Kansas Attorney General Opinion 2016-006

April 22, 2016
ATTORNEY GENERAL OPINION NO. 2016-6
The Honorable Mark A. Kahrs
State Representative, 87th District
State Capitol, 286-N
300 S.W. 10th Avenue
Topeka, Kansas 66612
Re: 	State 	Boards, 	Commissions 	and 	Authorities—State 	Lottery—Kansas
Expanded 	Lottery 	Act; 	Lottery 	Gaming 	Facilities; 	Gaming 	Facility
Management Contract Requirements; Privilege Fees; Breach of Contract
Synopsis: 	A racetrack gaming facility in Sedgwick County, after the referendum vote
against the placement of electronic gaming machines (EGMs) in the county,
is a “similar gaming facility” as used in Paragraph 30 of the South Central
Facility Management contract and K.S.A. 2015 Supp. 74-8734(h)(19)(A)(ii).
Enacting a statute that authorizes a revote in Sedgwick County, a county in
which the placement and operation of electronic gaming machines at a
parimutuel licensee location is currently prohibited by statute, may be a
designation of an “additional area” in violation of Paragraph 30 of the South
Central 	Facility 	Management 	contract 	and 	K.S.A. 	2015 	Supp. 	74-
8734(h)(19)(A)(ii). If this action by the State is determined to be a breach,
one consequence may be the required repayment of the privilege fee plus
interest on such amount, compounded annually at the rate of 10% pursuant
to Paragraph 31 of the South Central Facility Management contract and
K.S.A. 2015 Supp. 74-8734(h)(19)(B).
Three factors are considered when evaluating a claim that state law violates
the United States Constitution Contract Clause: “whether the state law has,
in fact, operated as a substantial impairment of a contractual relationship;
whether there is a significant and legitimate public purpose behind the
legislation; and whether the adjustment of the contracting parties’ rights and
responsibilities is based upon reasonable conditions and is of a character
appropriate to the public purpose justifying the legislation’s adoption.” Cited

The Honorable Mark A. Kahrs
Page 2
herein: K.S.A. 2015 Supp. 74-8702; 74-8733; 74–8734; 74–8737; 74-8740;
74–8741; 	74-8742; 	74-8743; 	74-8744; 	74-8746; 	K.S.A. 	74-8802; 	Kan.
Const., Art. 15 §§ 3, 3a, 3b, 3c, 3d.; 2016 House Bill 2537, New Section 10;
U.S. Const., Art. 1, § 10.
* 	* 	*
Dear Representative Kahrs:
As State Representative for the 87 th District, you ask our opinion on three issues related
to the Kansas Expanded Lottery Act (KELA). 1 Specifically, you ask:
1. 	Would enactment of a bill, such as [2016] HB 2537, that permits a revote on
electronic gaming machines at a racetrack in Sedgwick County breach the
management contracts between the Kansas Lottery and the Lottery Gaming
Facility Managers and thereby result in imposing on the State of Kansas
repayment of privilege fees plus interest, as specified in K.S.A. [2015
Supp.] 74-8734(h)(19)?
2. 	Would such a breach of contracts subject the state to additional liabilities for
damages?
3. 	Would such a breach of contracts occur at the time the bill is enacted?
Background on Gaming in Kansas
Some background on gaming in Kansas may be helpful. 	The Kansas Constitution
provides that “[l]otteries and the sale of lottery tickets are forever prohibited.”2 “[T]he term
lottery, as used in Art. 15, § 3 of the Kansas Constitution, has been defined [by the
Kansas Supreme Court] as any game, scheme, gift, enterprise, or similar contrivance
wherein persons agree to give valuable consideration for the chance to win a prize or
prizes.” 3
Since the constitutional ban against lotteries was adopted in 1861, four voter-approved
constitutional amendments to the ban against lotteries have been adopted to authorize
charitable 	bingo, 4 	parimutuel 	wagering, 5 	state-owned 	and 	-operated 	lotteries, 6 	and
1 K.S.A. 2015 Supp. 74-8733 et seq. “K.S.A. 74-8733 through 74-8773, and amendments thereto, shall be
known and may be cited as the Kansas expanded lottery act. The Kansas expanded lottery act shall be
part of and supplemental to the Kansas lottery act.” K.S.A. 2015 Supp. 74-8733(a).
2 Kan. Const., Art. 15, § 3 was adopted in 1861.
3 State ex rel. Stephan v. Finney, 254 Kan. 632, 644 (1995).
4 Kan. Const., Art. 15, § 3a was adopted in 1974.
5 Kan. Const., Art. 15, § 3b was adopted in 1986.
6 Kan. Const., Art. 15, § 3c was adopted in 1986.

The Honorable Mark A. Kahrs
Page 3
charitable raffles. 7
The Kansas Lottery Act,8 the KELA and the Kansas Parimutuel Racing Act 9 were enacted
to execute the constitutional authorization for parimutuel wagering and a state-owned and
-operated lottery. These acts, inter alia, control lotteries in Kansas.
The KELA became effective on April 19, 2007, upon publication in the Kansas Register. 10
There are three requirements of the KELA that are pertinent to this opinion. Two
requirements relate to lottery gaming facilities and the other relates to racetrack gaming
facilities.
First, the KELA authorizes the Kansas Lottery, on behalf of the State, to operate one
lottery gaming facility 11 in each gaming zone. 12 There are four statutorily created gaming
zones: 13 the northeast Kansas gaming zone, the south central Kansas gaming zone, the
southwest Kansas gaming zone, and the southeast Kansas gaming zone. The Kansas
Lottery’s 	authority 	to 	operate 	a 	lottery 	gaming 	facility 	is 	subject 	to 	approval 	of 	a
referendum in each county composing a gaming zone. 14 “If a majority of the votes cast
and counted at such election is in favor of approving the operation of a lottery gaming
facility within the county, the Kansas lottery may operate a lottery gaming facility in such
county, subject to the provisions of [the KELA].”15 	Conversely, “[i]f a majority of the votes
cast and counted at an election . . . is against permitting the operation of a lottery gaming
facility within the county, the Kansas lottery shall not operate a lottery gaming facility in
such county.”16 The deadline for conducting the special election was not more than 180
days from April 19, 2007, 17 which was October 16, 2007.
7 Kan. Const., Art. 15, § 3d was adopted in 2014.
8 K.S.A. 74-8701 through K.S.A. 74-8730.
9 K.S.A. 74-8801 through K.S.A. 74-8829.
10 26 Kansas Register, No. 16 at 518 (2007). See L. 2007, Ch. 110, § 63.
11 “‘Lottery gaming facility’ means that portion of a building used for the purposes of operating, managing
and maintaining lottery facility games.” K.S.A. 2015 Supp. 74-8702(l).
12 K.S.A. 2015 Supp. 74–8734(a).
13 “‘Gaming zone’ means: (1) The northeast Kansas gaming zone, which consists of Wyandotte county;
(2) the southeast Kansas gaming zone, which consists of Crawford and Cherokee counties; (3) the south
central Kansas gaming zone, which consists of Sedgwick and Sumner counties; and (4) the southwest
Kansas gaming zone, which consists of Ford county.” K.S.A. 2015 Supp. 74-8702(f).
14 K.S.A. 2015 Supp. 74-8737(a). We note that “[t]he lottery commission may waive the requirement that
an election be held pursuant to this section if the lottery commission determines that after December 31,
2004, and before the effective date of this act, the county has held an election of qualified voters pursuant
to the county's home rule authority: (1) At which the ballot question was in substantial compliance with the
requirements of this section; (2) which was administered by the county election officer in a manner
consistent with the requirements of state election law; and (3) at which a majority of the votes cast and
counted was in favor of the proposition.” K.S.A. 2015 Supp. 74-8737(e).
15 K.S.A. 2015 Supp. 74-8737(c) (emphasis added).
16 Id. (emphasis added).
17 K.S.A. 2015 Supp. 74–8737(a).

