Legal challenge to casino ballot measure likely, Cape businessman says

A Cape Girardeau businessman hoping to lure a casino to downtown said Thursday he is almost certain to be a party to a lawsuit challenging a ballot measure that would cap the number of casinos in Missouri.

No legal challenge has been filed against the proposal, which was certified Tuesday for a spot on the Nov. 4 statewide ballot. But David Knight, owner of Ole Hickory Pits, said he has been talking with a local lawyer about whether to initiate the challenge and he has also been in contact with leaders in Sugar Creek, Mo., a town in western Missouri that also would be blocked from landing a riverboat casino by the measure.

In response, Chuck Hatfield, an attorney for the Yes for Schools First Coalition, said he believes the proposal will withstand any legal challenge. And Scott Charton, a spokesman for the coalition, said the measure would not prevent Cape Girardeau from luring a casino license away from another city in the event of a casino closing in another location.

Knight and Jim Riley, owner of Red Letter Communications, are the principal partners in DREAMbig LLC, a company formed to purchase vacant land and deteriorating housing along North Main Street. Much of the property was previously owned by Boyd Gaming Group, the company chosen to develop a Cape Girardeau casino in the 1990s. DREAMbig was looking for a casino company to be the developer of the project when the Missouri Gaming Commission voted in June to impose a moratorium on new licenses while the ballot measure was pending.

The most likely avenue for a challenge, Knight said, is a lawsuit contending that the measure violates the Missouri Constitution's restrictions on the number of subjects included in proposals submitted by initiative. The constitution directs that initiatives address only one subject.

A previous unsuccessful lawsuit to block the measure included a challenge based on the single-subject rule, but Cole County Circuit Judge Patricia Joyce ruled the time was not right to decide that issue. Under state law, Knight or anyone else intending to challenge the ballot measure has until Aug. 15 to file a lawsuit.

"The chances of a lawsuit at this present time are about 90 percent," Knight said.

The ballot measure, financed by $2.4 million of casino company funds, would cap the number of casino licenses in Missouri at the current number of 13. In addition, it would eliminate the $500 loss limit on wagering, raise the tax on casino profits to 21 percent and direct the new revenue, estimated at more than $100 million annually, to public schools. The measure also calls for annual audits to show that the new casino tax money is not being used to replace other support for schools.

Hatfield, an attorney with Stinson Morrison Hecker LLP, said that while any lawsuit would name Secretary of State Robin Carnahan as the defendant, the coalition would probably seek to intervene.

By approving the measure for the ballot, Carnahan has essentially decided that legal questions, including those raised in a letter written last month by Cape Girardeau Mayor Jay Knudtson, are without merit, Hatfield said.

"We believe Secretary of State Carnahan is correct," Hatfield said. "She sees a lot of these initiatives, and she has to pass on them. We think she made the right decision."

In a letter to Carnahan, Hatfield said Knudtson's arguments about lost revenue and lost jobs if the number of licenses is limited shouldn't be part of the discussion of the legality of the measure. And any argument that the proposal contains more than one subject misunderstands the intent of the constitution, Hatfield wrote.

Every piece of the initiative is essential to achieving its purpose, Hatfield wrote. "While there is no doubt that the Schools First proposal would enact three new sections of Missouri law and amend five sections of existing law, each and every change relates [to] gaming, including the sections involving the use of gaming taxes to fund education," he wrote.

Knudtson also raised questions about whether the proposal accurately reflects its impact on state law, claiming it repeals by implication a provision that gives the gaming commission the power to determine where casinos are located and how many to have in any city or county.

The commission will still have that power subject to the statewide limit, Hatfield said.

Knight said attracting a casino from another city would be almost impossible if the proposal passes in November.

"At this point, that would be a three-rail bank shot if you are playing pool," Knight said.

rkeller@semissourian.com

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