Casinos at a crossroad: as competition mounts, gaming towns mull next move.

• Author: Peterson, Eric

The house always wins.

That's a truism that has made the gaming industry a $130 billion enterprise worldwide, and unlike, say, mining, gambling is an industry that's as recession-proof as they come. While the rest of the tourism world, from hotels to airlines to restaurants to amusement parks, became mired in losses following the terrorist attacks of 9/11, Las Vegas' growth never skipped a beat.

In Colorado, year-over-year growth also was the case for a gaming industry that became legitimate after voters approved limited-stakes gambling for the historic mining towns of Black Hawk, Central City and Cripple Creek--at least until unlucky year number 13, that is. In 2003, revenues dipped by 3 percent, but, like Las Vegas in recession, growth returned to Colorado gaming the next year, as statewide gaming revenue swelled to $725.9 million, a growth rate of 4 percent. So far, 2005 has followed a similar curve.

But for those who have invested more than $1 billion in Colorado's gaming towns since the industry became legal, 2003 was a reminder that the state's casinos do not operate in a vacuum. Besides each other, the three towns' competitors range from lotteries to Las Vegas itself, and from the Internet to Indian casinos.

In that context, if you're not raising the stakes, you might as well fold your hand. And raising the stakes is becoming more and more an issue for Colorado's gaming industry.

Black Hawk, for example, has upped the ante for years now, mostly in the form of bigger and better casinos. But now Central City has gotten into the act with the new $38 million Central City Parkway, opened last November. Without any government money to build a new road, the Central City Business Improvement District privately funded the eight-mile, four-lane parkway's construction by selling a $45 million bond.

From the perspective of the business district, the parkway will help Central City get a bigger share of gambling riches enjoyed in Colorado today, primarily by the slightly lower-elevation Black Hawk. Gamblers who take the new road from Interstate 70 hit Central City first and Black Hawk second, the opposite from what has been the traditional route to 1-70 commuter gambling, where the main access to the two gambling towns was via tortuous Colorado 119.

Central City's gaming revenues--which totaled about $48 million in 2004--are up about 40 percent since the parkway opened. Meanwhile, Black Hawk's casinos--which took in $495 million for 2004--have gone flat.

Buddy Schmalz, Central City's mayor and owner of Dostal Alley, the city's oldest casino, said he hadn't seen his parking lot fill up for three years before the new road opened, but now a full parking lot is a regular occurrence. And there are other signs of economic life in Central City.

The casino count is now at nine, up from a low of four, and bigger projects are on the drawing board. A $13.5 million covered parking garage with 1,000 spaces is next on the city agenda, to be built "ASAP" and financed over 25 years without the need for new taxes, said City Manager Lynnette Hailey.

"Unlike Black Hawk, we have the capacity for the new generation of growth," said Joe Behm, marketing director at Central City's Fortune Valley Casino. "There are very few buildable sites left in Black Hawk."

Growth in the number of casinos also will provide a boost in assessed property valuations and help the CCBID's members pay off their bond debt, Behm added. Coincidentally or not, Hailey served as city manager for the City of Black Hawk from 1995 to 2000, and came to work for Central City after Schmalz recruited her two years ago.

At the time, the CCBID was still undecided on the parkway, as it had been since the idea first surfaced in the mid- 1990s. "She was a major force in what went on over (in Black Hawk)," said Schmalz, referring to the building boom there during most of the 1990s. "Their loss was our gain."

ROOTS OF COMPETITION

That's mostly how it has been in Black Hawk and Central...