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Above & Beyond

Tribes growing casino portfolios and diversifying economies

Above & Beyond

From Atlantic City to South Korea, to the Caribbean Islands, American Indians are looking beyond their reservations—and even U.S. borders—in growing their tribal gambling portfolios.

But tribal economic diversification beyond casinos, largely fueled by gambling resources, is occurring at an even faster pace.

Economic progress in Indian Country predicted with passage in 1988 of the Indian Gaming Regulatory Act (IGRA) has dramatically accelerated in the last five years after a slow start leading into the depression of 2007, industry sources say.

The accumulation of revenue and diminished debt tied to casino development, improved human resources and business acumen, and an increasing willingness of lending institutions to invest in Indian Country are all factors in the economic growth of many indigenous communities.

Tribes are launching and acquiring business enterprises beyond casinos and tourism, including commercial real estate, technology, agriculture, manufacturing, government contracting and traditional and green energy.

Meanwhile, as the tribal casino market grows saturated and opportunities for gambling on Indian trust lands become scarce, an increasing number of tribes are acquiring off-reservation casinos and launching commercial gambling ventures.

Hard Rock International, a multibillion-dollar enterprise of the Seminole Tribe of Florida, continues to generate headlines with domestic and international expansion, pursuing projects in Japan, Costa Rica and Spain. Its worldwide ventures include a purchase of the former Trump Taj Mahal in Atlantic City, set to reopen in the summer of 2018 under the Hard Rock brand. The company also recently added a racino near Ottawa, Ontario, the Rideau Carlton racetrack.

Mohegan Gaming & Entertainment, an enterprise of the Mohegan Tribe of Connecticut, last year added a planned South Korea gambling resort to the list of casinos and racetracks it owns or manages in Atlantic City, Pennsylvania, Connecticut, Louisiana and Washington.

The Poarch Band of Creek Indians of Alabama last year partnered with the Washoe Tribe of Nevada in opening the Wa She Shu Casino in rural Gardnerville. The band also acquired the Marriott Resort & Stellaris Casino in Aruba and a greyhound track and poker room in Florida.

Laguna Development Corporation, the economic arm of the Pueblo of Laguna in New Mexico, earlier this year purchased the Isle of Capri Casino Hotel Lake Charles in Westlake, Louisiana.

And Global Gaming Solutions, an enterprise of the Chickasaw Nation of Oklahoma, purchased Remington Park racetrack in Oklahoma City and owns 49 percent of Lone Star Park in Grand Prairie, Texas.


Gaming Expertise

With the maturity and growing saturation of the largely rural $30 billion U.S. Indian gambling market, which consists of 480 facilities in 28 states, it comes as no surprise tribes would utilize their expertise in acquiring and/or managing commercial and tribal casinos off their reservations.

It’s been quite an evolution since the explosion of tribal casinos began with passage of IGRA, when many tribes initially turned to commercial gambling companies for investment capital and management expertise.

Things have changed.

“This is an industry that has matured, and the tribes with it,” says Dante Desiderio, executive director of the Native American Finance Officers Association (NAFOA). “Tribes in the beginning were trying to figure out how to do this. Now we’ve taken on the role of gaming management companies. We’re at the point where we’re going into other markets.”

“Tribes are looking beyond the domestic market,” Desiderio says. “You might have heard about tribes thinking about expanding to the Caribbean. That’s a trend worth paying attention to.”

That tribes have become adept at casino operations also was to be expected. Unlike commercial casinos that generate revenue for shareholders, tribal gambling funds housing, health care, education and other government services. It’s crucial to the tribal community that casino operations are efficient and well-regulated.

“Tribes are good operators. They’ve developed top-notch, high-quality management teams,” says Matt Sodl, co-founder and managing director of Innovation Capital.

Getting state and local approvals for commercial casinos is often quicker than the lengthy, risky and politically onerous process under IGRA, particularly when a project involves placing newly acquired land in federal trust.

“You’re seeing much more of a proactive effort by tribes to seek out commercial opportunities,” Sodl says. “They are much more open about their willingness to do business in a commercial environment.

“Tribes that have accumulated net worth and have been smart when it comes to reinvestment of their capital have the ability to look at other markets, and are out competing against commercial entities to buy properties; absolutely.”

Some ventures are intended to protect tribal gambling markets against the encroachment of commercial casinos. Tribes and commercial gambling companies almost equally split some 1,000 casinos nationwide, a roughly $68 billion market that is growing increasingly competitive.

The Mohegan and Mashantucket Pequot tribes of Connecticut recently got approval from the state legislature to build a $300 million commercial casino in East Windsor. The project is intended to dilute the impact of MGM Resort International’s $950 million casino and entertainment complex under construction in nearby Springfield, Massachusetts.

“Tribes aren’t going to sit back and watch commercial operators camp out on the fringe of their territories,” Sodl says.


Economic Conversation Has Changed

“Gaming is still a very significant, important part of tribal economies,” says Kristi Jackson, chairwoman of TFA Capital Partners. “Looking forward, though, the conversation we have with just about all our tribal clients is how they can grow beyond gaming.

