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Howard Stutz

Calfornia Gaming: Tribes Fly High

24 April 2006

SAN DIEGO, California -- Joe Welch Sr. has lived his whole life on the Barona Indian reservation, an 8,000-acre patch of ranch land nestled in a valley near the community of Lakeside.

For years, he watched the poverty-stricken tribe struggle. He thought bringing a small bingo hall would be a step toward giving the community economic self-sufficiency.

Never did Welch imagine that 20 years later, his idea would grow into a gambling operation rivals some of the Strip's well-known resorts.

At a cost of $320 million, the expansive Barona Valley Ranch sits as a tribute to the Indian tribe's perseverance. In 1983, Welch and the Barona Band of Mission Indians needed a favorable ruling by the U.S. 9th Circuit Court of Appeals to have bingo.

In 2003 the bingo hall was replaced by a 400-room hotel that's surrounded by a 310,000-square-foot casino (MGM Grand's casino, by comparison, is 170,000 square feet) and an 18-hole golf course.

Welch, now 69, still serves on Barona's council. Soft-spoken and humble, the tribal elder says he's sometimes amazed at the riches the casino profits have brought the tribe and its 500 members.

"Our only goals were to do something for the community and our members," Welch said. "I think we've achieved that."

About an hour north of Barona, Steve Glisson piloted his van around the Pala Indian Reservation one morning and picked up a few of the 25 students who attend classes at the private Aswe-T Pati'a Christian Academy.

Glisson, principal of the tiny school located in a large portable across Highway 76 from the Pala Casino, doesn't belong to the tribe. His friendship with a tribal member, however, brought the school to Pala.

"She wanted a Christian school for the tribal children and she gave us the land for the building," Glisson said.

Serving grades 3-12, the school will move next fall into a new modular structure and will have room for all grades, which will double the enrollment. In addition to a normal school curriculum, the students receive a Christian education and a bonus: Once a month an Indian woman comes into the classrooms to teach tribal culture.

Tuition costs about $500 a month, a seemingly steep price to pay for members of the rural community. Glisson said there is just one reason why parents are able to give their children a private education: the annual payment each member of the Pala tribe receives from the earnings pool of the Pala Casino.

"There is absolutely no way this school would be here without the casino," Glisson said. "The tribal members have the money to pay for tuition, and a member provided land for the school."

Five years ago, San Diego's first Las Vegas-style casino opened after California voters approved Proposition 5 in 1998 and Proposition 1A in 2000, which allowed Indian tribes the right to have full-blown gambling on reservation land.

Gambling was viewed as an economic development tool Indian tribes could use to provide a revenue stream to members.

For most tribes, housing, medical insurance, education, tribal infrastructure and other economic development opportunities have increased, fueled by gambling revenue.

"Every tribe is different, and some are a lot more successful at this than others," said Robert Smith, the chairman of the Pala Band of Mission Indians. Smith is in his 17th year at the helm of the tribe with almost 700 voting members and their families.

"We've been able to do what we set out to accomplish, putting the money back into the tribe so we can use it for years to come," Smith said. "I think we've been successful."

Bonnie LaChappa, a councilwoman for the Barona Indians, said the large casino was controversial at first, but the tribe's operation of the bingo hall helped ease any fears.

"We're doing things for our members that we never thought possible," LaChappa said. "(Gaming) has meant so much for us."

California has 56 American Indian casinos, stretching as far north as Amador County near the Oregon border to the far southeast in Imperial County near Arizona.

Nowhere in California, however, have the Indian casinos gained a greater concentration than in San Diego County. Nine casinos are spread through the northern and eastern reaches of San Diego's rural communities, from a tiny slot machine parlor in Pauma Valley off Highway 76 to the expansive Barona Valley Ranch just northeast of Santee and El Cajon.

California's casinos operate 58,000 slot machines; in San Diego, 12,680 slot machines are being used, almost 23 percent of the state's total.

"Without question, this county, probably because of the sheer size of some of the facilities, has to be the casino leader in California," said Jerry Turk, who heads the management company that operates Pala Casino.

Turk said that when you add in the eight casinos in neighboring Riverside County and two casinos in San Bernardino County, Southern California drives the state's casino engine.

"It's remarkable to see what's happened in San Diego," Turk said.

One of the majority owners of Fitzgeralds in downtown Las Vegas for almost a decade, Turk cashed out in 1996 and retired to San Diego. But a chance meeting with representatives of the Pala Band of Mission Indians led to his involvement with the tribe's quest to open a casino on a portion of its 12,000-acre reservation in the shadow of Palomar Mountain.

