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GAMING–Prop. 1A May Impact More Than Reservations

Ocean’s Eleven card casino in Oceanside has a big promotion right now.

The 3-year-old club is hosting a $200,000 free-roll card tournament. It’s said to be the largest free-roll tournament in gambling history.

Why is the club making it a big to-do? It’s a matter of survival, said Bob Moyer, partner and general manager for Ocean’s Eleven.

“We have to come up with ways to promote our casino to bring people here rather than them going to the (Indian) reservations, where they have slot machines and the 21 game, which we can’t play.”

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With possible passage of the constitutional amendment on Indian casinos just a couple weeks away, Moyer and other California card club owners are fearful they will be dealt a losing hand.

The measure, Proposition 1A, is an amendment to the California Constitution that would allow Native American tribes to develop and operate Class III gaming facilities on tribal lands in the state. Class III games include video slot machines and blackjack.

Proposition 1A comes after a California state Superior Court judge overturned Proposition 5 last year , the Indian gaming measure approved by California voters in 1998 , on the basis that the state constitution does not allow Las Vegas-style casino gambling in California.

Proposition 5 was written to allow tribes to operate Las Vegas-style games such as video slot machines, the primary money makers.

If Proposition 1A passes, tribes will operate casinos under compacts signed with Gov. Gray Davis last fall. If the measure fails, the compact will be void and tribes face losing all Class III games.

Machine Limitations

Under the terms of the Davis compact, the current 19,500 video slot machines in Indian casinos will be grandfathered in. Tribes will then choose from a new pool of machines. Each tribe can have no more than 2,000 machines. (Under Proposition 5, there was no limit on how many video slot machines each tribe could have.)

First pick of the new pool of machines will go to tribes who signed the Davis compact that have less than 300 machines, and to those that don’t have any games at all but want to get into gaming.

Tribes like the Viejas Band of Kumeyaay Indians near Alpine, which has 1,100 machines, will have to wait in line for more. If the pool goes dry before Viejas has its pick, then the tribe is out of luck.

Under the Davis compact, the tribes will pay a licensing fee of $1,300 per machine to create a revenue sharing fund. The money will go to tribes that have less than 300 machines or to those who don’t have a compact.

The tribe’s revenue sharing with the state was also increased from 6 percent to 13 percent per machine. A yet-to-be-determined allocation from Indian gaming revenue will be collected to start a statewide gambling addiction program. A 10 percent impact fee fund will also be created for local government.

Moyer, along with many in the gaming industry, believe California voters will approve Proposition 1A when they go to the polls March 7.

While Moyer supports Proposition 1A, he said California card clubs should be allowed to have the same games as Indian casinos.

Playing The Numbers

Ocean’s Eleven offers card games like poker, seven card stud, hold ’em, Omaha, pai gow panquinni and 21st century blackjack. Ocean’s Eleven draws about 9,000 visitors a month, mostly from San Diego and Orange counties. The Viejas Casino & Turf Club has 75,000 visitors a week.

Moyer said the state’s card club owners plan to author their own legislation that allows them to offer similar games offered in Indian casinos.

“We’re not looking for 2,000 slot machines,” he said. “We’re looking at five slot machines per licensed table. That would make the clubs in California happy.”

Viejas Chairman Anthony Pico argued card clubs have been successful because they are located in metropolitan areas and have developed a loyal following.

How has Viejas grown its successful rural enterprise? By taking great risks, Pico said.

“Any successful entrepreneur has never succeeded unless they have taken great risks,” he said.

Viejas has built a sustainable economy on its East County reservation by investing profits from its casino into other business ventures such as an outlet center and a bank.

The tribe plans to build a golf course and resort hotel, as well as purchase a small, local TV station. Viejas has also teamed with Commodore Cruise Lines to offer one-day gaming cruises between San Diego and Rosarito Beach, Mexico.

Pico said the passage of Proposition 1A, which has been endorsed by both the California Democratic and Republican parties, will allow tribes to continue to build their economies.

“We’re not in this to create wealth,” he said. “We’re in it to raise the standard of living of all Indians in California.”

While Pico is hopeful voters will embrace Proposition 1A, he’s acting with caution.

“I have no expectations of Proposition 1A,” he said. “I don’t want to set myself up for disappointment. All I can do is work as hard as I can.

“If it doesn’t pass we will go back to work. We will prevail. We owe it to the suffering of our ancestors.”

No Sure Thing

Collectively, tribes have spent about $12 million so far on a Yes on 1A campaign, which has included radio, TV and newspaper ads, and billboards.

The Barona Band of Mission Indians near Lakeside is spending $1 million on its own Proposition 1A campaign, which includes outdoor billboards and direct mailings.

“You can never count on a sure thing,” is Barona Chairman Clifford LaChappa’s reason for launching the campaign. “You always hope there’s light at the end of the tunnel. This is a very substantial change in the state’s constitution.”

If Proposition 1A does pass, it will create more competition for Nevada, according to a recent report titled “Native American Gaming in California: Nevada’s Biggest Risk?”

The 62-page report, written by New York-based investment banking firm Bear, Stearns & Co., reveals certain parts of Nevada will be significantly affected by California Indian casinos.

“We’re looking at a 15.8 percent loss in annual revenues in Laughlin by 2004,” said Marc Falcone, vice president of Bear, Stearns.

The report also shows a 21.6 percent annual revenue loss in Reno-Sparks, a 15.4 percent loss in Lake Tahoe and a 3.6 percent loss in Las Vegas due to Indian gaming in California.

An estimated 35 percent of Nevada’s annual gaming revenues are generated by Californians.

The report assumes as many as 100 California Indian casinos could open by 2004, with each costing $30 million to $100 million. There are currently 37 Indian casinos in California.

Falcone said the acceptance of Indian gaming in California will allow tribes to have greater access to capital.

He pointed to the $18 million in municipal bond financing Barona received last week for the construction of a championship 18-hole golf course. Barona was the first tribe in the nation to go to Wall Street for non-taxable bond financing.

The golf course, scheduled to open this summer, is part of Barona’s $150 million expansion plans, which also include a 125-room resort hotel and a new casino. The new casino, which will be twice the size of the current 115,000-square-foot Barona casino, is being designed by renowned architectural firm Bergman, Walls & Youngblood, designers of the new Paris Hotel & Casino in Las Vegas.

Barona’s LaChappa said the expansion is necessary to grow his tribe’s economic base.

“You try to be secure but this world is changing. We want to be able to change with the economy around us,” he said.

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