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Technology Explosion

Posted on March 30, 2010 by Roger Gros -

Even before the model compact for Oklahoma Indian tribes was drawn up in 2005, the state had a robust Class II gaming industry. As the compacts were being negotiated, there were already 30,000 slot machines in the state-at least 90 percent of them Class II games.

Today, there are well more than 50,000 machines in Oklahoma, but now, more than two-thirds of them are Class III traditional slot machines.

Right from the start, Oklahoma customers were more sophisticated than the normal new jurisdiction. They had experience in Missouri, Louisiana and even Las Vegas, so a boring bingo machine wasn’t going to cut it. To solve that problem, several small companies stepped up to the plate to develop new games. The only catch was that the federal government, via the National Indian Gaming Commission, kept threatening to draw a “bright line” between Class II and Class III machines that might have, at any time, short-circuited this remarkable technology revolution.

Chris Korpi, vice president of sales for slot manufacturer and longtime Oklahoma supplier Cadillac Jack, says boring games were never the norm in Oklahoma.

“Tribes in Oklahoma have always been interested in the newest technology” he says, “and as the market has matured and many tribes are now operating full-scale casino resorts, we have enhanced our game development to remain ahead of the competition using free-spin bonuses, in-house progressives, and variable volatilities in our video reel product.”

Another company with deep roots in Oklahoma is Austin, Texas-based Multimedia Games, which introduced the first linked progressive to the state in 1995, MegaMania. Mick Roemer, the company’s vice president of sales and marketing, says a second progressive game, MegaNanza, used the more traditional spinning reels to give it a real slot machine feel, but with the bingo technology.

“The ‘bonanza’ (pre-drawn) aspect of that game was challenged by the NIGC in 2002, so Multimedia Games and its tribal customers converted those deployed machines to Reel Time Bingo, a ‘standard-sequence’ game that featured the results in an entertaining, spinning-reels manner. Standard sequence simply refers to the fact that all cards are sold before the bingo numbers are drawn,” said Roemer.

Jim Nulph, marketing director at Tulsa-based VGT, says innovations were the key behind the success of the smaller slot companies in Oklahoma.

“Our company’s founder and CEO, Jon Yarbrough, had the vision to recognize the importance of investing in improvements to bingo,” he says. “First, it simply presented a good business opportunity. Secondly, Jon realized that a strong-performing bingo game is vital to the independence and sovereignty of Native American tribes. As a result of VGT’s vision and leadership, we were able to develop long-lasting partnerships with Oklahoma tribal leaders. These partnerships played an important role in bringing highly profitable bingo games to the Oklahoma market. VGT games have generated close to $4 billion in Oklahoma tribal profit, more than the games of any other manufacturer.”

It’s this insistence on sovereignty that drives the business of Cadillac Jack, according to Korpi.

“We consider Class II products as tribal sovereignty enforcement devices,” he says. “The placement and use of Class II is vital to the sovereignty of tribal nations, and we are honored to have been a significant contributor to the success of Indian gaming in Oklahoma. Revenue from Class II devices remains entirely with the tribe, without any revenue sharing with other governments. It is Cadillac Jack’s goal to continue to be a part of tribal economic self-sufficiency.”

Nulph says the issue has always been important to his company.

“At a recent tribal conference,” he explains, “tribal leaders equated a strong Class II business to the preservation of sovereignty. Disruptions and unclear definitions threaten the foundation of what is clearly a tribal right, and from a business perspective, make it inefficient for all Class II business interests. So, while the work that has been done to protect Class II bingo games has been a great effort by us all, we know that the rewards are worth it and we can’t let our efforts wane.”

But there was always the threat that the NIGC could end the experiment, if rigid rules and regulations were put into place.

“In the last decade the NIGC tried to promulgate new game classification standards that would make games such as Reel Time Bingo less marketable,” says Roemer. “Beginning in 2008, MGAM joined with other Class II gaming manufacturers, including Rocket Gaming, Bally, IGT, VGT, AGS, Nova Gaming and Planet Bingo, in a working group alongside tribes from across the country and two NIGC committees to fight the NIGC’s proposed restrictions. In the end, the NIGC pulled back its classification standards proposal and its attempt to redefine ‘facsimile’ (for Johnson Act purposes) and instead published Class II technical standards and Class II minimum internal control standards.”

Korpi says Cadillac Jack was able to minimize this disruption by working closely with the tribal gaming regulators and other manufacturers within the industry.

“Since the tribal gaming regulators are the only entity that can define what is or what isn’t a Class II device, we looked to these regulators to guide us as to how our Class II devices should operate,” he says. “As part of a concerted and cooperative effort with the tribes and other manufacturers, Cadillac Jack was able to help defend tribes against efforts by the NIGC to erode tribal sovereignty.”

For manufacturers, the ability to help grow the gaming market in Oklahoma was more gratifying than simple profits for their companies.

“The stronger our games perform, the more that the casino, and ultimately the tribe, earns, which results in better lives for the members of the tribes with which we do business,” says Korpi.

Roemer says Multimedia has been a true partner to the state tribes.

“Multimedia Games was the first company to support Oklahoma tribes by financing the construction of new gaming facilities,” he says. “The original Chickasaw WinStar Casino in Thackerville, Riverwind near Norman, the two Osage Million Dollar Elm casinos near Tulsa and the Peoria tribe’s Buffalo Run Casino in Miami were among development projects where Multimedia provided financing and project support. Other gaming companies have since joined with that type of financing support to tribes. Multimedia Games remains a major financing partner with the Chickasaw Nation, Oklahoma’s largest gaming tribe.”

VGT has also partnered with tribes.

“It is an honor to be part of an industry that does so much good for its communities and employees,” says Nulph. “The transformation of our partner tribes and the communities in which our games are placed has been just phenomenal. It is rewarding to know that almost $4 billion in tribal profit has come from VGT machines alone. It is difficult to say how many students have been educated, how many sick have been cared for, and how much Native American culture has been preserved from this tribal partnership. The word gratifying does not begin to capture how good this all makes company associates feel about their contributions.”

While the entry of the main Class III slot manufacturers into Oklahoma has created more diversity in the market, the original Class II providers still achieve a major level of sales in the state. The tribes recall the suppliers’ commitment to them when others were reluctant to make the technology adjustments necessary to compete in the market. And as a result, companies like Multimedia, VGT and Cadillac Jack have become major players in the Class III gaming markets beyond Oklahoma.

OK for Gaming

Posted on March 30, 2010 by Roger Gros -

Tribal gaming has created opportunities for Native Americans across the United States and Canada. States like Minnesota, Washington, Oregon, California, Connecticut, Florida and many others have tribal gaming. But there is one state that was actually reserved for Indian tribes that was late to the game, but has made a tremendous impact across Indian Country.

Oklahoma was designated by the United States in the 1820s and ’30s as “Indian Territory.” While trying to remove tribes from the southeastern states to make room for settlement, the U.S. government forced the tribes to move from that region to Oklahoma in the infamous “Trail of Tears” march. Thousands died, families were torn apart, and Oklahoma was essentially a foreign land already occupied by different tribes.

But even Oklahoma wasn’t safe. Once envisioned as a state for Native Americans called “Sequoyah,” Oklahoma’s increasing arrival of white settlers was encouraged by a land rush in 1889 that opened tracts for settlement. Those who arrived early were called “sooners.”

The discovery of oil and natural gas became the main thrust of the state’s economy, which is still the case today.

Despite the land rush, Indian reservations still made up large swaths of the state. Dozens of tribes lived for generations in poverty, while the energy companies made a fortune on adjacent land. The Cherokee, the Creek, the Chickasaw, the Choctaw and the Seminole Indians, who were known from the early 1800s as the Five Civilized Tribes, dominated the government-to-government relations through the years. But contact was limited, and offered little benefit to either side.

But it was a slump in the energy business that provided an opening for the tribes. When tribes began to realize that bingo provided an opportunity for revenue generation in the 1980s and ’90s, Oklahoma tribes were quick to join in. By 2000, the operations became substantial as technology grew quickly, providing tribes with electronic games that mimicked traditional bingo.