The Honorable Mark A. Kahrs
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The south central Kansas gaming zone comprises Sedgwick and Sumner counties. 18 On
August 7, 2007, within the 180 days required by statute, Sedgwick County held a special
election in which the following propositions were presented to the electorate:19
Proposition No. 1
Shall the following be adopted?
Shall the Kansas lottery be authorized to operate a lottery gaming
facility in Sedgwick County?
Proposition No. 2:
Shall the following be adopted?
Shall the Kansas lottery be authorized to place electronic gaming
machines in Sedgwick County?
A majority of the Sedgwick County electorate participating in that election voted against
operating a lottery gaming facility and also against placing EGMs 20 in Sedgwick County. 21
That action left Sumner County as the only remaining county in the south central Kansas
gaming zone that could have a lottery gaming facility. 	Sumner County had previously
held a special election on December 20, 2005, and the electorate voted to approve a
“destination resort casino,” i.e., a lottery gaming facility, in the county. 22 	On June 22,
2007, 23 the Kansas Lottery Commission determined that the December 20, 2005, election
in Sumner County met the three requirements of K.S.A. 2015 Supp. 74-8737(e) and,
therefore, waived the election requirement in K.S.A. 2015 Supp. 74-8737(a).24
There is a lottery gaming facility in the northeast Kansas gaming zone,25 the south central
18 K.S.A. 2015 Supp. 74-8702(f)(3).
19 http://www.sedgwickcounty.org/elections/election_results/spcl07/index.html (accessed March 12, 2016).
20 In pertinent part, “‘[e]lectronic gaming machine’ means any electronic, electromechanical, video or
computerized device, contrivance or machine authorized by the Kansas lottery which, upon insertion of
cash, tokens, electronic cards or any consideration, is available to play, operate or simulate the play of a
game authorized by the Kansas lottery pursuant to the Kansas expanded lottery act, including, but not
limited to, bingo, poker, blackjack, keno and slot machines, and which may deliver or entitle the player
operating the machine to receive cash, tokens, merchandise or credits that may be redeemed for cash.”
K.S.A. 2015 Supp. 74-8702(c).
21 http://www.sedgwickcounty.org/elections/election_results/spcl07/index.html (accessed March 12, 2016).
22 Letter to Ed Van Petten, Kansas Lottery Executive Director from Shane J. Shields, Sumner County Clerk
and Election Officer, May 8, 2007.
23 Kansas Expanded Lottery Act Results of County Elections with Resulting Deadlines for Lottery Gaming
Facility Manager Applications, Keith Kocher, Director of Program Assurance and Integrity, Kansas Lottery.
24 Id.
25 Hollywood Casino is located in Kansas City, Wyandotte County, Kansas.

The Honorable Mark A. Kahrs
Page 5
Kansas gaming zone, 26 and the southwest Kansas gaming zone. 27 A lottery gaming
facility management contract28 in the southeast gaming zone was awarded in June of
2015. 29 	Therefore, the State operates lottery gaming facilities in three of the four
statutorily created gaming zones, and, assuming obligations under the southeast gaming
zone contract are carried out, soon will operate the same in the fourth zone as authorized
by the KELA.
The second requirement under the KELA pertinent to this opinion is the requirement that
lottery gaming facility managers, 30 as part of the lottery gaming facility management
contract, pay a one-time fee (privilege fee) to the state for the privilege of being selected
as a lottery gaming facility manager. 31 The privilege fee plus interest is to be returned to
the lottery gaming facility manager upon a breach of contract as specified in the KELA
and the lottery gaming facility management contract.32 	The lottery gaming facility
management contract also requires the manager to make a minimum investment to build
the proposed lottery gaming facility.33
In 2010, the Kansas Lottery entered into a lottery facility management contract for the
south central gaming zone. That contract, which remains in effect, was signed October
19, 	2010, 	by 	Ed 	Van 	Petten, 	then-Executive 	Director 	of 	the 	Kansas 	Lottery; 	and
September 8, 2010, by M. Brent Stevens, Chief Executive Officer, Peninsula Gaming
Partners, LLC (referred to as “Manager” in the contract and hereafter in this opinion). 34
26 Kansas Star Casino is located in Mulvane, Sumner County, Kansas.
27 Boot Hill Casino is located in Dodge City, Ford County, Kansas.
28 “‘Lottery gaming facility management contract’ means a contract, subcontract or collateral agreement
between the state and a lottery gaming facility manager for the management of a lottery gaming facility, the
business of which is owned and operated by the Kansas lottery, negotiated and signed by the executive
director on behalf of the state.” K.S.A. 2015 Supp. 74-8702(n).
29 Kansas Crossing Casino, LC was selected as the lottery gaming facility manager of a lottery gaming
facility in Pittsburg, Crawford County, Kansas. See Board of County Comm’rs of Cherokee County, Kansas
v. Kansas Racing and Gaming Com’n, et al., Shawnee County District Court Case No. 2015-CV-635.
30 “‘Lottery gaming facility manager’ means a corporation, limited liability company, resident Kansas
American Indian tribe or other business entity authorized to construct and manage, or manage alone,
pursuant to a lottery gaming facility management contract with the Kansas lottery, and on behalf of the
state, a lottery gaming enterprise and lottery gaming facility.” K.S.A. 2015 Supp. 7-8702(o).
31 The northeast and south central Kansas gaming zones were required to pay a privilege fee of $25
million, and the southeast and southwest Kansas gaming zones were required to pay a privilege fee of $5.5
million to the state treasurer for the privilege of being selected as a lottery gaming facility manager of a
lottery gaming facility. K.S.A. 2015 Supp. 74-8734(h)(6).
32 K.S.A. 2015 Supp. 74-8734(h)(19)(B).
33 “The commission shall not approve a management contract unless … the commission determines that
the proposed development consists of an investment in infrastructure, including ancillary lottery gaming
facility operations, of at least $225,000,000 in the northeast and south central Kansas gaming zones and of
at least $50,000,000 in the southeast and southwest Kansas gaming zones.” 	K.S.A. 2015 Supp. 74-
8734(g)(2).
34 Subsequently, Boyd Gaming Corporation acquired Peninsula Gaming, LLC. 	The Kansas Lottery
Commission approved of the acquisition. See Minutes, Kansas Lottery Commission, November 14, 2012.
Through the acquisition, Peninsula’s lottery gaming facility management contract with the State was
transferred to Boyd Gaming Corporation as the lottery gaming facility manager.

The Honorable Mark A. Kahrs
Page 6
This contract, hereafter referenced as the “South Central Facility Management contract,”
includes the following provisions:
Paragraph 8 contains the following clause:
[N]othing in this section will be interpreted to restrict, waive or delete any
rights Manager may have to seek repayment of Managers’ [sic] privilege fee
if the Kansas Expanded Lottery Act were to be amended or repealed by a
legislative body or declared unconstitutional in a future proceeding.
Paragraph 20 contains the following clause:
Nothing in this Agreement will be interpreted to restrict or to be prejudicial to
any right or remedy Manager may have at law or equity … to exercise any
other right Manager may have under this Agreement or at law or equity to a
refund of the privilege fee.
Paragraph 30 reads in its entirety:
Prohibitions Applicable to the State. The Kansas Lottery, acting on behalf of
the State of Kansas, agrees by entering into this Agreement that:
a) Neither the Kansas Lottery nor the State of Kansas will enter into a
management contract for[] more than four (4) lottery gaming facilities or
similar facilities in the four gaming zones outlined in the Kansas Expanded
Lottery Act with one Lottery Gaming Facility in each gaming zone;
b) Neither the Kansas Lottery nor the State of Kansas will designate
additional areas of the state where operation of Lottery Gaming Facilities or
similar gaming facilities will be authorized, other than those set out in the
Kansas Expanded Lottery Act; or
c) Neither the Kansas Lottery nor the State of Kansas will operate an
aggregate of more than 2,800 Electronic Gaming Machines at all pari-
mutuel licensee locations. 35
35 Inclusion of this paragraph in the lottery facility management contract was required by K.S.A. 2015 Supp.
74-8734(h)(19), which provides that any lottery gaming facility management contract approved by the
commission shall include the following enforceable provisions:
(A) Prohibiting the state, until July 1, 2032, from: (i) Entering into management contracts for
more than four lottery gaming facilities or similar gaming facilities, one to be located in the
northeast Kansas gaming zone, one to be located in the south central Kansas gaming
zone, one to be located in the southwest Kansas gaming zone and one to be located in the
southeast Kansas gaming zone; (ii) designating additional areas of the state where
operation of lottery gaming facilities or similar gaming facilities would be authorized; or
(iii) operating an aggregate of more than 2,800 electronic gaming machines at all

