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More restrictions likely to limit spread of neighborhood casinos

WEEKEND EDITION: Jan. 5, 2003

On a windblown square of land at the outer edge of Flamingo Road west of Interstate 215, earthmovers turn dirt for a giant shopping center that will take shape a stone's throw from new apartments, townhomes and stately single-family homes behind gates.

Construction has just been completed on a Mormon church a short drive away, just down the street from a junior high school.

The Spring Valley retail center won't include a 300-room Boyd Gaming Corp. hotel-casino that had been proposed for the site -- the result of forceful opposition from nearby residents and ammunition in the form of a state law passed in 1997 that aimed to prevent the proliferation of casinos in local neighborhoods.

Experts say the precedent set in the Boyd Gaming case has already put the brakes on development of neighborhood casinos.

And a provision in the law that became effective with the new year on Wednesday will limit such development even more, experts say, though there are some large exceptions built into the law.

These exceptions include casinos planned in master-planned communities and casinos at sites that are exempt from the 1997 law by a grandfather clause.

Those are major exceptions, said an attorney who represented Boyd Gaming in its losing battle for the Spring Valley casino.

"If the intent of the law was to keep casinos from spreading outside the core of the Strip, the Legislature has missed the mark," said Mark Fiorentino of the firm Kummer Kaempfer Bonner & Renshaw. "To the extent that it was designed to create better notification of where casino sites will be, it will work."

But supporters of the law say it's working as intended by requiring locals' casino developers -- outside of master-planned communities -- to prove their casino projects will not threaten the health, safety and welfare of surrounding residents.

And experts note that, in a little-known twist, off-Strip casinos are now even more difficult to build because of the new provision in the law that took effect with the new year.

Known by its bill number, SB 208, the law allowed projects that had already been zoned for casinos in 1997 to be exempted from the restrictions for five years. To win the exemption, developers had until the end of 2002 to license neighborhood casinos with state regulators.

Last year only two major casinos -- the Cannery in North Las Vegas and the Tuscany on West Flamingo Road -- were licensed in time to meet the deadline. A third licensed in 2002 -- Casino MonteLago near the new Ritz-Carlton hotel at Lake Las Vegas in Henderson -- wasn't subject to the deadline because it is part of a master-planned community with a pre-approved gaming site.

A handful of other potential locals' casino sites, most of them in unincorporated Clark County, are expected to lose their status as authorized casino sites this year and will require approval under the same rules that thwarted the Spring Valley casino and another casino proposed by Station Casinos Inc. in North Las Vegas in 2001.

SB 208 requires that future casinos be at least 500 feet from residences and at least 1,500 feet from schools and churches. Land on and within 1,500 feet of the Strip was exempted from the rules.

It's another aspect of the law that will likely derail future projects, experts say.

That aspect stipulates that casino developers present "clear and convincing" evidence that casinos will not affect residents' quality of life.

"That's a very high burden of proof," said Andy Gabriel, a real estate attorney with McDonald Carano Wilson in Las Vegas.

That hurdle has brought some relief for Spring Valley resident Cheralin Zaugg, who lives a few miles away from the shopping center site.

Zaugg says she was drawn into the casino fight over the prospect that the Boyd Gaming project could open the door to other casinos along I-215, a burgeoning residential area at the Valley's western edge where people can escape the 24-hour bustle of the Las Vegas Strip.

"I didn't want it to set a precedent. We don't want another Strip along the 215."

"A lot of (casino opponents) work down on the Strip," she added. "They are around it every day and they don't want to come home and have it in their back yard."

The year-end deadline should have been no surprise to casino developers with projects in the works, experts say.

In 1997, Clark County's planning department notified owners of casino-zoned property about the five-year limit. To meet the deadline, projects were also required to receive local approvals by the end of 1998. Nevada gaming regulators must have granted a license to the casino operators before the end of 2002. The Nevada Gaming Commission, which grants final approval to new casinos, held its last meeting of the year Dec. 19, and there were no last-minute requests for approval on the agenda.