B-I-N-G-O
John Tahsuda, an attorney with Global Navigator, a former general counsel for the U.S. Senate Indian Affairs Committee and a member of the Kiowa Tribe of Oklahoma, believes it was the passage of the Indian Gaming Regulatory Act in 1988 that began the long change.

“IGRA presented a wide definition of bingo and that included a wide variety of games,” he says. “In Oklahoma, the tribes took advantage of that latitude in descriptions right from the start. When it was passed, everyone thought it was about bingo. Few people had any idea how broadly it would be applied to all forms of gaming.”

It was competition with other gaming states that caused the quick advancement of the industry in Oklahoma, once the compact was struck with the governor.

Today, Oklahoma has the second-highest grossing gaming revenue in Indian Country, $2.8 billion (after California at $7.3 billion). With 110 facilities (most of them smaller slot parlors, convenience stores, travel plazas, etc.), Oklahoma also has the most tribal gaming operations in the country.

The enlightened attitude of the tribes and state government is one of the primary reasons for this ascension in facilities and revenues, according to David Schwartz, director of the Center for Gaming Research at the University of Nevada Las Vegas.

“Oklahoma has really shown what can happen when you put a premium on gaming,” says Schwartz. “From the start, Oklahoma has profited from the untapped market that is Texas and Kansas-until recently, that is. It shows what can happen when you have the full support of state government.”

Compact Negotiations
When energy prices slumped in the early years of the 2000s, state government went looking for more revenue and made efforts to diversify the state’s economy so it would not be so dependent upon oil and gas. Tribes saw an opportunity not only to help the state through a budget crunch, but also to reach an agreement with the government that would mean better and larger facilities, more jobs and more revenue for the state and the tribes.

“Remember, Oklahoma didn’t even have a lottery for many years,” explains Tahsuda. “So when the economic slump came on us, the legislature was open to many options, and the lottery, relief for the state’s racing industry and tribal compacts were just part of the package. It was a chance for the tribes to achieve some certainty.”

Janie Dillard, executive director of gaming for the Choctaw Nation, says the larger tribes led the way.

“The Choctaw Nation gaming team was the leader in the process by bringing together the horsemen and state members to write and develop the plan for advancement,” she says.

In addition to the Choctaws, the Cherokees, the Creek Nation, the Apaches and many others were involved in the compacting process. Because tribes had good relations with the government, the process went relatively smoothly.

“The Chickasaw Nation has always had a very positive and productive relationship with the state of Oklahoma,” says Governor Bill Anoatubby of the Chickasaw Nation.

Tahsuda says the compact was an enlightened piece of legislation that had a greater impact than was first imagined.

“Our revenue sharing model is one of the lowest in country,” he says. “It enables the tribal gaming industry to be a vital force in the economy of the state, especially in the rural areas. In some cases, it’s the main economic generator for that area and has contributed to the building of infrastructure such as roads and hospitals. It’s a real market force that helped the state diversify from the oil and gas industry.”

John Berrey, chairman of the Quapaw Tribe, owners of the Downstream Casino Resort in the northeastern corner of the state, says even though the relationship wasn’t bad between the tribes and state government, the gaming compact has made it even better.

“Tribes have been in Oklahoma since long before statehood in 1907,” he says. “But there was never a real well-established relationship between the tribes and the governor’s office. Today, we have a great relationship with the governor and the legislature. The environment in Oklahoma City is very positive to Indian Country.”

Tahsuda agrees with Berrey.

“There’s still a healthy tension between the state government and the tribes,” he says, “but Indian gaming really brought them together. While Oklahoma City and Tulsa got the benefit of that diversity, it’s the rural county officials who really work closely with the tribes, because that’s where the impact is.”

Communities Come Together
While most of the Oklahoma casinos are centered in Oklahoma City, Tulsa or along the Texas border, the rural areas of the state have done very well because of tribal gaming. The Quapaw Nation in the far eastern corner of Oklahoma is a good, but unique, example.

“Our driveway is in Missouri, our parking lot is in Kansas and our casino is in Oklahoma,” laughs Berrey.

He says the tribe’s commitment to the community is an important aspect of everything it does.

“It is crucial to our business plan,” he says. “We’re probably the biggest donor to charitable organizations in the four-state region. We have a lot of interaction with the hospital. We’ve adopted the women’s center and provide flowers on a daily basis. We work with people in need. We do a lot of things that involve us with the town and the region. We have a pavilion and meeting space that have become the center of conferences and meetings for the region.”

The Choctaws, who just opened a new Las Vegas-style resort in Durant near the Texas border, have used gaming to help the tribe and the surrounding communities.

“Our gaming facilities alone employ 40 percent Choctaw members,” says Dillard. “We also employ and have built organizations such as medical clinics, hospitals and other programs. These opportunities would not have been so quickly achieved without the advent of gaming. This has enabled the Choctaw Nation to become more self-sufficient, and independent of the federal government. Many of our tribal members have grown with our organization to become part of senior management throughout our facilities.”

Dillard says Choctaw casino executives participate in the communities in which they work, including local chambers and charities.

“We have contributed on average, over the past five years, $3,135,990 to charitable organizations,” she says. “We support 10,000 jobs in the state of Oklahoma as well as 5,000 outside the state. We spend $5 million to $6 million annually on roads within Oklahoma. Our 2009 fiscal year spend included $28,286,685 in contributions for police and fire departments, county, city, schools, churches and scholarships. Scholarships have grown to about 5,000 per year.”

Anoatubby says the Chickasaws are also committed to helping the community.

“We believe it is very important to be good neighbors,” he says. “We have productive partnerships with state and local governments, community organizations, schools and other organizations which enhance the lives of all citizens. The Chickasaw Nation works closely with a number of charitable organizations. In addition to monetary donations, we encourage employees to donate time and talent to several organizations including the United Way, Red Cross, March of Dimes and Relay for Life, to name a few. The Chickasaw Nation also partners with state, county and municipal governments for the construction, repair and maintenance of roads and bridges.”

For Berrey, the economic development brought by Downstream has helped the tribe by providing jobs for any member that wants one.

“When I first became chairman eight years ago, we had 89 employees,” he explains. “Today, we have nearly 2,000 employees. That’s not only brought a lot of jobs to our tribal members, but it’s brought some revenue to the tribe. Part of our bond financing only allowed for a certain amount of money to go to the tribe, but even that has made a big impact. For the first four years, we’re committed to paying the interest on the loans. After that four years is up, we plan on restructuring the debt and sending even more money to the tribe.”

Competitive Pressures
With 110 facilities and growing-not counting gaming establishments active and planned in surrounding states-competition in Oklahoma is getting fierce. While most casinos have niche markets, the larger ones are depending on a broader appeal.

The new Choctaw casino was built in Durant, site of the Choctaws’ first foray into gaming, because it is a proven location.

“Due to its location, the facility has advanced as the premier casino throughout our 10 and a half counties,” says Driscoll. “It has the largest populated area from which to draw and was the natural selection for the beginning of the facilities to be developed with such offerings as the current amenities. We maintain a total of seven casinos, and have incorporated gaming centers within 11 of our 13 travel plazas.”

For the Quapaws, the Downstream facility has become the state-of-the-art casino within a hundred miles. Berrey says he was not convinced that a full-blown casino resort was necessary in the beginning.

“At first, I just wanted to put up a big metal building and put some slots in there to generate some revenue,” he says. “But it was from talking to people like (Downstream developer) Mickey Brown and (Quapaw Vice Chairman) J.R. Mathews I came around to the idea that we had to think big. We got our business committee on board and we went full tilt.”

Although not far from Tulsa, the tribe decided to aim away from that population center.

“Our objective was to go east, not west,” says Berrey. “Originally about 5 percent of our market was projected to be from Tulsa, and we might get 10 percent now, but we really focused on the northwest Arkansas corridor of Fayetteville and Bentonville. Springfield, Missouri, is a big market for us. And the towns that are south of Kansas City are also a market.”

One of the most unique casinos in Oklahoma is the Chickasaws’ WinStar World Casino. Visitors get tastes of Rome, Venice, London, Paris and Beijing all under one roof-or one tent, you might say. WinStar World includes façades of these international destinations, with the interiors located inside stressed membrane structures. A traditional hotel with 395 rooms and suites lies adjacent to the casino.