“They’re seeing increasing casino competition. They’re seeing cash flows remaining relatively stable or in some cases declining. There is a need in most cases to look beyond the boundaries of the reservation and do things that will diversify the economy.

“An absolute trend is the diversification away from home-based gaming. Some tribes are looking at geographical diversification. They are looking to do gaming outside of the reservation boundaries to mitigate economic or competitive issues,” Jackson says.

“Others are saying they don’t want to continue with gaming as other businesses become available. They’ll look at hospitality. They’ll look at other forms of entertainment. They’ll look at real estate.”

“Whether it’s due to the saturation of tribal gaming or whether it’s just the logical next step, there does appear to be an acceleration of economic diversification out there,” says Fred Schubkegel, a Michigan tribal attorney. “It’s really taken off now, finally.”


Intent of IGRA Becoming A Reality

The congressional intent of IGRA was to assist the 367 federally recognized tribes in the lower 48 states in strengthening their governments and building diversified economies.

With the exception of a handful of natural-resource tribes in the Great Plains and Southwest, most indigenous communities have struggled, subsisting on federal and state grants to operate inadequately funded schools, health clinics and other services. Much of Indian Country remains plagued by poverty and high unemployment.

IGRA and gambling have enabled some 250 tribes—many with marginal casinos on remote reservations—to expand and subsidize government programs and services. Gambling also is helping create a generation of educated indigenous Americans needed to manage tribal programs and economies.

With enactment of IGRA, tribes were quick to launch casino ventures or expand existing bingo operations with the goal of providing for immediate needs, including government infrastructure, housing, health services and education.

“We were desperately poor,” Jeff Crawford, attorney general for the Forest County Potawatomi of Wisconsin, recalls of the early 1980s, when some $300 a week began trickling in from a small tribal bingo operation.

“You have to put food in people’s bellies. You have to have a roof over their heads. You have to provide medical care,” Crawford says. “That’s exactly what the tribe did. We poured resources into what was immediately needed.”

A decade later, the tribe acquired and placed in federal trust a crumbling Milwaukee Indian school and used the land to expand the bingo business.

“It took time to overcome the despair in Indian communities,” says Valerie Spicer, founding partner in the Trilogy Group, a tribal government relations firm. “You first had to work on the infrastructure needs of your community.

“Tribes needed roads and houses and fire protection and health care. Many tribes had to build governments from the ground up. That had to come before business diversification.”

Tribes such as the 500 citizens of the Forest County Potawatomi lacked an educated work force and skilled, educated individuals to build and manage a diversified economy.

The Potawatomi also struggled politically to obtain a long-term casino regulatory agreement, or compact, with the state of Wisconsin. Without an extended compact it was extremely difficult to obtain the financing needed to expand the casino and diversify the economy.

“Gaming was not a sure thing for us,” Crawford says of the political pushback to casinos on tribal land.

The Poarch Band of Creek Indians of Alabama, which owns three Class II bingo casino resorts, has also operated in an often-hostile political environment. Legislators and state officials refuse to negotiate a Class III compact with the band, the state’s only federally recognized tribe.

The uncomfortable political environment hastened the band’s desire to seek casino opportunities in Nevada, Florida and the Caribbean. Meanwhile, Creek Indian Enterprises (PCI) is diversifying the tribe’s economy with 14 hotels, an amusement park and PCI Aviation, which makes parts for military aircraft.

“We know we’re going to have challenges—perhaps even roadblocks—with the state of Alabama,” Vice Chairman Robert McGhee says. “The market may become saturated. We don’t know what the future of gaming is in the state.

“While we have the financial resources and the ability to do so, we want to look for opportunities that can sustain us if something were to happen with gaming. We’ve proven ourselves when it comes to gaming and hospitality. We’re always looking at the possibility of working with other tribes and going into different markets. We’re also looking at an investment fund to build six or seven more hotels throughout the United States.”


Getting a Head Start

A handful of tribes such as the Crow Nation of Montana and the Southern Utes of Colorado—blessed with natural energy resources such as coal, oil and gas—established tribal or federally chartered economic development corporations long before IGRA and compacted gambling, with the goal of launching business enterprises. There were others.

“A lot of tribes that structured themselves for business growth with separate development corporations seem to be moving along at a pretty fair clip,” Spicer says.

The Mississippi Band of Choctaw Indians, under visionary Chief Phillip Martin, established Chahta Development in 1969, first to build tribal housing and later to craft wire harnesses and speakers for the automotive industry.

The Chickasaw Nation of Oklahoma formed Chickasaw Nation Industries—a federally chartered corporation—in 1995, nine years before it negotiated a gambling compact with the state. CNI is a holding company with a dozen subsidiaries engaged in manufacturing and technology, health care, defense logistics and business support services.

Bill Lance serves as the tribe’s secretary of commerce, overseeing 60 tribal casino and non-gambling businesses employing more than 6,500 workers.

“We have been fortunate and blessed to have a very forceful, innovative tribal government,” Lance says—particularly Bill Anoatubby, the tribe’s governor for more than 30 years.

“Because of Governor Anoatubby’s leadership, we have always had a diversification strategy,” Lance says. “We have been methodically executing that going forward.”

