It’s payback time for
Democrats who opposed
‘The Terminator’

Aug 24, 2004 5:24 AM

Initially, a plan to build a casino that would dwarf even Las Vegas’ largest gaming floor seemed to fit right in with California Republican Gov. Arnold Schwarzenegger’s goal to extract many millions of dollars from the state’s tribal gaming industry.

But cynics were quick to point out that granting a casino license for Casino San Pablo at its Bay Area location was a payback for the area’s residents opposition to Schwarzenegger’s recall election.

And it added fuel to the ongoing controversy over the ballooning costs of the Bay Bridge earthquake retrofit that the governor blames on the Bay Area officials. The Bay Area is the state’s most Democratic region and a large casino would create massive traffic problems to an area that already is highly congested.

In announcing the casino plan, Schwarzenegger said the Lytton Band of Pomo Indians had agreed to turn over to the state 25% of its gaming revenue. With the prospects of a 200,000 square feet gaming floor providing room for upwards of 5,000 slot machines, the casino is expected to generate as much as $300 million in tax revenue annually.

Opponents were swift to condemn the plan pointing out that the working-class city of about 30,000 residents won’t be able to absorb such a facility.

"Besides that," said one critic, "it won’t only affect the city of San Pablo but the region within a 50-mile radius.

And that will include San Francisco, just 15 miles away.

Quickly, powerful Sen. Diane Feinstein, a Democrat, joined the fray saying "I find the proposed casino agreement reached by Gov. Arnold Schwarzenegger and the Lytton Band of Pomo Indians totally unacceptable. To compromise a community so the state can get 25 percent of the casino’s revenue is unconscionable. Such a huge casino will have a serious impact on the entire East Bay community, generating traffic congestion and environmental damage, and potentially increasing crime."

Preparing to cash in on the announcement is Philadelphia businessman Sam Katz who with a group of partners has been funding the Lytton Band’s casino efforts for several years. The group reportedly has funneled some $13 million into the project and is ready to take its profits.

Word out of Pennsylvania is that Katz and his partners are prepared to sell out the position rather than wait until the casino is built and operating.

"We will not do as well as if we stayed in," Katz was reported as saying. "But we no longer have any question as to how much we will get." A lawyer close to the situation estimated the Katz group would receive "tens of millions of dollars" for their interest.

Offer rejected

With very little hesitation, the board of directors of Riviera Holdings Corporation (RIV) Monday said it "would not support the potential acquisition of Riviera" by D.E. Shaw Laminar Portfolios LLC.

The company had indicated in an SEC filing on Friday that it was prepared to buy all the outstanding stock in Riviera Holdings for $12 a share.

In rejecting the offer, Riviera said in a press release that among the factors the directors had weighed in its deliberations was the lack of information relevant to Shaw Laminar’s satisfying certain gaming regulatory requirements, specifically in Missouri where Riviera proposed to build a casino complex in Jefferson County.

About face

Viacom’s Sumner Redstone spent several months earlier this year acquiring a majority interest in game maker Midway Games Inc. (MWY) through his own portfolio or through his wholly-owned company, National Amusements.

Throughout the purchasing period, that saw the share value of Midway rise to a lofty $12 and change from the middle single digits, Redstone insisted that the purchases were to satisfy his own interest in the company and that they would have nothing to do with Viacom.

"I do not look at this as a Viacom agenda”¦it’s a personal investment," he was quoted as telling media representatives.

That ended last week when Redstone advised the SEC that three independent members of Viacom’s board of directors will work with Viacom management to determine whether Viacom should acquire Redstone’s interest in Midway.

In the filing, Redstone noted that he now owned 73.7% of Midway’s stock.

Losing interest

After reading the language of the law establishing 14 so-called gambling halls in Pennsylvania, some racetrack license-seekers have lost interest in the project.