Pala opened in April 2001 at a cost of $115 million with just a casino, event center and a handful of restaurants. In 2003, the tribe spent $125 million to add a 500-room hotel tower, a spa and convention space.

"The business has been phenomenal for the tribe," Turk said. "They run their business in a very democratic way and the casino proceeds have allowed them to do many things for the reservation and the community. They're very careful how they make outside investments, which is a good thing."

Customers to Pala and the other San Diego-area casinos come predominately from San Diego County, and nearby Riverside and San Bernardino Counties. Los Angeles and Orange counties, two of the state's most populated counties, are void of Indian casinos, providing a steady customer base for San Diego's gambling halls.

"When we opened we thought all the guests would come from San Diego," Turk said. "We were wrong. We didn't focus on the fact Los Angeles and Orange County didn't have casinos. That's a huge amount of people, and we've been able to penetrate that market."

Operating a casino in California has some differences from operating in Las Vegas. One example is alcohol. While booze flows freely in Las Vegas 24 hours a day, liquor sales by state law are ended in California at 2 a.m. Casinos also can't give free drinks to gamblers.

Barona Valley Ranch doesn't even offer alcohol on the casino floor. Customers can order drinks in the Barona Oaks Steakhouse, in their hotel rooms and on the golf course, but not in the casino.

Barona casino leaders said the winding and hilly Wildcat Canyon Road that leads into the reservation is a primary reason they don't want to be responsible for sending alcohol-impaired gamblers out on the highway.

"It works for us," said Barona General Manger Karol Schoen. "Our customers appreciate the environment we've established. If you think that might be a negative, you should have seen our New Year's Eve party."

Revenue figures on Indian gaming are not easily accessible. The tribes don't publicly disclose monthly gaming win, but all figures are reported to the National Indian Gaming Association in Washington, D.C.

In 2004, the most recent year for which statistics were available, American Indian casinos generated $19.6 billion in gaming revenue. In California, the 56 tribal gaming operations reported gaming revenue of $5.8 billion, the highest of any state in the nation. Nongaming revenue generated by the Golden State's Indian casinos was $544.6 million, also highest in the nation.

A spokesman for the National Indian Gaming Association said figures for 2005 should be released within a month.

Companies managing the tribal casinos have different arrangements for revenue sharing. Some receive a set management fee, some a portion of all revenue generated by the property, while others have a contract calling for a little of both.

Harrah's Entertainment, the only major Las Vegas gaming company running a casino in the San Diego area, receives a percentage of the profits from the operation of Harrah's Rincon as a management fee from the Rincon San LuiseƱo Band of Mission Indians.

In the company's quarterly earnings statements, Harrah's protects the tribe's revenue secrecy by combining the fee with fees the company earns from managing American Indian casinos in Kansas, Arizona, North Carolina and on three cruise ships. The figure is under the heading labeled managed properties.

Revenue generated by the tribal casinos is used for economic development.

While most tribes won't divulge annual payments to members, Pala's Smith said each voting tribal member receives about $60,000 annually. The money for tribal members under age 18 is put into a trust that they can access once they achieve their high school diploma or an equivalent. What they do with the money is their business, Smith said.

"We have a financial department within the tribe that helps members invest their benefits," Smith said.

Since the Pala Casino opened, tribal members all receive medical, dental and life insurance coverage. The tribe spent almost $8 million to build a tribal administration building that is surrounded by an athletic complex.

The tribe operates its own infrastructure and Smith said money from the casino enhanced sewer treatment and trash collection. A $7 million fire station is under construction.

About 17 homes annually are built around the reservation and an elders program provides about 150 meals a day to homebound seniors.

"We had some stuff before gaming, but the money from the casino enhances everything and gives us a way to provide for our members," Smith said.

Similar activities have taken place on the Barona reservation.

More than $5.5 million has gone toward infrastructure enhancements, while the tribe pays its students $1,500 per semester in college scholarships as a way to give tribal members an opportunity to continue their education.

The tribe spent $225,000 to expand its reservation public school and, at a cost $1.2 million annually, members, spouses and dependents all have insurance coverage.

"The first thing the tribe did for its members was to buy insurance," LaChappa said. "We pay for schooling. I worked two jobs full time just to go to community college. My son won't have to work. He can concentrate on his schooling and that's such a good benefit."