Critics: Ore. casino investors have mixed record
SALEM, Ore. -- Canadian developers who want to build a casino outside Portland have blanketed the airwaves and mailboxes with promises of $100 million for schools and public services from a project they've dubbed "The Grange."
That's a lot of money. But if the two companies asking voters to authorize Oregon's first nontribal casino give the state the same deal they gave governments elsewhere, it could be quite a bit more.
Opponents say the developers have a mixed record of results, claiming a handful of their projects have fallen apart or failed to generate anticipated revenue. One company was fined by regulators in Illinois.
"It comes down to a matter of can we trust them, and they just simply don't have a trustworthy track record," said Cynara Lilly, a spokeswoman for the campaign opposing Measures 82 and 83, which would allow the privately owned casino in Wood Village.
The opposition campaign is funded primarily by the Confederated Tribes of Grand Ronde, which runs Spirit Mountain Casino, the nearest casino to Portland.
The new Oregon casino would be owned by PDX Entertainment company, a corporation with about 19 shareholders created in March and based in Lake Oswego. Clairvest Group Inc. and Great Canadian Gaming Corporation, publicly traded Canadian companies, together own a majority stake in PDX Entertainment.
The investors point to letters of support from leaders in other communities where they run casinos. The campaign provided a letter from the mayor of Des Plaines, Ill., calling casino management and owners "welcome members of our community." The president of the British Columbia Lottery Commission wrote that Great Canadian casinos there are well-run.
"You want to deliver something that people are going to love to come to and have fun at, and people that are around it are going to be proud to be associated with it," said Jeff Parr, co-chief executive of Clairvest Group Inc., one of the primary investors in the Oregon casino project. "That's just good business, frankly. And that's what we do."
If voters sign off, the casino would be required to give 25 percent of its winnings to the state lottery fund. The state's share is far more than the 6 percent Spirit Mountain Casino pays toward nontribal community services. But it's short of what Clairvest and Great Canadian pay elsewhere.
British Columbia gets 75 percent of the revenue from slot machines and 60 percent from table games at Great Canadian casinos. New Brunswick in eastern Canada gets 50 percent from a Clairvest casino. Illinois got 45 percent last year, and Indiana gets 35 percent.
Company executives point out that the regulatory and market environments are different in every state or province. In British Columbia, Parr said, some of the taxes are dedicated to a fund for refurbishing the property. He also said the government owns and maintains the slot machines. In New Brunswick, Clairvest has a monopoly for 20 years and the government helps market the casino.
"What we wanted to do is be able to give something simple, clean, easy for the government of Oregon to understand," Parr said. "They don't have to support us in any way shape or form and we will dedicate 25 percent off the top."
Clairvest, a private equity firm based in Toronto, was founded in 1987 and made its first foray into the casino industry a decade ago. It has at least seven casinos in the United States, Canada and Chile that comprise half of its total portfolio, according to securities filings.
Clairvest reported a profit of $9.6 million in the quarter ending June 30, which was boosted by a $7.75 million legal settlement.
Most of Clairvest's casinos have been profitable for the company and the local government. Its brand-new casino outside Chicago took in $177 million in winnings between July and December last year and paid $61 million in taxes.
But there have been some blemishes.
The Chicago casino paid a $25,000 fine last year for violations of a voluntary program for problem gamblers who want to opt out of casino marketing materials. People in the self-exclusion program aren't allowed to visit a casino or take out credit on site. However, a person in the exclusion program was able to take out credit card cash advances worth $600 from a credit card over two days, according to a civil complaint filed by the Illinois Gaming Board.
Several others were able to sign up for rewards cards or received marketing materials. The casino reported the violations to the gaming board on its own.
People are sometimes able to fool casino security, but the casino takes the exclusion program seriously, Parr said.
In Kansas, Clairvest was part of a group selected to build a casino outside Wichita to help generate cash for the state. After a series of delays the governor pulled the plug, saying Kansas needed clear certainty for the state budget.
Parr countered that developers faced uncertainty in the market and couldn't come to terms with the government.
Clairvest also was part of a consortium that was initially selected to build a massive gambling project in New York City but was later disqualified. An inspector general found a flawed selection process that invited unsavory spending on lobbyists and campaign contributions, but the investigation laid the blame largely on politicians and lobbyists.
Clairvest was never found to be complicit in any wrongdoing, Parr said.
Great Canadian Gaming Corp., based in Richmond, British Columbia, owns 12 casinos and race tracks in Canada and five card rooms in Washington state. Great Canadian would manage the Oregon casino.
The company reported a profit of $2.7 million on revenue of $101 million in the quarter ending June 30.
About 72 percent of Great Canadian's revenue comes from gambling, including $5.4 million from its Washington card rooms. Great Canadian is reeling from changes to gambling regulations in Ontario, where it will have to remove slot machines that provide the bulk of revenue at two race tracks, according to documents filed with Canadian securities regulators.
It's also struggling from overestimating the demand in British Columbia, the records show.