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Governor wants Indian casinos to pay up



Printer Friendly VersionPost a CommentTell a Friend about this Article29 December 2003
As reported by: Daily Bulletin
Twice a week, 83-year-old Mimi Shore giddily climbs aboard a van in West Covina for a free ride to San Manuel Bingo and Casino in San Bernardino.

Shore usually joins six other bingo regulars in the van, one of about 30 shuttles going to the casino on the edge of north San Bernardino on an average weekday -- a migration of thousands of gamblers to booming Indian casinos largely to the east of the Los Angeles metropolitan area.

Some play bingo. Others prefer the slots. Some, such as Victor Valenzuela, a 44-year-old school teacher in Carlsbad, do a little of everything.

"I like (gambling) a lot," said Valenzuela, who wagers up to $10,000 a year at the racetrack, in Las Vegas and at card tables at the Indian-run Pala Casino, Pechanga Resort and Casino and Viejas Casino.

"I like the thrill of winning. Am I to the point where I am addicted? No."

Dreams of a big payoff have propelled Indian gaming into a recession-proof, $14.5 billion industry and turned tiny, once-impoverished tribes into major economic entities. Indian gaming saw its revenues jump 70 percent from 1998 to 2002. Today, there are more than 330 Indian gaming operations nationwide.

But the proliferation of Indian casinos has also incited strife at every turn.

In California, Gov. Arnold Schwarzenegger has made a bold demand for as much as $2 billion of tribal gambling money, and would be happy for a good bit less than that in the face of the tribes' political clout, which has been earned through hundreds of millions of dollars in contributions to campaigns for ballot measures and officials.

Gambling's old guard -- racetracks and card clubs -- have joined in the fray, proposing a state initiative that would force the tribes to share their wealth or let the tracks and card clubs have slots. But that hasn't stopped the tribes from expanding despite lingering moral arguments and a growing concern about gambling addiction.

"(Indian gaming) has grown faster than population. It has grown faster than inflation," said Steve Rittvo, gaming analyst for New Orleans-based Innovation Group.

It has also created vast wealth for once-poor tribes. Although financial details are a closely guarded secret under tribal sovereignty rules, insiders say that in some cases, the payoff from casino profits might range from $20,000 to $90,000 a month per adult tribe member.

Some have been able to channel those dollars into other business ventures.

In 2002, the San Manuel Band of Serrano Mission Indians entered the lucrative bottled-water business with Big Bear Mountain Spring Water, making the tiny tribe -- with fewer than 70 adult members -- an even bigger force.

In the past two months, the tribe has given $1 million to help in the recovery effort from the October fires, $200,000 to Lighthouse for the Blind and $5,000 each to 16 local charities that needed last-minute donations before Christmas.

@briefs: Humble beginnings

Most Indian casinos are a far cry from the bingo halls or card parlors that predated the legalization of gambling on reservations in 1988.

Now tribes are building massive casinos with hotels, golf courses and million-dollar jackpots. The keys to their success are location and a special tax status that excludes them from paying corporate income tax and only a small portion of their revenue to the state.

"Their cash flow is unbelievable," said Andrew Zarnett, a gaming analyst for Merrill Lynch. "That business will continue to expand."

Especially in California, which has 107 tribes -- more than any other state.

In 2001, California's 48 Indian casinos brought in $2.89 billion. By the next year, there were 52 casinos posting revenues of $3.59 billion.

"California is the only rapidly growing market at this time," said William Eadington, director of the Institute for Gambling and Commercial Gaming at the University of Nevada.

In Southern California, 19 Indian casinos have popped up since the early 1980s and, with more than 30 tribes, more are coming.

The San Manuel casino will double in size by 2006. Casino Morongo near Banning is growing from its single floor to a 23-story hotel-casino. And there are three proposals for casinos in Hesperia and Barstow.

The Agua Caliente Band of Cahuilla Indians opened a new resort-casino in downtown Palm Springs in November, the Cabazon Band of Mission Indians near Indio is adding a hotel to the Fantasy Springs Casino, and Pechanga Resort and Casino near Temecula is also expanding.

A new casino could soon pop up near Needles if the Fort Mojave Tribe can get all needed approvals.

