Nevada Hedges Bets in Case Gambling Comes Up a Loser : Economy: The state is diversifying; it lured 115 firms there in '93 alone. Convention business is booming, and the casino hotels are expanding into family entertainment and mega-malls.

By JOHN BARBOUR

June 12, 1994 12 AM PT

ASSOCIATED PRESS

LAS VEGAS — When the shuttle Endeavor drifted overhead last January, one of the astronauts routinely described the lights of Los Angeles and San Francisco on the planet below. And then:

”. . .Las Vegas coming into view. Las Vegas is outrageously bright. You can see the strip from 350 miles.”

Under those lights, tens of thousands of Americans flick their hold cards at blackjack tables, shove their bets to the red or black at roulette, roll the dice at crap tables and slide their nickels and dollars into the always promising slot machines. They shop at fancy shops and dine at gourmet restaurants and cheap buffets.

But what would happen if, by some fluke of political fortune or public attitude or excessive competition from Mississippi riverboats and the casinos on Indian reservations, this queen city of gambling should go belly up?

Does the state of Nevada, which gets 40% of its income from Las Vegas and Reno casinos, have a contingency plan? Does this state, which gets its second most lucrative revenue from mining, have alternative sources of revenue?

Henry Gluck, board chairman of Caesars World, the casino giant, was asked what Nevada would do if the United States banned all gambling.

“Secede from the Union,” he said without hesitation.

But the truth is Las Vegas and Nevada have thought ahead, not always seriously, but somewhat successfully.

They successfully lured 115 companies to their desert valleys in 1993, some small ones escaping the high taxes of California, and some big credit card operations like Citibank looking for low-rent districts with good communications and inexpensive labor.

Nevada’s convention and trade show business is booming, thanks to low-cost hotel space and huge exhibit arenas.

The casino hotels themselves are making forays into family entertainment, and megashopping malls with hundreds of shops catering to all tastes.

Kirk Kerkorian’s theme park at his new MGM Grand is aimed at the family and Caesars’ expansion of its Forum of shops is impressive, but whatever the hotel casinos offer, all paths still lead through the casinos.

More important are new buildings rising outside the shadows of the casino-hotels and housing enterprises such as Citibank and Household Credit and Ocean Spray.

A dozen years ago when the prospect arose of a twin gaming city on the boardwalks of Atlantic City, there was no panic in the streets, but there was a small tremor of the heart.

Gov. Robert Miller, a proponent of diversification of the state’s economy, remembers it well. “They said there wouldn’t be any room for Las Vegas or Nevada or Reno,” he recalled.

No, they said, the old lady of the Atlantic would siphon off all the gaming money from the huge East Coast population centers. Jets would stop jetting to Las Vegas; junkets would dry up.

“Obviously that has not turned out to be the case,” Miller said. “They regulate in a different fashion than we do; they’re a little more restrictive. . .Very few of those properties have been profitable, period.”

Las Vegas and Nevada have a history with the gaming industry, good times and bad.

“We grew with the industry. That’s something no one else is going to be able to do. . . .We grew up with the baby and we kind of matured with it.”

Obviously, the big players in the gaming industry are quite comfortable in the Nevada milieu. “There’s one thing about Nevada that is unique: The cooperation of the regulatory body (the gaming commission) and the political process has been extraordinary,” said Caesars’ Gluck.

What would take years to gain approval in other states, Gluck said, can be done sometimes in six months in Nevada, where the state Legislature meets every second year but where the state government is keenly aware that gaming allows the state to finance its operations without an income tax.

In the last year, three new casinos have blossomed in the glitter at an average cost of about $1 billion apiece.

Soaring over the Las Vegas strip is Kerkorian’s latest extravaganza, the MGM Grand, its leonine maw forming the main entrance, acres and acres of slot machines and gaming tables and restaurants and theaters with Dorothy’s trip through Oz one of the main themes. Its 5,000 rooms and mini-theme park, though lacking Disneyesque proportions, does hint at family entertainment.

“We’re close to 90,000 rooms in Las Vegas and still climbing,” Gluck said, “with a very strong infrastructure, with highways and airports and things like that. That’s very difficult for anyone to duplicate in the short run.”

There are nearly 30,000 more hotel rooms on the drawing boards, and the number of visitors to Las Vegas has nearly doubled in 10 years to 23 million. They spent, one way or the other, almost $15 billion last year.

Not that Caesars World isn’t hedging its bets. It has a contract in Windsor, Ont., across the river from Detroit, in partnership with Hilton and Circus Circus. It is currently bidding in Greece, and in Michigan City, Ind., and St. Louis, where there is county option for casino gambling. Caesars is also at work with the Agua Caliente Band of Cahuilla Indians in Palm Springs, waiting for the courts to decide just how far reservation gaming can go.

That doesn’t mean it is ignoring its Las Vegas operation. It has plans for a Magical Empire, an enterprise built entirely around magicians and conjurers and dining with theaters attached, patterned after the Magic Castle in Los Angeles. It’s due to open next spring to 3,500 guests a day.

Next year they will begin to renovate the main entrance to create ancient Roman villas, becoming a kind of casino within a casino, called “Casino of the Gods.”

Plans are to knock out a wall of the 240,000-square-foot Forum, a shopping mall of immense proportions, to add another 160,000 square feet, where a square foot brings in an average of $900 in sales per month.

It doesn’t match the Mall of America’s 4.2 million square feet and 352 stores in Minnesota, but this, after all, is a back yard operation to the casino.

