Bits and Pieces from Indian Country - March 2008

If 2008 looks to be a good year for gaming expansions in general, it has already been very good for Indian gaming. The governor of Florida negotiated a compact with the Seminole tribe of Florida in 2007, in 2008 the federal government approved the compact, and the tribe has already started installing Class III slot machines to replace the old Class II games. In California voters approved the four compacts the governor had negotiated, and a state lawmaker has introduced a bill that will allow all tribes to operate a full 2,000 games without any further permission from the state. State regulators had set some arbitrary limits to the total number of slot machines in the state and had not been granting permission for more. And, as if California needed more, Governor Arnold Schwarzenegger announced that he is already negotiating new compacts that will give the state a larger percentage of the revenue and allow the subject tribes more slot machines than the original compacts. The tribes in California, like the Seminoles in Florida, are acting quickly on the opportunity and are already adding games. The glee is shared by Aristocrat, Bally, IGT and Williams – and of course their shareholders. The first round of machines is 17,000. No one has tallied the total number of slots it will take to bring all of the eligible tribes up to 2,000 each, or the impact of new compacts on the number of slots that could be installed in California in 2008 and 2009.

California is headed for a major increase in casino gambling as four of the state's richest gambling tribes won the right to add up to 17,000 new slot machines. By average margins of 56 percent to 44 percent, voters Tuesday were approving Propositions 94, 95, 96 and 97 with 95 percent of precincts reporting. The vote would allow the tribes to build some of the world's largest casinos and boost efforts by Gov. Arnold Schwarzenegger to use tribal gambling revenues to help curb the state deficit…The Santa Ynez Band of Chumash Indians, which operates a casino in Santa Barbara County with 2,000 slot machines, has expressed interest in adding up to 5,000 more…The ballot outcome also appears to give new energy to plans by a Bay Area tribe, the Federated Indians of Graton Rancheria, to open a major casino resort along U.S. 101 in Sonoma County. Meanwhile, the Shingle Springs Rancheria, which is building a casino on its land off U.S. 50 in El Dorado County, is planning 2,000 slot machines under its 1999 gambling compact. (Peter Hecht, Sacramento Bee, 2-6-08)

On paper, the state of California and 61 American Indian tribes agreed in 1999 that each tribe may operate up to 2,000 Nevada-style slot machines. In practice, not all can have that many. The state implemented its historic 1999 gambling deals with a licensing system that makes licenses relatively scarce — scarce enough that some tribes can't reach their 2,000-machine ceilings. Now a state legislator is working to expand the number of licenses. State Sen. Jim Battin, R-Palm Desert, introduced a bill Feb. 13 that would help casinos with fewer than 2,000 slot machines get licenses for the full 2,000. (Brad Graves, San Diego Business Journal, 2-25-08)

A day after voters approved state compacts with four tribes, including two in the Coachella Valley, casinos are making room for the first wave of 17,000 new machines expected to be added to their casinos by 2030. The measures clear the way for a dramatic expansion of the state's overall gambling industry, already second only to Nevada's. The new slots alone could provide the state with as much as $9 billion over the life of the compacts…The Agua Caliente Band of Cahuilla Indians slots manager plans to move 300 to 350 machines into Agua Caliente Casino as early as Tuesday, tribal spokeswoman Nancy Conrad said. A room also will be reconfigured at Spa Resort Casino in Palm Springs to accommodate a couple hundred machines in the months to come. The Morongo Band of Mission Indians expects to welcome the first 400 machines by the end of the weekend at the Morongo Casino Resort in Cabazon. (Debra Gruszecki, Palm Springs Desert Sun, 2-7-08)

"This is like adding an entire new state into the mix," said Chuck Brooke, IGT. The California expansion is larger than the 15,000 slot machines being proposed for five casinos in Maryland and the potential of 15,000 slot machines in Kansas. IGT said they are ready to fire up the assembly lines after California voters approved a gambling expansion that could add up to 17,000 machines at four of the Golden State's largest Indian casinos…The outcome translates into a 27 percent increase in the California slot machine market, thrilling slot makers and Wall Street…gaming analyst Brian McGill said the major slot makers, including IGT, Bally Technologies and WMS Industries, could see their earnings jump upwards of at least 6 cents to 7 cents per share, based on California sales and shipments. (Howard Stutz, Las Vegas Review-Journal, 2-7-08)

Indian gaming in Michigan is also getting some good news, though not quite as good as the news in Florida or California. Congress appears to be close to approving another tribal casino in the state, adding to one that received approval at the end of 2007 and one that opened in 2007 and is seeing very positive results.

