investigation is due to be completed by Dec. 5.

 

The second phase will result in 875 slots and 20 tables, due to open in 2011.

 

The facility also will include a 124-room hotel.

 

Board member Jack Brier of Topeka, who raised the financing issue last week, said he was convinced of Butler's ability to fund its entire project. Four other board members agreed.

 

"I didn't see the strength in the financing from Dodge City that I did from Butler National," said Bob Boaldin of Elkhart.

 

Jim Bergfalk of Mission voted for the Wichita group even though he remained concerned that it didn't provide evidence of the partners' ability to pay off in cash.

 

Board Chairman Matt All of Lawrence provided the other vote for the Wichita group. All said he didn't share the other members' concerns about its ability to finance its project, and preferred the company's more conservative approach. He also said it was more consistent in its plans while Butler National changed its proposal multiple times.

 

A few of the board members cited other factors for choosing Butler National.

 

Jackie Vietti of El Dorado said she liked the fact that some of the gaming revenue would be shared with a local fund that would benefit a broader region, not just Dodge City.

 

Dean Ferrell of Topeka said Butler had more "sweat equity" in the project because it was involved longer than the Wichita group.