California to vote on casinos

October 11 2004, Elkan Allan

On the same day as the Presidential Election, November 2, Californians will vote on propositions to allow a significant expansion of casino gambling.

Gov. Arnold Schwarzenegger has said that approval of them would turn California into "the gambling capital of the world."

Even if the proposals fail - as is widely expected - poker and casino games will remain one of the fastest-growing businesses in California. At the current rate of growth, the profits from gambling in California will soon rival that of Nevada.

Gambling at casinos on Indian reservations has exploded in the past four years, with net revenues now approaching $6 billion a year. In Nevada, where gambling has been legal for more than 50 years, the annual profits are about $9 billion.

The first ballot measure, Proposition 70, is sponsored by a handful of casino-operating tribes. It would scrap the current compacts with the state under which 54 tribes operate casinos and replace them with ones allowing unshackled growth of gambling on tribal lands. The new compacts would run for 99 years and give the tribes absolute freedom from competition from non-Indian casino interests. The tribes, in exchange, would start paying the state's standard corporate tax rate, currently 8.84 percent, on net winnings.

The battle over this proposition pits Indian tribe against Indian tribe over the pace and terms of gambling expansion. Two alliances of tribes have already raised more than $50 million for competing campaigns over the future of their lucrative casinos.

But the tribes are working in parallel to defeat a second ballot proposal, Proposition 68, that would allow racetrack and card club owners to install 30,000 slot machines at tracks and gambling halls, effectively ending the Indians' monopoly on Las Vegas-style casino gambling in California.

However, the racetrack and card club owners have suspended their effort after spending more than $25 million, admitting that they could not match the resources of the newly-rich Indian tribes, which have vowed to spend whatever it took to defeat the measure.

California Card clubs rent tables to players but do not provide dealers or a house bank. This setup is much less profitable than Las Vegas-style card games.

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