It's all in the hands on Nancy Pelosi. The process of building a casino in the city of Romulus inched a little closer to success when the U.S. House Natural Resources Committee advanced a bill that would allow a controversial land claim by bands of the Chippewa Indians to build casinos in Port Huron and Romulus. The approval means that the bill will not likely be sent to the Rules Committee for modifications, and that Speaker of the House Pelosi could call for a vote anytime, said Romulus Mayor Alan Lambert…The supporters who back the plan include Lambert and Dingell, who spoke at the hearing, and several others who sent letters of support, including Sen. Carl Levin and Gov. Jennifer Granholm. There was also a delegation of speakers against the bill, including Detroit Mayor Kwame Kilpatrick and his mother, Rep. Carolyn Cheeks Kilpatrick (D-Detroit), who fear a casino 17 miles outside of the city will cut into the dedicated revenue stream Detroit gets from the three gambling houses in that city. (Molly Tippen, Romulus Journal News, 2-21-08)

How popular is the Four Winds Casino near New Buffalo? It's such a crowd pleaser that in its first two months of operation, gamblers provided the facility, owned by the Dowagiac-based Pokagon Band of Potawatomi Indians, with nearly $49 million just in slot-machine revenue. That was the figure derived from a listing of the Pokagons' 8 percent state revenue-sharing payment and 2 percent Local Revenue Sharing Board award that showed up Wednesday on a state Web site. The 8 percent share, intended to boost economic development, was listed as slightly more than $3.9 million. The 2 percent share shows a figure of $977,266… The figures, compiled for the period Aug. 2 through Sept. 30, don't include table games but Bush said they typically account for about 10 percent of gaming revenue. That would put the Four Winds' total at just less than $54 million for its first two months, or a little less than $1 million a day. (Lou Mumford, South Bend Tribune, 2-21-08)

2008 will probably be the year when the largest tribe in the United States, the Navajo, finally gets into gaming. The tribe is moving slowly, but finally has enabling legislation, financing, a manager, a development plan and even the first money. The tribe, besides planning on its own casinos, is leasing some of its slot entitlements to other tribes.

President announces $140 million earned from first auction of gaming devices The President said that development of its first casino at Church Rock, N.M. is on track, the Leupp Chapter in Arizona has withdrawn 100 acres for a destination resort casino, other locations are being considered for northern Navajo and western Navajo casinos, Arizona (Indian gaming) - - Navajo Nation President Joe Shirley Jr., announced that the Navajo Nation has become the first Arizona tribe to auction gaming devices and expects to raise more than $140 million over the next 18 years. During his first State of the Navajo Nation address of 2008 to the Navajo Nation Council, the President said Arizona's three largest gaming tribes bid on the Navajos' excess machines during the first pooling auction held in Arizona last week… "As a result of this historic auction, three of the larger Arizona gaming tribes offered bids that will result in almost $8 million per year for the next 18 years," he said. "This means that the Navajo Nation will earn more than $140 million from this one auction." (George Hardeen, Navajo-Hopi Observer, 2-21-08)

In Oklahoma the final act of Class II slot machines may be playing itself out; the National Indian Gaming Commission is holding hearings on its proposed changes to regulations. The NIGC would like to eliminate all of the ambiguity in Class II and create a bright line of separation between Class II and Class III. The tribes, particularly in Oklahoma, don't want to see an end to Class II slot as we know them. In Florida, at least before the new compact, and in Oklahoma those Class II games allowed the tribes to operate casinos with slot machines while the governor and legislature fought to prevent it. Even in California, Class II games were the only way around state regulators who refused to allow a tribe its full allotment of games. The NIGC seems determined, but trapped in a process that demands it take input from the tribes. It isn't clear what bearing that will input will have – as all of the input from tribes is against the rule changes. If the rules are approved the tribes will be forced to order Class III games and enrich the shareholders of slot companies, but it is something they can do legally; and now that the final major state, Florida, also has a compact, it won't be the best news for Indian gaming, but it won't mean the end of Indian gaming either.

U.S. Rep. Tom Cole erased any doubt Wednesday concerning his stance on proposed restrictions to America's $22 billion Indian gaming industry. During a congressional field hearing on the issue, Cole, R-Moore, called the idea "not only destructive, but highly unjust." The National Indian Gaming Commission, which regulates the industry, wants to clarify the difference between Class II, or bingo-based electronic machines, and Class III slot machines such as those found in Las Vegas. Technology developed over the last two decades has blurred that distinction, regulators say. Most experts agree the proposed changes would make existing Class II games illegal, forcing tribes to pay states a share of profits in return for the right to offer Class III games. (Tony Thornton, Oklahoman, 2-21-08)

All in all, 2008 may be better for Indian gaming than for the rest of the industry, which is besieged by a bad economy, increased competition and a tightening of the financial market.

But now, that is simply my opinion, isn't it?

Ken