Card clubs clamor for slice of slot pie

May 1, 2001 11:53 AM


Opponents of expanded Indian gaming in California argued that tribal casinos would put the state’s card clubs out of business. That prediction is coming to pass, according to card club operators, some of whom are suing the state in federal court in an effort to try to level the playing field.

The clubs are clamoring for house-banked slot machines like those permitted the tribes under Proposition 1A, which amended the state Constitution a couple years back to allow expanded Indian gaming. A lawsuit filed by four poker rooms in the San Francisco Bay area is challenging the measure’s constitutionality. They argue they are at a competitive disadvantage with tribal casinos because they can’t offer the same machines the tribes can.

Under state law, expanding the range of games offered by the card clubs would require a constitutional amendment similar to Proposition 1A.

Slots generate about 80 percent of tribal casino revenues, and tribes across the state are building ever larger casinos with the profits and adding thousands of the one-armed bandits.

The state licensed 454 poker rooms four years ago. That number is down to 100, according to figures compiled by the California Gaming Association, a group representing the poker rooms. Poker room operators say the remaining clubs will disappear without the Las Vegas-style slots offered by the tribes.

Funding blocked for regulators

California’s Indian gaming tribes flexed their political muscle in Sacramento last week to defeat two measures to fund a new gaming regulatory body that is supposed to oversee their operations.

The state Assembly’s powerful Budget Committee Chairman Tony Cardenas blocked approval of an interim budget for the Gambling Control Commission of $1.35 million and a permanent budget of $4.7 million. Without the money the commission will not be able to operate at full strength and its effectiveness will be hampered.

Cardenas has received some $600,000 in campaign contributions from gaming tribes and is considered one of their key allies in the state capital.

The most powerful gaming tribes, like the Pechanga and Agua Caliente, criticized the commission in hearings last week before a budget subcommittee chaired by Cardenas. The tribes dispute the commission’s authority to license new slot machines and have refused to provide the commission with information on tribal slot operations. So far, some 40 tribes have refused to disclose the information, which is holding up some $39 million in revenue-sharing payments to smaller gaming tribes and non-gaming tribes. Cardenas and tribal leaders want the state to distribute the money without the information.

The commission also has been mired in a turf war with the gambling control division of the state Attorney General’s Office.

Nevada AG names new gaming chief

The gaming division of the Nevada Attorney General’s Office has a new boss.

Keith Kizer, a senior deputy with the gaming division, has been appointed chief deputy attorney general. Kizer replaces Kirk Hendrick, who is leaving the office after eight years to return to private practice with the law firm of Jones Vargas in Las Vegas. The change is effective May 14.

West Virginia lawmakers approve slot machines

The West Virginia Legislature approved the establishment of up to 9,000 legal video lottery terminals to combat the proliferation of so-called "gray market" slots in the state.

The new slot-style machines, which dispense paper vouchers rather than cash, will be installed beginning next year under a bill that provides for licensing and taxing the machines. The machines will be restricted to five per location at bars and restaurants and 10 per location at fraternal organizations.

Additionally, the bill raises the maximum wager at slot machines at the state’s four racetracks from $2 to $5. The new video terminals will be limited to a $2 maximum bet.

Gov. Bob Wise is expected to sign the bill into law.

An estimated 13,000 "gray market," or illegal slots, are in operation around the state. The new law formally outlaws those machines.

Slots shut down in Illinois

An agreement between the Illinois Gaming Board and Waukegan-based WMS Industries forced about 1,200 WMS slot machines to shut down last week. The machines were turned off after it was discovered they might be vulnerable to cheating.

The machines are shut down until WMS can fix a defect in the bill acceptors. The slot machines represent about 13.5 percent of the state’s 8,882 slots. The plugs were pulled after employees at a Detroit casino found a defective bill acceptor on some of the WMS machines, which could give players extra credits.

Emerald Casino Inc. wins delay

The hearing for Emerald Casino Inc. has been granted a two-week delay. The hearing will challenge the Illinois Gaming Board’s refusal to allow Emerald to build a casino in Rosemont.

Emerald wanted extra time to request information about the process of selecting administrative law judges, hiring lawyers and gathering information from outside law-enforcement groups.

Connecticut towns want more gaming revenue

Municipal leaders around Connecticut’s two mammoth Indian casinos are seeking a larger share of state aid to offset the impact of the gaming resorts on their towns.

The Southeastern Connecticut Council of Governments is asking for legislation to set up a special Casino Impact Fund to distribute a greater share of money to local communities from the more than $300 million collected by the state from a 25 percent tax on slot revenues.

A bill to set up the fund died in the Legislature’s Appropriations Committee, but lawmakers said they will continue to meet with local leaders to try to craft a mechanism to provide more money to the region.

Gaming bosses to speak at conference

Leaders of four gaming corporations are scheduled to speak at a conference later this month focusing on gaming issues in Atlantic City. Bill Boyd, chairman of Boyd Gaming, Thomas Gallagher, president and CEO of Park Place Entertainment, Philip Satre, chairman of Harrah’s Entertainment and Paul Rubeli, chairman of Aztar Corp. will join Wall Street analysts and gaming regulators in discussing industry issues at the fifth annual Mid-Atlantic Gaming Congress on May 24 at the Atlantic City Convention Center.

Regulators limit new casino construction

In response to environmental concerns, the Mississippi Gaming Commission has adopted a rule permitting only one casino on the back bay west of the Interstate 110 bridge in D’Iberville on the lucrative Gulf Coast casino strip.

Coast Resorts of Las Vegas is one of at least two companies interested in building a hotel casino in the town. The town has refused to release the name of the second company, which has asked to remain anonymous.

A federal court last summer issued a ruling postponing casino development on three sites, including the D’Iberville site, pending the results of an environmental impact study by the Army Corps of Engineers.

Harrah’s taps new markets with $625M Harveys buy

Harrah’s Entertainment last week announced an agreement to buy Harveys Casino Resorts for $625 million from Colony Capital Investors.

The deal, already approved by the boards of directors of both companies, expands Harrah’s’ presence in Lake Tahoe and gives the gaming giant entry into Colorado and the Iowa riverboat market.

Harrah’s will acquire Harveys Resort & Casino in Lake Tahoe, Harveys Casino Hotel and the Bluffs Run Casino, both in Council Bluffs, Iowa, and Harveys Wagon Wheel Hotel Casino in Central City, Colo. The acquisition does not include Colony’s recent purchase of Resorts Casino Hotel in Atlantic City.

The terms of the deal call for Harrah’s to assume $50 million of Harveys debt, contingent on a November 2002 vote by Council Bluffs residents to approve an expansion of gaming in the region. According to published reports, Harrah’s has polled local voters and found overwhelming approval for the expansion.

The purchase also is contingent on approval by gaming regulators in Nevada, Iowa and Colorado.

Harveys generated cash flow of $110 million for the fiscal year ended February 28, which more than justifies the purchase price, according to financial analysts. Harrah’s Chairman and CEO Phil Satre said his company expects to increase Harveys’ cash flow by $25 million in the next 18 months.

"We believe the synergies between Harrah’s and Harveys are very similar to those we have already achieved from the acquisition of Players International," Satre said in a statement released when the deal was announced last Tuesday. "The Harveys properties are an excellent complement to our existing geographic network of casino locations."

Harrah’s expects to close on the purchase by the fall.

Harrah’s currently operates 21 casinos in some 17 gaming jurisdictions. Its huge portfolio was fattened by several acquisitions in the last few years: Players International, Showboat Inc. and the Rio Suite Hotel & Casino in Las Vegas.