Bill Lance, the administrator for the Chickasaw Nation Division of Commerce, says there was a reason the tribe constructed the fifth-largest casino in the world.

“The idea behind the WinStar expansion was to create a destination,” he says. “We wanted to create the most unique, beautiful and dynamic casino space this side of Vegas for destination status, and we’re doing that with WinStar World Casino.

“WinStar is quickly establishing itself as a destination resort, attracting patrons and convention business from across the U.S. So, we have positioned ourselves to compete with major cities across the country, not just Texas and the surrounding states.”

Market Saturation?
Because of the increased number of gaming facilities-nine were added in the difficult year of 2009 alone-there is some question about how much more gaming Oklahoma can absorb. And opinions differ according to tribe.

For the Choctaws, the keys are product and service.

“We are competitive in the market and will continue to strive to offer outstanding guest services,” says Driscoll. “We focus on providing superior product along with the respect our guests deserve. We offer exciting games and amenities such as hotel, full-service spa and variety of food venues as well as retail options. We will listen to our guests and use technology to meet the needs of the future.”

Driscoll says they monitor the business on a day-to-day basis.

“There are segregated areas of the state that are beginning to show signs of saturation,” she says. “Each organization should be cognizant of business needs and demands so as to not cannibalize ourselves. We continually monitor business levels and adjust accordingly.”

Berrey believes that there is room for expansion in some areas of the state, but he’s not worried about increased competition in the Downstream market.

“The south is pretty full going after the Texas market,” he says. “There’s some opportunities in the Highway 35 corridor between Wichita and Oklahoma City. But what we provide is unlike almost any facility in the state. We’re almost elegant. We have an incredible staff that’s friendly and outgoing. It would be very difficult to duplicate what we have. Our competitive advantage is in our facility and our customer service.”

For the Chickasaw Nation, the keys are diversity and preparations for businesses beyond gaming.

“Our long-term goals in gaming are built with competition in mind-not only from other casinos, but online gaming as well,” says Lance. “However, our response to that is to diversify our business portfolio and invest in the manufacturing, energy and health care arenas.”

Anoatubby says the tribe is well down that road.

“The Chickasaw Nation owns a diversified and growing portfolio of more than 60 businesses that employ more than 11,500 individuals and produce annual revenue of approximately $750 million,” he explains. “In addition to its gaming facilities, the nation owns Bank2 in Oklahoma City with $90 million in assets; Solara Healthcare LLC, operating eight hospitals in Texas, Oklahoma and Louisiana with more than 1,000 employees; Chickasaw Nation Industries Inc. with more than 2,000 employees providing administrative, technical, construction, medical and information technology services to federal agencies; Bedré Fine Chocolate, which produces chocolates for corporate clients and upscale stores; five radio stations located in the Ada area; and a utility company that provides electric, water, sewer and natural gas services.”

The Choctaws have also been developing diversified businesses.

“The Choctaw Nation has been working diligently to ensure diversification within our business programs,” says Driscoll. “We have the vision and foresight to continue the growth of the Choctaw Nation and the success of its endeavors. Choctaw Management Services Enterprise has enabled the expansion of health care services, social programs and educational assistance. Texoma Print Services manages a commercial printing facility that also produces promotional items. Choctaw Manufacturing Development Corporation operates two certified manufacturing facilities within Oklahoma. Choctaw Nation is also involved with land and cattle management. We also farm, and grow hay and pecans for reinvestment. Furthering the economic development is a priority when considering our investments.”

When compared with those two tribes, says Berrey, the Quapaws are only just beginning.

“We are at the stage now that we are just looking to diversify to see where we can grow,” he says. “We want to put more dollars into health care and elder care, wellness centers, while at the same time looking for new business. The other tribes are a little further along than we are at this point. We spend a lot of time talking to other tribes. We all work together.”

Tahsuda believes that saturation will force tribes to consider other businesses.

“It is now a mature market,” he says. “There’s still room for growth but the tribes must now compete with out-of-state casinos more and more. And there are still a lot of needs in Indian Country, so gaming must grow stronger and diversify.”

February 2010 News

Posted on February 4, 2010 by Roger Gros -

this is where we have current news updates

First Line of Defense

Posted on January 8, 2009 by David Ross -

Gaming has become the single largest governmental revenue source for hundreds of tribes since the Indian Gaming Regulatory Act was enacted in 1988-yet despite that, many naysayers, almost always without direct experience with tribal gaming, doubt the wisdom of tribes overseeing their own gaming operations.

Yet tribal regulators are the first-and some would argue-the most effective line of defense in protecting the integrity of their gaming operations.

Of the three layers of gaming regulation, state, federal and tribal, the tribal element is the most important according to most tribes-not surprisingly! But is it true that the agency closest to the casino in question does the best job?

California Conflict
In California, the state agency in charge of regulating tribal/state gaming compacts and 58 casinos is the California Gambling Control Commission. Governor Arnold Schwarzenegger’s budget for 2008-2009 increased its number of officers from 70 to 83, to reflect the growth of tribal gaming in the state.

Yet one tribal gaming commission in that state, that of the San Pasqual tribe in San Diego County, whose executive director is John Roberts, has a staff of 52 to regulate Valley View Casino. That’s more than half of the amount devoted by the state agency to nearly 60 casinos.

Extend that same truth to the 400 Indian gaming establishments, operated by 230 gaming tribes all over the United States. In the sentiments of one federal regulator, it would take the states and federal government armies of regulators to perform the same job that the tribes perform.

But that didn’t stop the California Gambling Control Commission last October from aggressively trying to assert its authority by demanding “prompt access” to tribal casinos and their financial records. It also approved regulations that gave it the authority to inspect casino books, gaming operations, customer and employee access to cash, and the game integrity.

The commission said that it was filling a vacuum that had been created after a federal appeals court ruled that the National Indian Gaming Commission didn’t have the authority to directly regulate tribal gaming.

But those are all tasks currently performed by tribal gaming commissions.

As Howard Dickstein, an attorney who represents gaming tribes, observed at the time, “The dispute really isn’t about the standards. The dispute is over who has the authority to enforce them… The state apparently doesn’t have adequate respect for tribal governments and their gaming agencies’ independence. They’re managing to unite every tribe in the state of California against them.”

Roberts explains the split.

“To say we’ve had a difference of opinion is an understatement,” Roberts said. “We didn’t feel they had legal authority to do this. We screamed, ‘You can’t do it.’ And they said, ‘Yes we can.'”

In December the commission retreated from its stance. Tribes in California hailed the retreat as an admission, or at least recognition that the tribes already do a more-than-adequate job.

The tension between the California commissions and the gaming tribes is a dynamic that is played out in states and between tribes all over Indian Country.

Most tribes take their regulatory role very seriously. “Tribes take a tremendous amount of pride in their ability to regulate themselves,” says Tracy Burris, for many years a gaming commissioner with the Choctaw Nation in Oklahoma, and who a few months took up that job at Viejas Casino in southern California.

Is it justifiable pride?

“I understand what my culture requires me to do,” explains Burris. “It is important to me culturally that I have honor. It is the honor of the tribes that is important to them. Whether that is true of all of the people who work for us, I can’t say. But when it comes to self-regulation or governance our honor is important to us. Doing a good job is a matter of honor.”

“The only thing I leave the world with is my word. A handshake is only as good as the one who shakes it. Paper can burn. Your word is the only thing that you take with you when you leave this world,” says Burris.

Rules & Regs
Most tribes believe the tribal first line of defense suffices because they have the most interest in making sure that everything is operated cleanly.

That’s also the view of Norman H. DesRosiers, vice chairman of the National Indian Gaming Commission, the federal agency that oversees Indian gaming. DesRosiers was himself a gaming commissioner for several tribes, and is credited with writing many of the gaming regulations that the great majority of tribal gaming commissioners use today.

“DesRosiers drafted phenomenal policies that are almost a standard for tribal gaming,” says Burris. “We all looked to Norm in the early days for guidance.”

DesRosiers started in 1993 as an inspector and training supervisor at Fort McDowell Tribal Gaming Commission. From 1994 to 1998 he was vice president of the Arizona Tribal Gaming Regulators Alliance and during that same period was executive director of the San Carlos Apache Tribal Gaming Commission. Later he served as commissioner for the Viejas Tribal Gaming Commission. He has been on the NIGC for two years.

