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The House Always Wins

How Colorado mining towns gambled away their souls



In 1990, Colorado voters overwhelmingly approved limited-stakes gambling in three decaying Colorado mining towns. The idea was to revitalize the local economies, save the crumbling historic structures and have a little fun along the way.

A decade after the first casino opened in the fall of 1991, Colorado boasts the largest fund for historical preservation in the nation, using gambling revenues to renovate crumbling buildings all over the state.

But Colorado's gambling towns -- Cripple Creek, Black Hawk and Central City -- are facing woes scarcely imagined when the first gambler laid down a $5 bet on a blackjack table.

Big-name casinos such as Central City's Harrah's, Cripple Creek's Double Eagle and Black Hawk's Isle of Capri and the new posh Hyatt have muscled out dozens of mom-and-pop casinos, forcing many out of business or into bankruptcy.

And, the state's mining towns have been transformed -- particularly in the former sleepy town of Black Hawk -- into tacky mini--Las Vegases.

In all three towns, historic structures have been gutted and, in some cases, razed, to make way for massive casinos. This year, the Katinka Building, a turn-of-the-century structure in Cripple Creek, was torn down with the exception of its faade, to make way for a new 500-car covered garage for the Midnight Rose casino.

In Black Hawk, historical integrity has been bulldozed, along with entire mountainsides that have been dynamited away, to make room for parking lots and huge, Las Vegas--like casinos.

Worries that organized crime and prostitutes would overrun Colorado's mountain towns have largely proven incorrect, but thousands of people have fallen into gambling addiction, losing money and ruining lives.

Central City, once the jewel of Colorado gambling towns, is once again a ghost town, where only five casinos remain open, while nearby Black Hawk is booming. In Cripple Creek, the town struggles to retain its identity as mom-and-pop casinos fight to stay open.

Has gambling made these communities better places to live? That all depends on who you ask.

Tale of two cities

When Colorado's first casinos opened, most were small, family-owned operations with a handful of slot machines and two or three card tables. Central City and Cripple Creek shined with dozens of vibrant casinos while Black Hawk, a former mill city a mile below Central City, opened with fewer than 10 casinos.

"There was just a great excitement on Bennett Avenue," said Cripple Creek mayor Terry Wahrer, one of the early backers of the gambling effort. "The town was packed and everyone was real excited about making history and making money."

The mood was just as good in Central City. In 1992, it was booming with nearly 30 casinos and 4,200 slot machines while Black Hawk had just 2,100 slot machines in just a handful of casinos.

That quickly changed, however, as Black Hawk grabbed the casino business by the throat. As the first gambling town Denver-area gamblers hit after the treacherous drive up the narrow Clear Creek Canyon, Black Hawk casinos quickly benefited from its geographic advantage.

In addition, Central City's gambling district was limited to its downtown, while Black Hawk had much more space for parking and larger casinos on the land that had been used by mills to refine the gold from Central City's mines a century ago. That land turned into today's gold mine for Black Hawk casinos.

Lax guidelines and a liberal interpretation of state gambling laws allowed huge, Vegas-style casinos to sprout in Black Hawk. The state constitutional amendment allowing limited-stakes gambling gave local municipal governments authority to approve casino development. Black Hawk's casino-friendly town council pushed through mega-casinos that many say over-extend the original intent of gambling.

"The original idea was that gambling would be limited and that the normal tourist business would continue. That's not what's happened," said Bruce Schmalz, owner of the Dostal Alley Saloon and Gambling Emporium on Central City's Main Street. "The idea was pretty quickly taken over by the huge casinos in Black Hawk."

Today, Black Hawk dwarfs its neighbor with 20 casinos, more than 8,000 slot machines and $394 million in gross earnings last year while Central City languishes by comparison, its five remaining casinos having earned a meager $69 million last year.

"We were very different than Central City or Cripple Creek," said Roger Black, assistant city manager and former county librarian. "Our commercial district was primarily mills that were gone even before gambling was approved. We had a lot of relatively flat, vacant land rather than existing historic buildings."

In Central City, 32 of the 39 casinos that opened over the past 10 years have closed. Casualties include Bullwhackers, the Gold Coin and Central City's crown jewel, the Teller House. Central City buildings that were sold for $5 million 10 years ago are now being sold for as low as $350,000.

