Mini-casinos playing for larger stakes
Las Vegas entrepreneur Eric Nelson's newest investment? Four mini-casinos in Washington and the license to operate Playfair in Spokane, which he wants to turn into a "racino" where gamblers can bet on not just the horses, but cards and, maybe someday, electronic slot machines.
Nelson is not alone: One of the largest gambling companies in Canada has crossed the border into Washington, investing $10 million in mini-casino properties up and down Interstate 5. The son of a Wisconsin pipeline magnate is here, too, pouring millions into five mini-casinos.
A steady loosening of gambling laws and a boom in card-room revenues are fueling the growth of the nontribal gambling industry. Washington also has no limit on the number of gambling licenses an operator can hold and, unlike 29 other states, charges no state gambling tax.
"Washington is just so wide open," Nelson said.
Of Washington's 78 licensed nontribal mini-casinos, 18 are now jointly or wholly owned by out-of-state interests. The investors are coming from Alaska to Texas and most states in between, as well as Canada, state records show.
Washington imposes no residency requirement to get a gambling license. The state Gambling Commission does conduct a criminal background check of potential license holders, their spouses and employees. Most applications are approved.
Since 1992, operators have pushed to up the gambling ante to compete against the tribal casinos: more games, higher wage limits, more tables and, finally in 1997, house banking, which allows gamblers to bet against the house, just like in Las Vegas. The mini-casinos were a $247 million industry last year, with revenues growing an average of 42 percent annually since 1999.
Now it's time for the state to raise the ante once again, nontribal operators say.
A coalition of bars, restaurants, bowling alleys, bingo halls and mini-casino operators is backing a bill introduced in the state Legislature on Friday. The bill ends the tribes' monopoly on electronic slots, giving nontribal operators access to the same machines and just as many — 18,900 electronic slots in all, for starters. Any time the tribes got more machines, nontribal operators would, too.
The bill, HB 1948, was introduced with a bipartisan list of 27 co-sponsors, including Rep. Helen Sommers, D-Seattle, chairwoman of the House Appropriations Committee. Its supporters say the measure would raise about $250 million a year in gambling taxes for state and local governments on gambling revenues of more than $1 billion. It would effectively double the gambling action in Washington, to more than $2 billion a year.
The tribes already have spent at least $334,000 since last May with the Seattle public-relations firm of Cocker Fennessy to help build their case against the bill. Bill backers meanwhile have spent more than $477,427 since last April to help sell state lawmakers on electronic slots.
Nontribal operators insist they need the machines to survive — and grow.
Take Nelson, the Las Vegas investor. If other nontribal operators get electronic slots, he wants 1,500 at the Playfair track, which he has an option to buy, doubling his investment here. He already has banked $8 million on Washington and employs about 300 people.
Washington "is an opportunity if you are a long-term player," Nelson said — especially if the Legislature delivers on electronic slots.
Others agree.
For Great Canadian Gaming Corp., a Richmond, B.C.-based gambling company that operates six casinos in the greater Vancouver area, Washington looked ripe for making money.
In British Columbia, a monopoly market with limited licenses, the taxation rate is 61 percent on table games, and 75 percent on slots. Washington, with unlimited licenses and local gambling tax rates of up to 20 percent, is a land of opportunity by comparison.
Great Canadian announced its nearly $6 million purchase of Big Al's Casino in Everett last September through its subsidiary, Great American Gaming Corp.
The company also owns a 50 percent interest in the Grand Central Casino in Tukwila, where revenues exceeded projections by almost 50 percent in the first month of operation in July 2002.
The casino is a $5.5 million investment just off I-5 with a 300-seat nightclub, restaurant and bar, and 15 house-banked card tables.
The company is also building another Grand Central casino in Lakewood, which it hopes to open in June, and owns a piece of property in Algona that may become another casino, as may another piece of bare ground in Everett.
While the mini-casinos so far "aren't home runs," they are a good investment, said David Fretz, executive director of planning and development for Great Canadian.
"There is a lot of competition out there," Fretz said. "But we look at Washington as where we were in the mid- to late 1980s, it's just developing. It has potential."