He began writing the policies that so many tribes would use as a touchstone at San Carlos and finished them at Viejas.

“I did write a couple of tribal regulations that exceeded state and federal regulations,” says DesRosiers. “They were based on my experience with other tribal regulator agencies and things that could go wrong. I am proud and flattered that many tribes have used those models and even the state of California picked up on a few of those things.”

After about 14 years of tribal experience, “I got a pretty good feel for how to regulate it at all levels,” he says. The foremost insight he took away from that experience was that IGRA recognizes tribal regulators as primary. “In my experience most of those regulators are very protective of that sovereign authority,” he says.

“Any shared authority with the state is the product of government-to-government agreements, i.e. compacts. The federal government retains an oversight role in Class II regulation. We have to approve tribal gaming ordinances and management contracts and we have the right to review background investigations of key employees and the right to object to key employees,” says DesRosiers.

NIGC is certainly a busy agency, even if it doesn’t have direct responsibility for enforcing tribal gaming regulations. It has a field staff of auditors who perform compliance reviews, and another group that conducts background checks for management contracts. It reviews violations and ordinances to ensure that they comply with minimum requirements, or Minimum Internal Control Standards (MICS).

“Occasionally we provide opinions as to whether proposed gaming facilities are eligible. The chairman (Phil Hogen) and I spent a lot of time in the field consulting with tribes on proposed regulations.”

DesRosiers feels that once a tribal gaming agency establishes a record of meeting or exceeding federal regulations, that engenders confidence among state and federal regulators. “If they do that, they should get minimum oversight by those agencies. If I am a tribal commission and I do the job right I’m minimizing the number of visits from state and federal regulators.”

Burris contends that it ought to be obvious that a tribe will do a good job of regulating its casino since its own money is at stake.

Roberts agrees. “Some statements that come from the state contend that if tribes are regulating themselves that they must not be doing a very good job. We have tried telling the state and other agencies that the tribe is looking out for its own money. The purpose of this tribal commission is to protect the tribe’s assets. The tribe is going to employ as much proper rules and internal controls as it can. There are the minimum standards of NIGC, and there is the reality is that most tribes have more stringent rules. Valley View Casino has been open for eight years. We are constantly upgrading to take new technology into account. The tribe is looking out for its own money. Who else will do that?”

Another criticism that is leveled is that a tribal commission might show preference for a tribal member in a dispute.

“There are only 300 tribal members,” says Roberts, answering that charge. “How many of those actually go into the casino and play is very small. There hasn’t been an incident since I have been here where a tribal member was accused of something wrong. Employees who are members of the tribe are treated no different and no worse than other employees.”

Digging Deep
San Pasqual’s commission runs a very complex business. It is in charge of all audits. Every employee in the casino has to have a gaming license, which the commission issues after conducting background checks.

The state tribal gaming compact requires that certain “key” employees get a special license through the state. The tribe also runs key employees’ backgrounds checking for past criminal behavior. The commission uses a small machine that electronically scans fingerprints and sends them off to the FBI, which actually performs the checks.

Another vital function of most tribal gaming commissions is to monitor individual slot machines to make sure that they are working correctly.

At Viejas the commission has one commissioner with a staff of 59. Most commissions have administrative responsibility for their staffs. At Viejas, in addition to licensing staff members, they also license vendors, so background checks are necessary for them.

“It’s pretty extensive,” says Burris. “You are trying to determine suitability, from work history, credit to criminal past, if any. We are responsible for looking at people’s character and associations.” A former or current gang member, for example, would probably not be a suitable employee.

The compliance issues that a commission must address deal primarily with technology, says Burris.

“You inspect and test the electronic gaming units and the cards. We use national standards but we also use industry standards. As technology advances, the game is classified and you have a technical standard by which it functions. The statute always drives us. First it gives us our authority and then it gives us our direction.”

Standard Deductions
Where tribal commissions from tribe to tribe and state to state differ is in standards, although because of the efforts of DesRosiers and others those standards are becoming more standardized all over Indian Country.

“The unique thing about tribal gaming in California,” says Roberts, “is that we help each other. If a new tribe might not have the resources to put together regulations and standards we offer assistance to them for free. Because if one tribe stumbles-it reflects on all.

“Someone will call me up and say, ‘Shoot me your policies for table games.’ They may not have the resources to hire an accounting or law firm to draft those policies. Or we might go to their property and give them advice,” he says.

But increasingly, Roberts says, that standard of cooperation is extending across the entire Indian gaming map.

“Standards are similar statewide and nationally. They are at least equal to if not better than commercial regulations in Nevada or Mississippi. Their regulations do not surpass what we have in California.”

In DesRosiers’ mind there is no doubt that IGRA vests the tribes with the authority and the responsibility of regulating their own gaming operations. In many cases, state-tribal compacts also give tribes that responsibility.

“But much more important in my opinion, the tribal agencies are there, physically present 24/7, enforcing compliance, conducting investigations, settling disputes, conducting internal auditing and background investigations. They have a hands-on knowledge of their own facilities and at least at the federal level we depend on that front-line oversight and presence,” he says.

Typically, a tribal agency finds and investigates improprieties within days or even hours of the occurrence.

“If left to federal auditors it might be months or maybe forever and the evidence would be long gone,” says DesRosiers. “In my experience they are physically present to respond to protect the patrons’ interest when they are required to investigate disputes. It certainly helps in building the integrity of gaming operations to have gaming officials there to immediately attend to those issues.”

Burris agrees, “If we relied on the NIGC to oversee all of the facilities with a staff of 100 it would nowhere be adequate for our gaming facilities.”

Tribal Level
Federal statutes and regulations and IGRA establish the minimums, that tribes must have ordinances and minimum background and licensing requirements for key employees, plus requirements that tribes must safeguard the environment, public health and safety.

However, according to the commissioner, “through tribal ordinances and regulation and often as part of compacts, the tribes more often than not exceed those federal requirements. A lot of tribal regulations that I wrote had not previously existed and exceeded those models.”

Could the laws that created the relationship between tribal, state and federal gaming regulation be improved?

“If you ask a hundred different people you will get a hundred different opinions,” says DesRosiers. “Tribal people probably think it should be left entirely to them. If you talk to states they will tell you that laws should give them more authority in tribal affairs.

“From the federal perspective you will get a little different take. We think some things could be changed to clarify the issues. I think there is universal agreement that the act has made the best effort to try and balance the efforts of three sovereigns and not every sovereign got everything they wanted. But it has been enough to allow the industry to flourish and by most accounts to become one of the greatest economic successes for tribal governments that has come down the road.”

‘This Land is Your Land…’

Posted on January 8, 2009 by Patrick Roberts -

When Woody Guthrie penned that iconic song, his intent was certainly not to exclude anyone, but give everyone a stake in what happens to the United States. His evocative lyrics brought together a sense of belonging for nearly all Americans.

Except perhaps for one group: the first Americans.

Yes, “this land is your land” but too often we forget who the land belonged to originally. From the $24 worth of trinkets for Manhattan to the “Trail of Tears” across the South, land from “the redwood forests to the gulf stream waters” was ripped from Native Americans in a way that can only be looked back upon with shame.

But those were different times, they tell us. Now, Native American land claims are handled in a more equitable and realistic manner.

If that is the case, however, how do you explain the recent Carcieri v. Salazar case by the Supreme Court? While some argue that the scope of the decision is limited to the Narragansett tribe and 32 acres of trust land in Rhode Island, the truth is that it has had much wider implications even before other land-into-trust circumstances get tested in other courts.

Some tribes have had to cancel projects scheduled to be built on trust land. Other casinos already on trust land are threatened with closure.

Congress will undoubtedly consider remedies to this unfair decision, but until then, Native Americans are once again questioning the wisdom and integrity of the U.S. government as it applies to land that they once wholly owned.

So it’s important to remember the last two lines of Guthrie’s song and how they may apply, once again, to Native Americans:

“And some are grumblin’
and some are wonderin’

If this land’s still made
for you and me.”

