Vote Could Transform State’s Gambling Patterns

LEDYARD, Conn. —  To drive along Route 2 in rural Connecticut, where the 23-story Foxwoods casino resort suddenly appears above the woods like some Emerald City, is to contemplate the future of California.

The $1-billion-a-year casino business was launched by a struggling Indian tribe that just 15 years ago was growing lettuce and running a pizza parlor.

Today, the Indian-run Foxwoods Resort Casino is the largest in the world, with 5,900 slot machines--far more than any Las Vegas casino--three hotels and showrooms that host the likes of Luciano Pavarotti and Rod Stewart.

Just as the 1993 legalization of slot machines in Connecticut changed the state’s landscape, passage next month of Proposition 1A would inexorably alter the face of gambling in California.

Only 14 years ago, California voters legalized a lottery--but also explicitly declared Nevada-style casinos unconstitutional. In 1998, voters overwhelmingly approved Proposition 5, an Indian initiative to legalize and expand tribes’ existing, limited-scale casinos.

When that popular measure was declared unconstitutional by the state Supreme Court, Gov. Gray Davis and legislators, lobbied by the newly influential Indian tribes, responded with Proposition 1A, a constitutional amendment to grant Indian tribes exclusive rights to operate Nevada-style slot machines and card games.

With the measure’s expected approval on March 7, California’s Indian tribes would be authorized to have roughly the same number of one-armed bandits as the Las Vegas Strip.

The state’s slot-machine epicenter would become the Palm Springs region, where the Agua Caliente Indians plan to remake their existing downtown casino into a $100-million facility and are eagerly contemplating a second casino. Three other Indian casinos are just a short hop away by car.

“Casinos will take a good economy to the next level,” said David Aaker, who heads the Palm Springs Chamber of Commerce.

Detractors counter that passage of Proposition 1A would mar the laid-back ambience of Palm Springs. Statewide, gambling critics add, Nevada-style gambling would become all too accessible, exacerbating associated social problems and opening the door for much more gambling than is immediately anticipated.

“Slot machines are easily the most addictive form of gambling,” said former California Lt. Gov. Leo McCarthy, a leading opponent of Proposition 1A. “No one is paying any attention to the social and economic impacts of that group of California residents.”

2 Casinos Allowed Per Reservation

Proposition 1A would grant Indian tribes the right to offer Nevada-style slot machines, video poker, blackjack, poker, pai gow and other casino-banked card games at no more than two casinos per reservation.

Roulette and craps would remain off-limits, but 18-year-olds would be allowed to gamble at tribes’ discretion.

If Proposition 1A is approved, California would become the third-largest gambling state in the nation, after Nevada and New Jersey. If voters reject it, federal agents could move to shut down 38 casinos that are operating without government permission.

At stake is big money for the tribes, which now gross at least $1.5 billion annually in gambling revenue. With the increased gaming that Proposition 1A would permit, the revenues would grow to $4.7 billion annually, according to Professor William Eadington of the University of Nevada, Reno, who was retained by the California state attorney general’s office to analyze the state’s regulation of casinos.

Through a complex payment formula hastily negotiated last fall between Davis and the sovereign tribes, the state and non-gambling tribes can expect to receive 3.26% of that, or $153.2 million annually, Eadington estimated--a payment formula lower than any other gambling state’s. By comparison, Nevada receives 6.25% and Connecticut receives 25% of Foxwoods’ slot revenues--a cut that amounted to $182 million last year.

Indian tribes, which spent $63 million campaigning for Proposition 5, have reported spending $15.3 million through Jan. 22 to win passage of Proposition 1A. Despite pockets of opposition, critics of the measure have been unable to finance an organized campaign. Given the strong support for Indian gambling shown in 1998, most observers believe Proposition 1A should win handily.

Nevada firms spent $25 million fighting Proposition 5 but are sitting out this election. Approval of the new measure would allow them to do business in California without risking their Nevada gaming licenses--and some already are moving in on the action.

Last month, Harrah’s Entertainment announced plans to build a $100-million casino for the Rincon Indians, about 40 miles north of San Diego. Anchor Gaming, which operates slot machines in non-casino venues such as grocery stores, is working with San Diego County’s Pala Indians to build that tribe’s first casino. Near Sacramento, the Auburn tribe wants to build a casino with Palace Stations, best known for its neighborhood casinos.

Other tribes say they also may bring Las Vegas brand names to California but don’t want to disclose the nature of their talks until after the March vote.

The most dramatic result of Proposition 1A’s passage would be the tribes’ exclusive privilege to operate slot machines that are ubiquitous in Las Vegas and in Atlantic City, N.J.

Some of the 38 tribes that now run casinos operate 1,000 or more quasi-slot machines--video gaming devices that don’t have pull-arms and that dispense winnings with paper receipts instead of hard coins.

Under the agreements already signed between 58 Indian tribes and Gov. Davis, any one of California’s 105 recognized tribes could have as many as 349 slots.