The Honorable Mark A. Kahrs
Page 7
Paragraph 31 contains the following clauses:
State Payment for Breach. Manager will be entitled, as its sole monetary
remedy, to payment in an amount equal to the actual privilege fee paid by
Manager, plus interest on such amount, compounded annually at the rate of
ten 	percent 	(10%), 	if 	the 	State 	of 	Kansas 	violates 	any 	provision 	in
Paragraph 	30 	above 	during 	the 	term 	of 	this 	Agreement. 	The 	parties
acknowledge and agree that nothing in this paragraph will be interpreted to
prevent or limit any rights Manager may have to seek specific performance
or other equitable relief against the Kansas Lottery or the State of Kansas
to enforce the prohibitions contained in Paragraph 30.
Paragraph 59 contains the following clause:
Amendments. 	Except 	as 	otherwise 	provided 	in 	this 	paragraph, 	no
amendment, waiver, or consent as to any provision in this Agreement will
be effective unless it is in writing and agreed to by the Executive Director
and Manager, and each such waiver or consent will be effective only in the
specific instance and for the specific purpose for which given…. This
Agreement will also be modified, in whole or in part, in order to comply with
future statutory enactments or judicial interpretation of applicable law by a
court of competent jurisdiction. This Agreement is subject to modification, in
whole or in part, or cancellation, as deemed necessary by the Executive
Director 	to 	comply 	with 	any 	future 	statutory 	enactments, 	subsequent
regulatory changes, or judicial interpretations of applicable law by a court of
competent jurisdiction occurring after this Agreement’s execution, without
additional consideration being exchanged between the parties. The parties
agree nothing in this paragraph will be read to limit the remedies provided
to Manager in Paragraphs 31 or 65.36
Paragraph 59 also contains the following clause:
Notwithstanding[] 	any 	provision 	to 	the 	contrary, 	it 	is 	understood,
acknowledged and agreed to by the parties hereto that amendments to the
KELA after the date of execution of this Agreement shall not impair either
parimutuel licensee locations; and (B) requiring the state to repay to the lottery gaming
facility manager an amount equal to the privilege fee paid by such lottery gaming facility
manager, plus interest on such amount, compounded annually at the rate of 10%, if the
state violates the prohibition provision described in (A).
We note that identical language appears in K.S.A. 2015 Supp. 74-8741(c)(4) under the KELA provisions
relating to racetrack gaming facility management contracts.
36 Paragraph 65 in the South Central Facility Management Contract provides for Manager’s right to cease
management activities under enumerated circumstances.

The Honorable Mark A. Kahrs
Page 8
party’s legal entitlements or remedies that would have been available at law
or equity before the date of any such amendment.
The third requirement under the KELA pertinent to this opinion is the requirement that not
more than an aggregate of 2,800 EGMs may be placed and operated at the three then-
existing 37 parimutuel licensee locations. 38 	The KELA authorizes the Kansas Lottery to
“negotiate a racetrack gaming facility management contract to place [EGMs] at one
parimutuel licensee location in each gaming zone except the southwest Kansas gaming
zone.” 39 	Put simply, the KELA prohibits the placement of EGMs at racetrack gaming
facilities anywhere in the State except at a parimutuel licensee location in the three
gaming zones. 	At the time the KELA was enacted, there was a parimutuel licensee
location in one county in the northeast Kansas gaming zone, 40 one county in the
southeast Kansas gaming zone 41 and one county in the south central Kansas gaming
zone. 42
The placement of EGMs at a parimutuel licensee location is, as with the operation of a
lottery gaming facility, subject to approval by the electorate of the county at an election
conducted no more than 180 days after April 19, 2007, the effective date of the KELA. 43
37 See generally, K.S.A. 2015 Supp. 74-8741 and 74-8744. Note that “[u]ntil lottery gaming facility
management contracts for lottery gaming facilities in all gaming zones become binding, the total number of
electronic gaming machines placed at all racetrack gaming facilities shall not exceed 2,200. When lottery
gaming facility management contracts for lottery gaming facilities in all gaming zones have become
binding, the lottery commission shall take privilege fee bids from the lottery gaming facility manager and
racetrack gaming facility manager in each gaming zone for the remaining electronic gaming machines
allocated to but not yet placed at the racetrack gaming facility in such zone. The minimum bid shall be a
privilege fee of $2,500 per electronic gaming machine. If the racetrack gaming facility manager submits the
highest bid, the lottery commission shall place the remaining electronic gaming machines at the racetrack
gaming facility. If the lottery gaming facility manager submits the highest bid, the commission shall not
place any additional electronic gaming machines at the racetrack gaming facility.” K.S.A. 2015 Supp. 74–
8744(b)(1).
38 “‘Parimutuel licensee location’ means a racetrack facility, as defined in K.S.A. 74-8802, and amendments
thereto, owned or managed by the parimutuel licensee. A parimutuel licensee location may include any
existing structure at such racetrack facility or any structure that may be constructed on real estate where
such racetrack facility is located.” K.S.A. 2015 Supp. 74-8702(w). “‘Racetrack facility’ means a racetrack
within Kansas used for the racing of horses or greyhounds, or both, including the track surface,
grandstands, clubhouse, all animal housing and handling areas, other areas in which a person may enter
only upon payment of an admission fee or upon presentation of authorized credentials and such additional
areas as designated by the commission.” K.S.A. 74-8802 (cc).
39 K.S.A. 2015 Supp. 74–8741(a).
40 The Woodlands is located in Kansas City, Wyandotte County, Kansas and has been closed since 2008.
See, In the Matters of the Racing Association of Kansas East, et al., Kansas Racing and Gaming
Commission Case No. 88-KRC-14.
41 Camptown Greyhound Park is located in Frontenac, Crawford County, Kansas and has been closed
since 2000. See, In the Matter of the Organization License of the Racing Association of Kansas Southeast,
Inc. et al., Kansas Racing and Gaming Commission Case No. 88-KRC-18.
42 Wichita Greyhound Park is located in Wichita, Sedgwick County, Kansas and has been closed since
2008. See, In the Matters of the Racing Association of Kansas East, et al., Kansas Racing and Gaming
Commission Case No. 88-KRC-14.
43 K.S.A. 2015 Supp. 74-8743(a). This provision provides for an election, within 180 days of the effective
date of the KELA, in “each county where there is a pari-mutuel licensee location…” (emphasis added). In

