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California on Path to Become Nation's Gambling Capital

A boom in tribal gaming could double the state's casino revenue in coming years.

August 25, 2004|Dan Morain | Times Staff Writer

SACRAMENTO — A state once skeptical of wagering is in the midst of a gambling boom that could double casino revenue in coming years.

In time, according to gambling industry officials and economists, the Golden State almost surely will pass Nevada as the nation's biggest gambling venue.

The fast expansion of gambling marks a major shift for the state. For 50 years -- from 1933, when the Depression-era electorate approved horse racing, to the mid-1980s -- gambling remained limited in California.

"People liked gambling; they would drive to Nevada," said Roger Dunstan, who in 1997 wrote a study about gambling in the state for the California Research Bureau, part of the state library. "But they didn't want it next door."

For The Record
Los Angeles Times Thursday August 26, 2004 Home Edition Main News Part A Page 2 National Desk 1 inches; 39 words Type of Material: Correction
Indian casinos -- A map in Wednesday's Section A that appeared with an article about gambling in California showed San Pablo in Marin County, north of San Francisco. San Pablo is in Contra Costa County, in the East Bay.

That began changing in the 1980s. As cities approved card rooms in an effort to replace property tax revenue lost after Proposition 13, voters statewide approved the lottery as a way to help pay for schools.

What was a trickle became a flood after ballot propositions in 1998 and 2000 successfully pitched Indian gambling as a road toward economic independence for tribes. Now, the state has more than 60,000 slot machines, the most lucrative game for any casino owner, and tribal casinos generate roughly $5 billion to $6 billion annually.

For now, California's gambling industry remains considerably smaller than Nevada's, which has 220,000 slots and generates more than $9 billion in annual revenue.

Moreover, Indian casinos, which are sprinkled throughout the state, are not likely ever to be concentrated in one area that would rival the Las Vegas Strip as a tourist attraction or gambling center.

Still, the growth in California gambling is sure to continue.

"We're very bullish on California. The market is there. The demand is there," said Scott Nielson, executive vice president of Station Casinos Inc. of Las Vegas. The company has the contract to manage Thunder Valley, the highest-grossing casino in California, owned by the 255-member United Auburn Indian Community.

Other corporations synonymous with gambling, including Trump and Harrah's, are betting on the future of California's tribal casinos. Steve Wynn, who built the Mirage and Bellagio in Las Vegas, is a potential investor in a proposed Indian-owned casino in Garden Grove near Disneyland.

Given California's population, the take from tribal casinos could double in the next few years, said Bill Eadington, director of the Center for the Study of Gambling and Commercial Gaming at the University of Nevada, Reno. Deron Marquez, chairman of the San Manuel Band of Mission Indians, owners of a major casino in the hills above San Bernardino, predicted gambling revenue in California would overtake Nevada's by 2010.

Critics of gambling say the expansion, and particularly the location of more casinos near population centers, will lead to more gambling addiction.

"Proximity is an issue," said former Lt. Gov. Leo McCarthy, who served on the National Gambling Impact Commission in the 1990s. "We'll simply grow more quickly the number of pathological and problem gamblers. It will produce a population more likely to commit crimes to get back money they think they will use to win back what they lost."

The problems associated with expanded gambling have become issues in the campaigns over two initiatives on the November ballot, Propositions 68 and 70, that will help determine how large the industry gets. Each could vastly expand gambling. Meanwhile, card room owners have gone to the U.S. Supreme Court seeking the same rights as Indian tribes to operate slot machines in the state.

But even if the court rejects the card rooms' appeal and both ballot measures fail, Gov. Arnold Schwarzenegger, seeking new money to boost the state's treasury, already has opened the way for substantial casino expansion.

Schwarzenegger has scrapped a limit imposed by his predecessor, Gov. Gray Davis, that held Indian casinos to 2,000 slot machines or fewer. Currently, 16 tribes have casinos with 2,000 slots. Schwarzenegger has been authorizing tribes to add as many slots as the market will bear, so long as they promise to pay the state up to 25% of the profit.

No one really knows how much the market will bear, but economists who have studied the matter, and gambling companies that want to invest money, agree that California is nowhere close to saturated. Unlike Nevada, which relies primarily on tourists from other states, California has a huge population of its own for casinos to serve.

Already, Nevada casinos, particularly those in Reno, have been losing customers to California. The Silver State will retain its allure, however. Unlike Nevada, California does not allow sports books, craps or roulette, although tribes have devised card games that mimic the classic casino games.

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