Swiftly seizing on state voters' approval of expanded Indian gambling--and signaling how California's casino landscape will change under Proposition 1A--Trump Hotels & Casino Resorts Inc. on Wednesday announced plans to expand and manage a now-modest Indian casino near Palm Springs.
The company's tentative deal, unveiled just hours after state voters gave a landslide victory to the Indian gaming initiative, is with the Twentynine Palms Band of Mission Indians, which has 13 adult members. Tribal officials said they wanted to piggyback on a known gambling brand name because they expect the California Indian casino business, particularly in the Coachella Valley, to become increasingly competitive.
The company operated by flamboyant development tycoon Donald Trump, which runs casinos in Atlantic City and near Chicago, becomes the first corporate gambling firm to join forces with a California tribe that already operates a casino. Three Las Vegas-based firms--Harrah's, Station Casinos and Anchor Gaming--have previously announced plans to enter partnerships with tribes to build casinos. Two are to be near San Diego and one near Sacramento.
Additional agreements with outside firms are anticipated after Tuesday's passage of Proposition 1A. The measure, supported by the state Legislature and Gov. Gray Davis and approved by 64.6% of those who voted, amended the state Constitution to give Indian tribes the exclusive right to operate Nevada-style slot machines and card games in California.
Davis, Critics Differ on Number of Slots
Davis has estimated that agreements he has signed with 58 tribes, which can be enacted as a result of the vote, will allow tribes to operate about 45,000 slot machines statewide. Critics have countered that the pacts could result in as many as 113,000 slot machines--more than there are in any state other than Nevada.
The proposition won slightly greater support than did Proposition 5, a similar measure sponsored by tribes in 1998 that was declared unconstitutional by the state Supreme Court because it violated the state's ban on Nevada-style casinos. Proposition 1A solved that problem by amending the Constitution itself to allow tribes to operate casinos that are otherwise banned.
The agreements between Davis and the tribes still need to be reviewed and blessed by the U.S. Interior Department. Quick approval is expected.
Because of other logistic issues--including the need that the tribes determine how many slot machines they will operate, up to a maximum of 2,000 per tribe--California casinos are not expected to take on a distinct Vegas flavor until summer. Tribes now operate video machines that do not accept or dispense coins or have pull arms.
Manufacturers of traditional slot machines have already begun marketing their wares to tribal officials. Among their efforts was a slot machine trade show in Palm Springs in January.
"Our trucks are warming up, but they're not crossing the state line yet," said Marcus Prater, marketing director for Bally Gaming and Systems, a large slot machine manufacturer. "We're showing the tribes some of the new stuff we have planned . . . and we've taken letters of intent for hundreds of machines.
"The activity has been fast and furious," Prater said. "Our guys are trying to round up as many orders as they can."
The immediate impact of Proposition 1A is the right it gives Indian casinos to offer the conventional slot machines, which are the biggest moneymakers at most casinos.
Once casino compacts are signed by the Interior Department, gambling companies elsewhere will be able to complete management and development agreements with California tribes without risk of losing their gaming licenses elsewhere.
At this point, the Trump-Twentynine Palms deal consists of a letter of intent, with contractual details to be resolved in coming weeks, according to Trump hotels president Nicholas L. Ribis and tribal attorney Gene Gambale.
A joint marquee is unlikely to pop up before next year on the casino alongside Interstate 10.
For Trump, who operates three casinos in Atlantic City and a riverboat casino near Chicago, the announcement marks his strongest intention yet to form partnerships with Indian tribes.
On the East Coast, his casinos face stiff competition from two Indian-owned casinos in Connecticut, the largest and the third-largest in the nation.
Last fall, Trump signed a tentative agreement to open a casino with a third Connecticut tribe, which has not yet won federal recognition.
Ribis said the Trump firm had been in talks with the Twentynine Palms tribe for more than six months and is prepared to participate jointly in a $60-million expansion of the tribe's existing Spotlight 29 Casino.
"Their location is exactly what we envision for the kind of development Mr. Trump has in mind," Ribis said.
He lauded the region's other amenities, which make it a popular tourist destination, and its proximity to the huge Southern California population base.
"It's the best [location] there is," he said.
Trump Stayed Out of Prop. 5 Battle
Gambale said the tribe decided to link with Trump because, among other reasons, the company "didn't spend one dime in opposition to Proposition 5, whereas the Las Vegas organizations tried to put us out of business."
Nevada-based interests spent more than $25 million in 1998 fighting Proposition 5; in this election, they remained silent.
Gambale said the tribe's casino "is very successful right now, and it would be easy for us to sit back and enjoy this level of success.
"But we believe that, as a result of Proposition 1A, there are going to be some very substantial competitive projects out there . . . and we want to make sure we can play in that league."
A spokeswoman for the Cabazon Indians, who operate their Fantasy Springs casino within a mile of Spotlight 29, said her tribe is considering its own partnership with a Nevada gaming company.
Brenda Soulliere, a member of the tribe's governing council, said three companies have approached Cabazon in recent years to discuss management contracts "and we're keeping all of our options open."
Mark Macarro, chairman of the Pechanga Indians near Temecula and the television spokesman for the Yes-on-1A campaign, said his tribe had no interest in partnership with an outside company.
"We're not about to let some Las Vegas or New Jersey company come into Pechanga and ride our coattails," he said. "We've worked too hard to build this business ourselves."
The news of Trump's interest in California did not surprise advisors to Davis, who endorsed Proposition 1A as a "modest" expansion of gaming.
"It was probably inevitable that if we solved this problem [of legalizing reservation casinos], the form of gaming and kinds of investment would take a lot of forms," said Garry South, Davis' top political consultant.
David Anders, a gaming analyst with Credit Suisse First Boston, said he found Trump's decision to invest in California "a little peculiar" because it would distract his management team from more pressing competitive issues in Atlantic City.
But the arrival of the Trump name in California "will generate incremental interest in the casino," Anders said. Moreover, he said, Trump "has never gone into Las Vegas, and this may be his jab at Vegas--by siphoning off visitors before they get there."