Forest County in 2002 established the Potawatomi Business Development Corporation, which today provides technology, goods and services to the military and manages environmentally friendly construction and renovation projects.

The tribe recently purchased a bank and a Milwaukee hotel. It also built a $33 million wholesale data center and a waste-to-energy anaerobic digester and biogas plant capable of converting food waste into enough electricity to power 1,500 homes.

“Our goal is not only to become economically self-sufficient but also energy self-sufficient,” Crawford says.


Learning From Gambling

Building and financing casino resorts and tourism on the reservation helped largely impoverished communities lacking human resources develop the business acumen needed to move ahead with various ventures.

“Gambling has been a great classroom for tribal economies,” Lance says. “There’s no doubt about it.”

“You go from seeking out a person with a financial background, to a comptroller, to a chief financial officer,” Crawford says. “I’ve seen that progression.”

Small-enrollment tribes with limited land bases—such as the 110 federally recognized Indian communities in California—may choose passive investments rather than launching business enterprises or building community infrastructure.

California generates about $8 billion of the annual $30 billion won by tribal casinos. Yet there is only about 500,000 acres of Indian trust land in the state, less than all but two of the 28 states with tribal casinos.

About 130 of the 250 tribes with casinos have revenue allocation plans allowing for distribution checks to individual tribal members, according to the Department of the Interior. Many of the larger per-capita checks go to small-enrollment tribes in metropolitan areas.

“Some per-capita tribes have very little financial flexibility,” Jackson says. “Non-per-cap tribes may have a high level of government programs and building and services. Asset allocations are going into investment-type opportunities to grow the overall government profile.

“Everything centers on capital,” Jackson says. “You either have a lot of capital and you want to invest or you’re trying to do something and need capital.”


Building A Culturally Rich Economy

The goal of many indigenous communities is to develop an economy reflective of their history, culture and traditions.

Whether it is fishing tribes in the Northwest, agricultural tribes in the Midwest or ranching tribes in the Great Plains, gambling resources are credited with enabling tribes to expand their markets, often to overseas customers.

Spicer, who until recently served as executive director of the Arizona Indian Gaming Association, notes that the Ah-Chin Indian Community is now able to export its cotton. The Fort McDowell Yavapai Nation is finding foreign buyers for its pecan harvests.

“I like that gaming enterprises have allowed tribes to not only reinvest in their historic economics, but reinforce their traditions and values,” she says.

“If there’s any kind of a theme, the tribes I work with take a long-term view,” attorney Schubkegel says. “You’re not seeing tribes team up venture investors to buy and flip a company. That’s not been the tribal mindset.

“They’re also looking at sustainable opportunities with respect to the environment. They’re looking at a business with an ethical purpose with the goal of more than just making money.”


Protecting the Environment

Elders with the Forest County Potawatomi decades ago noticed diminished potency in medicinal herbs on their rural Wisconsin reservation and changes in the habitual behavior of the wildlife.

“The elders were having these discussions long before the debate over global warming,” Crawford recalls.

The Potawatomi casino was credited with providing the tribe with the legal and financial resources to defeat an effort by Kennecott Minerals Company to mine zinc and copper on land near the town of Crandon on the Wolf River in northeast Wisconsin.

Forest County Potawatomi and the Mole Lake Ojibwe eventually purchased the site.

Forest County Potawatomi’s Greenfire management team ensures that new buildings on the tribe’s reservation are energy-efficient with a minimal impact on the environment.

“Coming from nothing and now having resources, it was a time for us to define ourselves,” Crawford says. “That’s what we’re doing.”

“We needed to build an economy reflective of the community and what was important to us. In our case that meant environmental protection and green energy. We focused on things back home.”

As is the case with many tribes, Forest County used gambling revenues to acquire and place in trust fee lands within its checkerboard, 17,000-acre reservation.

Forest County Potawatomi was conservative in growing an economy. Initial investments following enactment of IGRA weren’t jaw-dropping. Sixty of 77 residences on the reservation were mobile homes. The reservation needed housing, a feed store and a grocery store.

“We wanted to build things that were important to the tribal community and the surrounding communities,” Crawford says. “They weren’t home runs. They weren’t intended to be home runs. They were necessities.

“We didn’t overextend ourselves,” Crawford says of tribal economic investments and enterprises. “There were failures. There were no disasters.”

It has been common for tribes to invest in environmental projects such as clean energy and securing water rights. Washington tribes restored fisheries. Other tribes engage in wildlife preservation.

While much of Indian Country remains impoverished, the growing tribal economy has contributed jobs and economic growth to largely rural non-Indian communities surrounding tribal lands.

“These tribal economies are literally woven in the fabric of the states in which they are located,” Lance says.

“You know, tribes aren’t going anywhere. They’re never going to sell and move their corporate headquarters. They’re not passing dividends to shareholders. The money generated by the tribal enterprises is turned over to the local communities. It has more of an economic impact.”

Dave Palermo is an award-winning metropolitan newspaper reporter. He has written about American Indian governments for more than 20 years, working as an advocate for several tribes and tribal associations. He also has co-authored books on gambling and gambling law. He can be reached at [email protected].

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