Some blame Central City's decline on a 10-month town council--approved moratorium on new businesses in 1993 that pushed newer, larger casinos to Black Hawk. Developer Stan Fulton dropped plans in Central City and instead opened the Colorado Central Station casino in Black Hawk in 1994, the largest and most successful casino in Colorado at the time.

Some also say Central City's strict historic-preservation codes have deterred businesses. Plus, many customers simply got into the habit of stopping at Black Hawk after making a treacherous 40-mile drive up Clear Creek Canyon from Denver.

As gaming continued to grow at a 10-percent clip throughout the 1990s, Black Hawk approved the Isle of Capri, the Riviera and Mardi Gras, three new mega-casinos that opened in 1999 and 2000.

The building frenzy continues with the Hyatt's new $150 million Black Hawk Casino that raises the bar for the already hyper-competitive casino market. The 55,000-square-foot Hyatt, scheduled to open Christmas week, looks more like a massive ski lodge than a turn-of-the-century mining building.

The Hyatt is now the largest casino in Colorado, with 1,550 parking spaces and 1,332 gaming machines. Five years ago, a development conglomeration with interests from Colorado, Texas and California quietly bought up more than 200 acres of mining claims, making it the largest landowner in Black Hawk. Most of the land was on top of a mountain, so developers, with city approval, blasted away and moved more than 800,000 cubic yards of rock.

"The larger casinos have more amenities and more parking. That's simply what the customer wants," said Joe Rammos, general manager of the Colorado Central Station casino in Black Hawk. "The competition drives larger casinos and that sort of steals the thunder from smaller casinos, but that's the nature of the business."

In Black Hawk, the local population has actually shrunk by half to barely 120 residents as homes and trailers were cleared out to make room for mega-casinos. Yet the city government boasts an annual budget of $22 million to serve the city's 20 bustling casinos.

And, while Black Hawk will draw as many as 50,000 gamblers on busy weekends, dust gathers on quiet slot machines in Central City. There's parking right on the main street and only a few people walk along the vacant streets.

"It's pretty grim," said Schmalz, whose family owned a T-shirt and rock shop in Central City before opening a casino in 1992. "We're just kind of hanging on right now."

Betting on Cripple Creek

Gambling has had a dramatic effect on all three mining towns. In Cripple Creek, the city's population dropped to under 600 in 1990, but has since mushroomed to more than 1,200 year-round residents. Gambling has created more than 7,000 full-time jobs, but most are service-oriented jobs where pay starts at $7 an hour.

In Cripple Creek, after gambling was approved, many longtime residents cashed out and moved on. On Bennett Avenue, home to nearly all of the city's 18 casinos, only three or four souvenir shops remain.

"There were many overnight millionaires and many people moved away," said Cripple Creek police chief Gary Hamilton, who opened a donut shop in 1985 before becoming a police officer. "We lost a sense of community when gambling came in."

A hundred years ago, Cripple Creek was the epitome of a Colorado boomtown. More than 50,000 people lived there and the city boasted three hospitals, 28 millionaires, 41 assay offices, 91 lawyers, 88 doctors and 70 saloons. Dubbed the "World's Greatest Gold Camp," 60 trains a day rumbled in and out of town, full of dreamers and schemers. More than 500 mines produced 21 million ounces of gold, equivalent to $8 billion in today's dollars.

By World War II, the mines shut down and Cripple Creek began a long, slow decay. By 1990, less than 600 full-time residents lived there and the local economy was dependent on summer tourists. Today, even with the gambling dollars, there's not even a full-service grocery store in town. The closest hospital is in Colorado Springs and there are only nine doctors in all of Teller County.

Cripple Creek's fortunes changed forever in the fall of 1989 after South Dakota voters approved limited-stakes gambling in Deadwood, another gold mine boom town gone bust.

"We stole the idea from Deadwood," said Cripple Creek mayor Wahrer who owned the Red Lantern, a former local hangout that's now a closed-down casino. "We were all sitting around, drinking coffee, thinking about how we could get things going, and lo and behold, Deadwood popped on TV. About that quick, we decided to try to get limited-stakes gambling in Cripple Creek."

