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Reflecting Nevada: California's Indian casinos take in nearly half of annual U.S. gaming revenues.

Bettor Daze

How many Indian casinos are too many?

By Bruce Robinson

In the fall of 1973, Las Vegas looked like a ghost town. The Arab oil embargo had a stranglehold on gasoline even as the price shot upward, and conservation was, for a short time, an act of patriotic necessity. So the big casinos on the Vegas strip pulled the plug on their garish exteriors, and miles of neon, millions of marquee bulbs, went dark. Inside, however, it was business as usual.

Three decades later, it appears that the next generation of gambling entrepreneurs has found a lesson in Nevada's temporary dimming down. Glitz is no longer essential to lure willing bettors; the chance to take a chance is attraction enough to make even the plainest gambling emporium a desirable destination, especially if it doesn't require hours of driving to the next state east.

Look no farther than Sonoma County's lone outpost of contemporary gaming. River Rock Casino sits perched on a slash in the hillside southeast of Geyserville, a Hershey's Kiss–shaped dome of dark fiberglass with a massive concrete parking structure looming behind it. Minimalist road signs guide visitors across the Alexander Valley floor to the driveway that snakes up the hillside to the casino, where a modest, even tasteful, marquee adorns the main entry. It's clearly the choice of the operators--in this case, the Dry Creek Rancheria band of Pomo Indians--since as a sovereign Native American nation they are not bound by any local ordinances regarding such mundane matters as signage or, for that matter, construction standards.

Many Indian casinos up and down California are dealing in elaborate tents or other semipermanent structures such as River Rock's mini-mosque that can be erected with minimal time and expense, providing a shell where the digital slot machines can begin spinning as soon as the power's turned on.

But within these bare-bones structures, some multimillion dollar commerce has commenced, and while the Dry Creek band is already cashing in, many of their tribal cousins are lining up for a piece of the action. Some may soon share in the windfall; for others, the window of opportunity may already have passed.

 

According to the National Indian Gaming Association, Indian casinos took in $18.5 billion nationwide in 2004; California's share of that was nearly $6 billion. In contrast, Nevada's gambling houses took in $9.8 billion.

Not surprisingly, more tribes are lining up for a piece of that action, including seven based in the North Bay that have suggested building new casinos on various sites across the region. Tribal representatives say there is room for them all to co-exist profitably, and industry observers concur. But voices of opposition, from those in neighborhoods affected by casinos all the way up to Capitol Hill, are raising a chorus of protest, and the regulatory landscape for new Indian casinos is becoming increasingly rigorous.

There are 109 federally recognized Indian tribes based in California; 54 of them already operate casinos, including one in Sonoma County and seven others in Lake and Mendocino counties. Other tribes are actively planning new or additional casino projects, and from a free-market point of view, they'd be foolish not to. "Indian Gaming: On the Rise," a 2003 analysis of the industry by Merrill Lynch, noted that overall gambling revenues nationwide more than doubled in the seven years preceding that study, from $17.7 billion in 1994 to $39.4 billion in 2001. In that same time, Indian gaming nearly quadrupled, from $3.6 billion to $12.7 billion.

The Merrill Lynch report concluded that "significant opportunities remain" for Indian gaming in California, despite seeing "significant anti-gaming sentiment" growing at many levels within the state. But their cautious 2003 prediction of "moderate but still significant growth over the next few years" did not anticipate the explosive expansion that has come since.

"I see continued growth in the future," agrees Alan Meister, an economist with the Analysis Group in Los Angeles, the entity that authors the annual "Indian Gaming Industry Report." "I think it's going to be strong," he adds, citing the double-digit growth rate the industry has enjoyed every year since 2000.

How much more casino growth can California support? "There's always a saturation point," Meister acknowledges. "What that is and how close we are to it are questions that are difficult to answer without doing a very detailed type of analysis." Yet it seems that no one has done that.

