Gaming and gaining
Oregon’s Indian tribes are expanding their ventures and their influence
By Winston Ross The Register-Guard
First of a four part series on Indian casinos in Oregon
Today: Tribes use casino revenue to pull members out of poverty
Monday: Cow Creek Band of Umpqua Indians grows bingo hall into diverse portfolio with side story, Cow Creek, county at odds over land intended for trust
Tuesday: Tribes’ political influence keeps pace with revenues with side story, Casinos deal clout, controversy to lobbyists
Wednesday: Off-reservation casinos threaten to shake stability among Oregon’s tribes with side story, Critics say Kulongoski’s pact sets precedent
$79 million Revenue of Oregon’s six Indian casinos in 1995
$419 million Revenue of Oregon’s nine Indian casinos in 2004
36.1 Percentage of Indians in Oregon living in poverty in 1990; state total: 14.2 percent
28.6 Percentage of Indians in Oregon living in poverty in 2000; state total: 13.1 percent
GRAND RONDE – She survived a U.S. Army raid on her Rogue River Indian village by hiding in a beaver dam. She marched barefoot, at federal troops’ gunpoint, for 33 days and 250 miles to this strange place in the fog-soaked foothills of the Coast Range mountains.
Now, Martha Jane Sands is immortalized in bronze in the foyer of the fine-dining restaurant at the Grand Ronde tribe’s Spirit Mountain, Oregon’s richest casino. In her hands is a basket full of slot machine vouchers and cash, good luck donations from passing gamblers. A placid, Mona Lisa smile is spread across her weathered face.
Sands has much to smile about.
Before the federal government restored this 5,000-member tribe in 1983 with 10,000 acres of its original reservation, tribal leaders were reduced to meeting in a tool shed on their only, tiny piece of property: a cemetery. Now, the Grand Ronde owns a 90,000-square-foot casino, pulling in an estimated $76 million in revenue per year.
Once subjugated, vanquished and scattered, Oregon’s Indian tribes are now the state’s fastest-rising class of citizens. Flush with cash from a decade of casino profits, they are expanding their gaming ventures into full-scale resorts, complete with golf courses and high-end hotels.
They are buying up local land and businesses. They are pumping money into Wall Street investments, building projects and funding endowments to preserve revitalized health clinics, scholarship funds, government programs and subsidized housing for generations to come. They’re funneling millions into campaign contributions in Salem and Washington, D.C.
Most important: Oregon’s nine federally recognized tribes are pulling their sovereign nations out of the abject poverty that has had them in a chokehold for decades. They remain the state’s poorest minority group, but poverty and unemployment rates among tribes here are plummeting.
If tribal leaders can continue to diversify their booming portfolios, their impact on surrounding communities, politics and the statewide economy can only get bigger, experts say.
Oregon Indian tribes owe this success, in part, to federal law that gives them unique competitive advantages against other businesses. Tribes don’t pay property taxes on land taken into trust. They don’t pay state or federal income taxes on casino profits. And they’re exempt from state and local land use laws, leaving tribes free to develop properties as they see fit and heightening the potential for conflict with resentful neighbors.
Without sweeping changes to federal law, however, those special rights are interminable – and the tribes’ futures are bright.
“Indian casinos have put tribes on the map,” said economist Bob Whelan, who has studied the issue for his firm, ECONorthwest, since the first casinos opened. “They were long-ignored politically, socially and economically. This has given them a chair at the table.”
Consider the statistics:
In 1995, the six Indian casinos then in business pulled in an estimated $79 million in revenue, according to Whelan’s research. Two years and one more casino later, the number jumped to $224 million. In 2004, after Three Rivers Casino opened in Florence, Oregon’s nine casinos had $419 million in revenue, a figure close to the annual budget of the city of Eugene. This growth surmounted an actual decline in the percentage of adults who told ECONorthwest that they’d gambled at an Oregon casino – from 25 percent to 18 percent from 1998 to 2005 – and explains why Spirit Mountain marketers now shun their reputation as the state’s biggest tourist attraction.
For one, they say, it is no longer true (the Woodburn outlet mall holds that title). More important, casino operators don’t want to be seen so much as a tourist haven but a local destination, which is
why profits can continue to rise even with fewer visitors. Repeat customers spending more at their favorite establishment account for 69 percent to 94 percent of casino profits today.
With more than 1,600 workers and a $32 million annual payroll, Spirit Mountain is now the largest employer in timber-depressed Polk County. The Coquille, Siletz and Umatilla are the second-largest employers in their respective counties, and the Cow Creek Band of Umpqua Indians is the third-largest in Douglas County.
In 2003, nearly 11,000 jobs in the state could be traced to tribal gaming, paying $348 million in wages and benefits and resulting in a billion dollars in indirect economic output for the state, according to ECONorthwest.
By the 2000 census, only a few years after most casinos opened, social statistics among Oregon’s 22,000 Indians already had improved dramatically over the prior 10 years. Indian households earning less than $25,000 per year fell from 56 percent to 40 percent from 1990 to 2000, while those earning more than $75,000 per year jumped from 3 percent to 11 percent. The unemployment rate for Oregon Indians dropped from 15 percent to 12 percent. The poverty rate fell 7 percent. The number of Indians enrolled in college grew 22 percent.