Caesars’ mall does offer some surcease from gambling as the lighted sky passes day by day overhead on the vast and vaulted ceiling and the god Bacchus celebrates periodically with his court, statues come to life, under a laser-lighted dome. On the way out, visitors pass through the casinos again.

Even Gluck is bemused by the idea. When he walks through Caesars he is always in a business suit, distinguishing him from the casual tourist, so people seek him out for questions.

“The two most frequent questions,” he said, “are, ‘How do I get out of here?’ and, ‘Where is the men’s room?’ ”

Meanwhile, next door at the Mirage and Treasure Island hotels, both owned by Golden Nugget, make-believe takes another turn. A volcano erupts from waterfalls and a full-size British Man of War sails into view to do battle with a pirate vessel, both fully manned by actors, in front of what one might suppose is a Caribbean port. The Brits go down to a watery grave after verbal and fireworks salvos while a recorded band plays “Rule Britannia,” arising from the water again to the same melody.

Down the street in a make-believe and turreted Camelot, the hotel Excalibur takes an Arthurian theme. Luxor is ancient Egypt.

But whatever face they paint on the old lady, it all boils down to gambling dollars.

As it now stands, all the gaming and sales tax revenues are collected by the state and doled out to the other jurisdictions. Las Vegas and other cities cannot levy taxes of their own, nor sell bonds.

But Las Vegas, with a population of about 900,000 in a state of 1.3 million, generates the lion’s share of state revenues.

Las Vegas Mayor Jan Laverty Jones, who will run against Miller for governor in the fall, would like to revise the constitution to give more power to the cities. She said her city has an image problem and wonders whether big business would really want to locate there.

“People perceive Las Vegas as just a growing Sin City,” she said. “They think we don’t have neighborhoods, we don’t go to school. You have to overcome that perception first. Secondarily, because we have never funded education to what I believe are appropriate levels, in many cases we can’t provide that pool of technically and professionally trained employees to attract businesses.

“I think we have a period of time during which Las Vegas will still be the major resort-gambling destination. We’re so far ahead of the other jurisdictions. If you don’t take that time to diversify the economic base, to really look at how we’re going to structure the government and what we’re going to try to build, we haven’t faced up to our problems.”

Jones looks at the possibility of gambling around the country, especially in California, and it worries her.

“They may still come to Las Vegas for their mini-vacations, but they’ll shorten their stay,” she said. “And if gaming goes into California, should that ever happen, and if you look at the percentage of Las Vegas tourism that depends on California, it becomes a crisis.”

Manuel Cortez, the chairman of the Las Vegas Convention Bureau, is more sanguine about the future.

“It is certainly no secret that 40% of our visitor volume comes from California,” he said. “It’s our closest drive-in market. But I think that the resort industry has in fact diversified our economy by expanding and adding more events. At one time, and rightfully so, Las Vegas was looked at as a single-purpose destination, a gaming destination, the world’s best, but a single-purpose destination nonetheless.

“We’re still a gaming destination; don’t misunderstand me. Gaming is the little engine that drives our economy. But we’re diversified within the leisure industry.”

With the building of the MGM Grand, Cortez said, Las Vegas went from being the No. 1 gaming destination to being a major resort destination.

He is proud, too, of the convention business, which accounts for about 12% of the 23 million visitors Las Vegas draws each year. There are few cities that can accommodate the 90,000 people that the biggest trade shows and conventions bring in.

Tim Carlson, who heads the Economic Development Commission, is in charge of luring new business to the state. He is interested in permanent residents, permanent businesses.

“I think we’ve had a tremendous amount of luck in bringing industry into this community as well as the state,” he said. That growth, he added, is due in large part to companies relocating from California to avoid taxes and regulation.

When Citibank wanted to set up a credit card operation, it looked to New Mexico first. But New Mexico wouldn’t change its banking laws; Carlson got wind of the trouble and placed a call to Citibank. The governor called a special session of the Legislature and was able to change the rules in nine weeks.

“Today their building sits up on West Sahara Avenue employing 2,000 people,” Carlson said. Since then, Household Credit has come to Nevada and built a 150,000-square-foot building northwest of Las Vegas to handle the GM Card operations.

Those two led the way for other credit-card companies.

Ocean Spray is building a plant to produce its drinks and syrups and Lockheed has opened a technical engineering and design operation near Reno.

Last year, Carlson said, the hundred-plus new companies and 29 existing ones created more than 5,300 jobs.

But Carlson is quick to explain that the new enterprises won’t eclipse the gaming industry. “That’s not our goal,” he said. “Our goal is to strengthen the economy, to back up our major industry.”

Gov. Miller, whose father was a casino part-owner in the early days, recalls “the rough-and-ready guys” of early Las Vegas and the emergence of the Mafia with Bugsy Siegel who took it “from a back room operation and built a hotel.”

Since then, the state has created a gaming commission to investigate the ownership of the casino-hotels, a commission that Miller said is “the best regulatory mechanism in the world. Everyone who considers legalizing gaming comes and studies Nevada now.”

Howard Hughes introduced “a bottom line” assessment of every operation, and that in turn led to companies going public and having to answer to Wall Street and stockholders.

Cortez sees a benefit from Las Vegas’ not-so-holy past. It is part of the mystique, he said, the ambience.

“It’s never going to go away,” he said. “So I think we ought to use it to our best advantage.”