Susan Jensen, communications director for the California Nations Indian Gaming Association in Sacramento, says she is "not aware" of such a study, adding that it would be very difficult for anyone to obtain accurate data upon which to base an analysis. "The tribes aren't releasing the information," even to her organization, Jensen explains. The National Indian Gaming commission in Washington, D.C., is "the only entity that received audited financial reports" from the tribal casinos, she says.

That's not to say that individual tribes aren't keeping an eye on what their neighbors, or rivals, might be planning. But any internal studies individual tribes may have commissioned to assess the viability of their casino plans are strictly confidential.

There are signs that the boom times are slowing. Meister's 2004 report shows California generating 28 percent of the total Indian casino revenues nationwide, more than double that of Connecticut, which is second with 11.7 percent. But it also shows California's Indian casino revenues grew at a rate of 13.3 percent last year, 13th among the 28 states where Indian gaming is allowed. In 2003, California's tribal casino revenues grew at a 27.8 percent rate, which was then fifth in the nation.


Sole on Ice: Slap 'em up and get the slots going is the new casino aesthetic.

The concentration of casino speculation in our region can be traced directly to the unfortunate history of the Pomo peoples.

Under the Indian Gaming Regulatory Act (IGRA) adopted by Congress in 1988, a tribe can only conduct gaming on lands that were owned by a recognized tribe at that time, a provision that was intended to limit tribal gambling enterprises to established reservations. There is, however, an exception for tribes who were wrongly stricken from the list of federally recognized tribes prior to 1988 and restored to the list after that date.

"Some of the Pomo groups were illegally terminated in the 1950s by the U.S. government," explains Tony Cohen, a Santa Rosa attorney who has represented at least two area tribes on casino matters. These tribes sued to be reinstated, finally winning their cases in the 1990s. But by then, their historic tribal lands were long gone--bought out and built up by scores of nonnative newcomers.

These "landless" tribes, numbering about a dozen, are legally permitted to petition Congress to place other property in trust for them; once that is done, those lands can be designated as eligible for gaming. "These are the tribes that are scrambling for any opportunity to correct the wrongs that were committed against them in the 1900s," says Cohen. Such opportunities, they hope, may lie scattered around the North Bay. A handful of tribes are already cashing in, with casinos open in Geyserville, Hopland, Middletown and Lakeport. Others are hoping to hit the jackpot with locations closer the metropolitan mother lode of potential customers that ring the bay. Here is a short list of current activity:

Lytton band of Pomo Indians, San Pablo: The most politically charged of the current Bay Area casino proposals, this project involves an existing 70,000-square-foot card room that was acquired by the 277-member tribe in 2000. The Lyttons took it on after U.S. Congressman George Miller, D-Martinez, won passage of federal legislation giving the tribe federal trust status for the property by appending some little-noticed language to an appropriations bill. That measure back-dated the Lytton band's purchase date to before 1998, effectively bypassing the IGRA and the regulatory process it put into place.

The Santa Rosa–based tribe subsequently proposed expanding the club to 600,000-square-feet--four times the size of Santa Rosa's Costco store--with 5,000 slot machines, which would have created the first major casino in an urban area in Northern California. But after widespread cries of alarm--from everywhere but the San Pablo City Council, which embraced the economic boost the casino promised--the tribe scaled the expansion back by half.

That 2,500-slot plan was subsequently included in the compact agreement announced by Gov. Schwarzenegger last summer, a deal that would have given the state a quarter of the revenue from those machines. However, the Legislature refused to ratify the compact, and the tribe recently announced plans to install up to 1,000 less lucrative Class II bingo machines, which do not require a state compact.

The Lytton band has also acquired a 50-acre piece of land near Windsor, ostensibly to build housing for tribal families. Town officials are watching warily as the San Pablo drama plays out.

