Tuesday, July 5, 2011

Casino nation II

A Pro-Casino Presidency?


Slot jockeys: not a pretty sight.

When he was a state senator in Illinois, Barack Obama was skeptical to the point of downright hostility toward casinos. His opposition was still in evidence in the earliest stages of his presidential candidacy.

The Obama administration, however, is anything but. In June, Assistant Secretary of the Interior Larry Echo Hawk, who heads the Bureau of Indian Affairs, rescinded a January 2008 memorandum issued by an outgoing Bush administration official—a memorandum that strongly asserted a policy of limiting the ability of Native American tribes to acquire off-reservation land for the purpose of building and running casinos. “The 2008 guidance memorandum was unnecessary and was issued without the benefit of tribal consultation,” Echo Hawk said. President Obama recently met with tribal leaders, many of whose reservations have seen unprecedented economic benefit from off-reservation gamblers spending money in tribally owned casinos.

On-reservation casinos exist in every state where a federally recognized tribe has a reservation. But at this writing, several state governors are actively opposing plans for off-reservation casinos. Tribes in Michigan, Minnesota, Mississippi, Oklahoma, and California are actively seeking to establish more off-reservation casinos. The Seminole tribe of Florida, which operates a casino near Miami, is seeking to purchase land in Atlantic City, New Jersey, and to run a tribally owned casino there, more than a thousand miles from its home.

New York Senator Charles Schumer hailed the Department of Interior’s policy change in a June 13 statement. Schumer is an advocate for a Catskill Mountains casino, which the St. Regis Mohawks, the Stockbridge-Munsees of Wisconsin, and the Senecas of Western New York have all been interested in developing. None of those federally recognized tribes have federal “trust” or reservation land within hundreds of miles of the Catskills.

The Center for Responsive Politics, a Washington public interest group that tracks political campaign money, found the Seneca Nation of Indians donated approximately $352,000 to federal candidates in 2007 and 2008. Other records show that the Senecas spend heavily on lobbying, legal fees, investment counsel, and underwriting expenses related to bonds issued by the Seneca Gaming Corporation, which recently refinanced over $500 million of outstanding debt. In a recent article in Indian Country, an online publication on Native American issues, Seneca Nation President Robert Odawi Porter is quoted saying that “If anyone wants to be critical of what Indian nations are doing, then they better be critical of the entire system in which money flows through American politicians and political parties.” Indeed, the Senecas’ contributions are dwarfed by those of other tribes that own casinos. In the list of the top 20 casino-based political donors, 15 are Indian tribes. In 2010, they gave over $10 million of the nearly $13 million the casino industry gave to national politicians. Two-thirds of the money went to Democrats.

The question for American policy-makers is whether the economic impact of off-reservation casinos is positive or negative for non-reservation communities. In a recent study of he Seneca Niagara casino in Niagara Falls, Professor Steven H. Siegel of Niagara University was extremely critical of the Seneca Gaming Corporation’s practice of handing out hotel rooms, food and beverage services, and entertainment for free. Using data on the first nine months of 2010 from the filing with the Securities and Exchange Commission, Siegel found that the Seneca Gaming Corporation spent over $42 million subsidizing those items, giving away more hotel room-nights than were sold by Buffalo’s Adams Mark and Hyatt hotels combined, yet still had over $83 million in net revenue. “In my 34 years researching and teaching in the area of strategic management for the hospitality industry,” Siegel wrote, “I have never encountered a competitive situation where one business entity has such a staggering competitive advantage over other entities.”

Official Seneca pronouncements about the Buffalo casino have recently included a pledge that there will be no such hotel. But Seneca Gaming Corporation has proved that the formula of combining hotel beds, restaurants, bars, and nightclubs in one self-contained entertainment complex is hugely profitable. Unless new court action or the July 2008 ruling of Federal District Court Judge William Skretny results in the Buffalo casino being closed, there is no way of predicting whether the Senecas will or won’t duplicate their Niagara Falls operation in Buffalo. The potential impact on existing non-Indian businesses could be huge.

bruce fisher

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