The Honorable Mark A. Kahrs
Page 9
“If a majority of the votes cast and counted at such election is in favor of approving the
placement of electronic gaming machines in the county, the Kansas lottery may place
and operate electronic gaming machines at a parimutuel licensee location in the county,
subject to the provisions of this act.”44 Conversely, “[i]f a majority of the votes cast and
counted at an election under this section is against permitting placement of electronic
gaming machines in the county, the Kansas lottery shall not place or operate electronic
gaming machines at a parimutuel licensee location in the county.”45
As stated previously, pursuant to the statutory referendum, a majority of the electorate in
Sedgwick 	County 	voted 	against 	the 	placement 	of 	EGMs 	at 	a 	racetrack 	facility 	in
Sedgwick County. 46 	That action left Wyandotte County in the northeast Kansas gaming
zone and Crawford County in the southeast Kansas gaming zone as the only counties
that could place EGMs at a parimutuel licensee location if approved by the electorate. On
June 5, 2007, within the 180 days required by statute, a majority of the electorate in
Crawford County voted to approve the placement of EGMs at the parimutuel licensee
location in the county. 47 	On June 26, 2007, within the 180 days required by statute, a
majority of the electorate in Wyandotte County approved the placement of EGMs at the
parimutuel licensee location in the county. 48
There are no racetrack facilities operating in the state at this time. 49 Because conducting
live horse racing 50 or greyhound racing 51 is a prerequisite to operating EGMs at a
racetrack gaming facility, there are no racetrack gaming facilities operating in the state at
this time.
Notwithstanding the KELA requirement discussed above, 2016 House Bill 2537 provides,
inter alia, for authorization and a process to obtain a revote in Sedgwick County on the
following question:
the south central gaming zone, this provision was applicable only to Sedgwick County because there was
no parimutuel licensee location in Sumner County.
44 K.S.A. 2015 Supp. 74-8743(c) (emphasis added).
45 Id. (emphasis added).
46 Thus, since the time of the Sedgwick County referendum, and still today, there has existed no legal
authority to place EGMs at a racetrack facility anywhere in the south central Kansas gaming zone. In that
regard, the south central gaming zone since the Sedgwick County referendum has been like the southwest
gaming zone in that, by operation of the KELA and other applicable provisions of law, only lottery gaming
facilities, and not racetrack gaming facilities, may operate.
47 Kansas Expanded Lottery Act Results of County Elections with Resulting Deadlines for Lottery Gaming
Facility Manager Applications, Keith Kocher, Director of Program Assurance and Integrity, Kansas Lottery.
48 Id.
49 Don Brownlee, Executive Director of the Kansas Racing and Gaming Commission, Letter to Athena E.
Andaya, Deputy Attorney General, February 18, 2016.
50 K.S.A. 2015 Supp. 74-8746(a)(2).
51 K.S.A. 74-8746(a)(2) and (3).

The Honorable Mark A. Kahrs
Page 10
Shall 	the 	operation 	of 	electronic 	gaming 	machines 	at 	the 	Wichita
Greyhound 	Park 	by 	the 	Kansas 	lottery 	be 	permitted 	in 	Sedgwick
[C]ounty?52
With this background information presented, we now will discuss your questions in turn.
Would Enactment of a New Statute Permitting a Revote in Sedgwick County
Cause a Breach of Contract
In your first question, you ask “would enactment of a bill, such as HB 2537, that permits a
revote on electronic gaming machines at a racetrack in Sedgwick County breach the
management contracts between the Kansas Lottery and the Lottery Gaming Facility
Managers and thereby result in imposing on the State of Kansas repayment of privilege
fees plus interest, as specified in [K.S.A. 2015 Supp.] 74-8734(h)(19)?”
We wish to clarify the question we are answering. First, the essence of your question is
whether the State would incur liability under the four lottery gaming facility management
contracts, such as for a breach; thus, that is necessarily a matter of contract law and
ultimately is a question of whether “[t]he new statute prevent[s] the [State] from keeping
[its] promise[s]”53 made in the management contracts. Second, you ask specifically about
a “revote on electronic gaming machines at a racetrack in Sedgwick County.” House Bill
2537 contains numerous other provisions, but we limit our opinion narrowly to what effect
the provision authorizing a Sedgwick County revote may have; we offer no opinion on the
potential effect of other provisions of House Bill 2537. Third, as noted above, there
currently are four separate contracts in place between the State of Kansas (via the
Kansas Lottery) and a lottery gaming facility manager, one in each of the four gaming
zones. To analyze whether a breach of a contract may occur, it is necessary to analyze
the pertinent contract provisions. Although provisions in the other three contracts may or
may not be materially the same, in order to produce this opinion in a timely manner we
are limiting our analysis to whether a breach of the contract for the south central gaming
zone (in which Sedgwick County is located) would occur. 	We are expressing no opinion
on how, if at all, a revote in Sedgwick County might implicate provisions of any other
contract.
Thus, the specific question we are answering as your first question is this: Would
enactment of the provision of 2016 House Bill 2537 that authorizes a revote on the
placement of EGMs at a racetrack facility in Sedgwick County render the State liable to
refund the privilege fee paid to the State under terms of the lottery gaming facility
management 	contract 	between 	the 	Kansas 	Lottery 	and 	the 	lottery 	gaming 	facility
manager in the south central gaming zone?
We think the answer to that question is yes for three separate reasons, any of which
standing alone would lead to the same conclusion. First, a breach of contract likely would
52 2016 House Bill 2537, New Section 10(b).
53 See Mobil Oil Exploration and Producing Southeast, Inc. v. U.S., 530 U.S. 604, 624 (2000).

The Honorable Mark A. Kahrs
Page 11
arise under Paragraph 30 of the South Central Facility Management contract. Second,
even without reliance on the provisions of Paragraph 30, Paragraph 8 authorizes the
Manager to seek repayment of the privilege fee if the KELA “were to be amended … by a
legislative body...” and Paragraph 20 also expressly contemplates that a cause for
demanding refund of the privilege fee may arise outside the provisions of Paragraphs 30
and 31. Third, even absent a breach pursuant to Paragraph 30 and Paragraph 8,
Paragraph 59 of the South Central Facility Management contract would make the State
financially liable for refunding the privilege fee. 	If Paragraph 30 is breached, then
Paragraph 31 expressly provides the refunding of the privilege fee, plus interest, as the
remedy. If any common law duty preserved under Paragraph 8 is breached, or if
Paragraph 59 is breached, then refund of the privilege fee is a remedy that could be
demanded by the Manager under general principles of contract law, and that remedy is
expressly contemplated by Paragraph 20.
Breach of Contract under Paragraph 30
of the South Central Facility Management Contract
A breach of contract pursuant to Paragraph 30 54 may occur if, prior to July 1, 2032, any
one or more of the following three circumstances occurs: 	(1) the state enters into a
management contract for another lottery gaming facility or similar gaming facility because
a lottery gaming facility management contract already has been let in each of the gaming
zones; (2) the state expands gaming by designating additional areas where lottery
gaming facilities or similar gaming facilities would be authorized in the State; or (3) the
state operates more than an aggregate of 2,800 electronic gaming machines at all
parimutuel licensee locations. 	If any of these circumstances occurs, repayment of the
privilege fee plus interest on such amount, compounded annually at the rate of 10%, is
triggered pursuant to Paragraph 31 55 of the South Central Facility Management contract.
The second circumstance is pertinent to your question. The key question is whether a
revote on placement of EGMs at the racetrack facility in Sedgwick County would
constitute a designation of an “additional” area where lottery gaming facilities or similar
gaming facilities would be authorized in the State within the meaning of the second
condition of Paragraph 30. 	If a revote in Sedgwick County permits the placement of
EGMs at a racetrack gaming facility in Sedgwick County, where such a facility is now
barred, then the answer to your question would turn on whether that facility is a “similar
gaming facility.”
Designating Additional Areas
Paragraph 30 of the South Central Facility Management contract and K.S.A. 2015 Supp.
74-8734(h)(19)(A)(ii) prohibit designating additional areas of the state where operation of
lottery gaming facilities or similar gaming facilities would be authorized. The question of
law we are asked to determine is what is meant by the word “additional.” 	The term
54 See also, K.S.A. 2015 Supp. 74-8734(h)(19)(A).
55 See also, K.S.A. 2015 Supp. 74-8734(h)(19)(B).