Gambling on Energy

Posted on January 8, 2009 by Dave Palermo -

Chairman Carl Venne of the Crow Nation of Montana, testifying before a May 2008 meeting of the Senate Committee on Indian Affairs, had a clear vision for his nation’s 12,000 citizens, many of whom reside on the tribe’s remote, 9 million-acre reservation. The future, he said, lies with the more than 10 billion tons of high-grade coal on Crow lands, about 3 percent of the world’s coal resources.

“Given our vast mineral resources, the Crow Nation can, and should, be self-sufficient,” says Venne. “My administration desires to develop our mineral resources in an economically sound, environmentally responsible manner consistent with Crow culture and beliefs. Crow people are tired of saying we are resource rich and cash poor.

“My larger vision,” Venne said, “is to become America’s energy partner and help reduce America’s dependence on foreign oil.”

Some 500 miles away in Belcourt, North Dakota, Jessie Cree, an elder with the Turtle Mountain Band of Chippewa, spoke of his tribe’s plans to harness energy generated by winds that blow over the vast prairie.

“It has spirituality,” Cree told the Boston Globe newspaper. “You can’t see the wind blow, but you can see whatever it hits… the old people that were spiritual, they were able to see the wind. They would be able to see the spirit of the wind.”

“Wind blowing through Indian reservations in just four northern Great Plains states could support almost 200,000 megawatts… enough wind power to eradicate all fossil fuel-burning power plants in the U.S.,” said environmental activist Winona LaDuke, a Anishinaabe (Ojibwe) from Minnesota.

Whether it is the winds that blow in the North, oil and gas in the Great Plains or coal, uranium and solar power in the West and Southwest, American Indians are close to reaping huge economic gains from the voluminous energy resources on largely remote tribal reservations.

U.S. Department of Energy experts believe 10 percent to 14 percent of the nation’s traditional fossil fuels, gas and renewable energy resources can be found on the 59 million acres that make up the country’s Indian reservations, land held in federal trust and deeded to tribal governments and individual tribal citizens.

The first Americans intend to utilize those resources in an environmentally friendly manner that respects cultural and spiritual beliefs and respect for the land.

Perhaps most important, tribes view ownership and management of energy resources as a means of strengthening sovereignty and self-governance and building the foundation for a sustainable future for future generations.

With President Barack Obama’s pledge to reduce the country’s dependence on foreign oil, the nation’s indigenous peoples are poised to reap billions of dollars in energy production in the coming decades. Some predict revenues will exceed the nearly $27 billion tribes generated in 2007 from government casinos.

“Maybe not in the next 10 years, but in the next 20 years, yes, I believe it will,” says A. David Lester, executive director of the Council of Energy Resource Tribes of Denver, Colorado, and a citizen of the Muscogee Cree Nation.

There is justice in the energy opportunities in Native America as most tribes with conventional and renewable energy resources are located on remote reservations and have not benefited greatly from casinos. Seventy percent of revenue from tribal gaming is generated by 15 percent of the Indian casinos owned by small tribes in urban areas.

DOE geological surveys estimate there are 5 billion barrels of oil, 37 trillion cubic feet of natural gas and 58 billion tons of coal on Indian reservations. About 25 percent of the known onshore oil and gas resources are on tribal lands. Yet only about 4 percent of the tribal energy resources are in production.

In terms of renewable resources, geological experts say of the 360 reservations in the lower 48 states, 118 have biomass potential and 77 have wind resources.

The full potential of energy resources is difficult to gauge. Of the 15 million acres of potential tribal energy and mineral resources, only 2.1 million acres are being explored and developed.

“There are reserves in Indian Country we don’t know about,” says former U.S. Senator Benjamin Nighthorse Campbell, a citizen of the Northern Cheyenne Nation. “Only 30 percent of Indian Country has been adequately explored.”

New Tribal Paradigm
The opportunities in energy production on tribal lands extend far beyond economics, as great as they may be.

“Tribal leaders have a different vision of the future,” Lester says. “They view energy as a means of achieving more and stronger self-governance and a pathway to greater tribal prosperity. Energy is the means to achieve the goal, not the goal itself.”

A key component of President George W. Bush’s 2005 Energy Policy Act is the creation of Tribal Energy Resource Agreements, or TERAs, which enable tribes with adequate governmental structures greater authority in negotiating agreements with private utility companies and assuming ownership and management of energy production. The Southern Ute Tribe of Colorado, which owns a multibillion-dollar methane gas industry, is a prime example of what a tribe can accomplish when it controls its energy destiny.

“We believe TERAs will be a significant tool for tribes that would like to have more control over energy development decisions on tribal trust land,” says Robert W. Middleton, director of the Office of Indian Energy Economic Development. “There are several tribes that are already major players in domestic energy markets and we assume would take advantage of the additional flexibility of a TERA.”

Though well intended, Congress has not funded components of the Energy Policy Act to provide the education and training tribes need to build their capacity to own, manage and regulate energy development.

“There is no commitment from the federal government to build ownership and governmental capacity in Indian tribes,” Lester says.

It took 20 years for Indian tribes utilizing educational and training programs provided by the U.S. Environmental Protection Agency to establish and regulate environmental standards on tribal reservations. The U.S. Department of Energy must provide similar educational and training for energy resource tribes, Lester says.

As gaming tribes have been allowed to exercise their sovereign right to own, operate and regulate government casinos, energy resource tribes are seeking the opportunity to own, manage and regulate energy production.

“We need to open the door that allows Indian tribes to make significant contribution to the achievement of America’s national energy policy goals,” Lester points out.

Venne’s Vision
Although Venne died last month of heart failure, his vision remains. The Crow are partner with Australian-American energy in development of a $7 billion coal-to-liquids mine and plant project that would produce 50,000 barrels a day of clean diesel, jet fuel and naphtha. The project would create 4,000 construction jobs and 900 permanent jobs.

The Navajo Nation is close to beginning construction of a $3 billion, 1,500-megawatt coal burning power plant south of Farmington, New Mexico. The Desert Rock Energy Facility is expected to generate $52 million a year and create up to 400 jobs. Half the Navajo workforce is unemployed.

“Energy reserves on tribal lands represent the single largest source of untapped energy resources in the United States,” Navajo President Joseph Shirley says. “Tribal energy development is the future of U.S. domestic energy production as well as the future of tribal economic development. For Native nations the most pressing concern is the crushing poverty that renders impossible our dream of regaining our independence and preserving our language and culture. I believe the federal government and Native nations can come together as sovereigns and solve these problems in a mutually beneficial way.”

The Three Affiliated Tribes (Mandan, Hidatsa and Arikara) of the Fort Berthold Indian Reservation in North Dakota have taken steps to establish a TERA to expedite oil and gas leases on the nearly 1 million- acre reservation. There are 3.6 billion barrels of oil, 148 billion barrels of natural gas liquids and 1.85 trillion cubic feet of natural gas in what is known as the Bakken Oil Formation.

“We are poised at the brink of what could be the largest period of economic development in the history of the tribe,” says Chairman Marcus D. Wells Jr.

Renewable Strategies
About 100 tribes are exploring wind and solar energy, says Bob Gough, a founder of the Intertribal Council on Utility Policy, or COUP. Solar and wind energy resources in the Southwest and Great Plains are among the most abundant in the United States.

NativeEnergy partnered with the Rosebud Sioux of South Dakota in 2003 in building the first large-scale Native-owned wind turbine. The Rosebud Sioux and Citizens Energy Corporation of Boston, Massachusetts. have entered into a joint venture to develop a 100-megawatt wind turbine power project.

The Confederated Tribes of the Colville Reservation in Washington state is partners with Clipper Windpower of Carpinteria, California, on a plan to build a wind farm with up to 500 turbines. The tribe would eventually own and operate the wind energy company. The tribe also is planning to build a biomass energy facility at its Colville Indian Plywood and Veneer plant.

“Our goal is to bring benefit to the Colville Tribes while protecting and preserving our lands,” tribal energy coordinator Ernie Clark says. “The tribe is very excited about possible renewable energy developments, including wind.”

The Sisseton-Wahpeton Oyate is developing a wind farm on tribal trust lands in northeast South Dakota.

The Blackfeet Tribe of Montana is working with Anschutz Exploration Corp. of Denver to find oil along the Canadian border. And Native American Resources Partner of Salt Lake City, Utah, is investing hundreds of millions of dollars in energy projects on two other Montana Indian reservations.

