Local businesses debate 100-room gaming ordinance

In light of an ever-diminishing market share, the debate about the future of gaming in Carson Valley appears to be pitting big guy against little guy.

Douglas County is considering an ordinance that would require a minimum of 100 guest rooms be built for the gaming district overlay: the required zoning for a nonrestricted gaming license.

The ordinance, similar to one approved in Carson City, went before the Douglas County Planning Commission on Tuesday and goes before county commissioners on July 1.

Douglas County Community Development, supported by Valley casinos, contends that the ordinance would strengthen existing businesses and encourage long-term investment.

"One of the overall themes throughout the economic development plans is the need to protect and enhance the existing business base and find ways to bring more tourism dollars to the area," county planner Brandy McMahon wrote in her staff report. "The 100-guest room requirement would also prohibit new 'stand alone' gaming establishments that could possibly take away business from existing casinos that have already invested in the community's economic base and tourism."

On the other hand, some Valley mom-and-pop shops, looking to boost revenue in a down economy, argue the ordinance would be discriminatory.

"It sounds pretty unfair to the small businessman trying to get his foot in the door of the gaming industry," said Greg Sayabalian, owner of Hamdogs Restaurant, which has been in business in south Gardnerville for 15 years.

In October, county commissioners denied Sayabalian's request for a special use permit and two zoning map amendments that would have converted 6,630 square feet of general commercial space in the Meadowdale Shopping Center into a tourist commercial zone with a gaming district overlay.

Citing a 30 percent drop in business since the 2006 Nevada Clean Indoor Air Act, Sayabalian said he wanted to change a 2,190-square-foot suite - formerly a movie theater and church - into a separate bar and gaming area for smoking customers.

As allowed by a restricted gaming license, Sayabalian has 15 slot machines in Hamdogs. He said the special use permit would have capped the nonrestricted license at 50 slot machines, which he planned to divide between three units to separate smokers from diners.

County commissioners said the request was incompatible with other uses in the shopping center and inconsistent with the purpose of the requested zone change. They sympathized with Sayabalian, they said, but were concerned about businesses that might follow in the center and take advantage of a nonrestricted gaming license.

Now, Sayabalian says the new ordinance would hinder the little guy even more.

"For the 100-room minimum, I would have to go get millions of dollars of backing to do what I wanted to do in the first place: survive," he said.

According to county officials, the 100-room ordinance wouldn't affect any existing casinos or those where gaming overlays have been approved. That includes the three casinos in Douglas County that don't have rooms: Sharkey's, Topaz Joes, and the Road House Bar and Grill in Topaz.

Also unaffected by the new ordinance would be the four approved casinos that haven't been completed, including the Goldtown Casino in Sunridge, the C.O.D. Casino and Nevada Northwest casinos in Minden and the Beverly Hillbillies Mansion & Casino approved for far northern Douglas County. The ordinance wouldn't apply at Lake Tahoe.

Sayabalian pointed out that the C.O.D. Casino in downtown Minden, which was approved in 2008, has no hotel rooms.

"It sounds like they grandfathered it in," he said. "They get the C.O.D. Garage passed and then cut everybody else off."

Sayabalian said the new ordinance amounts to favoritism.

"It definitely favors the bigger businesses and the bigger taxes to the county, the bigger casino projects and the Walmarts," he said. "I guess they consider the taxes I create not worth while. I actually keep 17 people employed. I could have created another six jobs and tripled the taxes to the county I pay every quarter, and the mall would have gotten a facelift on top of that."

Bill Henderson, director of marketing at Carson Valley Inn, said the viability of gaming in the Valley hinges on the new ordinance.

"From a business standpoint, the county is looking for economic vitality," he said. "One of the ways to make the community vital economically is through employment, tourism and business investment."

Henderson said gaming is one of the driving engines of the state economy whether we like it or not. He said a nonrestricted gaming license is a privilege, and the new ordinance ensures those licensed have a stake in the community.

"We're saying if you want the license, then we want you to make a well-thought-out business investment that is going to make the pie bigger," he said.

To build 100 rooms, Henderson said, requires a solid business plan, a substantial investment, and enough capital to market outside the area.

"That creates a reason to come to Carson Valley," he said. "It increases the likelihood of contributing to the well-being of the community. Everybody wins when a new business brings new tourists to the area, when there's more employment and more people spending money in town and more taxes collected." Henderson said a "free-for-all" gaming policy prevents the kind of substantial investment the county wants.

"Businesses with larger investments in the community offer employee benefits. They support community organizations, education, safety and health," he said. "I can't tell you all the things we've done with the sheriff's office."

