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Tuesday, October 19, 2004 - Page updated at 09:02 A.M. Slots initiative would bring big expansion of gambling By Lynda V. Mapes
Gambling is booming in Washington, with an estimated 7.8 million players — from within the state and beyond — generating more than $1.5 billion this year in net receipts, the money left after prizes paid to players. Yet profits aren't nearly as fat as they could be, some analysts say. With Washington's population and income, the industry is ripe for expansion but for one little problem: the rules. Washington allows the big action — the highest betting limits, the most card tables, the widest variety of games and, the most enticing lure of all, electronic slot machines — only in Indian casinos. Backers of Initiative 892, one of the biggest proposed expansions of gambling in state history, hope to change that by breaking the tribes' monopoly.
"We're in America, it's a free market, everyone should have the same opportunity," says Jenaro Rodriguez, general manager of Cleopatra's Wild Grizzly Casino in Kelso, Cowlitz County. "It's not about giving someone a better opportunity to make reparations for the past." Sponsored by anti-tax crusader Tim Eyman and bankrolled by casino interests, I-892 would allow electronic slots in neighborhood bars, restaurants, cardrooms, charities and bingo halls all over the state — anywhere with a gambling license. Taxes on the proceeds would pay for a state property-tax cut. Tribes, fighting to preserve their corner on the market, have spent more than $5 million to defeat the Nov. 2 ballot measure — the most ever to oppose an initiative in Washington.
That's notable restraint for a state that has steadily opened a wider, bigger and more lucrative gambling market. Tribes dominate market Washington is the only state in the country that doesn't levy a gambling tax. It puts no limits on the number of operations any single gambling interest can run. It imposes no residency requirement on gambling-license holders. Increasingly, Washington is attracting interest from investors outside the state and the country, who have at least part-ownership in 38 percent of the mini-casinos now licensed in Washington. That's up from zero before 1997, when the Legislature first allowed house-banked cardrooms, also called mini-casinos, in which card players bet against the house. Card-room gambling revenues quickly jumped. The most successful mini-casinos these days routinely take in nearly $10 million a year in gross receipts, state gambling records show. But that's chump change compared with the wealth pouring into some Indian casinos. Tribal gambling revenues have spiked from an estimated $514 million in 2002 to $888 million this year — mostly from slots. Nontribal cardrooms, by contrast, are in a slowdown. They enjoyed a vast jump in net revenues from $17.5 million in 1997, before house banking, to $268 million this year. But revenues have been virtually flat since 2002. Market share is declining. Keeping a low profile Wanting in on the exploding popularity of tribal gambling, casino interests this year hitched their cause to initiative veteran Eyman and a tax-cut pitch. They paid him $46,500 to get I-892 on the ballot and be the front man for the campaign. Big-time operators, eager to make their case for slots last time, this year are mostly declining interviews and ducking phone calls. "Why don't you talk to Tim Eyman? It's his initiative, OK?" said David Fretz, president of Great American Gaming, a wholly-owned subsidiary of Great Canadian Gaming in Richmond, B.C., which operates seven casinos in British Columbia and four mini-casinos in Washington. Great American is one of the largest contributors to the I-892 campaign, so far vastly outspent by the tribes. Anthony Martin, chief financial officer for Great Canadian, in an interview first aired in July on BTV — Business Television, spoke about the next big thing for his company: "community-based gaming" at its properties in the "bedroom communities" of Everett, Kent, Tukwila and Lakewood. "In Initiative 892 we'll see the introduction of slots in these local community casinos. All of our properties have been built ... with that aim in mind," Martin said. Gambling interests cut state and local governments out this time around, dedicating the measure's 35 percent slot tax to property-tax cuts for individuals. One percent of the proceeds would be dedicated to programs for problem gamblers. It's gambling interests that would hit the jackpot: They'd get 65 percent of slot proceeds off the top, and their long-coveted prize: the same slots as the tribes, up to 18,225 machines in all, doubling in one stroke the number of slots allowed in Washington. Not only doubling it, but bringing it close to home. In most cases, tribal casinos can be built only on trust land, and many are in remote locations. But under the