“We don’t invest in companies doing business in Indian Country,” NARP Vice President Lynn Becker told the Great Falls Tribune. “We partner with tribes on energy ventures in which we both earn an interest.”

The Chippewa Cree Tribe is working with NARP to develop natural gas or wind power on the Rocky Boy’s Indian Reservation. And the Assiniboine and Sioux tribes on the Fort Peck Indian Reservation are working with NARP to develop resources of some 60 billion barrels of oil.

“Right now, we’re working on a partnership to start our own oil and gas company that will allow us to do our own oil and gas drilling,” Fort Peck Tribal Councilman Rick Kirn says.

Leadership for the Future

Posted on January 7, 2009 by Roger Gros -

It’s no mistake that the cover of the 2009 issue of Tribal Government Gaming includes some of the most legendary leaders in the recorded history of Indian Country. History is important for Native Americans because it demonstrates that they have survived through the most difficult times, racist overseers and inhumanities visited upon few other people in the world.

The editors of TGG believe that the importance of tribal leaders will only increase as tribal gaming moves into its third decade. The original tribal gaming leaders are almost as legendary as those who faced down the insurmountable odds of a U.S. government gone wild with expansion late in the 19th and early in the 20th centuries. Richard Hayward and Ralph Sturgis in Connecticut; Chief Philip Martin in Mississippi; Richard Milanovich and Anthony Pico in California; Marge Anderson in Minnesota; the Billie clan in Florida; Ron Allen in Washington… I must stop here because I could fill this entire column just by listing some of the names that blazed the trail for tribal gaming (with apologies to any I neglected to name).

For it is leadership that will cement the respectability of Indian gaming across the country. While gaming has undoubtedly been good for Indian Country, there is so much more to do. And the emergence of new leaders is crucial to its continued development.

The five leaders we decided to profile in this issue are, as a group, extraordinary. But as individuals, they have that humility and passion to serve their tribes, their communities, their families and their nation that goes above and beyond the normal call of duty. If Indian Country had only these five leaders, I would be confident it would do fine. But because these five leaders are just a sample of the talent, commitment and dedication that is demonstrated by up-and-coming leaders of almost every tribe, I have no fears whatsoever that Indian gaming will be in good hands for generations to come.

As an example of what the “first generation” of leaders created for Indian Country, don’t miss the study conducted by Katherine Spilde Contreras, the chair of the Sycuan Institute on Tribal Gaming at San Diego State University, and Jonathan B. Taylor, the president of Taylor Policy Group. The executive summary of their findings, on page 24, is fascinating and uplifting.

But there are still hurdles to overcome, especially in light of the economy. Matt Sodl and Steve Rittvo of the Innovation Group explain how the economy has hit the tribal gaming industry, especially when it comes to financing. For any tribe that has plans for expansion or even new properties, this is a must-read.

Last January’s Supreme Court decision, Carcieri v. Salazar, has clearly put a damper on expansion for Indian gaming. Former BIA official Carl Artman explains some of the ramifications, while Jake Coin of the San Manuel Band of Mission Indians calls for congressional action to right the Supreme Court wrong.

It seems every issue of TGG, Judith Shapiro is begging me for more time because the Class II regulations are so fluid and changing right up to deadline. Even this year, when the National Indian Gaming Commission has abandoned its efforts to draw that “bright line” between Class II and Class III machines, Shapiro found uncomfortable legal implications on all sides.

Another annual feature on tribal regulation is again an important read, as author David Ross talks to some of the most powerful regulators in Indian Country on the need for diligence and steadfastness, especially at the tribal level, the first bulwark for regulators.

Ernie Stevens, the chairman of the National Indian Gaming Association, recounts the organization’s efforts in Washington, D.C. While the Obama administration seems to be “Indian-friendly,” he advises all to be attentive to the myriad of issues that are front-and-center at the federal level.

So in this, our seventh edition of Tribal Government Gaming, I would like to thank our writers-clearly the best in the business-who bring to you the most cutting-edge and informative pieces in any Indian gaming publication. We could not have put together such a quality magazine without their help.

Together Forever

Posted on January 7, 2009 by Ernest L. Stevens, Jr. -

As Indian Country confronts the economic crisis, it is empowering to see the strength of tribal governments as they tackle issues ranging from the threat of increased federal regulation to meeting the basic needs of their communities. It has been through the hard work and the dedication of the tribal leaders throughout Indian Country that Indian gaming will be poised to lead us out of this economic crisis with a renewed sense of optimism.

In just 20 years, Indian gaming has grown into a stable, professional and responsible industry that generates vital resources and jobs that were not previously available. This is attributable solely to the hard work and innovation of our tribal governments. It should never be forgotten that when Congress passed IGRA it was at the urging of the states that wanted to reduce tribal sovereignty. Despite IGRA, tribal governments succeeded and fostered an industry with over $26 billion in revenue and accountable for over 700,000 jobs nationwide. Now more than ever, tribal governments need to call on their resourcefulness and innovativeness once more to tackle and weather this current economic crisis. In addition, Indian Country must continue to come together and foster change for all and develop effective partnerships that will deliver federal policies in the spirit of tribal sovereignty and tribal self-governance, along with a renewed regulatory outlook.

Tribal Governments and the New Administration-Forging a New Path Forward
A new congressional leadership has taken office and President Obama has begun aggressively pursuing his agenda. From the beginning, President Barack Obama has expressed his commitment to deal with tribes on a government-to-government basis. Tribal governments should now put the president’s words into action.

Indian Country is calling upon President Obama to issue a new executive order requiring federal agencies to consult with tribal governments on all regulations that impact tribal operations. The last executive order on tribal consultation was issued by President Clinton in 2000 and is in desperate need of updating. Thanks to the growth tribes experienced in the last nine years, tribal operations can now be impacted by federal regulations that were never even intended to apply to tribes. These types of regulatory intrusions can be solved through government-to-government consultation with tribal leadership. Some of Indian Country’s biggest challenges have been from government agencies and their lack of effort to consult with tribal governments and meet with tribal leaders in a meaningful and respectful manner.

I am confident that President Obama was sincere in his campaign pledges to Indian Country and that this will translate into a federal policy that all government agencies are required to enact. However, we need tribal governments to contact not only the White House, but also their congressional representatives and let them know that Indian Country is awaiting this important policy initiative.

At NIGA, we helped push for the introduction of House Bill 5608, which will statutorily require federal agencies to consult with tribal governments. This legislation is necessary because unfortunately, we have seen federal agencies intent on regulating a problem into existence, rather than evaluating if there was a problem at all.

I believe that NIGA, along with the National Congress of American Indians, National Indian Education Association, National Indian Health Board and other Indian organizations, can capitalize on achieving a respectful dialogue with the federal government. A lot of our challenges over the next four years will be something we can work to solve, as opposed to battling with a federal agency to prevent an unwarranted solution.

The Current Federal Regulatory Environment
Forging a new regulatory partnership between tribes and the federal government is certainly needed after the National Indian Gaming Commission had one of its busiest regulatory agendas in recent years. In 2008 alone, the NIGC sought to finalize four new Class II gaming regulations that would have negatively impacted Indian Country. They also proposed to redefine the definition of “sole proprietary interest” under IGRA, and finally, they passed regulations requiring tribes to submit paperwork on the trust status of their own lands.

In 2009, we can expect the NIGC to again address several issues important to Indian Country. However, Indian Country wants to see a new NIGC chairman at the helm who will implement the tribal consultation policies initiated by the president. We thank Chairman Phil Hogen for his service, but his original three-year term expired in December 2005. The Indian Gaming Regulatory Act allows for the commissioner to serve past his three-year term until a successor has been named, which we have asked President Obama to do this year.

The important position of general counsel at the NIGC has also remained unfilled for a number of years. Indian Country and the Indian gaming community will call upon the Obama administration to fill that position as well. Indian Country must demand an NIGC that is a partner in regulation. We hope that the Congress will appoint associate commissioners who share Indian Country’s desire to negotiate on regulatory initiatives and mandated from above.