Wahrer, a former businessman who moved to Cripple Creek in 1986, was selected as chairman of the local group. Word quickly spread that Central City and Black Hawk already had a movement afoot. Forty-three Cripple Creek residents and business owners ponied up $10,000 each to fund the effort. Called the "Initial 43," the group joined efforts with Central City and Black Hawk.

With support from MaryAnne Tebedo and Sally Hopper, both former Republican state senators, the cities tried to push something through the state Legislature. Discouraged that several other towns tried to jump on the bandwagon, including La Veta, Trinidad, Silverton, Leadville and others, they decided to kill the bill and take it before state voters.

Despite strong opposition from then-Governor Roy Romer, the ballot easily passed. Colorado became the nation's fourth state with casino gambling. (Since then, six separate initiatives to expand gambling in Colorado -- including Manitou Springs -- have failed by a 2 to 1 margin.)

"We had a huge party at the Elk's Club. Everyone crossed their fingers and when the news came in, everyone was overjoyed," Wahrer said. "Suddenly, everyone who had a property had offers on the table. This was the gold rush of the 1990s."

Wahrer and many of his neighbors decided to try their luck at running casinos. Many quickly discovered that it took deep pockets to bring old, decaying buildings up to code. New floors and updated electrical and plumbing systems were needed, costing hundreds of thousands of dollars. Then even more money was needed for gaming machines, redecorated interiors, lights, tables, restaurants and parking facilities.

"I was probably pretty nave. I didn't envision $40 million casinos in Cripple Creek," Wahrer said. "The idea was mom-and-pop casinos with $5 stakes that wouldn't attract the big casinos."

Wahrer quickly realized he knew "zilch" about running a casino and sold his Red Lantern restaurant, which was transformed into the Jubilee Casino, now closed on Cripple Creek's Myers Avenue.

Still, many of the smaller casinos in Cripple Creek flourished. Bennett Avenue was rejuvenated as dozens of casinos sprouted overnight. That all started to change when the Double Eagle Hotel and Casino opened with 158 rooms, 12 suites and 600 slot machines in 1996.

The Double Eagle had a similar effect on Bennett Avenue as Black Hawk did on Central City. It had plenty of parking, plenty of games and a flashy, Vegas-like feel.

Casinos started falling like dominos and consolidation brought many casinos under one owner. Bronco Billy's grew from two buildings to six as it absorbed its fallen neighbors. The Gold Rush, the Imperial and others filed bankruptcy. Today, 11 casinos stand vacant on Bennett Avenue.

One of the last family-run casinos standing is the Palace Hotel and Casino, but it filed for Chapter 11--bankruptcy protection on Nov. 29.

Its owners didn't want to be quoted due to the bankruptcy proceedings, but said competition from large casinos and heavy device fees imposed by the city were killing the casino. Cripple Creek and Central City charge casinos $1,200 per year per slot machine, while Black Hawk charges only $750 per year. The Palace, under the ownership of the Lays family, was behind in its payment on the device fees, paid quarterly to City Hall.

Wahrer remains unapologetic over the high device fees and the high number of bankrupt casinos.

"That's the nature of the beast. Some are going to survive, some aren't. City Hall is not in the business to keep them in business," the mayor said. "We don't want to see them fail, but they can't blame us for it."

The huge, Vegas-style casinos dominate the market. According to the Colorado Division of Gaming, seven of the state's largest casinos drew nearly 70 percent of gambling revenue last year while the 25 smallest casinos took in just 10 percent.

And, fully 95 percent of the people who head to the three mountain towns to gamble are from Colorado, not tourists visiting from elsewhere, according to the Casino Owners Association of Colorado.

Can't walk away

Colorado might have limited-stakes gambling, but there's nothing limited about gambling addiction. Though health workers and other support groups don't have official numbers, thousands of lives have been ruined by gambling addictions at Colorado's casinos.

Despite a $5 limit on stakes, an addicted gambler can still lose hundreds, even thousands of dollars a day. Even quarter slot machines can be devastating to someone who can't walk away -- or who plays several machines at once.

One Cripple Creek casino owner, who asked not to be identified, said every casino knows who its problem customers are. In fact, those are usually their best customers.