Federated Indians of Graton Rancheria, Rohnert Park: For the past two years, this casino proposal has drawn the most attention this side of the San Pablo Bay. Reversing an earlier declaration not to pursue gaming, the 1,081-member Santa Rosa–based tribe first set its sights on land along Lakeville Highway, southeast of Petaluma. Deferring to the outcry that greeted that idea, it shifted to some low-lying pastureland at the western edge of Rohnert Park, where it now proposes to build a 2,000-slot machine casino along with a 300-room hotel and a performing arts center.

The tribe has quietly been working on acquiring the land for the past several months, a deal that has not yet been completed. Their agreement with the city of Rohnert Park to share up to $200 million in casino revenues got a boost June 30 from the 1st District Court of Appeals in San Francisco, which ruled that the agreement could not be placed before Rohnert Park voters for ratification, as a group of local opponents of the project had hoped to do.

Cloverdale Rancheria of Pomo Indians, Cloverdale: John Santana, the longtime postmaster of Cloverdale, was also apparently one of the few members of the local Pomo band who prospered enough to become a significant landowner, holding 12 acres of one-time tribal property at the southern edge of Cloverdale. After the IGRA became law, his lands gained federal recognition as a potential casino site, something that was his "dream" in his final years, according to Matt Lemley, Santana's grandson and a spokesman for the family. But the family and its tribe were unable to reach agreement on a selling price for the lands, so the 400 members of the Cloverdale Rancheria are now working in concert with the developers of a huge hotel and resort project right next to the Santana lands. The tribe has announced few specifics beyond an intention to create a "Las Vegas–style" gaming house.

Hopland band of Pomo Indian, Cloverdale: The disconnect between the Cloverdale Pomos and the Santana family is seen as a window of opportunity by the neighboring Hopland band to the north. Already experienced casino operators (they run the Shokawa Casino), they have stepped in to form an alliance with the heirs of John Santana and have announced plans to develop a second casino in Cloverdale. The Hopland band has also forged a new partnership with the Blue Lake Rancheria, developers and operators of a casino in Humboldt County, in a bid to build a casino with 1,700 slots, plus 50 table games in a 100,000-square-foot facility.

Lower Lake Rancheria-Koi Nation, Oakland: This tiny tribe, originally based on Lake County and variously reported as having just 30 to 53 members, shook up the East Bay last October when it announced plans to build a hotel and casino on 35 acres adjacent to the Oakland International Airport. The proposed 230,000-square-foot complex included a casino with 2,500 slot machines. The tribe withdrew its plans last month amidst a firestorm of community and governmental opposition. Two key tribal leaders live in Santa Rosa, but the tribe's office address remains in Oakland. No further casino plans have been announced.

Scotts Valley band of Pomo Indians, North Richmond: It may seem like a long way from Kelseyville to North Richmond, but the 176-member Scotts Valley band is taking the long view, conducting exploratory talks about a new casino project in this economically depressed industrial town. No specifics yet.

Guidiville band of Pomo Indians, Richmond: Based in Ukiah, this 112-member tribe is also looking across San Pablo Bay to a site at Point Molate in Richmond. Like its Scotts Valley counterparts, the Guidiville tribe's casino bid is reportedly being driven in considerable part by deep-pocketed partners from outside California who are hoping to cash in on the state's fast-growing Indian gaming industry. But both tribes are also likely to run afoul of the renewed efforts to constrain Indian casino expansion into the state's urban centers.

Kashia band of Pomo Indians, Stewarts Point: This eighth tribe has been included in other lists of potential casino speculators, but a tribal leader says that's not accurate. Owners of 41 acres of federally recognized reservation land in remote northwest Sonoma County, the 676-member Kashia band has no notions of developing a casino "at that site," says tribal administrator Lynn Roselli. The extremely rural reservation covers a coastal mountaintop above Stewarts Point, land so rugged that only 12 of the 41 acres are developable. A dozen homes now dot the property, with more to come.