Gambling has taken off across America, growing from a $10.2 billion industry in 1982 to a $69.7 billion industry today, with many states having legalized gambling in some form.

There are limited-bet casinos in South Dakota and Colorado, riverboats throughout the Midwest and Louisiana, racetracks with casinos in six states, and some form of Indian gaming in 29 states.

"(Casino gambling) has become a more acceptable form of entertainment," said Lawrence A. Klatzkin, managing director of equity research for Jefferies & Co., a New York-based investment bank. "The fact that you could win lots of money makes it more attractive."

The competition from California Indian casinos prompted Nevada gaming companies to spend heavily to fight the ballot measure that legalized them, but now Harrah's Entertainment, Park Place Entertainment and Station Casinos have all made deals with California Indian tribes to hedge their bets.

A bigger battle is being waged between the tribes and racetracks.

Some tracks are so close to Indian casinos they can't keep serious gamblers. But most complain the tribes' political clout stops them from keeping up with the changing market.

John Van de Kamp, a former state attorney general who is president of the Thoroughbred Owners of California, blames tribes for holding up legislation that would expand off-track betting. He also said tribes have blocked big racetracks from having slot machines and tables.

The California racetracks are hoping to get slots by using Schwarzenegger's recent demands that tribes share their revenues with the state. If voters approve a proposed initiative, tribes will be asked to share 25 percent of their slot-machine revenue.

If the tribes refuse, five racetracks and 11 card clubs would get slot machines.

Still, experts say the horse-racing industry itself is part of the problem, and faces declining popularity.

"The average person doesn't really give a (bleep) about racing," said Joe Harper, president of Del Mar Thoroughbred Club. "You don't want to go to Aqueduct on a winter day to bet the horses."

California's 97 card clubs say they are having trouble keeping up with Indian casinos as well.

They're restricted by law from having "banked" games such as blackjack, where the casino pays the winner instead of from a players' pool. Tribes, on the other hand, can have banked games.

"We operate under these really arduous legal restrictions," said Andrew Schneiderman, president of the Golden State Gaming Association, a trade organization representing California card clubs. "There is no way we can innovate our games to meet the market of the industry."

But tribes are unwilling to give up their advantages.

"Tribes have slot machines because they are sovereign entities," said Mark Macarro, chairman of the Pechanga Band of Luiseo Indians near Temecula. "That is why card clubs and racetracks can't do it. It is about economics. It is about a market base. We want to protect that."

But the San Manuels' Deron Marquez said racetrack casinos in California are inevitable, especially since they are seen as cures for budgetary problems.

"It is going to happen by 2010," Marquez said. "More and more states are looking at racinos. You see a trend and they are not going to go away."

That might create partnership opportunities between the tribes and the tracks.

"You are going to have to think way out of the box if you are going to run a racetrack," Del Mar's Joe Harper said.

Del Mar has teamed with the Barona Band of Mission Indians, which owns Barona Valley Ranch Resort and Casino, northeast of Santee and a 40-minute drive from the racetrack.

For $1.5 million over three years, Barona gets advertising and luxury suites at the track for its patrons. The racetrack and casino share customers.

In time, Harper said, slot machines would drive out the horses and leave just a casino.

"If I was a bottom-line guy, it wouldn't take long for me to figure out that I have to get slot machines everywhere and these horses out of here," he said.

Community opposition to new casinos is building in some areas, and the industry has concerns there soon will be too many casinos competing.

"Is anybody oversupplied? No," Rittvo said. "(But) the low-hanging fruit is gone."

But gaming consultant Michael Lombardi said Las Vegas worried about saturation during the 1990s and never stopped building more casinos.

"Every time they built a casino, they said, "Oh the bubble is going to burst now,"' he said.

California's Indian gaming has just as much potential to grow, Lombardi said.

"When you have people waiting in a Riverside County Indian casino for an hour and a half to play a slot machine," he said, "that tells you there is a long way to go."

Related Articles:

Indian Casinos Up the Ante on Vegas - 31 January 2005
You bet your bottom dollar, casinos pay off big for tribes - 28 December 2003
Davis signs another Indian gambling compact - 21 October 2003
2002 tribal casino revenue outpaces U.S. gaming sites - 22 July 2003
Proposal for a bingo hall receives cold shoulder from Covina officials - 21 July 2003

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