(Michael Chamberlain/Nevada Business Coalition) – A thriving business in a down economy, creating jobs while others are laying off, revitalizing areas where similar businesses have failed.
Obviously, there’s only one thing to do: Shut ’em down!
That’s the attitude of the Nevada Resort Association as it continues its crusade against Dotty’s, this time at the Gaming Control Board.
About 15 years ago, Dotty’s came up with an innovative new idea. No one objected to it at the time and many thought it wouldn’t last. But it has lasted. It has been successful – even to the point where business has been increasing for Dotty’s, and they’ve added new locations and new employees, as it declines for the big casinos. And that’s the NRA’s real beef.
After successfully working to change an ordinance in Clark County in an attempt to legislate Dotty’s out of business, the NRA has now gone to the GCB to do the same. What they’re trying to do is to change the definition of “incidental” as it appears in statute. Certain businesses in the state are able to obtain restricted gaming licenses allowing the operation of up to 15 gaming machines, as long as gaming is considered incidental to the business.
For the last 30 years, the standard has been that, for any operation that is licensed as a tavern, gaming is presumed to be incidental. There has been no attempt to use criteria such as percent of income or the physical characteristics of a business as determining factors for whether gaming is considered incidental, as long as it was licensed as a tavern by the appropriate local government. In fact, there are few, if any, taverns currently licensed that would qualify under any but the most generous definition of “incidental” if revenue were the criteria.
What the NRA, led by Stations Casinos, has tried to do is to develop a set of standards that taverns would have to comply with for gaming to be considered incidental. Their proposal was designed so that virtually all taverns currently licensed in Clark and Washoe Counties would comply, except the Dotty’s-style taverns.
The Gaming Control Board took up the issue at its July meeting. Many of the parts of the testimony from the representatives of Stations Casinos and the NRA read like a Laurel and Hardy comedy skit.
In trying to single out the Dotty’s model without appearing to single out the Dotty’s model, even after admitting their concerns were only with the Dotty’s model, these two engaged in twists and turns and contortions worthy of a Cirque du Soleil acrobat. The Stations representative alternated between advocating for “some objective or closer to objective criteria” and claiming there should be no “objective test” and “most of [the criteria] is subjective”.
While they stated their desire to encourage innovative models, they also advocated for criteria that only a traditional tavern could fit and admitted to designing the criteria based upon the models employed by traditional taverns currently in operation.
They claimed to want a uniform standard across the state but did not wish to go back to Clark County and alter the more restrictive ordinance they helped pass a few months ago.
They admitted that, while arguing for a minimum standard to cover the entire state, they did absolutely no research of the rural areas and how their proposed regulations would impact taverns in small towns. There are many communities in rural areas that may not be able to support a 2,000-square foot business with a restaurant serving hot food at least 12 hours each day, which are the minimums required to obtain a restricted gaming license per the NRA’s proposed regulations.
They utterly rejected the objective standard that has been in place for the last 30 years.
It appears that the only consistent element is that whatever they supported, Dotty’s would not qualify.
The big gamers have also expressed concern that the Dotty’s-style taverns are robbing the state of tax revenue. But one operator who has both nonrestricted casinos and restricted establishments similar to the Dotty’s model testified that his restricted locations generate five times more tax revenue than his casinos.
But by far the most offensive, the most objectionable, the most abhorrent aspect of their proposal is its retroactivity. Their proposal not only changes the rules going forward but would force existing locations that obtained licenses since February 2000 to conform to the new standards as well.
Dotty’s would likely have to spend millions of dollars retrofitting existing locations. Similar businesses could be forced to spend tens of thousands per location. In addition to the modifications directly required to comply with the new gaming regulations these locations would have to be brought up to the current building codes, a prospect that can itself be enormously expensive.
There was no one who testified, nor any of the commissioners themselves, that could remember the Gaming Control Board or the Gaming Commission ever making a regulation retroactive. This would be a first that could have tremendous negative effects, not just on Dotty’s, not just on taverns, but on all businesses.
The state of Nevada would be setting a precedent that any approvals it grants today it could take away years later simply because the business was too good and customers preferred it over competitors. What business would want to take the risk of gaining all of the approvals to start a new venture if they thought those approvals could be withdrawn retroactively years down the road? What bank would be willing to finance them under those conditions?
If there were a way to make entrepreneurs, financiers and venture capitalists more hesitant to risk their money we certainly can’t think of one.
The NRA seems to be saying that competition is great, just as long as you don’t run afoul of any of the big, powerful, entrenched competitors by doing something so awful as serving your customers better. If you thought that was what competition was all about, well, you’re just not familiar with the way things work in Nevada.
If the gaming regulators approve this proposal, including the retroactive provisions, they would be sending a clear message to budding entrepreneurs and investors: If you’re going to build a better mousetrap, don’t do it in Nevada. You might harm the business of one of the companies with an inferior mousetrap. And we certainly can’t have that.
(Michael Chamberlain is Executive Director of Nevada Business Coalition.)