Casinos Grow as Tribes Diversify

Casino revenue has been a game changer for Washingtons American Indian tribes. Money from tribal gambling operations in the past 20 years has gone to improve reservation housing, expand health care services and education programs, and provide a base for economic development.

Now, with challenges looming as Washington residents spend less enthusiastically on gambling, the tribes are working to protect their core businesses and at the same time, diversify into related enterprises such as hospitality and retailing.

Were asking ourselves, How do we sustain jobs, create jobs and enhance the general economy? says Ron Allen, president of the Washington Indian Gaming Association (WIGA) and chairman of the 600-member Jamestown SKlallam Tribe headquartered in Sequim. We still have a long way to go, but gambling money has changed the whole paradigm. It has enabled us to hire talent, to borrow, to develop infrastructure.

Last year, 22 of Washingtons 29 federally recognized tribes with total membership of 103,000 generated an estimated $1.95 billion in net receipts from casino operations, according to the Washington Gaming Commission. While that total reflects an increase from 2010s $1.74 billion, the money is spread among more locations. Some casinos actually saw their revenues decline because of the states general economic sluggishness. Per capita spending on gambling, which grew at a 12 percent annual rate from 1996 to 2005 in Washington, has slowed to 2 percent a year in the past five years.

Slowing growth has caused the tribes to become better business managers. Weve tightened up on FTEs [full-time employees], says Allen. Were becoming better operators in terms of the food and beverage businesses were in and we have been tighter with advertising money.

Tribal businesses have also diversified. The Chehalis Tribe ventured beyond gambling when it teamed with Great Wolf Resorts to build a hotel and indoor water park in Grand Mound. The Muckleshoot Tribe acquired the historic Salish Lodge at Snoqualmie Falls. The Jamestown SKlallam Tribe bought an 18-hole golf course in Sequim.

Still, with economic recovery painfully slow and state revenues painfully short, casinos are a tempting target for many who see gambling as an undertaxed industry.

To counter that view, the Washington Indian Gaming Association brought in Jonathan Taylor, a Florida-based economist and national authority on Indian affairs, to update a study on the statewide economic impact of Indian gaming. Taylors report concludes that Indian gaming in Washington supports 15,387 jobs. Other tribal enterprises employ an additional 4,160, while Indian government operations employ 7,829, for a total of 27,376 jobs representing $1.3 billion in wages and benefits. Thats a 56 percent increase in tribal-related employment since 2004. Sixty-six percent of those jobs were held by non-Indians.

Taylor also calculated that in 2010, the tribes purchased $2.4 billion in goods and services, with most of that business occurring outside the reservations. Those purchases generated $255 million in state sales tax revenue. Construction activity worth $270 million in 2010 produced $12 million in taxes.

Were proud of the contribution we are making on our reservations and to Washingtons overall economy, says Allen. We have a long way to go in Indian country, but we are making progress.

The threat of new taxation isnt the only challenge Washingtons Indian casino businesses face. Tribal casino operators worry that if federal legislation allows internet gambling, this competition would deal a severe blow to tribal revenues. They also worry that Washington state could allow slot machines in Washington card rooms as a means of generating more tax revenue from gambling. Indian casino operators say such a move would only divide existing gambling dollars among more operators.

State Representative Gary Alexander, a Republican from Olympia and the ranking minority member of the House Ways & Means Committee, sees the expansion of video slot machines into nontribal casinos as a reasonable way to broaden the states tax revenue base. Video slots in card rooms is a good idea because it would create more jobs in nontribal casinos, especially in rural areas, and it would generate an estimated $400 million in tax revenue for K-12 education over the next biennium, Alexander says. When were looking for new revenue, this option is worth considering if the alternative is increasing the statewide sales tax.

Rick Day, director of the Washington State Gambling Commission, says that in 2011, gambling operations from all sources, including the state lottery, horse racing, bingo, raffles, card rooms and tribal casinos, generated $2.51 billion in net receipts. Indian gaming represented 78 percent of that total, up from 72 percent in 2009.

We expect to see a continuing strain between federal and state law in terms of tribal and nontribal gambling, notes Day. How that develops could be dramatic. He adds that any federal law allowing online gambling would hurt the entire industry in the state, not just Indian gaming.

Christine Masse, a Seattle-based attorney with Miller Nash LLP who has worked for several Washington Indian tribes since 1999, sees tribal businesses doing fairly well despite the economic slowdown and competitive challenges.

Unlike commercial gaming, they dont report to shareholders, but they do report to their communities, Masse explains. They dont love gambling and would have been more than happy to make their money from something else, but its working and gives them an opportunity to get down the road to self-reliance.