Profits ease debt burden
To non-Indians, all of this money might conjure up images of Indians cruising reservations in Audis and Beamers, tribal leaders acknowledge. But that’s a fallacy in Indian Country. This minority group’s overall poverty and unemployment rates remain double that of other Oregonians.
Despite the common perceptions of fast, easy money, casinos are business endeavors like any other. It takes time to recoup startup investments. For the first several years after most of Oregon’s casinos opened, they were either saddled with debt or locked into a contract with an outside manager who took anywhere from 20 percent to 30 percent of gaming profits. If tribes borrowed money to build their casinos instead of relying on a manager to secure financing, they paid interest rates as high as 15 percent to nervous lenders.
Even at the Three Rivers Casino – where Tim and Mike Rose of ROI Gaming work as employees rather than under a management contract – the Coos, Lower Umpqua and Siuslaw Indians spent much of the casino’s profit from its first 18 months repaying 20 years of debt, economic development director Bob Garcia said. When the casino opened in July 2004, the tribe still owed money on the 100-acre parcel on which Three Rivers was built.
“We’re still at the point where the spigot has just been turned on,” Garcia said.
Members get their cut
With debt payments largely under control now, tribes have had to face one of the most controversial decisions in Indian Country today: whether to hand out a portion of their profits as cash payments to individual members.
Both the Siletz and Grand Ronde tribes pay out a third of their profits in per capita payments. For the Grand Ronde, that means $5,000 per year for its 5,000 members, plus another $1,000 a month for elders. Asked why they pay out such a large chunk of profits in per capita, 30-year-old tribal council member Chris Mercier’s response is, “because we can afford to.”
But there’s more to it. Federal law requires tribes to provide services such as health benefits and scholarships to those who live in the closest counties to their headquarters or ancestral homeland. Ninety percent of the Grand Ronde tribe’s members live outside that service area, and there’s constant pressure to beef up per capita payments.
Other tribes eschew the per capita system, afraid it’s at best a poor way to benefit the tribe as a whole and at worst a welfare check that actually makes it harder for Indians to succeed. Cow Creek’s per capita percentage is 5 percent of its profits. Umatilla’s is 15 percent. Both the Coquille and Coos tribes don’t do per capita payments at all. For Cow Creek Chairwoman Sue Shaffer, there’s a clear reason to invest profits rather than hand them out: It hasn’t worked in the past. Shaffer shudders when she remembers the impact cash payments for a government-forced land sale had on the Klamath tribe in the 1950s. Her brother’s Klamath wife spent the money on a big, black Buick, a red convertible and a pink Cadillac after her husband died, Shaffer said.
`You always wondered: `Why is there a Mercedes dealership in Klamath Falls?’ ‘ Shaffer said. “They might as well have given that money to a child who wanted to go to the ice cream parlor.”
Other ways to help
Both the Siletz and Grand Ronde tribes have found myriad other ways to provide for their members.
The Siletz gave desktop computers and training to each household of its 3,500 members. Any who want to go to college get a full scholarship. The tribe also supplements declining Indian Health Service funds, helps members with down payments on houses and subsidizes rent, besides establishing a charter school in Siletz that regularly bests the state average in test scores.
With Spirit Mountain’s profits, the Grand Ronde built a gleaming Head Start center, where Indian children learn the Chinook Wa-Wa trade language that bound the tribes herded onto the reservation; an expansive government center; a gymnasium; a health clinic that services the entire community and dozens of low- and middle-income tribal housing units.
To pay for government programs in the future, the tribe also has been investing its money into endowments. In a few years, the interest on those investments will support Grand Ronde programs indefinitely.
“This is going to bring people back,” said Melvin Brisbois, 36, who left the reservation in the 1990s concerned that there wasn’t enough for his children to do. He now works as the tribe’s recreation coordinator.
What there’s little of in Grand Ronde is much in the way of business endeavors that aren’t tied to gambling. The tribe does some outside investing, including financing an office building in Portland’s revitalized Pearl District, but few other businesses on or near the reservation are owned by the tribe.
In part, that’s because the highways that lead to Grand Ronde are curvy and narrow, and the surrounding communities still suffering from timber declines don’t offer much destination potential, tribal leaders say. Plus, new ventures can’t possibly create the return on investment that the casino has.
“Any venture we get into will not generate the instant revenue the casino has,” council member Buddy West said.
Now that state policy shifts raise the potential for off-reservation casinos to move closer to Portland, Grand Ronde council members are wishing they’d done more to diversify. With 40 percent of the tribe’s members still living below the poverty line, self-sufficiency remains a distant goal.
“We’re kind of going backwards,” tribal elder Earl LaBonte said. “We’ve only gained 1,000 acres in 18 years. There are no jobs here in this area other than the casino.”
To remedy that, the council soon will hire an economic development director. Once the endowments are big enough, there will be more money to shift to other projects.
Tribal council member Angie Blackwell says she knows revenues eventually will drop as the competition closes in. The percentage of growth in casino revenue has declined each year since Spirit Mountain opened. But she considers the endowments the tribe’s most important investment.
