Nevada casino companies switching sides as California gambling booms
LAS VEGAS (AP) – Nevada gambling companies facing an unprecedented explosion of competition from Indian casinos in California, their most fertile customer base, are beginning to switch sides and seek gaming development contracts with tribes.
The turnabout comes in advance of expected passage of a constitutional amendment Tuesday that is likely to trigger a casino boom in California, whose residents pull about 35 percent of Nevada’s gambling revenues out of their wallets in jaunts across the state line.
Casino giant Harrah’s Entertainment Inc., Anchor Gaming, and Station Casinos Inc. are leading the way, and other companies are testing the waters, including some that dumped big bucks into the battle against Indian gambling in California.
Doomsayers have written off Nevada since gambling began a nationwide expansion in Atlantic City 22 years ago. But it’s a different story now that the competition is next door.
The change of strategy is not unanimous, but Las Vegas gambling executives who no longer oppose Indian casinos in California argue that it is not simply a decision to stop throwing good money after bad.
Analysts predict that the Las Vegas Strip would remain strong, while the Reno-Lake Tahoe market would take a serious hit from California casinos.
”What you see is that with the expansion of gaming, the Las Vegas market has grown exponentially,” said Jan Jones, a former mayor who is now vice president of communications for Harrah’s Entertainment.
A handful of casino companies didn’t buy that view, spending $25 million in 1998 in a futile bid to defeat Proposition 5, a measure to allow Nevada-style gambling at California’s tribal casinos.
Proposition 5 ran into trouble in the courts, however, potentially setting up a new battle between tribes and Nevada casinos over the fix-it constitutional amendment on the Tuesday ballot. That didn’t happen.
”It didn’t serve the gaming industry well to spend a lot of money fighting gaming in another state,” said Bill Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno. ”Contributions became an issue in itself, and helped proponents win the case.”
Indian tribes and other proponents spent $63 million touting Proposition 5.
Companies who fought Proposition 5 ”are going to have a bit of a problem, depending on how long the memories of Indian tribes in California are,” Eadington said. ”I won’t be surprised if you see tribes stay away from companies that were involved, and are more attracted to the ones who stayed out of the fray.”
Waltona Manion, a Los Angeles-based tribal spokeswoman, said it is human nature for the tribes to be inclined to do business with companies that have supported them.
”You remember the people who stood with you in difficult times,” Manion said.
At the moment there are three companies with plans on the table.
Harrah’s, which is affiliated with tribal casinos in Arizona, Kansas and North Carolina, has plans to build and manage a $100 million casino-hotel for San Diego’s Rincon band.
The Pala band has announced a $90 million deal with Anchor Gaming, and the United Auburn Indian Community of Northern California has signed a $100 million agreement with Station Casinos Inc.
Others companies are considering such deals.
Mirage Resorts, Inc., spent $6.7 million fighting the 1998 initiative, but ”that’s water under the bridge,” said Alan Feldman, vice president of public affairs.
”We are in contact with a couple of tribes,” Feldman said recently. ”There’s a wonderful opportunity for the tribes to take their assets, locations and blend them with our experience in building fancy resorts.”
Feldman said his company’s concern about Proposition 5 was the legal structure, not the concept of Indian gambling in California.
Circus Enterprises, now Mandalay Resorts Group, pumped $6.5 million into the anti-5 battle. Senior Vice President Mike Sloan said the company has not made a decision whether to pursue any tribal ties and is not in the middle of any deals.
”We basically are familiarizing ourselves with locations,” Sloan said. ”We have not made a policy decision as to whether we would participate.”
But he said there was no question that there has been a ”significant rush” by some gaming companies to reach toward California’s tribes.
How much Nevada expertise and financing will be needed?
”California tribes who started a decade ago are self-managed today and will remain that way,” Manion said. ”You will see a small number of tribes who do not have the expertise and will turn to outside expertise and financing to start their operations.”
Most Nevada companies are brokering deals to provide management and cash to launch Indian casinos. But the deals are short-lived for the millions invested. Federal law limits a management contract for a tribal casino to five years, with a two-year extension.
”The law was designed so tribal gaming would always be regulated by the tribes,” Manion said.