The Honorable Mark A. Kahrs
Page 12
“additional” is not defined in the Kansas Lottery Act, the KELA or the Kansas Parimutuel
Racing Act. In determining whether a revote in Sedgwick County that permits the
placement of EGMs at a racetrack gaming facility is an impermissible expansion by
designation of an additional area for gaming and therefore a breach of contract, we must
determine legislative intent.
An appellate court must first attempt to ascertain legislative intent through
the 	statutory 	language 	enacted, 	giving 	common 	words 	their 	ordinary
meanings. When a statute is plain and unambiguous, an appellate court
does not speculate as to the legislative intent behind it and will not read into
the statute something not readily found in it. Where there is no ambiguity,
the court need not resort to statutory construction. Only if the statute's
language or text is unclear or ambiguous does the court use canons of
construction or legislative history or other background considerations to
construe the legislature's intent. 56
We think the language used by the Legislature is plain and unambiguous and, therefore,
we do not resort to the use of the canons of construction or legislative history. 	To
determine the ordinary and common meaning of “additional,” we turn to the Merriam-
Webster Dictionary, which defines the term to mean “added” or “extra.”57
As described above, the KELA provided for four gaming zones but expressly excluded
placement of EGMs at a parimutuel licensee location in the southwest gaming zone,
clearly leaving only three gaming zones potentially authorized to place and operate
EGMs.58 The KELA also required the named counties in each of the three gaming zones
to seek a referendum vote to determine whether the placement of EGMs at the local
racetrack facility would be allowed or prohibited. As a result of the votes described above,
the KELA currently allows placement of EGMs at parimutuel licensee locations in
Wyandotte and Crawford counties; in all other counties in the state, KELA prohibits the
placement of EGMs at racetrack facilities. 59
Thus, although the KELA contemplated three zones for the potential placement of EGMs
at a parimutuel licensee location, Sedgwick 	County’s 	referendum 	vote 	against 	the
placement of EGMs in that county effectively and expressly narrowed the number of
authorized zones to two. 	To put the same point a different way, KELA expressly
prohibited placement of EGMs at any racetrack facility in the southwest gaming zone and
56 State v. Keel, 302 Kan. 560, 572 (2015) (internal citations omitted).
57 Merriam-Webster.com/dictionary/additional (accessed March 12, 2016).
58 K.S.A. 74-8741(a).
59 The effect of Sedgwick County voters’ rejection of the proposition to allow placement of EGMs at the
racetrack facility in Sedgwick County was not merely to withhold the voters’ assent from such placement;
rather, under terms of the KELA, the effect was to affirmatively prohibit such placement. See K.S.A. 74-
8743(c). “If a majority of the votes cast and counted at an election under this section is against permitting
placement of electronic gaming machines in the county, the Kansas lottery shall not place or operate
electronic gaming machines at a parimutuel licensee location in the county.” (Emphasis added).

The Honorable Mark A. Kahrs
Page 13
KELA also created a mechanism that resulted in precisely the same result in the south
central gaming zone.
Consequently, at the time the South Central Management Facility contract was executed,
the parties to that contract were aware that state law prohibited the placement of EGMs
at 	a 	parimutuel 	licensee 	location 	anywhere 	in 	the 	south 	central 	gaming 	zone. 	A
subsequent change in statute that would result in placement of EGMs in Sedgwick
County would allow EGMs in an “additional” area within the meaning of Paragraph 30 as
the parties would have understood that meaning at the time they executed the contract.
The inquiry does not end with the conclusion that, on the facts presented here, a change
in statute resulting in a successful revote in Sedgwick County would constitute the state
“designating [an] additional area[]” in which gaming could occur. 	We also must analyze
whether a racetrack gaming facility is a “similar” gaming facility.
Similar Gaming Facilities
The term “similar gaming facilities” is not defined in the Kansas Lottery Act, the KELA or
the Kansas Parimutuel Racing Act. In determining whether a racetrack gaming facility is a
similar gaming facility to a lottery gaming facility within the meaning of Paragraph 30, we
must determine legislative intent.
We believe the language used by the Legislature is plain and unambiguous, and
therefore, we do not resort to the use of the canons of construction or legislative history.
To determine the ordinary and common meaning of “similar,” we turn to the Merriam-
Webster Dictionary, which defines the term to mean “having characteristics in common:
strictly comparable.” 60 	Clearly, the term “similar” relates to “lottery gaming facilities.” 	A
lottery gaming facility “means that portion of 	a building used for the purposes of
operating, managing and maintaining lottery facility games.”61 	Lottery facility games
include EGMs and other games that are authorized at tribal gaming facilities. 62
A racetrack gaming facility, 63 on the other hand, “means that portion of a parimutuel
licensee 	location 	where 	electronic 	gaming 	machines 	are 	operated, 	managed 	and
maintained.”64 It appears to us that the definitions of a lottery gaming facility and a
racetrack gaming facility are very similar. The most significant similarity with both facilities
is that the lottery facility games at both are owned and operated by the Kansas Lottery
60 Merriam-Webster.com/dictionary/similar (accessed March 12, 2016).
61 K.S.A. 2015 Supp. 74-8702(l).
62 “‘Lottery facility games’ means any electronic gaming machines and any other games which, as of
January 1, 2007, are authorized to be conducted or operated at a tribal gaming facility, as defined in K.S.A.
74-9802, and amendments thereto, located within the boundaries of this state.” 	K.S.A. 2015 Supp. 74-
8702(j).
63 A racetrack gaming facility should not be confused with a racetrack facility, as the terms refer to different
facilities. A racetrack gaming facility is authorized to have EGMs while a racetrack facility is not.
64 K.S.A. 2015 Supp. 74-8702(aa).

The Honorable Mark A. Kahrs
Page 14
and regulated by the Kansas Racing and Gaming Commission. 65 	Both facilities were
subject to a mandatory statutory referendum within 180 days of the enactment of KELA to
obtain 	authorization 	to 	operate 	in 	Kansas. 66 	Both 	facilities, 	by 	definition, 	have 	a
dedicated portion of a building that is to be used for purposes of operating, managing and
maintaining 	lottery 	facility 	games, 	which 	include 	EGMs. 	Our 	last 	example 	in 	the
nonexclusive list of similarities is that both facilities are required to include in the contract
the identical enforceable provisions enumerated in K.S.A. 2015 Supp. 74-8734(h)(19)
and K.S.A. 2015 Supp. 74-8741(c)(4), which is strong indicia of parity among these
facilities.
Lottery gaming facilities and racetrack gaming facilities have characteristics in common
and are clearly alike. In other words, these facilities are obviously similar within the plain
meaning of that term. We then must consider whether anything in the KELA operates to
transform what otherwise are obviously “similar” facilities into what might be described as
“nonsimilar” facilities. On the facts as they exist here, we think not.
The distinguishing factors between the facilities are the location of the gaming facility and
what types of lottery facility games are authorized to be operated at the particular gaming
facility. 	Lottery gaming facilities are limited to the four gaming zones and may offer
lottery facility games such as EGMs and table games. 	Racetrack gaming facilities are
limited to the northeast Kansas gaming zone and the southeast Kansas gaming zone and
may offer only EGMs at a parimutuel licensee location.
We think the strongest argument that could be made in favor of the proposition that the
KELA has transformed facilities that are “similar” in plain language terms into facilities
that are “nonsimilar” for KELA purposes is that the KELA has one set of statutory
provisions for lottery gaming facilities and another set for parimutuel licensee locations
authorized to operate EGMs. We acknowledge that an argument can be made from this
statutory structure that a racetrack gaming facility is not similar to a lottery gaming facility,
but 	we 	doubt 	it 	would 	succeed, 	particularly 	after 	a 	referendum 	vote 	prohibits 	the
placement and operation of EGMs in the county. We do not think that those differences
negate the other common characteristics both facilities share.67
65 K.S.A. 2015 Supp. 74-8734(h)(17) and (18), K.S.A. 2015 Supp. 74-8702(bb), K.S.A. 2015 Supp. 74-
8741(c)(2).
66 K.S.A. 2015 Supp. 74-8737 and 74-8743.
67 To help clarify our reasoning on this point outside the specific context of a Sedgwick County revote and
the dynamics of the south central gaming zone, consider a hypothetical situation in which the Legislature
were to amend the KELA to allow placement of EGMs at a racetrack facility in the southwest zone. We
think that action would be widely, and correctly, perceived as a violation of K.S.A. 2015 Supp. 74-8741(a)
and (c)(4)(A)(ii) and the corresponding provisions in the pertinent lottery gaming facility management
contract. Yet, because KELA currently prohibits placement of EGMs at any racetrack facility anywhere in
either the southwest or south central zones, the only distinction between that hypothetical circumstance
and the one in the south central gaming zone is that the KELA provided for a one-time vote that might
have, but did not, authorized placement of EGMs at a racetrack facility in Sedgwick County. It seems to us
that is a distinction without any relevant legal difference.

