Conservative choice

The Republican majorities in both houses of the Nevada Legislature—the first dual GOP majority since 1985—will find their fealty to free market principles put to a test if, as expected, the gambling industry comes looking for help against upstart small casinos.

During the 2013 Nevada Legislature, a couple of dozen right wing state legislators decided that, in the case of the major casinos, a little socialism was good for Nevada. They voted for a law to use state power to do for Nevada’s large casinos what those businesses had not been able to accomplish in the marketplace—throttle competitors. Such a vote is likely to come again in 2015.

In most states and at the federal level, state power is normally brought to bear on behalf of small businesses against predatory large businesses. In Nevada, it’s the other way around, at least in the gambling field.

While some of the Republicans are inclined to wield terms like “socialist” against the Democrats, they may find socialism appealing if opposing it means giving up casino industry campaign contributions.

The big casinos use laws to compete effectively against neighborhood casinos that drain off locals from the big boys.

For decades, this was not a big problem. The industry’s biggest market was out-of-staters, particularly Californians and the large Nevada casinos were content to ignore locals. But the advent of tribal gambling in the Golden State has caused a long, slow decline in casino traffic in Nevada. To make up that loss the casinos started targeting locals with a vengeance.

Small neighborhood casinos, however, had a prior claim on the loyalties of locals—and have been effective at beating back challenges from the big boys. At one point, for example, the industry won a law requiring that in “restricted license” places—which can include taverns, slot parlors, sports bars, sports kiosks—gambling should be “incidental” to the business’s main function, usually food and drink. This also means that they face fewer restrictions and lower gambling taxes. In locations like grocery stores, the few slots are plainly incidental, but there are growing reports that the big casinos are not happy with grocery slot arcades, either.

Many such places, and particularly the Dotty’s chain, skirted the edge of the law, their food and drink facilities serving as window dressing for the slots that were the principal attraction. At the 2013 Nevada Legislature, lawmakers cracked down on the small parlors to some extent in legislation that commanded impressive support from allegedly libertarian legislators. In the Senate, only three members—all conservative Republicans—voted against the bill. In the Assembly, not one member voted no. GOP lawmakers found themselves explaining their votes against the small businesses with statements that had the word “but” somewhere:

“I think the Legislature has the primary duty to meet the needs of the citizens, but a thriving gaming industry is certainly a component of that.”

“I agree that we absolutely have to look out for the well-being and viability of the gaming industry, but not at any cost.”

The theory runs something like this: Nevada’s economy is so dependent on major casinos that state policymakers have a responsibility to help them stay economically healthy.

That, in turn, goes counter to conservative economics, which runs something like this: When an industry loses its ability to compete effectively in the marketplace, the industry should die.

And as it happens, the small operators are showing a good deal of life, suggesting that they, not the big boys, are the face of the future of Nevada gambling. Clark County gambling industry reporter Howard Stutz calls Dotty’s “one of Nevada’s most successful gaming and tavern businesses, with more than 300,000 customers in its player database.” Will doctrinaire private enterprisers vote against such businesses?

In recent weeks the Clark County Commission has gotten involved in incredible detail in prescribing how it will allow small businesses to operate in order not to threaten large casinos. Having decided the Dotty’s chain was allegedly violating an already existing code revision requiring the company to embed slots into the tops of bars, it adopted another code for Dotty’s not to obey.

Dotty’s complied with the previous code by putting bars over sit-down slots. Frustrated by this innovation, the commissioners prescribed an inlaid machine on the flat top of a bar and prescribed the number of inches wide and tall (except where the Americans with Disabilities Act might be violated). It would require the businesses to spend millions retooling their operations.

Craig Estey, owner of Dotty’s, said the commissioners were hurting economic recovery. “We need more employment, not less,” he said.

Clark County Commissioner Steve Sisolak said, “This is a small group that I feel has been operating as slot parlors [and] were never taverns to begin with.”

In just 18 years, Dotty’s has grown to 120 locations in Nevada, most of them with 15 slots. The Clark County changes affect fewer than 30 of those locations.

Two years ago the Nevada Legislature set up a committee to study the problem and report back to the 2015 legislative session with recommendations.

According to the bill drafting list, the Senate Committee on Judiciary requested the bill drafting division to draw up a bill creating a new category of casino license—slot parlors, for operators with 15 or less machines whose primary business is gambling, and increasing the tax rate for slot parlors to 15 percent. That sounds like a bill making the whole Dotty’s model fully legal while bringing those businesses under regular state regulation and taxation. Given the all-but-unanimous votes against the small outfits in 2013, enactment of the new measure would be a remarkable turnaround.

Other measures are also in the bill drafting office, though their provisions are less clear—the descriptions of them made public seem intended to conceal, not reveal.

At any rate, there may well be tests in 2015 of whether the Republicans will maintain their ideological purity on government leaving business alone as fiercely as they do on taxes. Voting against taxes is an easy vote. Voting against the industry that funds campaigns is not.