While Thunder Valley thrives, Reno keeps its seat at the table

By Steve Wiegand -- Bee  Staff Writer
Published 2:15 a.m. PST

RENO - This was the winter of their discontent, made perilous by the Indians of Auburn.

Predictions were that the  opening of the Thunder Valley Casino in Placer County last June would ignite an economic apocalypse for this metropolitan area's 350,000 inhabitants.

Few Northern Californians would venture over the Sierra in the snowy months, seeking instead to scratch  their gambling itches at the impressive joint built by the United Auburn Indian Community not far off Interstate 80, near Rocklin, Lincoln and Roseville.

Reno-area businesses would wither. Unemployment would soar. Tumbleweeds would roll unimpeded down the main streets.

Not.

Like Brutus' love for Caesar, Macbeth's patriotism or Howard Dean's presidential campaign prowess, the economic demise of "The Biggest Little City in the World" seems to have been greatly exaggerated.

"It's true that the gaming segment of the economy has taken a hit," said Harry York, chief executive officer of the Reno-Sparks Chamber of Commerce, "but the  economy in general here is hot. We're just exploding. It's like the Roseville-Rocklin region in your area."

There is little question that Thunder Valley's success has had an impact on the casino industry in northern Nevada in general and Reno in particular. And describing Thunder Valley as  "successful" is like describing Niagara Falls as "wet."

Based on earnings reports by  Station Casinos, the company that operates Thunder Valley for the Auburn tribe, the casino stands to net more than $300 million in its first year.

Industry analysts say that  would make it one of the most lucrative casinos in the country, perhaps trailing only two Indian casinos in Connecticut and the Bellagio casino in Las Vegas.

"Obviously, it's hurt us; not only us, but the whole northern Nevada market," said Jack Fisher, general manager of the Boomtown casino and hotel complex a few miles west of Reno. "You've seen the numbers."

The numbers indeed are sobering for people in these parts who make their living from gambling.

Pinnacle Entertainment, the company that owns Boomtown, reported earnings from the casino were down 9.4 percent in the fourth quarter of 2003, compared with the fourth quarter of 2002. The Silver Legacy Casino's net income for 2003 was down 44 percent from the previous year, and Circus Circus Reno plummeted 56 percent.

"It is estimated that the Reno market draws about half of its customer base from Northern California," Moody's Investors Service said in a report that downgraded the stock outlooks of several Reno casinos in December. "While the Reno market has already been on the decline for several years, the successful opening of Thunder Valley Casino ... has had a further negative impact."

But some analysts say the slump is more likely to be short-term than fatal.

"At some point, the slide is going to stop," said Ken Adams, a Reno gambling industry consultant. "We're going to survive. We're going to have to retool, and it won't be the Reno of yesterday, but the industry will survive here."

And there is plenty to suggest that despite the gambling recession, there is more about Reno's economy to praise than to bury:

* The job growth rate for the area was 3.9 percent last year, triple the rate of 2002.

* The unemployment rate for January was 5.0 percent, below Sacramento's 5.7 percent.

* Increased convention business and a general recovery from a deep slump after the Sept. 11 attacks pushed the area's visitor count and hotel occupancy rate higher this past January than they were in January 2003.

* The current issue of Inc. Magazine rates Reno as the sixth-best medium-sized city in the country for business.

And most tellingly, the area's traditional reliance on gambling as its economic base gradually is shifting. According to state economic figures, the percentage of jobs related to casinos and hotels (23.8 percent) has fallen behind the percentage in the warehousing, transportation and utility sector (25 percent).

"It (gambling) has gone from probably 50 percent of the (economic) base to around 30 percent," said the Chamber of Commerce's York, "and that will probably continue to change as other businesses grow and expand and gambling stays flat."

York and other local officials say that even as Reno's casinos have suffered from competition with California casino tribes, the overall economy has prospered because of its proximity to California - and California's troubled business climate.

"That's a real big deal, not just for major distribution centers that locate here, but for someone who is building a part or manufacturing a component," said Chuck Alvey, president and CEO of the Economic Development Authority of Western Nevada, a division of the state's economic development agency. "We have the (California) customer base very close, but we don't have all the negative aspects in terms of the business climate."

Of 30 companies being wooed by Alvey's agency, 14 are from California and 10 of those are manufacturing firms that generally offer better-paying jobs than the casino industry.

Aki Korhonen heads one such firm. Korhonen, who came to the United States from Finland, is president of PC-Doctor Inc., a 12-year-old company that makes diagnostic software for computer manufacturers. Six months ago, he moved his 50-employee company from offices in Davis and Emeryville to Reno, bringing about half his workers with him.

"In the '90s, I saw California take on more and more the attributes of Europe," he said. "There were so many distractions from the core of the business, so much paperwork and bureaucratic rules."

Korhonen said he looked at other cities, including Phoenix and Salt Lake City, before settling on a business complex south of downtown Reno.

"The casinos weren't a factor (in the location decision)," he said. "I don't gamble."

Of course, success has a price tag, and Korhonen says some of his employees are having problems finding a place in Reno's sizzling real estate market.

According to the National Association of Realtors, the Reno area's median house price of $228,000 for the fourth quarter of 2003 was 17.3 percent higher than in the fourth quarter of 2002 and growing at a faster rate than the Sacramento area's.

"We still have a year's wait on most of our subdivisions, from the time we get approval to the time they start getting built," said Lori McCleary, a spokeswoman for the Builders Association of Northern Nevada. "We can't build them fast enough."

If there is a fly in Reno's economic ointment, it is the downtown area, which, in addition to most of the major casinos, is home to a plethora of pawnshops, porn stores and panhandlers.

"The key thing we have to do is fix downtown," said the Chamber of Commerce's York. "But it will come."

In the past year, the city has seen the reopening of the Nevada Museum of Art, the debut of a new theater, construction of a retail-condo complex, groundbreaking on a special eventsconvention center and the opening of a kayak park along 2,600 feet of the Truckee River, which runs through the heart of town.

On one recent and unseasonably warm weekday afternoon, visitors along the newly refurbished Riverwalk paused to watch three kayakers hot-dog in rapids not 100 yards from downtown casinos and only 25 yards from the White Lace and Promises Wedding Chapel.

Inside, owner John Ketaner was speaking with enthusiasm about Reno's changing economic fortunes.

"I saw some numbers the other day that said they expect the number of visitors along this walk to go from 300,000 a year to 400,000 a year, just because of the kayakers," he said. "That's a big increase ... and not because they're coming to the casinos."

He also offered an example of entrepreneurial adaptation to changing economic conditions - and maybe something for Reno casinos to chew on.

"We're turning our reception hall next door into a pizza parlor," he said.