Experts say many property owners dreaming of building casinos -- especially entrepreneurs who are new to town -- are largely unaware of the law and its new restrictions.

"I think there are a surprising amount of landowners in the area who are in the dark," said Carlton Geer, a gaming property expert at commercial broker CB Richard Ellis in Las Vegas. "I think most attorneys even don't understand the full implications of SB 208."

Gabriel, who has advised some developers on the law, agrees.

"Most attorneys don't know all the ins and the outs -- including many people in government -- because they don't really have to deal with it every day."

Station Casinos, the dominant off-Strip operator with nine neighborhood casinos in Las Vegas, initially stood to lose the most under SB 208.

Instead, the company has emerged as the one of the companies most likely to benefit from the restrictions and has accumulated land worth about $97 million for potential new locals' casinos.

That's because the company lobbied the Legislature to ensure that several parcels it bought or optioned years earlier across the valley were exempt from the rules, including the 2002 deadline for Gaming Commission approval.

At least two of those parcels are in master-planned communities where casinos were approved near homes, apartments and shopping centers. One of Station Casinos' upcoming projects, tentatively called Charleston Station, is in a planned community at Charleston Boulevard and I-215 in Summerlin. The same holds true for a parcel at Durango Drive and I-215. The parcel, which could become the site of a Station casino after Charleston, is part of the Rhodes Ranch planned community that now lies further south on Durango at Warm Springs Road.

Despite its successes in preserving casino sites, Station Casinos was dealt a blow similar to Boyd Gaming in 2001 when residents successfully appealed the approval of another casino by the North Las Vegas City Council. The casino site, at Craig Road and Commerce Street adjacent to the Craig Ranch Golf Course, wasn't initially exempted from SB 208.

Observers say Station Casinos has still been able to carve out a near-monopoly on major locals' casinos that will become even more apparent in the years to come.

The company, which says it won't sell off protected casino parcels to competitors, is the best positioned to reap the rewards of future growth in the local Las Vegas casino market -- a market that has been praised on Wall Street for its ability to generate stable profits that aren't subject to the changing tides of the tourism-dependent Strip.

Boyd Gaming hasn't been as lucky under SB 208. The company's Spring Valley casino site wasn't initially exempted from the rules, which allowed residents to appeal the project. Boyd's lawsuit of that appeal failed in state court. None of the other parcels owned by the company or the Boyd family are exempt.

Unlike Station Casinos, Boyd hasn't spent the past decade buying up land around town intended for locals' casinos, company spokesman Rob Stillwell said.

Still, the company may expand existing casinos on surrounding land it already owns -- projects that wouldn't be hurt by SB 208, he said.

Those include expanding on land adjacent to Sam's Town and Joker's Wild on Boulder Highway and building a new resort or multiple casinos at the Stardust, which sits on about 60 acres at the top of the Strip.

"Our plate is pretty full from a long-term and short-term perspective," Stillwell said.

The bill wasn't aimed at stopping future casinos outright but to let people know where future casinos would be built, said Scott Nielson, general counsel for Station Casinos.

People who buy into master planned communities approved for gaming know that a casino could be built nearby, he said.

For example in October, the North Las Vegas City Council approved plans for an 800-room hotel-casino that will be protected from SB 208 because it is part of Aliante, a master-planned community that is being developed by American Nevada Corp. and Del Webb Communities. American Nevada is owned by the Greenspun family, which also owns the Las Vegas Sun. The developers haven't yet named a casino operator, but Station could be a logical choice. American Nevada is already a partner with Station in two existing Henderson casinos.

Station's competitors had plenty of time to react to the law, Nielson added.

"I think it's completely fair. There were a lot of other people who could have bought those properties. We have demonstrated a commitment to a strategy."

The company hasn't yet determined the future of all the sites, but probably won't build casinos on all of them, he said.

Some, such as a site on Martin Luther King Drive and Coralie Avenue, may be sold for non-gaming uses, he added.

