Cash-strapped towns gambling on gambling : After the casinos go in, localities have some good luck and some bad luck. A bill before Congress could help hedge the bets.

Everyone in town knew it: Central City, like the gold mines above Main Street, was played out. On the clock of Western history, it was only a few ticks from the day when souvenir hunters would poke through the ghostly ruins and ask, “I wonder who lived here?”

The population that had hit 15,000 during the bonanza of a century ago had dwindled to 350. And as often as not, bartender Pete Redman spent his evenings presiding over an empty bar at the Elks Lodge. The police department was down to a single officer, and Mayor Bruce Schmalz had seen his budget shrink to $270,000 and the number of town employees fall to six.

“We could do some patchwork,” recalled Schmalz, “but there wasn’t enough money to run a town. Our ground water was coming from a 1860s collection system that leaked. That was just one of a bunch of problems. . . . Fact is, we were becoming a ghost town.”

Schmalz shakes his head remembering those dark days in the late 1980s. A waitress in Dostal Alley, the little casino he operates, refills his coffee cup as Schmalz reflects on the changes that have overtaken the town in four years. “I suppose we were all a little naive when we went into this, not realizing how successful it was going to be.”

What Central City went into was gambling.

Like a growing number of towns that have staked their futures on a turn of the cards--and helped turn gambling into a $482-billion-a-year national industry--this isolated community had no idea how completely life would be transformed and how pursuing jackpots would prove to be a blessing and a curse.

First the good news. Gambling has created 1,400 jobs in Central City. The town has a new water system and reservoir. Property taxes have fallen to about $30 a home. The annual town budget has skyrocketed to $13 million. Old buildings have been restored with gaming revenues, and the architectural integrity of the downtown core--a historic landmark--has been preserved.

And the curse. Traffic is so bad that the 17-person police force has closed Main Street to cars. Parking lots are being chiseled out of the hills above town, and residents need permits to park in front of their homes. Virtually every storefront has become a casino offering 99-cent margaritas and clanging slot machines, but nowhere in Central City can you get a haircut, buy a loaf of bread, fill up on gas or peruse a hardware store.

“If the gaming issue was put to a vote again, I expect the residents of Central City would go back to the way things were,” said City Manager Dave Stahl.

Stahl oversees a staff of 76 full- and part-time employees from his office in the remodeled City Hall that Central City bought for $500,000 from a failed casino. The irony of the town’s rush to prosperity, Stahl points out, is that if Central City had been able to find a $300,000 grant to repair its water system back in the 1980s, nothing much might have changed.

But for want of that money, Central City turned to gambling, which generated the revenue to undertake projects needed to meet the demands of growth, which in turn ran up a debt that stands today at $20 million.

With some form of casino gambling now permitted in 20 states and under discussion in 27 others, Congress is concerned that towns like Central City have embraced Lady Luck as a quick-fix for economic recovery without understanding the consequences. House and Senate bills have been introduced to eliminate the guesswork and provide towns with information on the economic, social and political effects of gambling.

The legislation, which could be voted on early next year, would set up a national commission to study, among other things, gambling addiction and crime spawned by gaming, the influence of casino advertising, who bets, and whether the $40 billion Americans spend in commercial gambling establishments and on lotteries each year represents new revenue for towns and states or is money that otherwise would have been spent in non-gambling businesses.

The American Gaming Assn. opposes the bills, believing they are anti-gambling and a first step toward federal restrictions.

Colorado voters amended the state constitution in 1990 to let three rundown historic mining towns--Central City, Black Hawk and Cripple Creek--open casinos offering slots, blackjack and poker. The top table bet was $5.

And gamblers lined up on Main Street when Central City’s casinos opened at 8 a.m. on Oct. 1, 1991. “We all talked about how wonderful it was going to be--the glamour of casinos, profits rolling in,” Redman said. “But I’ve got mixed emotions. I’m not sure the profits are all that great unless you’re a casino owner. What you find is that the togetherness of the community is gone. It’s just a big battle now between the haves and have-nots.”

Despite the success of the state’s three-town gambling industry--revenues will top $400 million this year and the payroll stands at 4,650--Colorado voters have turned down attempts to expand casino gambling.

“My feeling is, from talking to a lot of people, that Coloradans like to gamble but don’t want to create another Nevada,” said state Sen. Joan Johnson.

Although some residents may yearn for the quiet of past days, Central City is planning for the increased visitors that higher stakes would attract if approved by the state Legislature. The City Council envisions tripling the number of slots and tables to 12,000--the local tax on each is $1,265 a year--and building a $30 million road linking the town with Interstate 70.