The new law does not guarantee a gambling license to the operator of each thoroughbred track in the state. Thus, four groups thinking they would receive a slot machine license if they built a track decided to bow out.

They included Isle of Capri Casinos Inc., (ISLE); MTR Gaming Group Inc. (MNTG) who planned a track in Erie; a management group involved with Philadelphia Park in Bensalem, and the top executives of Pittsburgh real Estate company Oxford Development Co.

Also in the law is a prohibition against any company owning a majority interest in more than one gaming operation. This would affect Magna Entertainment Corporation (MECA) that already owns The Meadows, a harness track in suburban Pittsburgh that is expected to receive one of the four harness racing licenses that are proposed.

THE INSIDER: Ed Spector, whose family has been involved in horse race simulcasting for two decades, has been named CEO of Vernon Downs in upstate New York as he attempts to acquire the property from bankrupt Mid-State Raceway.

Sanford Rivers, a linesman for the National Football League, says he will give up his officiating work since the NFL is concerned about his role in the gaming industry. Rivers was recently appointed a Pennsylvania Gambling Commissioner.

Horse owner Mike Pegram has partnered with the management of Fair Grounds in New Orleans in a move that could halt efforts to force the track to be auctioned off as part of a bankruptcy commitment. Left out is Churchill Downs Inc. (CHDN) that had offered $45 million for the track.

As expected, a dispute over the slot machine referendum proposed for the November ballot has caused Maryland politicians to end discussions for this legislative year.

Officials of Garden Grove, Cal., reportedly have proposed that Las Vegas casino mogul Steve Wynn partner with an Indian Tribe in building a casino in their community.

The Indiana Lottery Commission has agreed to a three year extension of its contract with Scientific Games Corporation (SGMS). For fiscal year 2004, the lottery reported online sales of $294 million.

Ameristar casinos Inc. (ASCA) has announced a quarterly cash dividend of $0.125 per share payable on Sept. 15 to stockholders of record on Aug. 31.

Colorado casinos set a record in July with $67.3 million in revenues, topping the previous record of $65.8 million. The July figure was up 9% over July, 2003.

Mikohn Gaming Corporation has agreed to a strategic alliance with Cash Systems Inc. (CKN) that will allow for the cross-promotion of their respective products.

A Pittsburgh businessman has filed suit challenging the recently passed gaming law in Pennsylvania as unconstitutional. He was one of the unsuccessful bidders for a racetrack license.

Licensed gaming properties in Louisiana reported revenues of $200.6 million for the month of July, a huge jump over the $176 million reported in July 2003.

The New York Racing Association and its partner MGM MIRAGE Inc. (MGG) will have to wait until next year for legislation that would open the door for them to build a slot machine center at Aqueduct Racetrack. State lawmakers ended their 2004 session without taking action on the video lottery machines.

Delaware North Corp., the Buffalo, N.Y. company owned by the Jacobs Family, said its Wheeling Island Gaming operation in West Virginia will suffer "material adverse effects" when slot machines are activated at gambling halls in Pennsylvania.

Good weather and large beach crowds in July helped Atlantic City casinos to enjoy their second best monthly showings since gaming began in 1978. The casinos, all of which showed increases over last year, won a total of $474 million.

The two Indian casinos in Connecticut turned over $38.9 million to the state as its share of slot machine revenue. During the period Mohegan Sun had $78.4 million in slots revenue while Foxwoods took in $77.6 million.

Standard & Poor’s Ratings Services has revised its outlook on the debt of Pinnacle Entertainment Inc. (PNK) from stable to positive.

Financial help from the Mohegan tribe of Connecticut has helped the Cowlitz Tribe open a casino in the southwestern Washington town of LaCenter.

Aztar Corporation (AZR) has completed a $675 million senior credit facility that includes $550 million revolving credit account, and a $125 million five-year term loan.

Both Republican and Democratic gubernatorial candidates in New Hampshire have pledged to veto any effort to introduce slot machines in the Granite State.