"There is interest within the tribe" for a possible casino project, Roselli acknowledges. "Investors have approached us at various times, but it hasn't gone anywhere." They have no active plans as of now.


Die: The government is becoming less welcoming to the building of new casinos.

The bad news for tribes seeking to build new casino projects is the recent tightening of the government's regulatory leverage wherever possible. While Sonoma County supervisors have complained mightily about their inability to exercise any meaningful controls over the development of the Dry Creek Rancheria's River Rock Casino near Geyserville--especially regarding fire truck access up the winding, narrow access road and its massive and unsightly parking garage--they have so far succeeded in blocking the tribe's efforts to obtain a full liquor license for the facility.

In Washington, D.C., Sen. Dianne Feinstein is pushing a bill to rescind Congress' approval of Rep. George Miller's measure establishing a trust for the San Pablo lands where the Lytton band is already operating their casino. Her bill to require the tribe to begin the process of negotiation with the government afresh won approval of the Senate Indian Affairs Committee this June 29. However, it still requires passage by the full Senate and a matching measure in the House of Representatives to become law.

Gov. Schwarzenegger, with typical theatrical fanfare, issued a "proclamation" on May 18 asserting he will oppose new applications for federal trust status for lands in urban areas and refuse to negotiate compacts with tribes that do not have lands deemed eligible for gaming.

All of which means little, says economist Alan Meister, unless Congress changes the IGRA. "Some of the things in his proclamation were already requirements at the federal level," he says dismissively. "The tribes already need to go through that process anyway."

But broader state actions are being advanced by three different factions. Assemblyman Joe Nation, D-San Rafael, is rounding up support for an amendment to the state constitution that would place a freeze on any new gaming compacts until 2008. The bill, ACA 15, which Nation has characterized as "a timeout," would also create a 13-member commission to study the impacts of Indian gaming enterprises on public safety and local economies plus other social and environmental effects.

Fairfax city councilman Frank Egger is promoting a competing statewide initiative that is somewhat more stringent than Nation's. It would impose a moratorium on new casinos until at least 2011 and require a further vote of the citizenry to lift the ban. Egger plans to collect about 600,000 signatures in order to place his measure directly on the ballot, rather than seeking legislative approval.

A third initiative, reportedly backed by the Sierra Club and a UC Berkeley economics professor, is also said to be seeking signatures to ban tribal casinos within 15 miles of any urban area in the state. The advocates of the various measures have until Aug. 15 to get them qualified for the November election.

 

But none of these initiatives appear likely to change the odds of success for any of the projects envisioned by the North Bay tribes. For them, the determining factors are already in play. The Koi Nation and the Guidiville and Scotts Valley bands lack eligible land and face little chance of getting any near an urban population center. The Kashia band is likewise unlikely to find additional off-reservation property where it could build a casino.

As for the dueling proposals in Cloverdale, attorney Tony Cohen says, "The only thing that's clear to me is that it would have been much better if the two groups had talked to each other and adopted some sort of coordinated approach that was in their mutual best interest."

Casino San Pablo is already in limited operation, and should Feinstein's bill win full congressional approval, the Lytton Pomos have vowed to sue, alleging that legislative action would represent an unconstitutional "taking" of their previously established rights to conduct gaming in San Pablo. Industry observers expect that some sort of compact with the state will eventually be adopted there.

That leaves the Graton Rancheria, where things have been quiet for the past several months. "It appears they're working hard to make that Rohnert Park location theirs," observes attorney Cohen. "Graton will eventually have a casino somewhere in Sonoma or Marin counties. I'm not sure it will be in Rohnert Park, but that seems realistic, because they meet all the legal requirements."

At this point no one can say with any certainty exactly what will be built, much less when or even where. But in the realm of casino gambling, there is one bedrock truth that should never be forgotten: the odds always favor the house.

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From the July 20-26, 2005 issue of the North Bay Bohemian.

Copyright © 2005 Metro Publishing Inc. Maintained by Boulevards New Media.




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