The Honorable Mark A. Kahrs
Page 15
Accordingly, we opine that the term similar gaming facilities as used in Paragraph 30 in
the South Central Facility Management contract68 may include a racetrack gaming
facility. 69
For the reasons set forth above, we opine that enacting a statute that authorizes a revote
in Sedgwick County, a county in which the placement and operation of EGMs at a
parimutuel licensee location is currently prohibited, would constitute the state designating
an additional area in violation of Paragraph 30 in the South Central Facility Management
contract and K.S.A. 2015 Supp. 74-8734(h)(19)(A)(ii). 	We also opine that, on the facts
here, a racetrack gaming facility in Sedgwick County is a similar gaming facility as used
in Paragraph 30 and K.S.A. 2015 Supp. 74-8734(h)(19)(A)(ii).
Pursuant to Paragraph 31 of the South Central Facility Management contract, 70 if the
State violates Paragraph 30, 71 the Manager is entitled to repayment of the privilege fee
plus interest on such amount, compounded annually at the rate of 10%.
Liability for Repayment of Privilege Fee Under Paragraph 8
Paragraph 8 of the South Central Facility Management contract generally establishes that
the Manager assumes the risk that the KELA may be invalidated, in whole or in part,
through judicial action. Most of the provisions in Paragraph 8 specifically discuss various
possibilities of judicial action related to the KELA. Oddly, however, Paragraph 8 also
contains this clause:
[N]othing in this section will be interpreted to restrict, waive or delete any
rights Manager may have to seek repayment of Managers’ privilege fee if
the Kansas Expanded Lottery Act were to be amended or repealed by a
legislative body….
That clause is the only reference in Paragraph 8 to future legislative, as opposed to
judicial, action. Thus, it stands alone. Notably, it contains no reference to Paragraph 30,
the provision discussed above, that sets forth three circumstances in which the Manager
may be entitled to repayment of its privilege fee. It appears, therefore, that this clause in
Paragraph 8 is a freestanding reservation by the Manager of any right the Manager “may
have” to “seek repayment of Managers’ [sic] privilege fee” if the KELA “were to be
amended…by a legislative body.” 	By its plain language, Paragraph 8 does not create
any right of the Manager to recover its privilege fee, but that paragraph expressly
reserves any such right that may otherwise exist for the Manager and makes clear that
nothing in the contract extinguishes any such right.72
68 See also, K.S.A. 2015 Supp. 74-8734(h)(19)(A)(ii).
69 We believe the same analysis would apply to K.S.A. 2015 Supp. 74-8741(c)(4)(A) (ii).
70 See also, K.S.A. 2015 Supp. 74-8734(h)(19)(B).
71 See also, K.S.A. 2015 Supp. 74-8734(h)(19)(A)(ii).
72 We note that this provision of Paragraph 8 appears to conflict with the provision of Paragraph 59
providing that “This Agreement will also be modified, in whole or in part, in order to comply with future
statutory enactments … This Agreement is subject to modification, in whole or in part, or cancellation, as

The Honorable Mark A. Kahrs
Page 16
Thus, we must analyze whether the Manager would have such a right under the common
law or under any other provision of law. If so, then a claim pursuant to any such right is
expressly preserved by Paragraph 8 and the Manager could assert it.
Such a claim could be based upon a violation of the Contract Clause of the United States
Constitution, which provides that no state shall pass any law impairing the obligation of
contracts.73 	The Kansas Supreme Court has identified three factors that are to be
considered when evaluating a claim that state law violates the Contract Clause:
[W]hether the state law has, in fact, operated as a substantial impairment of
a contractual relationship; whether there is a significant and legitimate
public purpose behind the legislation; and whether the adjustment of the
contracting parties’ rights and responsibilities is based upon reasonable
conditions and is of a character appropriate to the public purpose justifying
the legislation’s adoption. 74
We think the second and third prongs of that analysis essentially merge here, so we
analyze the first and second prongs in turn. First, in determining whether the impairment
of a contract resulting from an after-the-fact state legislative enactment is “substantial,”
courts consider a wide range of factors:
In 	making 	this 	determination 	[whether 	the 	contractual 	impairment 	is
substantial], 	courts 	consider 	several 	factors, 	such 	as 	whether 	the
impairment eliminates an important contractual right, affects terms upon
which a party has relied, thwarts performance of an essential right, defeats
an expectation of the parties, significantly alter[s] the duties of the parties,
alters a financial term, or creates a significant financial hardship for one
party.75
At the time the parties entered into the South Central Facility Management contract, the
parties to the contract were aware that Sedgwick County voters had rejected placement
of EGMs at the parimutuel licensee location. They also were aware that the consequence
of that decision by voters was to permanently foreclose such placement because, under
the terms of the KELA, the “no” vote meant EGMs shall not be placed or operated
there.76 Presumably, the Manager took that information into account and relied upon it
when entering into the contract. Whether a subsequent placement of EGMs in Sedgwick
County is a substantial impairment to such contract would be a question of fact beyond
deemed necessary by the Executive Director to comply with any future statutory enactments…” It is,
however, possible to read the two provisions in harmony by concluding that the Paragraph 59 provision
reserves the right of the state to unilaterally modify the agreement, but Paragraph 8 reserves the right of
the Manager to seek damages, including the refund of the privilege fee, if the state does so.
73 U.S. Const., Art. 1, § 10, Cl. 1.
74 Zimmerman v. Board of County Com’rs, 289 Kan. 926, 966 (2009) (citations omitted).
75 16A C.J.S. Constitutional Law § 508, March 2016 Update (internal citations omitted).
76 K.S.A. 2015 Supp. 74-8743(c).