Reno of the North?
As Washington's card-room industry has boomed, communities have been transformed. La Center, just over the state line from Portland, has a mini-mart, bank, gas station and four casinos.
"You can walk to four casinos in five minutes. How much closer can you get to being like Reno?" says Janice Fillman, clerk treasurer of La Center, Clark County.
Casino operators work the Portland market with video billboards and bus placards blaring "Las Vegas-style gambling just 20 minutes away!" The big draw: house-banked gambling, which is illegal in Oregon except at tribal casinos, the nearest of which is about 90 miles away.
When dealer Gino Reynolds shows up for work at The Palace casino at 8 a.m., gamblers already are at it. The gambling action goes 20 hours a day, seven days a week. Some gamblers go until 4 a.m., then go across the street and play until the competitors close, then come back to The Palace for more. "They'll go two, three days," Reynolds said.
Casino owner Steve Michels' parents opened The Palace and the next-door Double Down Saloon. They backed them with their $70 million net worth, earned through their Wisconsin-based utility pipeline business, the third-largest in the country. Michels, of Seattle, now owns the two La Center mini-casinos.
Business is good — all four of the La Center card rooms are consistently among the top-grossing card rooms in the state. Gamblers put more than $25 million on the table at the four casinos in just the last quarter of 2002, state records show.
But while some operators are cashing in now, they say they need electronic slots to compete against the tribes. Tribal casinos raked in $514 million in 2002, more than any other form of gambling.
It isn't just the machines' more consistent payout rate — set by the house — and lower labor costs that make them attractive to gambling operators: The machines are what most gamblers want.
They create a Vegas-like buzz, with the alluring glow of their video screens and enticing electronic sounds. By comparison, the liveliest visual at The Palace is the saltwater fish tank.
"People see we don't have the machines and they walk out," said general manager Ray Akins.
George Teeny, his competitor at the casinos across the street, says he needs slots, too. Teeny started his gambling business in 1988, with two five-table card rooms and 55 employees. He paid himself a salary of $2,000 a month.
Today, Teeny said he pays himself $400,000 a year pumped from two 15-table mini-casinos, the Last Frontier and New Phoenix. He has about 400 employees, and the casinos generated more than $16.5 million in gross receipts last year.
But still, Teeny is worried. He fears his neighbors, the Cowlitz Tribe, will open a nearby casino, though the tribe has made no decision yet.
Operators with less-desirable locations or who are duking it out in saturated markets also say they need the slots to stay in business.
"I'm struggling," said Jim Routos, owner of The Roman Casino near Renton. Open since October, Routos said he has yet to make a profit.
"It's a tough business. The places that opened up early had the opportunity to grab a share of the market. As more places opened up, it has cut into the pie," Routos said. "The tribal casinos also have been able to offer a full range of games, and we can't."
One billion and growing
Gambling is now a more than $1 billion business in Washington. And operators still see room in the state's gambling market for growth.
"I think it's probably at its maximum for the number of (card) tables," Michels said. "Can it sustain more (slot) machines? I'd say yes."
The bid for electronic slots for nontribal operators has already drawn fire from a who's who of Washington pols opposed to gambling expansion.
But Washington's gambling industry is already booming. The Tulalips will open a new $100 million, 227,000-square-foot casino in June next to I-5, complete with mechanical leaping orcas out front. The Puyallups plan a $200 million casino with eight acres of gambling. The Muckleshoots' casino in Auburn has 70 tables and 2,000 electronic slots.
"The question is how will these mega tribal facilities, when they open, affect what's already here," said Tim Iszley, who parlayed a $440,000 second mortgage taken out on his mother's home to start his first mini-casino in 1998. He now has a string of seven mini-casinos along the I-5 corridor, several of them among the most profitable in the state.
Iszley makes no apology for wanting to surf an even bigger gambling wave.
"This idea about Washington being a nongaming state or not turning it into Vegas, that cracks me up," Iszley said. "If you want to say don't bring gaming into Washington, it's a little late."
Lynda V. Mapes: 206-464-2736 or lmapes@seattletimes.com