Henderson said the state's restricted gaming license, which allows up to 15 slots, is sufficient to help small businesses with additional revenue.

"Over and above that, the nonrestricted gaming license is really a privilege that involves a lot more bankrolling and a lot more requirements," he said. "Once the C.O.D. Garage is built, it's all the more reason in the world for the ordinance. We have more capacity of gaming here now than the market can handle."

Henderson said CVI's $10 million remodel is proof that high-quality investment pays off in the long run.

"We're finally seeing the fruits of all our investment here," he said. "The occupancy rate has been climbing over the last year. We haven't been able to say that in a few years. Without that investment to make the property better, we wouldn't be seeing it.

"We're not saying we don't want competition. We want quality competition, unique and marketable. We want three or four top quality places that make this area a major pull."

Sayabalian, however, takes exception to the assumption that small operators don't invest in the community.

"I've invested in the community the past 15 years," he said. "We've supported every nonprofit group that's walked through our doors looking for donations. I think we were one of the first businesses that held up the south end of town. We do everything to help the community."

Sayabalian said he doesn't understand why large casinos are afraid of his operation.

"I don't know why they're afraid of a little competition that brings more people to the area and makes this a destination area," he said. "They should welcome competition unless they're afraid of losing customers to a small establishment. They have some of our customers they don't want to give back. That's how they feel threatened. People do enjoy a local mom-and-pop establishment, and we're just trying to survive in this climate."

Sayabalian said more choices make a healthier community.

"I have my customers and they have theirs, but they mingle between places, and it's better for the community to have choices," he said. "I have seen a lot of closed restaurants in town. We're surviving, but it's not like it used to be. We've had to cut back and lay people off. I really thought I had an answer to please everyone, a chance to win back some of my customers."

When it comes to economic development, Sayabalian argues the county should allow smaller places to expand but not without controls through special use permits.

"There are restaurants in town that have to break the law and allow smoking at night to accommodate their customers and keep the doors open," he said. "If the zoning is right, allow people to have a chance to get bigger gaming licenses and a chance to get customers in the door.

"The big casinos, the guys who speak against me, what do they care if a mom-and-pop shop adds 35-40 machines? I don't see the threat I am to a big casino project. I'm just trying to make room and accommodate everyone. The more people in the door, the more people survive."

Other industries would also be affected by the new ordinance. Some bed-and-breakfast operators don't want more hotel rooms in the Valley.

Genoa House Inn owner Keith Corban, who's owned the three-room property for seven years, said occupancy rates have been low over the past year.

"It's supply and demand," he said. "I'm thinking the big guys have an advantage to start with. Lodging is only part of their operation. They have a gaming operation and a restaurant, all things they can spread costs over. We're restrained to three guest rooms, and we're trying to weather a storm in the third year of a recession watching the numbers steadily go down. We started doing everything we could, donating to charitable events, but it seems like the deck is stacked against us.

"It seems the small operations are getting cut out of it. I eat at Hamdogs regularly. I can't see them being competition for anyone, certainly not Sharkey's or CVI."

Corban said he doesn't buy the argument that smaller operations would destroy bigger ones.

"I think it's exaggerated," he said. "It's putting us at a disadvantage. Why let the big guys come in and operate under their rules?"

Ron Terrell, manager of Sharkey's Casino in downtown Gardnerville, which has no hotel rooms, said he supports the new ordinance.

"The market share is so small; gaming will never come back the way it was," he said. "We have all the healthy competition we can possibly stand right now. The competition is very strong between Sharkey's, CVI, Topaz Lodge and Bodines, and that's not taking into consideration the other Carson City casinos. It will take a long time for the gaming industry to recover from the standpoint of enough business to go around."

Like Henderson, Terrell believes the new ordinance will encourage gaming enterprises that grow rather than shrink the market.

"It has to be somebody with the financial resources to expand, grow or develop a property," he said. "It takes that kind of drive. Yet for something like that, the investor needs to be sure to get a return in the market. If the market is so diluted by small investors, why would somebody build a $10 or $12 million casino?

"We're trying to grow the market, to expand it, not share what we already have. To expand, we need hotel rooms. We don't need any more boarded-up buildings in downtown Gardnerville."

Terrell said an operation as small as Hamdogs, even if it ended up failing, could put Sharkey's out of business.

"The small amount he could make is the difference between Sharkey's staying open or closing," he said. "I have 74 employees here. You can open one of those operations with six employees. Six versus 74 - that's not a good return investment for the community."