initiative, any operator with a gambling license, whether charity bingo or mini-casino, is eligible for slots. "A whole new element" A broad coalition is fighting the measure, from former Washington governors to prosecutors and pastoral leaders. They say Washington already has enough gambling — and they fear slots on their doorstep. "I'm a parent, a youth-soccer coach and a homeowner, and I am totally opposed to this," says Alan Nelson, of Kingsgate, near Kirkland. He is battling a neighborhood bingo hall, near a school and day-care center, that's seeking to convert its operation to a mini-casino. "Right now, it's a bingo hall. It doesn't really affect the neighborhood. It's basically women that like to smoke. This would bring in a whole new element." Slots, he says, would be even worse. "That type of vice needs to be at arm's length. We don't need to be Nevada." Many local governments ban various types of gambling, but under I-892 they couldn't stop slots from coming into neighborhoods unless they banned gambling altogether. It's a painful proposition for local governments that depended on pull tabs and other forms of gambling for $44.1 million in local gambling-tax revenue in 2002. State officials predict a $60 million drop in state lottery proceeds and a $8.4 million hit to local tax collections if the measure passes, because gamblers would switch from other games to slots. Differences over numbers Eyman promises the initiative would generate $400 million a year for state property-tax cuts, saving the average property owner about $220 a year. Analysts in and outside government say the tax cut wouldn't be that big; they warn that Eyman is overestimating how much the machines would bring in. Eyman assumes $175 in net revenues per machine per day; officials at the state gambling commission say $115, generating $267 million for tax cuts. Patrick Bero, an independent gambling consultant based in Michigan who sized up Washington's gambling market for slot advocates in 2003, predicted the machines would garner $148 per day on average. In his 90-page analysis, Bero declared Washington an "underserved" and "underperforming" venue, with the potential to double annual revenues if the slot-machine measure were approved. "If it was a free market, you'd be Nevada," Bero said in an interview. Instead, in 2002, out of 14 state gambling markets, Washington ranked fourth in population and second in per-capita income, but placed 13th in both gambling revenue per adult ($327) and gambling revenue as a percentage of total income (1 percent). That was behind Mississippi, Louisiana, West Virginia, South Dakota, Indiana, Iowa, Montana, Missouri, Michigan, Illinois, Colorado and Oregon. Only Idaho ranked lower. It's time for Washington to pump up the action and cut more players in, I-892 advocates say.
At the Wild Grizzly, the house notched $2 million in gross revenues last year, state records show. The staff has grown to 86 people, and dealers make $15 or even $20 an hour, primo pay in Cowlitz County. But slots would enable the business to really take off. "We have people coming in now constantly that see we don't have slots and turn around and leave," Rodriguez says. The machines are a steady money maker. Payout rates are set by the house, and there is no risk of a big winning hand, as at the card tables. "You will never see a day when they lose money," Rodriguez says. "And there's no overhead. You don't need staff for machines." A former manager at the Upper Skagit tribe's Skagit Valley Resort Casino in Bow, he says he expects revenues would be about what he experienced at the tribe's casino, $100 to $150 per machine per day. "It's huge. The revenue would make all the difference in the world. There is only so much you can make off table games, and [slots are] a more-steady source of revenue," he says. "There's a little fear of the morality and ethics involved in gambling, but you know what, it's already here. If people can't gamble here, they will just gamble somewhere else. It's free will, we are all adults, and you know what your chances are when you come in. It's a legitimate business. This is entertainment." Jim Springer, owner of Hilander Bowl, just across the freeway, led the fight for slots before the Legislature. He says the machines would help his family-owned business stay afloat. He offers everything from pull tabs to bowling for seniors, and laser tag for kids. A bunch of slots in the bar would sure help pay the note he took out to move into a new, improved building, Springer says. "A lot of businesses like mine have seen this huge decline. I'm a small fish. I've got pull tabs and the Lottery, that's it. I go up to the tribal casino up the road, and I see my former customers — sitting at the machines." Lynda V. Mapes: 206-464-2736 or lmapes@seattletimes.com
Copyright © 2004 The Seattle Times Company
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