The Honorable Mark A. Kahrs
Page 17
the scope of this opinion, but given market dynamics, we will assume without deciding
that such a change would be substantial for contract-law purposes. 77 	We think it likely
the Manager would plausibly assert that it is.
If the threshold inquiry is met, the second factor in evaluating a claim that state law
violates the Contract Clause would be to determine whether the law has a legitimate and
important public purpose. 	“If a significant and legitimate purpose is not identified, then
the state law is unconstitutional under the Contract Clause” 78 and the inquiry ends.
If 	a 	significant 	and 	legitimate 	public 	purpose 	is 	present 	regarding 	a
regulation 	that 	significantly 	impairs 	a 	contract, 	then 	the 	court 	must
determine [the third factor,] whether 	the adjustment of the rights and
responsibilities of contracting parties is based upon reasonable conditions
and is of a character appropriate to the public purpose justifying the
adjustment. 79
We are uncertain what “significant and legimate [public] purpose” would be served by
enactment of legislation allowing a revote in Sedgwick County. Of course, certain
constituent groups presumably would be pleased with that outcome, but that alone is
unlikely to constitute a legally satisfactory public purpose. We acknowledge that the
Legislature may be able credibly to assert the existence of a “significant and legimate
purpose,” but that would be a question of fact beyond the scope of this opinion, and it is
not immediately obvious to us what such a purpose would be. Even if there were such a
“significant and legitimate purpose,” however, it is not clear that statutory amendments
authorizing a revote in Sedgwick County would be “based upon reasonable conditions
and [be] of a character appropriate to the public purpose justifying the adjustment.”
Even if the Legislature were to assert such a public purpose, we caution that courts are
unlikely to accept the Legislature’s assertion at face value. That is because in this case,
the State (through the Kansas Lottery) is a party to the contract that would be impaired by
enactment of new legislation allowing a revote in Sedgwick County:
If the contract allegedly impaired by a change in state law is one created, or
entered into, by the State itself, the State's self-interest is at stake, and a
court determining whether the change violates the Contract Clause is
required 	to 	pay 	less 	deference 	to 	the 	legislative 	determination 	of
reasonableness and necessity. 80
77 The State has represented as much in its separate efforts to keep the Wyandotte Nation from
constructing a casino in Park City, which is in Sedgwick County. See letter from Governor Mark Parkinson
to Assistant Secretary Larry Echo Hawk, U.S. Department of the Interior, dated September 13, 2010 (“[I]f
the Wyandotte Nation were permitted to build a gaming facility on the Park City land, the will of the people
in Sedgwick County, Kansas would be frustrated and the State of Kansas would experience reduced state
tax revenue from a state-owned gaming facility slated to operate under state law in an adjacent county.”)
78 16A C.J.S. Constitutional Law § 508, March 2016 Update (internal citations omitted).
79 Id.
80 Id.

The Honorable Mark A. Kahrs
Page 18
The Kansas Supreme Court has further explained principles of contract law applicable in
situations in which the State is a party to a contract and the Legislature subsequently
amends a statute in a manner affecting the rights and duties of parties to the contract.
For example, in State ex rel. Speer v. Barker, 81 our Supreme Court explained that
although the Legislature is free to repeal a statute under authority of which a contract was
entered, the contract nevertheless would remain valid. 	To paraphrase the Court,
although the Legislature may modify and repeal acts of former legislatures, and cannot
abridge succeeding legislative action, where a contract is made under authority of law,
the 	right 	of 	property 	arising 	from 	the 	contract 	cannot 	be 	divested 	by 	subsequent
legislative action. 82
Our Supreme Court further explained:
As a general principle, one legislature is competent to repeal or modify any
act of a former legislature, and one legislature cannot abridge the power of
a succeeding legislature. This power is sometimes reserved by statutory
provisions of a general nature. But this general principle has exceptions.
…Where a valid contract with the state has been entered into in pursuance
of a legislative enactment a subsequent legislature cannot enact a law
which provides for an abrogation of the contract.83
Thus, we assume, without deciding, that the Manager would assert that the impairment of
its contract resulting from the placement of EGMs in the South Central gaming zone is
“significant.” 	We 	presume 	the 	Manager 	relied 	on 	the 	statutory 	prohibition 	on 	the
placement of EGMs in Sedgwick County when deciding to enter into the contract. It is not
obvious to us what the state’s “significant and legitimate” purpose would be in reversing
the current statutory prohibition on placement of EGMs in Sedgwick County, but we think
courts would give little deference to any legislative determination that such a purpose
exists because the State itself is a party to the contract and “the State’s self-interest is at
stake.” For all these reasons, we think the Manager would have a cause of action against
the State for breach of its contract in violation of the Contract Clause.
Because the requirement in Paragraph 31 to refund the privilege fee applies only in the
event of a breach under Paragraph 30, and not a breach under Paragraph 8, it cannot be
determined with certainty what the remedy would be for a breach under Paragraph 8.
However, we think it likely the Manager would demand refund of the privilege fee under
general principles of contract law, and we note that Paragraph 20 expressly reserves any
such right the Manager may have.
81 4 Kan. 379 (1868).
82 Id. at 386. See also State ex rel. Boynton v. Kansas State Highway Comm'n, 139 Kan. 391, 393 (1934).
83 State ex rel. Boynton v. Kansas State Highway Comm'n, 139 Kan. 391, 393 (1934).

The Honorable Mark A. Kahrs
Page 19
Liability for Repayment of Privilege Fee Under Paragraph 59
Finally, even if the Manager did not have a cause against the State for breach of contract
under Paragraph 30, or under Paragraph 8, a clause in Paragraph 59 grants the Manager
a plain and unambiguous claim for breach in the event the Legislature were to effectively
remove the KELA prohibition on EGMs at the racetrack facility in Sedgwick County.
The pertinent clause of Paragraph 59 reads as follows:
Notwithstanding[] 	any 	provision 	to 	the 	contrary, 	it 	is 	understood,
acknowledged and agreed to by the parties hereto that amendments to the
KELA after the date of execution of this Agreement shall not impair either
party’s legal entitlements or remedies that would have been available at law
or equity before the date of any such amendment. 84
It is clear that if the State were to take action today, in the absence of enactment of new
legislation, to allow placement of EGMs at the Wichita racetrack facility, that action would
violate both the contract and state law. This is because the placement of such EGMs is
currently 	barred 	by 	state 	law 	as 	a 	result 	of 	Sedgwick 	County 	voters 	rejecting 	a
proposition for their placement.85 	If the State were to ignore that law and nonetheless
proceed to allow unlawful placement of EGMs in Sedgwick County, that would violate the
Constitution of the State of Kansas, 86 state law, 87 and the contract.88 	Viewed a different
way, if there were an attempt notwithstanding current law to place EGMs in a Sedgwick
County racetrack facility, the courts likely would block it because of the KELA prohibition,
and the Manager would have standing to bring the lawsuit seeking such a remedy
because of the negative effect that violating current state law presumably would have on
the right to operate a lottery gaming facility in Sumner County that is secured by the
contract. 	If the courts did not block the placement of EGMs in Sedgwick County in
violation of state law, the Manager would have a strong claim for damages from lost
market share due to the State’s illegal operation of EGMs in the South Central gaming
zone.
Because the manager has that legal remedy available today, then under Paragraph 59
the Manager would retain that remedy even if the Legislature were to enact a new statute
authorizing a revote in Sedgwick County. The new statute might render the placement of
EGMs in Sedgwick County lawful – i.e., not a violation of state statute – but it could do
nothing to alter the provision of Paragraph 59 of the contract, which specifically reserves
to the Manager any “legal entitlements or remedies that would have been available at law
or equity before the date of any such amendment.”
84 Emphasis added.
85 K.S.A. 2015 Supp. 74-8743(c).
86 Kan. Const., Art. 15, § 3.
87 K.S.A. 74-8740.
88 Paragraphs 30 and 31 of the South Central Facility Management contract. See also, K.S.A. 2015 Supp.
74-8734(h)(19)(A)(ii) and (B).