Moreover, the agreements, known as compacts, permit each tribe to operate as many as 2,000 slot machines by buying slot machine rights from non-gambling tribes.

“A casino with 349 slot machines is big,” said Whittier Law School professor Nelson Rose, who studies gambling. “A casino with 2,000 machines is gigantic.”

On the Las Vegas Strip, only 14 casinos have more than 2,000 slot machines.

The Davis administration maintains that if the ballot measure is approved, 44,798 slot machines would become legal statewide--more than twice as many as the current 18,597 quasi-slots.

That limit, Davis has said, is consistent with the kind of “modest” expansion of slot machines in California that he supports.

However, the agreement is so ambiguous that the nonpartisan legislative analyst, Elizabeth Hill, concluded that the compact actually authorizes 113,000 slot machines. “You put 100,000 machines in California, you’ll be drumming gambling into the population,” said Professor Bill Thompson, of University of Nevada, Las Vegas, a gambling expert.

Because of the convoluted wording of the compacts, the final arbiter is likely to be the courts.

The number of slots in California could still grow dramatically in the future, because the compacts can be renegotiated in three years. That means a governor, with legislative approval, could allow more slot machines or agree to an unlimited number, as is the case in Connecticut.

Rural Tribes May Seek Land Near Cities

If Proposition 1A is approved, rural Indian tribes might try mightily to buy land and establish more casinos closer to the state’s major cities.

A few existing reservations are already relatively close to large markets. The Sycuan Indians’ casino is about 30 minutes from downtown San Diego. The San Manuel Indians own a large casino in the foothills above San Bernardino. Other casinos are within one-hour drives of San Diego, Sacramento, Fresno and Santa Barbara.

The federal process for allowing tribes to acquire new reservation land on which to build casinos is cumbersome. Guidelines, which are being rewritten more stringently, require the approval of the Interior secretary and the state’s governor.

So far, it has happened only twice--in Milwaukee and in Washington state, where a tribe 55 miles north of Spokane acquired new reservation land to build a casino just five miles east of the city.

Indian efforts to acquire land are underway in California. In the Bay Area city of San Pablo, alongside a freeway within 10 miles of Oakland, the Lytton Band of Pomo Indians--one of 19 government-recognized tribes in California that have no reservation land--is seeking permission to buy property that already has a card room on it.

“The card room has been a [financial] godsend to the city,” said San Pablo City Manager Rory Robinson. The tribe already has agreed that, if it wins federal approval to get the land and turn the card room into a casino, it will pay the city $1.5 million up front and an additional $3.5 million annually.

Robinson said he expects efforts to convert the state’s 125 card rooms, most of which are in urban areas, into casinos--whether by sovereign Indian tribes or, eventually, private companies that, unlike the tribes, are taxed directly by the state.

“You can’t just say you can only do this in the hinterlands,” he said. “What’s fair is fair.”

Richard Milanovich, tribal chairman of the Agua Caliente Indians in Palm Springs, anticipates that if Proposition 1A takes effect, Indians will lose their monopoly on Nevada-style gambling within a decade.

“I believe citizens of California will realize how well [casinos] can be run,” Milanovich said. “Their fears about mobsters running around will be alleviated. After a while, they’ll say, ‘Sure, let it happen.’ ”

Foxwoods Seen as Likely Model

While the long-term impact of Proposition 1A remains uncertain, the lucrative Foxwoods is the ultimate role model for the state’s Indian tribes.

Foxwoods and a second huge Indian casino nearby are a mere 2 1/2-hour drive from New York or Boston, roughly the same drive time as Los Angeles and Orange counties to Palm Springs.

Another similarity: Much of the Connecticut casinos’ clientele is about the same distance from Atlantic City as Southern California is from Las Vegas.

“In California, casinos will draw people who never before went to a casino, or they’ll get people to gamble more frequently without having to go to Las Vegas,” said Shannon Bybee, director of the International Gaming Institute at UNLV.

While many Palm Springs business leaders welcome that prospect, some small-business people there do not embrace the expected expansion of gambling.

“Because Indian tribes don’t have to adhere to local planning and design standards, they can build just about anything, and that certainly could hurt how the area looks,” said Frank Tysen, who owns a bed and breakfast about three blocks from the downtown Spa Casino.

The Twentynine Palms tribe in nearby Indio, which operates a 740-slot casino alongside Interstate 10, is considering constructing a hotel on the site so the expanded casino can pull more customers from the Los Angeles basin, said Gene Gambale, the tribe’s attorney.

Agua Caliente’s Milanovich wants to piggyback casino expansion plans--including a second one in the downtown area--on Palm Springs’ resort reputation. “Now we’ll really want to go after the international market,” he said.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Prop 1A Players

Fifty-eight Indian tribes in California have signed compacts with Gov. Gray Davis to operate Nevada-style casinos if Proposition 1A is approved by voters March 7. Among them, 37, already operate casinos without government approval.

Source: Governor’s Office