Class II Regulations
Last year, with the assistance of our member tribes and regional gaming associations, NIGA coordinated an effort to oppose the NIGC’s overreaching Class II definition and Class II classification regulatory proposals. The NIGC’s new regulations would have overturned hard-fought federal court victories by Indian Country in defense of Class II gaming.

In a big victory for Indian Country, the NIGC officially withdrew those regulations in October. The NIGC officially withdrew their proposed Class II classification standards and changes to the definition of “electronic or electromechanical facsimile.” NIGA and Indian Country had long voiced their opposition to these two proposed regulations. Indian Country’s opposition only increased when the NIGC released an economic impact report detailing the dire economic consequences for Indian Country if these regulations became law.

By convincing the NIGC to withdraw the classification and definition regulations Indian Country achieved a great victory in defending the Class II industry. Our congratulations go out to all those tribal leaders who helped fight these regulations over the past two years.

However, the NIGC still went ahead and published Class II Technical Standards and MICS. We have asked that the Obama administration, along with the new NIGC chairman, bring these issues back to Indian Country for further consultation.

Tribes continue to be unhappy with the Class II Technical Standards and MICS. The game-recall provisions of the proposed technical standards require the player interface to display results of any alternate display. This requirement confuses the reality of the game and may obscure the distinction between the legal relevance of a bingo game and any alternate entertaining display. More consultation with tribal governments is needed to resolve these outstanding issues. Only then would these regulations be ready for final publication.

Last-Minute Regulatory Changes By The NIGC
On December 22 the National Indian Gaming Commission published in the Federal Register proposed rule changes. The proposed rule seeks to modify “various commission regulations to reduce reporting burdens on tribes, update costs for background investigations, clarify definitions and regulatory intent, and update audit requirements to consolidate and reflect industry standards.” Many of these proposed rule changes were initially released as drafts by the NIGC in 2006. These rule changes have not been priority for the NIGC and the NIGC has not engaged in dialogue with tribal governments since their initial debut.

President Bush’s OMB director directed federal agencies to stop issuing agency regulations on November 1. President Obama’s chief of staff directed agencies to stop issuing regulations unless an Obama appointee had reviewed them on January 20. The NIGC failed to follow either of these presidential directives and Indian Country must demand that the NIGC withdraw the proposed rule changes.

While some of the proposed changes are minor, tribes have strongly objected to the proposed rule changes to the statutory definition of “net revenue.” Any NIGC regulation on this definition should conform to the statutory definition under IGRA. By striking the word “gaming” from the definition, the NIGC is seeking to include non-gaming revenue in the calculation of net revenues, such as hospitality revenue generated at a casino-resort complex. This would clearly not be consistent with IGRA. Instead, the NIGC should stay closer to the statutory language mandated by Congress in IGRA: “The term ‘net revenues’ means gross revenue of an Indian gaming activity less amounts paid out as, or paid for, prizes and total operating expenses, excluding management fees.”

There should be courtesy between the outgoing and incoming presidential administrations. The responsibility of amending existing federal regulations belongs to the incoming commission that will be appointed by President Obama and BIA Secretary Ken Salazar. This is why it is important that Indian Country deliver the message to President Obama that the NIGC should not finalize any rules until a new chairman and a new associate commissioner are appointed.

Consultation
Last year’s NIGC activity highlights the fact that there must be a new partnership between tribes and the federal government in implementing and carrying out federal regulations. Indian Country must seek a consultation process where tribal representatives are active participants from the beginning in deciding whether federal regulation is needed or if tribal law processes are the more responsive avenues for effective regulation. Indian tribes must have a more active role not only in providing advice and input, but also in the drafting process itself.

President Obama has promised at least this much and tribes must begin this process with his administration. We feel that tribal governments, as the first-line defenders of Indian gaming, have a strong track record of experienced professionals and top-notch regulation. In 2008 alone, tribal governments spent over $375 million on regulation. Tribes realize that the benefits of Indian gaming would not be possible without good regulation. Successful operations require solid regulation and tribal governments will match their history of regulation against that of any state or local government.

This system is costly, it’s comprehensive, and it has a proven track record of success. We need the Obama administration to work with and consult tribal governments so that we may improve upon the success of regulatory systems and the current state of tribal-federal relations.

In 2009, we again expect to spend a great deal of our time and effort defending the success of our industry from unnecessary regulatory interference. However, given the economic stake that states and local communities and business leaders now have in the success of Indian gaming, I see a new opportunity for regulatory cooperation. Our tribal leaders are open to consultation and the development of new regulations when they are needed.

NIGA will continue to defend tribal sovereignty and any attempts to open up IGRA to amendments. However, it is my hope that with a new administration, we really can change the way the federal government does business and we can put to rest the adversarial stances of the past and engage in a new era of cooperation and mutual understanding.

When Down Looks Like Up

Posted on January 7, 2009 by Matt Sodl & Steve Rittvo -

In these difficult and unprecedented times, few industries or businesses have proven themselves immune to the effects of recessionary activity. All parties in the “economic food chain” are experiencing pressure, and even those outperforming their competitors are reassessing their approach and positioning.

This is particularly true in many corners of Indian Country, where reduced cash flows at gaming properties are beginning to influence the financial position, both inside and outside of the casino walls. And when the economic engine of gaming starts to show significant declines in profitability, the community programs those dollars support may also be in jeopardy. Tribes recognize that the right response is needed. And quick.

If there is a silver lining, it just may be that because the current environment is so incredibly challenging, it is forcing tribes throughout the U.S. to closely evaluate (if not completely revisit) their business, marketing and construction/development plans-and “operational soul searching” of this intensity has a way of yielding some unexpected benefits. For the tribes who do it right, the changes they make now should not only help their tribal properties weather the current crisis, but will also result in more streamlined operations and effective business models that should help bolster profits for years to come.

Perspective
The gaming industry continues to be adversely affected by the economic downturn. In order to offer some perspective, let us look at the performance of the major gaming industry indices. As of March 6, the Dow Jones U.S. Gambling Index is down 18.2 percent for the year (following a decline of 73.3 percent in 2008). Relative to a 7 percent decrease in the S&P 500 over the same period, the data tells us that gaming is no longer a preferred sector for investors. Furthermore, shareholders in the world’s largest gaming operators-Las Vegas Sands, MGM Mirage and Wynn Resorts-have lost more than $70 billion of market value since the beginning of 2008.

From a credit perspective, the data is not any better. Within Fitch’s U.S. High Yield Default Index, the gaming sector experienced a record default rate of 32 percent in 2008, well above the overall high-yield market default rate of 8.5 percent. Seven issuers defaulted on more than $13 billion of high-yield principal. Twenty-one companies received credit rating downgrades from Moody’s, nine of which were Native American operators. To date in 2009, three Native American entities have been downgraded including Mohegan Tribal Gaming Authority, Mashantucket Western Pequot Tribe and Snoqualmie Entertainment Authority. Fortunately, the news is not all bad. While destination markets like Las Vegas and Atlantic City continue to generate record decreases in revenues, many regional gaming markets are benefiting from a lack of travel by gamers. For example, Mississippi and Louisiana have shown small decreases or even small gains as they have rebuilt after Hurricane Katrina’s devastation. Many new properties in these regions have improved their competitive position in comparison to their predecessors. Beyond commercial gaming, a handful of Native American properties in regional markets have improved their competitive positioning, notably the Seminole Tribe of Florida.

Impact on Tribal Enterprises
While much of this data may make many investors and operators nervous, it offers an opportunity for an in-depth review of the casino operations as well as the capital structure. With a solid framework in place, entities can preserve one of the most important aspects of business for many Native American operators: tribal distributions.

Cash flows provided by tribal gaming enterprises are of the utmost importance to tribal governments and act as lifelines for the majority of Native American tribes. Not only do these distributions fund tribal programs such as health care, education and infrastructure, but individual per capita payments also augment incomes for many tribal members.

Unlike a traditional corporate structure, Native American tribes operate in an interrelated environment whereby the casino operations cannot exist without tribal government, yet the tribal government is dependent upon the funds provided by the casino. Given this dynamic, the interests of the tribe and creditors are aligned. Both parties stand to benefit when the tribe operates the casino in a way that maximizes cash flow generation and profitability.

