Dean Rand quote in New York Times Article

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School of Law


Indian Tribes Look Beyond Casinos for Income

ATHENS, Mich. — For now, the field isn’t much. All that stands along a quiet country road is a small storage building, beyond which rolls 28 acres of prairie a mile south of this blink-and-miss-it hamlet. To Mon-ee Zapata, though, this land is both the past and the future.

As denoted on a historical marker across the street, this is the vicinity where, 175 years ago, the United States government rounded up her ancestors, the Potawatomi Indians, and forced them on a deadly walk to inhospitable Kansas. But it is also a place where her tribal elders plan to build a manufacturing operation of some sort as a way to ensure their long-term economic stability beyond the revenue from the six-year-old FireKeepers Casino.

“We’re buying the land that was originally our people’s and using it for our future,” said Ms. Zapata, a specialist in the Culture and Historic Preservation Office of the Nottawaseppi Huron Band of the Potawatomi. “There’s evidence here that our people existed. You can sense it.”

It’s also easy to sense, across Indian country, an anxiety among many tribes about their near-total reliance on gambling profits in an era when growth in the casino industry has slowed considerably or even ceased. To that end, groups like the 1,100-member Nottawaseppi Band are following the leads of much larger tribes in pursuing ways to make all that casino cash work for them in other sectors, forming enterprises from food production to private equity groups.

“There are places that are feeling saturation and competition more acutely than others, but all tribes are paying attention to diversification,” said Kathryn R.L. Rand, co-director of the Institute for the Study of Tribal Gaming Law and Policy at the University of North Dakota. “It’s happening sooner rather than later in some parts of the country where the industry is no longer experiencing the kind of growth it used to.”

While gambling revenue remains substantial — and indispensable for groups like the Nottawaseppi Band, which relied primarily on grants and federal payments before opening FireKeepers in 2009 — it also isn’t experiencing the double-digit percentage growth typical throughout the 1990s and early 2000s.

Last year, the nation’s 459 tribal casinos in 28 states saw a meager 1.5 percent uptick despite the opening of 10 additional tribal casinos, according to data reported to the federal government by the National Indian Gaming Commission. That followed an anemic 0.5 percent increase in gambling revenue in 2013, a year that 24 new tribal casinos opened.

The jitters are even more acute in places like Michigan. From 2012 to 2014, a nine-state cluster in the Upper Midwest experienced a 2.5 percent drop in gambling revenue despite the addition of 10 more casinos. The Nottawaseppi Band does not disclose revenue for FireKeepers, but its leaders have long known theirs was a highly competitive and mature market that featured three existing commercial casinos in Detroit, tribal casinos within a half-hour drive of every significant population center and a new commercial casino in Toledo, Ohio, that opened in 2012.

To that end, the group in 2011 formed Skasge, a solar power company in its infancy that provides electricity for the casino and some facilities on their reservation, about 20 miles southwest of the casino. The aim is to perfect their solar technology and then start selling power to the grid. The next year, they added a 242-room hotel tower and a 17,000-square-foot events and conference center to add nongambling reasons to attract visitors.

In 2014, the Nottawaseppi Band formed Waseyabek Development Company, which will be the parent company for the band’s future endeavors, and this year it hired Jennifer Turner, a consultant who helped tribes in northwest Arizona and Saginaw diversify, as temporary chief executive on a one-year contract. Along the way, the band has also snapped up parcels of land available in bankruptcy auctions around the south-central Michigan region, including the site south of Athens across the street from the historical marker, about five miles southeast of the reservation.

“If we were to put all our eggs in one sector like Detroit and the car industry, when the economy caches a cold, Michigan catches pneumonia,” said the Nottawaseppi tribal chairman, Homer A. Mandoka. “You can’t diversify your economy if you don’t have funds or don’t have access to funds. And really, we weren’t in a place to do any of that, and most tribes aren’t, until the day it is granted to you that you can actually open a casino.”

Therein lies the paradox. A decade ago, the 120-acre Nottawaseppi reservation was dusty and unpaved, with a half-dozen ramshackle homes — “three weren’t even livable but they were being lived in,” Mr. Mandoka said — and no indoor plumbing. Now, because of casino payouts, it is a village of about two dozen new homes on cul-de-sacs and it has fresh, smooth streets, a group of government buildings that includes a Head Start center and a vast new powwow atrium. (Most of the members live outside the reservation.)

Yet as grateful as tribes like the Potawatomi are for casinos, they know it’s a fickle business, subject to the health of the broader economy, declining interest among younger Americans and the inclinations of federal and state policy makers. Owing to the historic distrust between Native Americans and the peoples who displaced them, there’s a sense they must be alert to the prospect that their “rights” to open casinos could be snatched back or curtailed.

“I think they’re less worried about a downturn in profits and more in changes in the law, politics or in policy that might impact Indian gaming,” Ms. Rand said. “Tribes have known all along that this is something that could change overnight.”

While some tribes have been diversifying since the advent of Indian-operated gambling in the late 1980s, much of that involved adding nongambling amenities like outlet malls, water parks, golf courses, bowling alleys and concert venues to the casino to compete better with destinations like Atlantic City, Las Vegas and Reno, Nev.

In recent years, though, there has been a proliferation of development and holding companies aimed at helping tribes go outside the casino and hospitality business altogether. In 2007, the Rincon Band of the Luiseno Indians of the San Diego area and the Colusa Indian Tribe near Sacramento formed First National Capital Partners, a private equity company that has bought four companies, including a netting manufacturer and a firm that builds shipping cases for bombs.

“Our goal is to have economic diversification to the point that it would pay 100 percent of tribal government operations and our health plan if the casino went away,” said Steven Stallings, a Rincon council member and vice chairman of the California Nations Indian Gaming Association. “The tribes that aren’t thinking about this really need to be.”

While some diversification efforts can seem random, many tribes aim to tie their activities back to their histories. The Yocha Dehe Wintun tribe near Sacramento has made a big push into olive oil, wine and honey production. “This carries on our tribe’s historic connection with the land of the beautiful Capay Valley,” said Leland Kinter, the tribal chairman, “which is an important part of who we are as a people.”

Ms. Rand pointed to the Oklahoma-based Cherokee Nation, the largest Native American tribe with more than 300,000 members, as the pacesetter. Cherokee Nation Businesses, its holding company, reported $829 million in revenue in 2014 that included profits from manufacturing and service contracts with such varied entities as Cisco, the Department of Homeland Security and Lucent.

The trick, Ms. Rand said, is to use the casinos not just as a tangible asset but also a training ground for entrepreneurial expertise.

“The casinos give tribes collateral for loans from banks and institutional legitimacy that make them safe bets for other kinds of businesses, for contracts with the government, for partnerships with local governments,” she said. “Then they have a track record of good business relationships with vendors and people in their tribes with knowledge of growing businesses. It allows tribes to do even more in terms of economic diversification than they could be before tribal gaming.”

Still, Mr. Mandoka isn’t under the illusion that the Potawatomi can diversify through green energy or manufacturing to the point that the casino ceases to be the Nottawaseppi Band’s bedrock. Revenue from FireKeepers provides more than 75 percent of his group’s annual budget of $30 million, according to the band’s 2014 annual report.

“You need to use your distributions and reserves to go out and get yourselves into a good position,” he said. “But most models still have a very important slice of the pie that is from the casino.”