"I've grown very callous about the whole thing, but I know these people are going to gamble, so they might as well spend their money here. That kind of bothers me," he said. "I'm a pretty strong Christian. I feel like I've promoted people's addiction. I've actually hurt the business in the past by telling people, 'Hey, you've got a problem.' We're a family-run casino. I know the big houses never do that."

Only 1 percent of Americans has a pathological compulsive gambling problem, according to the National Research Council of the National Academy of Sciences. But often it's the casino workers, who can't gamble in casinos where they work, that have the most serious problems. National studies reveal about 40 percent of all casino workers have a gambling problem.

Casinos say they do their fair share to help stop compulsive gamblers, but many casino owners know that their best customers are often the problem gamblers.

"Some casinos have recognized we have a problem," said Lois Rice, executive director of the Casino Owners Association of Colorado. "More and more casinos are offering employee assistance programs, counseling services. The company pays for a percentage of the treatment if they go into counseling and for family members."

Rice said the Colorado gaming industry instituted mandatory training for its employees in 1997 to help identify chronic gamblers. The group has helped fund a gambling-problem hotline and public-service ads. She said the industry also voluntarily started a chronic gambler's registry to help keep them out of casinos.

For people with serious problems, however, those efforts are little more than a smoke screen. The sound of the ringing bells on a slot machine and the thrill of the win keep them coming back.

"No matter who it is, it always starts the same. You start gambling a little, you win a little, you get excited and start to play some more," said "Howard," a Colorado Springs man who lost tens of thousands of dollars and nearly ruined his marriage during the three years he worked and gambled in Cripple Creek.

"Literally before you know it, gambling is an integral part of your life to the point it becomes the primary focus of your life."

He works closely with the local chapter of Gambler's Anonymous and says Colorado casinos aren't to blame. But the abundance of local gambling proves too tempting for chronic gamblers.

"It's not their fault that I have a problem," he said. "If they weren't there, I'd find a bookie. We can't blame the gaming industry, even though it's proliferated, even though it's done us no good. I can't blame Vegas or Cripple Creek. I can only blame myself."

Gambler's Anonymous started in 1957 and today there are 67 chapters around the world. Meetings are held in Colorado Springs, Cripple Creek and Pueblo. A half-dozen or so show up for twice-a-week meetings at the Colorado Springs chapter. Gambling used to be a male bastion, but now nearly half of Gambler's Anonymous members are women.

"If you talk to a gambler with a serious problem, every one of them has thought about not turning that wheel at the curve on the narrow road and going off the cliff," Howard said. "Every compulsive gambler is a loner. You can see the glazed look on some people's faces. Those are the people with a problem."

Gambling is statistically the toughest addiction to kick. According to GA, Alcoholics Anonymous has a 53 percent success rate, while GA has a 22.7- percent success rate.

"Gambling is a progressive problem. I started playing nickel slots and I won. The employees there called me 'Lucky,'" he said. "My problem was the poker machines. I would lose one, two, three hundred a night easily."

Howard said his wife confronted him about his problem and he kicked gambling with help from his church, family members, professional counseling and GA. He's been "clean" for more than seven years and completely avoids casinos.

Safety in numbers

Worries that the Mafia and prostitutes would move into the mountain towns have proven largely false. Initially, local law enforcement was caught off guard by the huge influx of gamblers pouring into towns, but most increases in crime were minor offenses, such as purse thefts or inside jobs by casino workers.

Cripple Creek, which only had one chief and two officers in 1990, now has 14 officers patrolling the city. Cripple Creek police chief Hamilton said he's only heard of two instances of prostitutes trying to work in Cripple Creek and both times they left town within a week.

"Of course crime has gone up, but not a lot. We have 10,000 to 15,000 people a day up here, so those numbers are going to go up," Hamilton said. "We still consider this a real safe place to visit and live."

Also, the Division of Gaming in the Colorado Department of Revenue keeps a close eye on the industry with a staff of 73. The division conducts extensive background investigations of gaming license applicants, monitors owners for illegal activities and patrols casinos looking for violations of gaming laws.

Preserving the past

A big carrot waved before Colorado voters by pro-gambling forces back in 1990 was historic preservation.

