CASINOS: Sovereignty keeps financial reports from state, public

November 24, 20033

By GUY KOVNER THE PRESS DEMOCRAT

The Press Democrat

Patrons at California Indian casinos are pouring about $130 million a day into 52,600 slot machines. How much they are reaping in return and whether the payoff is better across the state line in Nevada is one of the central issues in the competition for the gambling dollar.

Nevada pays almost 95 cents of every dollar dropped into slots back to players, and it must account for every nickel in reports to the state. California has no such records, leaving gamblers at the state's 54 tribal casinos guessing and state policy-makers in the dark.

Indian casinos are located on sovereign territory, with most rules and enforcement handled by the tribes themselves. Their financial reports go to a federal agency, which doesn't share the details with the state or the public.

Tribal leaders say their casinos pay out as much as Nevada's. A Nevada gaming expert maintains the return is probably lower, but there is no independent verification for any claim.

"There's no way to know," said Bill Thompson, gaming expert and professor of public administration at the University of Nevada, Las Vegas.

Millions of gambler dollars are at stake because slots, from nickel-a-pull games to progressive machines with multimillion-dollar jackpots, account for the bulk of casino gaming revenues: 67 percent in Nevada; 80 percent to 90 percent in California.

Some Nevada gaming analysts say their state's 185,000 slots are more generous -- "looser" in gaming parlance -- than California's, contending that stiff competition drives Nevada's odds in the player's favor.

Nevada casinos advertise as much as a 97 percent payback, with some machines set above 100 percent, Thompson said. Casinos advertise the rates to draw customers, and the 100 percent machines are scattered on the casino floor.

Nevada's Gaming Control Board polices casino advertising and constantly checks slot machine performance, said Joanie Jacka, administrative coordinator for the agency.

The state won't allow anyone to claim the "loosest machines in town," Jacka said, because individual casino payback rates aren't made public. Nevada reports slot payback by area, such as Las Vegas, Reno and Tahoe, and by type of machine, from 5 cent to $100 games. "Our machines pay the most of any in the United States," Thompson said.

Atlantic City slots return 91 percent to 92 percent to players, and New Jersey doesn't allow casinos to advertise their odds, he said.

In contrast, California's 54 casinos enjoy what Thompson calls a "local monopoly," sheltering them from competition and allowing a slot machine payback he estimates at 85 percent.

A tribal casino executive says there's no way the payoff could be poorer in the Golden State. "You'd have a big empty room," said Anthony Miranda, who runs the Pechanga Resort and Casino in Riverside County, one of California's largest gaming halls.

Tribal casinos pay back an average of 95 percent to 96 percent, keeping only 4 percent or 5 percent and depending on high volume, meaning heavy play at the machines, to make a profit, Miranda said.

"If we had 80 percent payout games, our customers would be flocking to Nevada," he said. Miranda declined to cite Pechanga's payback, but said it was "comparable to Nevada."

A computer chip in every machine controls the payback rate. In Nevada, state officials test the machines before and after they are placed on a casino floor, assuring they meet the state's 75 percent minimum payback. Competition forces casinos to sweeten the pot considerably.

The payback varies, from 93.8 percent last year on the Las Vegas Strip to 95.35 percent in Sparks, one of the best rates in the state, according to Nevada Gaming Control Board reports. Reno casinos paid back 95.02 percent; South Shore Lake Tahoe, 94.23 percent; and North Shore, 94.62 percent.

Payback rate improves with the stakes: Nevada's nickel slots returned 92 percent to players, while $25 machines paid back 96.7 percent.

Patrons dropped $115 billion into Nevada slots last year, and the casinos kept $6.3 billion, about 5.5 percent. Keeping another 1 percent of the total would have added more than $1 billion to the casinos' coffers.

California tribal casinos do not make public how much they are making and paying back from slot machines, but state officials and other experts say slot machines earn casinos $250 a day, or $13 million a day statewide. If that represents 10 percent of the money put in by players, assuming a 90 percent payback, then $130 million a day -- $47.5 billion a year -- is pouring into the machines.

Tribal casinos submit annual independent audits, including slot machine payout, to the National Indian Gaming Commission, a federal regulatory agency.

The agency doesn't share the financial data with states, said Greg Bergfeld, who works in the national commission's Sacramento office.

California casinos' slot payback rate is "very competitive with Nevada," he said.

"There is no verification," said Cheryl Schmit, director of Stand Up for California, a gambling watchdog group.

The only statistics released by the national commission are tribal gaming revenues by region, including one region that essentially covers California. Gaming revenue for fiscal year 2002 in California was $3.6 billion, up 24 percent, or more than $700 million, from the previous year, according to the national commission.

Critics say the tribes are too conservative in calculating their revenues. The state says tribal gaming revenue is $5 billion to $6 billion a year.

River Rock Casino, which opened amid controversy last fall in Alexander Valley, offers a payback "similar to those in Nevada," said spokesman Dave Reiseman. He didn't cite a specific figure.

Inside the domed, tent-topped casino, bright lights flash, chimes ring and drums spin on 1,600 slot machines with names like "Blazing 7," "Movie Star" and "Winning for Dummies." A 25-cent slot lists a $1,198 jackpot, while the $1-a-play progressive slot "Megabucks" shows a jackpot of $7.8 million and counting upward right before players' eyes.

Two players said they think Nevada offers better odds.

"I think they pay better in Nevada," said Pedro Fernandez of Santa Rosa, who said he puts about $50 in the slots on his visits to River Rock.

James King of Santa Rosa said he has "done pretty well" at River Rock, including a recent $1,700 jackpot. But he used to go to Reno once a month "and it always seems I did a little better there."

Even if River Rock slots are less generous, King said there's a big difference in time and money between a four-hour, 170-mile drive over the Sierra to Reno and a 20-minute trip to Alexander Valley.

Convenience is a significant economic factor, which may erase the difference in slot payback between distant Nevada and casinos near a Californian's home, Thompson said.

No matter how high the payback, there's no guarantee a player will profit from pumping money into a machine. By continued playing -- a process known in gambling parlance as "the grind" -- machines will usually take it all.

If the experience lasts long enough, it may not matter. "People tend to put in all their money anyway -- they're just buying time," Thompson said.

King said that when he hit the $1,700 jackpot, he left while he still had $1,200. "In the long run you always end up losing more than you win," he said.