Commercial Mindset
Looking forward, it is our expectation that most, if not all, tribal entities will act commercially to preserve value for all of their stakeholders, including tribal members and creditors.

Even with limited refinancing options available due to the credit crisis, many tribes understand that they will need to tap the commercial credit markets at some point in the future to refinance their balance sheets and fund expansions or new projects. Additionally, tribes must recognize the potential impact on future generations from the decisions made in today’s difficult environment.

Give and Take on Both Sides
As noted earlier, the interests of tribes and creditors are often aligned. Both parties will need to approach discussions regarding tribal distributions in good faith, but may need to make concessions. Many debt agreements for Native American gaming enterprises permit guaranteed minimum distributions to fund essential governmental functions, even in the event of a default.

If during this difficult economic time, however, a situation arises where the gaming entity cannot make required interest payments, tribes may be forced to cut back on non-essential programs similar to state governments experiencing major budget deficits.

Ultimately, creditors need to permit distributions at a level where tribes can continue running their governments, otherwise, the tribe may have no reason to continue operating the very business that is expected to pay back its loans. Difficult decisions will need to be made, but they are necessary to align distribution expectations with the current economic environment.

How Are Tribes Responding?
Native American operators are responding by focusing on things they can control-announcing deep cost-cutting measures, reducing staff and delaying major development projects.

For example, Mohegan Tribal Gaming Authority announced in January a number of initiatives including reductions in salaries for senior executives, suspension of compensation increases, 401(k) contributions, and a reduction of hours of operation for some businesses. In September, the Mohegan Tribe also announced the delay of its $925 million expansion plan.

Long Overdue?
An interesting irony has emerged for tribal operators with regard to staffing levels. When tribes are positioning themselves for the development of a casino, the promise of job creation can be crucial to gaining political support and the approval of a state compact. Some even over-hired to prove their benefit to the local economy, creating inefficiencies and excessive payroll costs.

Although layoffs and downsizing are not welcome for anyone now, the current situation has forced tribes to deal with this issue and find a way to finally right-size their staffing levels. While it certainly is not the preferred method of addressing such a situation, tribal casinos are like every other business and have taken necessary measures to reduce such overhead costs and improve their profitability. Unwelcome, maybe. Overdue, definitely. These decisions may not be the best political moves both locally and within the tribal membership; however, these challenging times are requiring unpopular decisions.

Another positive development has surfaced out of the recession in the form of improved marketing programs. Whereas tribal operators may have had little need for highly targeted and perceptive marketing during the high-volume days of the recent past, creative and patron-sensitive tactics are now necessary for survival. Between reductions in staffing and enhanced marketing, tribal operators can improve operations and position themselves for a future recovery.

The Government Weighs In
The federal government is doing its part to assist tribes in their economic development. The American Recovery and Reinvestment Act of 2009 provides Native American tribes the authority to access up to $2 billion of tax-exempt bond funding to finance hotels and other non-gaming amenities using tax-exempt bonds.

In addition, the National Indian Gaming Commission recently issued a letter regarding the securitization of financings by a pledge of gross gaming revenues. The NIGC had questioned the validity of such financings, expressing concern that the documentation for such financing is void unless it has been approved by the NIGC chairman as a gaming management agreement. The letter did not object to securitization by gross gaming revenues and set forth a specific list of restricted creditor actions. Creditors are not permitted to engage in any “management activities” including supervision of personnel, determination of hours of operation, marketing, accounting, operation or purchase of gaming machines and allocation of operating expenses. By offering clarity on this issue, tribes and creditors now have a detailed operational guideline in the event that gaming revenues do not meet expectations. In summary, the NIGC has stepped forward with additional guidance that will be beneficial to both tribes and creditors in the future.

Time Will Tell
Despite the negativity and difficult economic environment, there is a silver lining for tribal gaming operators. The rationalization and right-sizing of cost structures will result in more efficient businesses and solid foundations for long-term success and profitability. A proactive mindset and foresight is crucial to weathering the storm and emerging unfazed.

The best operators are making informed decisions assisted by their financial and legal advisors. While no one truly knows how long the current recession will last, these businesses will be well-positioned to take advantage of more prosperous times.

Betrayal of Trust

Posted on January 7, 2009 by Jacob L. Coin -

It has long been the belief of this nation’s first Americans that the federal government would attempt to rid itself of its trust obligations to American Indians. That prophecy is becoming realized in recent federal court decisions and congressional attempts to erode tribal sovereignty and the inherent right of first Americans to govern their people, on their lands.

The trend was accelerated dramatically last month with the U.S. Supreme Court decision in Carcieri v. Salazar. The ruling is creating great uncertainty for a number of Indian tribes seeking nothing more than the ability to exercise their governmental right and authority to provide for the welfare of their people.

Justices in Carcieri v. Salazar ruled that Indian tribes not recognized or under federal jurisdiction when the Indian Reorganization Act (IRA) was passed in 1934 were barred from using the act’s land-into-trust process to establish a homeland.

U.S. Senator Jack Reed (D-Rhode Island) was correct when he suggested casino gambling was “lurking behind” the greater and far more important issue: the trust relationship between two sovereigns, American Indian tribes and the federal government.

The Supreme Court, ruling on efforts by the Narragansett Tribe to place 31 acres of land in trust for a casino, prevents numerous other tribes recognized after 1934 from obtaining economic self-sufficiency through tribal government gaming by blocking their ability to place land into trust for casinos.

Interior Secretary Ken Salazar quickly released a statement saying he was disappointed in the decision, which ignores long-held practices by the department in placing land in trust for tribes.

“The department,” he said, “is committed to supporting the ability of all federally recognized tribes to have lands acquired in trust.”

House Natural Resources Committee Chairman Rep. Nick Rahall (D-West Virginia) said the ruling “could throw a shroud over the sovereign nature of land held by untold numbers of Indian tribes.” He pledged to conduct a hearing on the matter.

It is incumbent on the U.S. Congress to remedy the situation.

Indian Gaming Brings Benefits
It is time Congress, the courts and others cease using gaming as an excuse to erode tribal sovereignty and self-governance and rid itself of the federal government’s trust responsibility to the first Americans.

Tribal government gaming has proven to be a successful and productive economic development tool for Indian Country. Gaming is creating jobs with competitive pay and benefits for Indians and non-Indians. It is providing tribes with the resources to fund critical public services on reservations.

Non-Indian businesses near tribal reservations have seen their operations grow as a result of patronage by tribal governments.

Indian gaming has made it possible for young Native men and women to pursue their education at universities, colleges and vocational schools. It is helping tribes revive their languages and preserve their culture.

Communities surrounding tribal reservations have benefited from the vision and generosity of tribal governments.

The San Manuel Band of Mission Indians near San Bernardino, California, recently awarded more than $7.3 million to charitable organizations and community groups in Southern California and the western United States, enabling these groups and organizations to continue their good work and outreach. In the current economic environment, many more Americans are relying on these organizations for their basic needs.

Indian gaming is enabling tribal governments to become significant contributors to community improvements on and off their reservations.

The Supreme Court ruling threatens these opportunities for a number of tribal governments and their neighboring communities.

Congressional Action is Needed
Congress must act now to restore the right of all tribes to take lands into trust.

Elected officials on Capitol Hill must realize that some 90 million acres of Indian lands were lost from 1887-when a federal police of allotting tribal lands was imposed-and passage of the Indian Reorganization Act in 1934. Only 5 million acres have since been reacquired and placed in trust for Indian tribes.

Congress was quick to embrace the stimulus package offered by President Obama, passing the legislation in record time. It acted quickly to enact financial recovery programs for auto makers and financial institutions.

Indian tribes deserve the same speedy consideration.

Indian Country was optimistic when President Barack Obama took the oath of office. He and his administration have a real-time opportunity to honor the treaties and promises made to Native nations, a pledge he made to Indian audiences during his campaign. The president should confer with Congress and encourage them to quickly develop a fix.

It is difficult to gauge just how far-reaching Carcieri v. Salazar may prove to be. But without congressional action, options are limited and the future is bleak for a number of tribes.

There is reason to be hopeful. Native lawyers and policy analysts are reviewing the decision. Soon they will offer their guidance on the best course for Indian Country.

This also was predicted by tribal elders.

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