Gambling supporters linked gaming and historic preservation as a major selling point. Colorado's efforts were modeled after Deadwood, S.D., the nation's first community to allow limited-stakes gambling back in 1989 that used gaming proceeds to refurbish the mining town. Today, 11 states allow casino gambling.

Thanks to hefty taxes -- up to 20 percent of all gambling revenues -- Colorado boasts the largest fund for historical preservation in the nation. Colorado's State Historical Fund receives about $15 million a year from casino taxes. In 10 years of gambling, more than $90 million has been spent throughout the state on 1,900 projects.

"It's made a huge difference," said Mark Wolfe, the historical fund's director. "A lot of buildings were in emergency condition. Without rapid attention, they would be lost forever."

Projects range from a few hundred dollars to more than $100,000. Wolfe said every county has seen at least one project funded by gambling dollars.

There have been dozens of projects funded in El Paso and Teller counties (see below). Others include saving the Tabor Opera House in Leadville, the 1886 Beaumont Hotel in Ouray and the Stanley Hotel in Estes Park. Recent projects include work on the spaceship-shaped house along Interstate 70 that was used in Woody Allen's film Sleeper just west of Denver.

"It's hard to drive through a Colorado town without seeing at least one project that's been funded," Wolfe said. "Almost $100 million in less than 10 years has had an incredible effect in most Colorado communities."

Twenty percent of what the state historical fund collects is funneled back to the gambling towns to be used as they wish. Coupled with fees on slot machines and other local taxes, gambling cities have been able to modernize their communities.

In 1990, Bennett Avenue was the only paved street in Cripple Creek. Now, all but seven local streets are paved. The town boasts two shiny new fire trucks, a new community center and an annual city budget that grew from $300,000 in 1990 to $9 million in 2000.

Much of that money, however, has been spent on improving the infrastructure to support the sudden boom in gambling. Cripple Creek is still paying off its $4 million sewer and water system project it was forced to underwrite to handle new casinos.

"Is the town better off? Obviously it is," says Cripple Creek mayor Wahrer. "Our deteriorating buildings would have been in further decay. I think the town would have survived. This town is a town of survivors. Some people don't like all the changes, but that's the price of progress."

The Winners

Gambling taxes have generated almost $100 million over the past 10 years and have been used to help renovate and restore historical properties all over Colorado. Here's a partial list of projects that have benefited in the Pikes Peak region:

Pikes Peak Library District master plan, exterior and renovation of the downtown library: $809,950

Historical structure assessment and door replacement at the Colorado School for the Deaf and Blind: $254,480

Exterior restoration at the Rock Ledge Ranch House: $115,380

Exterior renovation and restoration of cupola and roof at Colorado College's Cutler Hall: $324,844

Exterior restoration of Colorado College's Bemis Hall: $150,000

Interior and exterior rehabilitation at Lowell School in Colorado Springs: $625,000

Roof replacement and exterior renovation at Colorado Springs City Auditorium: $200,000

Historic structure assessment and exterior restoration at Taylor Memorial Chapel in Colorado Springs: $129,000

Interior and exterior restoration at City Hall in Colorado Springs: $194,165

Carousel restoration at the Cheyenne Mountain Zoo: $93,411

Historic site mapping of El Paso County:$2,400

Exterior restoration and reconstruction at Manitou's Business of Art Center: $112,930

Exterior restoration at the Community Congregational Church of Manitou Springs: $81,272

Roof, door, window and other interior and exterior restoration at the Cliff House in Manitou Springs: $216,430

Building stabilization at the Colorado Center for Contemporary Art & Crafts in Manitou: $115,000

Master planning and archaeological survey for El Paso County's Calhan Paint Mines Park and Rec project: $82,500

Roof replacement, historic structure assessment, and repair and restoration at the Monument Nursery: $136,100

Purchase of the Old Homestead House in Cripple Creek: $100,000

Window rehabilitation and restoration at the Teller County Courthouse: $213,590

Building stabilization and rehabilitation at the Gold Mining Stock Exchange building in Cripple Creek: $145,775

Foundation and mechanical system, and interior/exterior rehabilitation at City Hall in Victor: $171,780

Building restoration of the middle school gym building in Woodland Park: $100,000

Cara DeGette

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