“I don’t have to worry about whether my child is sick enough to go to the doctor anymore,” said the self-described high school dropout and teenage mom. She credits tribal programs with getting her toward a college degree and a good job.
As for hindsight, Blackwell said the tribe’s location off of a major interstate but close to Oregon’s big population centers has made the casino the best investment there is.
“None of us picked where our reservation would be,” she said. “But we’ve all done the best we can with what we had.’
Proximity a key factor
The 340-member Burns Paiute tribe knows that story too well. Isolated in the high desert of Eastern Oregon, the two closest towns of Burns and Hines are populated with fewer than 7,000 residents combined.
Proximity to a casino is the single best predictor of whether a person visited one in the past year, according to ECONorthwest.
The Old Camp Casino in Burns has added 100 slot machines to the 75 it had when it opened. But after losing money on table games, the tribe pulled them out. The casino still struggles to break even.
“Location, location, location,” sighed Burns tribal Chairman Dean Adams, who is working on getting a data storage company online that he hopes soon will host state archives. “We’re just trying to survive with what we have.”
Other remotely located tribes have struggled to make their casinos lucrative as well. Though the actual profits are kept confidential, Whelan says the best indicator of a casino’s success is its size. The Klamath tribe’s 300 slot machines make the Kla-Mo-Ya casino one of the smallest in the state. Warm Springs’ Kah-Nee-Tah casino is no bigger than that, and the tribe is desperately lobbying the federal government to allow it to build a new gaming center in the Columbia River Gorge.
Diversification pays off
What makes the difference between a successful tribe and a struggling one? Where casinos are concerned, it’s certainly all about location. But it’s also important to have a stable tribal government, a positive attitude about the outside world, an entity specifically established to deal with business and a written commercial code, says Scott Clements, a financial consultant who has worked with Northwest Indian tribes since 1978 on some of their outside endeavors.
“Some tribes are better prepared to involve themselves in the commercial world than others,” Clements said.
Some tribes say having an established land base is a boon, but for others, the “fresh start” brought about by government termination is equally beneficial, freeing the tribe to develop property where it makes the most sense.
The Umatilla, whose tribal status was never terminated by the federal government like six of the state’s other tribes, oversees a reservation of nearly 210,000 acres in northeastern Oregon.
Its operating budget has ballooned from $7.5 million in 1992 to $108 million in 2004, according to figures from the tribe’s annual report. Only $11.2 million of those funds came from gaming; most of the rest came from other tribal enterprises. Just two years after the Wildhorse casino was built in 1994, the Umatilla broke ground on a golf course, 100-room hotel and 100-unit RV park.
“We were probably the first tribe to think about diversifying our economy,” said Gary George, the 2,500-member tribe’s executive director and chairman of the Oregon Gaming Alliance, a consortium of the state’s nine tribes that advocates for the right to continue gaming.
The Umatilla may have been among the first to venture outside the gaming business, but it certainly wasn’t the last.
The Coquille tribe, with 6,500 acres in trust, is spending $3 million to build a fiber-optic network that will snake from The Mill Casino in North Bend to its offices and housing in nearby Empire, a small city west of Coos Bay. A 10-acre organic cranberry farm, planted a decade ago, recently has begun to turn a profit.
But the 800-member tribe’s biggest new venture is its 60-acre parcel north of the casino, where the Coquille Economic Development Corporation is planning a $100 million retail development that’s hoped to revitalize the North Bend-Coos Bay waterfront.
Learning from others
Meanwhile, the last tribe to build a casino in Oregon has been waiting in the wings. With a meager six-acre parcel also in Empire, the 800-member Coos, Lower Umpqua and Siuslaw Indians once planned to build a casino in Coos County. But when the Coquille tribe was restored in 1989, the federal government allowed it to build The Mill Casino first in North Bend. The Coos tribe sued to block that project and lost, then set its sights on Florence.
After 10 years of legal battles and perhaps the most hotly contested casino project in the state, the Three Rivers Casino’s expansion plans hint at its early success. The tribes are now planning to quadruple the casino’s size, build a 100-room hotel and double the casino’s slot machine offerings to 650, adding craps, roulette and poker to the gaming options.
Economic diversification is a ways off, as the tribe continues to pay down debt and focus on expansion. But in just the past two years, the tribe acquired developable land at Coos Head in Empire and bought the Windward Inn in Florence, where offices are planned.
Assuming Three Rivers continues to prosper, this tribe will have had the benefit of watching eight others go first. Per capita payments are unlikely, Garcia says, in part because they’re taxed, reducing the value of the investment. Investing in the stock market also is something the tribe isn’t interested in.
“I’ve seen tribes that have a Wall Street money manager look after their assets,” Garcia said. “I would question what that does for a local community.”
What they’ll do exactly is too far off to be specific about. “The thing to avoid,” Garcia said, “is spending too much money.”
Winston Ross can be reached at (541) 902-9030 or email@example.com.
Gaming and Gaining. (Part of a four-day series on the emergency of Oregon Indian tribes, thanks largely to gaming revenues.)