A casino in Sugar Creek would cause “a large amount of cannibalization” of existing Kansas City casinos, according to an economic study released Friday.

A casino in Sugar Creek would cause “a large amount of cannibalization” of existing Kansas City casinos, according to an economic study released Friday.

The report puts Sugar Creek down as the least likely to offer Missouri a good return of revenue for the one casino license available in the state. A casino in Cape Girardeau is the state’s best bet, the report says.  

The anticipated cannibalization in the Kansas City market would cause the Sugar Creek casino to generate the lowest revenue, gaming taxes and new employment of any new casino in Missouri, according to the study compiled by the Missouri Department of Economic Development.

Paragon Gaming is one of three applicants in the running for the 13th gaming license in Missouri. The Las Vegas-based company wants to build a multimillion dollar casino in Sugar Creek. Isle of Capri wants to build a casino in Cape Girardeau, and Casino Celebration hopes to build in St. Louis.

The Missouri Gaming Commission is expected to select a winner next week. But the commission does not have to grant a license. Missouri law requires the state to have no more than 13 casino licenses.

The Sugar Creek casino would be within five miles of the area’s other four casinos.

“The close proximity means that any new casino located near existing competitors in Kansas City will cannibalize ARG (adjusted gross receipts) to a high degree,” the study said. “The high level of cannibalization is what existing casinos fear most.”

The reason: A majority of Missouri’s gaming revenue is from local patrons, the study showed.

The findings also showed that the proposed Hollywood Casino that is coming to the Kansas Speedway would also increase cannibalization.

The St. Louis area has six casinos, compared with Kansas City’s four and Cape Girardeau’s two. The study showed casinos in St. Louis are more spread out than those in Kansas City and cannibalization would occur to a lesser degree. But in Cape Girardeau, a new casino could compete with existing casinos in Metropolis, Ill., and Caruthersville, Mo., with “much less cannibalization of sales.”

Casinos in Kansas City and St. Louis are in a 30-mile radius of one another. Casinos around Cape Girardeau, in southeast Missouri, are in a 60-mile radius.

But the findings give a “best case scenario” involving cannibalization. It cites Lumiere Place, St. Louis casino, that opened in 2007 as an example. Lumiere Place was expected to cannibalize more sales than it actually did in the first year. In 2008 and 2009, the total St. Louis market, both Missouri and Illinois casinos, grew by 3.1 percent and 1.9 percent. But that growth might have been linked to a 2008 statewide smoking ban in Illinois.

From April to September 2010, older St. Louis casinos were down $40.8 million in adjusted gross receipts from the same period in 2009. The drop could be traced to dips in spending from the recession but not much based on numbers from other Missouri markets.

Overall, the study showed the Cape Girardeau project would likely generate the best return for the state. Although a major factor, economic impact is not the only factor in picking a winner. Having strong community support is a factor, and Sugar Creek has much of that.