Taylor, who is the principal economist with the Taylor Policy Group of Sarasota, Florida, says it is a misperception that Indian reservations are tax havens because of their sovereign legal status. His research shows that off-reservation taxable sales do not decline when casinos open. Instead, proceeds spent by casino-owning Indian governments stay in Washington, with 94 percent of spending for goods and services occurring off reservation and generating state and local sales tax revenue.

Casino money goes into developing human capital and addressing reservation poverty, Taylor states.

In 2000, Taylor wrote a report based on United States census data, showing that annual per capita income among Indians living on American reservations was $7,942, compared to a nationwide average of $21,587. His study reported poverty rates dropped 10 percent from 1990 to 2000 in gaming areas, unemployment declined and housing overcrowding decreased when Indian casinos began operating.

Economists tend to talk about capital in the sense of resources, physical plants and the ability to leverage financing, Taylor says. Before gaming, the pump was not getting primed for American Indians. Now it is. With the tribes, were talking human capital.

There are lots of stories, Taylor continues, where theyve not been able to pull their weight, but more revenue means you can get the talent and you raise your game. Thats what the tribes are doing.

Ken Kettler, president and chief operating officer of the Tulalip Resort complex 36 miles north of Seattle, sees the Tulalip Tribe diversifying in the right direction by adding hotel and convention space in 2008 and moving into retailing.

With 30 years of experience working for Harrahs in Lake Tahoe, Kettler has seen plenty of change and challenge in the gambling industry. The Tulalips are operating a four-star, high-quality resort, Kettler says. The hotel-convention expansion helped create midweek business. The complex is adding 30 to 40 more outlet stores to its booming Quil Ceda Village complex, he notes. Cabelas, the hunting/fishing/camping retailer, will open a 110,000-square-foot store in the village this year. Altogether, Tulalip operations employ about 4,500 people.

The challenge, Kettler says, is to get the right mix of businesses that will generate future growth. How and when to expand? How to diversify? These are questions the tribe is asking, he points out.

All of Washingtons tribes grapple with the same issues, WIGAs Allen notes. They all have gotten a lot better at looking at the long term and running their businesses themselves. Gambling money has allowed us to secure the kinds of human resources and expertise that before we couldnt afford. The casinos have given us economic independence. They have made a huge difference.

TRIBAL CASINOS IN WASHINGTON

Chelan County Manson, Mill Bay Casino, Colville Tribe

Clallam County- Sequim, 7 Cedars Casino, Jamestown SKlallam Tribe

Grays Harbor County- Ocean Shores, Quinault Beach Resort & Casino, Quinault Tribe

King County- Auburn, Muckleshoot Casino, Muckleshoot Tribe

King County- Auburn, Muckleshoot Casino II, Muckleshoot Tribe

King County- Snoqualmie, Snoqualmie Casino, Snoqualmie Tribe

Kitsap County- Kingston, The Point Casino, Port Gamble SKlallam Tribe

Kitsap County- Suquamish, Clearwater Casino Resort, Suquamish Tribe

Lincoln County- Davenport, Two Rivers Casino Resort, Spokane Tribe

Mason County- Shelton, Little Creek Casino Resort, Squaxin Island Tribe

Mason County- Skokomish, Lucky Dog Casino, Skokomish Tribe

Okanogan County- Coulee, Dam Coulee Dam Casino, Colville Tribe

Okanogan County- Okanogan, Okanogan Bingo Casino, Colville Tribe

Pacific County- Tokeland, Shoalwater Bay Casino, Shoalwater Bay Tribe

Pierce County- Fife, Emerald Queen Hotel & Casino, Puyallup Tribe

Pierce County- Tacoma, Emerald Queen Casino I-5, Puyallup Tribe

Skagit County- Anacortes, Swinomish Casino & Lodge, Swinomish Tribe

Skagit County- Bow, Skagit Valley Casino Resort, Upper Skagit Tribe

Snohomish County- Arlington, Angel of the Winds Casino, Stillaguamish Tribe

Snohomish County- Tulalip, Quil Ceda Creek Nightclub & Casino, Tulalip Tribe

Snohomish County- Tulalip, Tulalip Resort Casino, Tulalip Tribe

Spokane County- Airway Heights, Northern Quest Resort & Casino, Kalispel Tribe

Stevens County- Chewelah, Chewelah Casino, Spokane Tribe

Thurston County- Olympia, Red Wind Casino, Nisqually Tribe

Thurston County- Rochester, Lucky Eagle Casino, Chehalis Tribe

Whatcom County- Deming, Nooksack River Casino, Nooksack Tribe

Whatcom County- Ferndale, Silver Reef Casino, Lummi Tribe

Yakima County- Toppenish, Yakama Legends Casino, Yakama Tribe