After COVID, a Kansas City casino asks for a break on rent but gets a cool reception
One of the area’s top performing casinos is asking for a break on its rent next year after it was forced to close its doors because of the coronavirus pandemic.
Harrah’s Kansas City Hotel & Casino wants its landlord, the city of North Kansas City, to forgive as much as $410,000 in rent payments. Julie Sola, general manager of the casino, asked the council last week to consider some sort of concession
“We were closed for 75 days. And clearly that was very, very hard for us,” she told council members on Tuesday. “During this time due to closure we did not have any revenues. Yet we still had a significant amount of expense.”
The request received a cool reception from council members, though several said they would be open to some sort of extended repayment plan rather than forgiving payments altogether. The casino, between Armour Road and the Missouri River, rents the land from the city but owns its building.
The council discussion underscored the reliance some local communities have on gaming revenues, which have been hit hard by the pandemic.
Since reopening, Sola said casino admissions were down 10% and the hotel was only 65% percent occupied. It’s generally about 90% full, she said.
Financial reports from the Missouri Gaming Commission show that Harrah’s, like other casinos in the state, was hit hard during the initial wave of the coronavirus pandemic. Harrah’s pulled in $7 million in adjusted gross receipts in March, compared to nearly $18 million in March 2019. Harrah’s made no money at all in April and May.
But since government restrictions have lifted, Harrah’s appears to be bouncing back. The casino posted modest gains in June, July and August compared to those three months a year ago.
Harrah’s is owned by Caesars Entertainment, a conglomerate that was recently purchased by Eldorado Resorts, which kept the Caesars name.
Caesars Entertainment lost more than $275 million through June 30, according to filings with the U.S. Securities and Exchange Commission. The loss reflects all of the company’s casinos shutting down from March to mid-May in response to local and state shutdown orders meant to slow the spread of the coronavirus.
While council members expressed gratitude for the casino’s involvement in the community — one even mentioned that she had her wedding reception at the venue — they were skeptical of offering a break to one business when many had been hurt by the economic lockdown this spring.
Councilman Richard Stewart said other business owners might come and ask the city for property tax breaks to account for lost revenue this year.
“I know it was rough. But it was rough for restaurants and theaters. And so far I don’t think they’ve asked for any tax deduction,” he said. “That’s the problem I have: What do we tell these people if we pass this?”
Councilman Anthony Saper seemed to agree.
“We can’t do it for them if we don’t do it for everyone else,” he said.
He described the casino’s request as a “reasonable” one.
“But it’s not reasonable for us to do it. And from their balance sheet, they don’t seem to be in need of it. They’re simply putting it forward because it’s a possibility,” Saper said.
Money from Harrah’s supports North Kansas City’s finances in two ways.
First, there’s the city’s gaming fund, which pays for capital improvements and “extraordinary services.” Gaming and admission revenue goes into that fund.
The amount of money in that fund has been in steady decline since 2010, when it totaled $10.4 million. In 2019, it was $7 million. When the proposed budget for next year was written in August, the city estimated 2020 would end with a total of $4.5 million going to the gaming fund.
The other way North Kansas City gets money from Harrah’s is through rent payments, which is $2 million a year or 2% of gaming revenues, whichever is greater. That money goes into the general fund, which pays for basic city services. Casino rent payments make up about 14% of the revenue going into the general fund, which also gets money from property taxes, sales taxes, franchise fees and other sources.
Like the gaming fund, the amount of money the city gets from rent has been declining. In 2007, it was $4 million. In 2020, it was $3 million. The city’s proposed budget counted on just the minimum $2 million for 2021.
It’s from those rent payments that Harrah’s is seeking a break, a pro rated amount from being shut down for 75 days. Eric Berlin, North Kansas City’s administrator, said the rent forgiveness, if approved, would represent about 3% of the general fund budget.
The city projects a $2 million deficit in its general fund this fiscal year.
The casino employs about 750 people, though Saper said the company did lay off some workers because of the pandemic. In a letter to the city, Harrah’s said it spent more than $1 million to maintain benefits for employees who were furloughed through the end of September.
The Argosy Casino In Riverside sought and received a rent deferral this spring, said city administrator Brian Koral. But the business has paid the back rent and is current on its lease agreement.
Riverside lost about $2 million in gaming revenue during its last fiscal year, which ended in June. And the city expects a 20% hit to this year’s budget. With a population of 3,300, Riverside has a budget that is heavily reliant on gaming income. Including its lease agreement, sales tax dollars and gate revenue, Koral said the casino generally brings in $10 million to $11 million a year to city coffers.
Riverside’s general fund is about $22 million.
“It is a huge chunk of it,” Koral said.
While the current climate is unpredictable, he said the city is hopeful that gaming revenues will continue to rebound.
“We’re optimistic, yeah,” the city administrator said. “But who knows if we’re over the worst of it.”
The Argosy is operated by Penn National Gaming, which also runs the Hollywood Casino near the Kansas Speedway. But that building and land is privately owned.
The Isle of Capri Casino, which is rebranding to Casino KC as part of a major redevelopment, rents its site from the Port Authority of Kansas City. Twin River Worldwide Holdings Inc. recently purchased that property as part of the $17 billion merger between Eldorado Resorts and Caesars Entertainment.
Port officials said they have provided no rent concessions to the casino during the pandemic.
This story was originally published October 9, 2020 at 5:00 AM.