The Honorable Mark A. Kahrs
Page 20
As is the case with a violation of Paragraph 8, because the requirement in Paragraph 31
to refund the privilege fee applies only in the event of a breach under Paragraph 30, and
not a breach under Paragraph 59, it cannot be determined with certainty what the remedy
would be for a breach under Paragraph 59. However, we think it likely the Manager would
demand refund of the privilege fee under general principles of contract law, and we note
that Paragraph 20 expressly reserves any such right the Manager may have.
An Analogous Case
Because the United States Supreme Court confronted questions similar to yours in Mobil
Oil Exploration and Producing Southeast, Inc. v. United States, 89 a review of that case is
instructive in understanding how courts would be likely to analyze the first question you
present. In that case, oil companies in 1981 had made up-front “bonus” payments to the
United States of $156 million for the rights to engage in specified offshore oil exploration
and, in exchange, received 10-year renewable lease contracts with the United States. 90
During the term of the lease contract, Congress changed the law in a manner that
imposed additional conditions that must be met before the Secretary of the Interior could
approve the companies’ offshore drilling contemplated by the lease contracts. The
companies sued the United States for breach of their lease contracts and demanded the
government repay the up-front payments. In deciding the case, the Supreme Court set
forth the general framework and applicable principles for analyzing similar claims of
breach of contract arising when the government is party to a contract and later changes
the law upon which the contract was based:
A 	description 	at 	the 	outset 	of 	the 	few 	basic 	contract 	law 	principles
applicable to this action will help the reader understand the significance of
the complex factual circumstances that follow. When the United States
enters into contract relations, its rights and duties therein are governed
generally by the law applicable to contracts between private individuals.
The Restatement of Contracts reflects many of the principles of contract law
that are applicable to this action. As set forth in the Restatement of
Contracts, the relevant principles specify that, when one party to a contract
repudiates that contract, the other party is entitled to restitution for any
benefit that he has conferred on the repudiating party by way of part
performance or reliance. The Restatement explains that “repudiation” is a
statement by the obligor to the obligee indicating that the obligor will commit
a breach that would of itself give the obligee a claim for damages for total
breach. And “total breach” is a breach that so substantially impairs the
value of the contract to the injured party at the time of the breach that it is
89 530 U.S. 604 (2000).
90 Mobil Oil, 530 U.S. at 609. In addition to the up-front “bonus” payments, the companies would be
required to pay royalties on any ongoing production pursuant to the lease contracts.

The Honorable Mark A. Kahrs
Page 21
just in the circumstances to allow him to recover damages based on all his
remaining rights to performance.
As applied to this action, these principles amount to the following: If the
Government said it would break, or did break, an important contractual
promise, thereby substantially impairing the value of the contracts to the
companies, then (unless the companies waived their rights to restitution)
the Government must give the companies their money back. And it must do
so whether the contracts would, or would not, ultimately have proved
financially beneficial to the companies. 91
The United States refused the oil companies’ demand that it refund their up-front
payments for three reasons: First, the government argued it did not breach the contracts
or communicate intent to do so. Second, it argued any breach was not “substantial” and
thus did not constitute repudiation of the contracts and should not result in a requirement
for repayment. Third, it argued the companies had waived their rights to restitution.92
It is instructive for our purposes that in rejecting the government’s arguments, the
Supreme Court looked to the terms of the lease agreements themselves.
First, the Supreme Court searched in vain for any provision in the lease contract that
would have made the lease provisions subject to future changes in federal statutes that
effectively altered the bargain between the parties. “Without some such contractual
provision limiting the Government's power to impose new and different requirements, the
companies would have spent $156 million to buy next to nothing.”93 	Although it would
have been possible for the parties to have included in the lease contract such a provision,
the Supreme Court was unwilling to find such a provision in the contract unless it was
expressly 	included 	by 	the 	parties 	because 	any 	less-exacting 	expression 	was 	“not
sufficient to produce the incorporation of future statutory requirements, which is what the
Government needs to prevail.” 94 Ultimately, the Supreme Court concluded that the later
statutory changes made by Congress “were changes of a kind that the contracts did not
foresee,” were not “authorized by any … contract[] … provision,” and thus enacting those
statutory changes constituted the government “communicating its intent to violate the
contracts.”95
Second, the Supreme Court analyzed the facts surrounding the case and concluded that
the government’s breach of its contracts was “not technical or insubstantial.” 96 Citing the
Restatement of Contracts, the Supreme Court observed the “breach was substantial,
depriving the companies of the benefit of their bargain.” 97 Specifically referencing the up-
91 Mobil Oil, 530 U.S. at 607-08 (internal punctuation and citations omitted).
92 Mobil Oil, 530 U.S. at 614.
93 Mobil Oil, 530 U.S. at 616.
94 Id.
95 Mobil Oil, 530 U.S. at 620.
96 Mobil Oil, 530 U.S. at 621.
97 Mobil Oil, 530 U.S. at 621 (punctuation omitted).

The Honorable Mark A. Kahrs
Page 22
front cash payments, the Supreme Court posed the following question: “Under these
circumstances, if the companies did not at least buy the promise that the Government
would not deviate significantly from those procedures and standards [in place at the time
of the contract], then what did they buy?”98
Third, the Supreme Court rejected the government’s argument that the oil companies had
waived any claim to restitution by accepting at least partial performance of the contract.99
Ultimately, the Supreme Court concluded:
Contract law expresses no view about the wisdom of [a statute enacted
after the contract was entered into by the government]. We have examined
only that statute's consistency with the promises that the earlier contracts
contained. We find that the oil companies gave the United States $156
million in return for a contractual promise to follow the terms of pre-existing
statutes and regulations. The new statute prevented the Government from
keeping that promise. The breach substantially impaired the value of the
contracts. And therefore the Government must give the companies their
money back. 100
For similar reasons, we think it likely that if the Legislature were to unilaterally alter the
terms of the bargain the state struck with the Manager and embedded in the contract by
amending state law to allow unexpected competition, in the form of EGMs placed at the
racetrack facility in Sedgwick County, that after-the-fact change in statute likely would
“substantially impair[] the value of the contract[]. And therefore the [State] must give the
[Manager its] money back.”
Other Causes of Action
In your second question, you ask whether such a breach of contract subjects the state to
additional liabilities for damages. 	We refer you to our extensive analysis above, which
we think addresses this question. We further note that, although under Paragraph 31 of
the South Central Facility Management contract, the exclusive remedy is refund of the
privilege fee paid by the Manager, plus interest on such amount, compounded annually at
the rate of 10 percent, that provision by its terms applies to breach under Paragraph 30
and does not apply to breach under other provisions of the contract.
Accrual of a Breach of Contract
In your third question, you ask whether such a breach of contract would occur at the time
the bill is enacted. 	We believe you are asking when a cause of action accrues. 	In
general,
98 Mobil Oil, 530 U.S. at 620-21.
99 Mobil Oil, 530 U.S. 622-623.
100 Mobil Oil, 530 U.S. at 624 (citations and punctuation marks omitted).

The Honorable Mark A. Kahrs
Page 23
[a] cause of action for breach of contract accrues when a contract is
breached by the failure to do the thing agreed to, irrespective of any
knowledge on the part of the plaintiff or of any actual injury it causes.101
The contract term or terms alleged to have been breached will dictate when accrual
transpires. 	There 	also 	are 	general 	principles 	of 	contract 	law 	that, 	in 	applicable
circumstances, allow an aggrieved party to seek judicial relief prior to the breach actually
occurring. Because the timing of litigation can be influenced by matters of strategy that
are not determined solely by the literal legal rights at issue, we do not offer an opinion on
when an aggrieved party might seek judicial relief if the Legislature were to amend KELA
to allow a revote in Sedgwick County.
Conclusion
In light of the analysis above, we think the Manager in the South Central gaming zone
would have a cause of action to demand repayment of the privilege fee, to seek other
damages or remedies allowed by contract law, or to enjoin the enforcement of any new
statute permitting a revote on placement of EGMs at the Sedgwick County racetrack
facility.
Sincerely,
Derek Schmidt
Kansas Attorney General
Athena E. Andaya
Deputy Attorney General
DS:AA:sb
101 Ace Property & Cas. Ins. Co. v. Superior Boiler Works, Inc., 504 F.Supp.2d 1154, 1160 (D. Kan. 2007),
reconsideration denied.