That parcel lost its gaming entitlement when the law changed Wednesday.

Company sites with undetermined futures include a parcel at Boulder Highway and Nellis Boulevard (across from Boyd Gaming's Sam's Town casino) and land at Boulder Highway and Tropicana Avenue.

In addition to providing legroom for Station Casinos, SB 208 also protects Las Vegas megaresorts by limiting outlying competition, observers say.

"It generally makes it more difficult for smaller developers to enter into the market," said David Atwell, president of Las Vegas hotel broker Resort Properties of America.

"It has limited the playing field and made Strip prices very, very expensive."

It may also make it harder for other casino giants besides Boyd Gaming -- the acquisitive Harrah's Entertainment Inc., for example -- to enter the lucrative local gambling market, said Bill Eadington, an economics professor and director of the Institute for the Study of Gaming and Commercial Gambling at the University of Nevada, Reno.

In addition to protecting neighborhoods, SB 208 set out to protect the Strip resorts that are vital to the state's economy.

"(A) significant part of the continued growth and success of gaming depends upon the attractiveness, excitement and vitality of the Las Vegas Strip ... (T)here is a need to promote new development along the Strip and to concentrate the next generation of resort hotels in a location that is convenient to visitors (and) supported by an existing infrastructure," reads a 1997 update to the state's gambling regulations.

More than 10 miles from the Strip and at least six miles from major neighborhood casinos to the southwest, the 201-room Cannery Casino Hotel rises from the corner of Craig and Losee roads in North Las Vegas just west of Interstate 15.

The Cannery, a piece of glitz amid drab industrial buildings, is only one of several potential casino sites in the city allowed to move forward after the passage of SB 208.

Residents didn't object to the development -- which isn't near homes -- and disapproval could have resulted in a lawsuit by Cannery developers against the city, officials reasoned.

The Cannery has been welcomed by businesses and government for its customer potential and ability to generate tax revenue.

SB 208 will rightfully prevent developers from building a casino on every streetcorner, Cannery owners say.

"The residents of Las Vegas were becoming frustrated with buying land and houses ... and having a casino come up nearby," said William Wortman, one of three partners in the Cannery and a locals' casino owner. Still, he said, "As Las Vegas grows, developers will have the ability to build new product in identified locations."

But not everyone approves of casinos in some of those identified locations, including master planned communities. Lisa Mayo-DeRiso, who fought Boyd Gaming's Spring Valley casino, says the exemption for those communities should be reviewed if residents are confronted with an unwanted casino.

"If a neighborhood says 'now we have schools and other things around, now we're concerned about traffic,' those are things that need to be looked at," she said.

Station Casinos' planned Charleston Road casino doesn't trouble Ira Blitstin, a Summerlin resident who lives a few miles from the site and who fought Boyd's Spring Valley casino.

"People have known that a casino could be built on this property in the near future," he said. "People have called me about it, saying they don't want it, but I've told them to get ready for a long battle because they have no leg to stand on."

Because of SB 208, Station Casinos has posted a sign on its Summerlin property notifying passersby that the site could become a casino. Similar signs are posted around other casino-zoned sites around town.

The law will prevent the valley from being glutted with casinos that take residents by surprise because developers can't simply rezone their properties, said Blitstin, who opposed the Spring Valley casino over claims that nearby residents were unaware of the project.

"I moved as far west (from the Strip) as I could possibly get at the time. If I could move farther, I would."

More significantly, SB 208 has prompted residents to become more involved in the planning process for their communities, residents say.

North Las Vegas residents contacted Spring Valley casino foes to help them win the battle against the Station Casinos site in North Las Vegas, Zaugg said. They also have called seeking help to stop other developments that have encroached on residential areas in recent years, from retail centers to big-box stores.

Summerlin residents' efforts to fend off a Wal-Mart at the west end of Sahara Avenue is just one example, she said.

"I think it's made people aware of the (planning) process. More people are standing up against things they don't want."

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