CITY FOLLOWS TRIED SELECTION PROCESS FOR GAMBLING COMPANY

The manner by which Cape Girardeau will select a riverboat casino operator is identical to the process that netted St. Louis a share of gambling revenues that far exceed the amount mandated by Missouri law.

Cape Girardeau is no St. Louis, and the proposals for this city -- a $51 million facility offered by Boyd Gaming Corp. and a $58 million Lady Luck Gaming Corp. project -- pale in comparison to Gateway Casino's $210 million project in St. Louis.

But City Attorney Warren Wells said there's no harm in allowing Boyd and Lady Luck to up the ante here.

"I don't have any qualms about asking the proposers to explain or elaborate on their submittals," Wells said. "If they elect to add to those proposals in a substantive way, they're entitled to do that."

But Lady Luck officials and some city councilmen have objected to opening up the process to allow the gaming companies to turn the selection process into a "bidding war."

In St. Louis, that process produced six gaming companies competing for a gaming license at the St. Louis riverfront. The Gateway project, a proposal submitted by Caesars World Inc. and Casino Magic Corp, was the top choice for development.

The proposal still has to go before the St. Louis Board of Alderman, but already the city has been able to secure the promise of a 43-story hotel in the Laclede's Landing area downtown, a riverboat casino and a $10 million donation for construction of a parking garage.

Gateway also has agreed to pay the city 9 percent of gaming revenues, which eventually will rise to 11 percent. The city also would share in casino profits.

Officials have estimated the casino development could generate $550 million for the city over a 25-year period.

"From all the research we've done, St. Louis is getting the highest lease rate of any city in the country," said Clara Kinner, director of communications for the St. Louis Development Corp.

Kinner explained that St. Louis started its selection process by drafting a request for proposals (RFP) document, which was sent to casino operators from across the country.

A deadline for proposals was set, and six companies emerged with development plans. An ad hoc selection committee was formed to consider the six proposals and, ultimately, to recommend the board of alderman adopt the best project.

"In late December the city wrote a letter to each applicant," Kinner said. "The letter had several general questions for everyone and specific questions for each one.

"They also visited the operations the respondents control elsewhere."

On Jan. 24, the committee ranked the proposals, and the city has started negotiations for a development agreement with the number one company."

In Jefferson City, a similar process was followed.

City Attorney Allen Garner said up to seven companies were vying for a gaming license in Jefferson City.

"The city spent some time writing the RFP, which got out early in 1993," he said. "After we got the proposals we had presentations from each of the groups, which gave the city council the chance to ask questions.

Since then the city was able to negotiate a development contract with Becker Gaming Corp. of Las Vegas. The gaming company has proposed a $40 million project that includes land-based restaurants, a riverboat casino and $5 million for a convention center in Jefferson City.

Garner said the Becker offer was augmented during the negotiation process. He said that's the way most cities have selected riverboat operators.

"It's a request for proposals," he said. "If it's a bid, you can't change it; but if it's a proposal, the whole idea is to have ongoing negotiations of those proposals."

Wells said the selection process in Cape Girardeau, which will culminate March 7 in the council's recommendation to the Missouri Gaming Commission, won't be compromised simply because Boyd and Lady Luck might add to their proposals.

"I don't think it's necessarily going to sway the council just because one proposal shows more dollars," he said.

Wells said the city must ensure that a riverboat gaming operation won't adversely affect infrastructure in the city. Also, the gaming companies will be required to provide financial assurances that they'll complete what they propose to do.

The types of changes that will arise now that the proposals have been submitted will be those types of things that will guarantee a minimal negative impact on the city.

"This will have a tremendous impact on the city in a number of different ways," Wells said. "The council's responsibility is to see to it those impacts are minimal.

"This process is going to produce a proposal that's most advantageous to the city," he said. "I think they're going to be able to augment what they have."

Wells said a crucial issue for the city is to make any agreement for a proposal binding, and that includes any items that might be added.

The city attorney doesn't expect the proposals to change significantly in the coming weeks.

"I think there's a misconception that the sky's the limit with these companies," Wells said. "But there are practical limits on what investors are willing to put into a project.

"In theory, one competitor could come in and offer to quadruple the other project," he said. "But whatever thy agree to do, we expect them to be bound by that -- they won't be able to offer the sun, the moon and the stars."