Nevada Seems Willing to Gamble on Indian Casinos

SAN DIEGO —  After fighting tooth-and-toenail against Indian gaming in California, indications are mounting that the Nevada gaming industry is about to become partners with its former foes.

In the first such agreement since Gov. Gray Davis struck compacts with 60 tribes to run casinos, a Las Vegas-based gaming company last week announced a deal with the Pala band of Mission Indians in northern San Diego County.

Under the arrangement, Anchor Gaming will develop and manage a casino and entertainment venue for the tribe and assist in finding financing for the $90-million venture. The tribe currently does not run a casino.

The talk among analysts of the burgeoning Indian gaming industry is that the Anchor-Pala arrangement will not be the last cross-border deal.

“There are several deals that I know of that are being discussed right now,” said New York-based analyst Todd D. Jordan, who watches the gaming industry for the Raymond James firm. “Nevada is not going to try to defeat the [March] initiative as it did Proposition 5. They know it’s a losing cause.”

Harrah’s Entertainment already operates Indian casinos in Arizona, North Carolina and Kansas. Other Las Vegas interests are said to be shopping for deals.

“You’re going to start seeing the traditional sector of gaming increasingly look at California for business opportunities,” said Alan Feldman, spokesman for Mirage Resorts, which runs four Las Vegas casino-hotels.

Gaming analyst Jason Ader of Bear Stearns & Co. caused a mini-stir in the gaming world recently by suggesting that Mirage Chairman Steve Wynn, known for his dazzling Treasure Island and Bellagio resort-casinos, is looking into California Indian gaming for possible investments.

Although Anchor did not contribute, other Nevada gaming industries spent millions in 1998 to defeat the gaming initiative, which passed with 63% of the vote but was rejected as unconstitutional in August by the California Supreme Court. Proposition 5 opponents spent more than $25 million, while the tribes spent $63 million to back the measure.

In addition to the compacts negotiated last month between the Davis administration and the tribes, a proposed constitutional amendment to legalize Indians’ Nevada-style casino gambling will be placed on the March ballot, in effect giving tribes the exclusive right to such gaming in California.

It is not surprising that the first post-Proposition 5 contract between a Nevada interest and a California tribe should prove to involve Anchor and the Pala band.

The tribe, which has 600 members on its reservation 20 miles north of Escondido in the foothills of Palomar Mountain, has shown a proclivity for going its own way, even to the point of angering other tribes.

Pala became the first tribe to sign a compact with then-Gov. Pete Wilson, at a point when other tribes were protesting the compact requirement as a violation of their status as sovereign nations. The tribe was also among a small handful of tribes to oppose Proposition 5.

Moreover, in 1992, Pala signed a deal with Harrah’s and in 1998 with Excelsior of Connecticut. Both deals fell apart amid the legal and political uncertainty surrounding Indian gaming in California.

Anchor, a diversified company that is publicly traded, has been expanding rapidly.

“It’s by far our favorite stock in the gaming industry,” Jordan said. “With the opening up of the California market, and the debut of their video ‘Wheel of Fortune’ game, which promises to be the hottest new game, Anchor is in very good shape.”

Anchor develops and distributes its own games, and operates two casinos in Colorado plus a racetrack and casino in New Mexico. Although it has no casinos in Nevada, its equipment and systems are used in the United States, Canada, Australia, Europe, South America, South Africa and the Caribbean.

Anchor’s chief executive officer, Michael Rumbolz, is the former chairman of the Nevada State Gaming Control Board. “This [the Pala deal] is just the type of opportunity that allows us to capitalize on our many years of experience in successfully managing gaming operations.”

An Anchor subsidiary recently installed the technology for the South Dakota Lottery and for the first-ever national lottery in Vietnam. Even as the Pala deal was announced, another Anchor subsidiary was signing contracts to provide the parimutuel wagering systems for racetracks in Michigan and Louisiana.

The Pala deal--contingent on the passage in March of the Davis-sponsored measure--calls for a 150,000-square-foot casino, 1,500 gaming machines and 40-plus tables games, as well as dining facilities. The target opening date is March 2001.

The initiative would allow the tribes to install Las Vegas-style casino operations but put a cap on the number of machines and increase taxes. The cap provision, while angering some tribes, may have gone a long way toward cooling opposition from Nevada interests that fear that the Indian casinos will be competitors.

Although Anchor did not contribute to the anti-Proposition 5 kitty, it has been active politically in California. Last year the firm contributed $200,000 to California politics, including $175,000 to a Los Angeles labor union political action committee and $25,000 to Assembly Democrats.

“Our goal of reaching economic self-sufficiency is no longer just a dream, but will soon be a reality,” Robert Smith, Pala tribal council chairman, said of the Anchor deal.