Tribal Casino Rules Revisited - WSJ.com

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White House Considers Altering Policy to Allow Gambling Far From Reservations

By A.D. PRUITT and PETER GRANT

The Obama administration may make it easier for Indian tribes to build casinos on land far from their reservations, a move likely to spur a wave of new casino development.

The Interior Department, which runs the Bureau of Indian Affairs, is reconsidering a Bush administration directive requiring that off-reservation casino sites be within commuting distance of the reservation. Many tribes, struggling with high unemployment and poverty on their reservations, are looking to casinos for jobs and other economic benefits.

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"It's an important issue. It's a controversial issue and they're rethinking it," George Skibine, a deputy assistant secretary at the bureau, said in an interview last week. He added he expected a decision on whether to change the policy "fairly soon."

Some governors, including Democrat David Paterson of New York and Republican Arnold Schwarzenegger of California, have come out in favor of certain projects in recent months.

A reversal would pose more competition to existing casinos that are getting pummeled by the economic downturn. Owners of some of those casinos and their supporters in Congress are putting pressure on the Interior Department to maintain the restrictions on new developments off tribal lands. But have-not tribes are hoping the Obama administration will view casino development as a cheap way to stimulate the economy without tax dollars.

"Some governors have embraced this as a way to close their budget deficits," said Larry Rosenthal, a partner at Ietan Consulting LLC, a lobbying firm that represents Indian tribes.

About 22 Indian casinos on non-reservation land exist, and about 20 tribes have off-reservation plans in the works.

The Confederated Tribes of Warm Springs of Oregon wants to develop a casino along the Columbia River Gorge, and the St. Regis Mohawks has plans for a site in the Catskill Mountains, about 350 miles away from the tribe's reservation -- not within the required commuting distance -- but less than a two-hour drive from New York City.

Some tribes note that the off-reservation sites they have identified are actually on their ancestral lands.

"We'd just be going back home," said Lewis Pitt, spokesman for the Warm Springs tribes in Oregon.

Even if the Obama administration reverses the policy, some tribes will face a rough time developing casinos anytime soon. With casinos across the country running into financial problems, many lenders are loath to finance new projects.

Indian casinos can be particularly problematic when they run into financial trouble. One example: Foxwoods Resort Casino in Connecticut, which is in talks with lenders to restructure an enormous debt load.

Moody's Investor Service has warned that lenders have limited recourse because, under U.S. law, they can't seize Indian casino assets in the case of a default or bankruptcy.

The anxieties of Foxwoods creditors were further stoked late last month after the New London Day reported that Michael Thomas, the chairman of the Mashantucket Pequot Tribal Council, which controls Foxwoods, sent a letter pledging to protect the payments to the tribal government and tribe members and saying that they would be "paid first."

The council subsequently put Mr. Thomas on administrative leave "pending the outcome of an internal review." It says it is pursuing a "mutually beneficial resolution with its banks and bondholders."

Mr. Thomas couldn't be reached for comment Sunday afternoon.

Despite these concerns, some off-reservation casino projects, especially those near major population centers, have been able to line up financing.

Kien Huat Realty III Ltd., an investment company owned by a Malaysian family that has financed start-ups of major Indian casinos in Connecticut and New York, is acquiring a near 50% stake in Empire Resorts Inc., the company that has been working with the St. Regis Mohawks on plans for a casino in Monticello, N.Y.

About 300 casinos have been developed by tribes since a watershed U.S. Supreme Court ruling in 1987 that greatly loosened state restrictions on such operations. In 1988, Congress said tribes could develop off-reservation casinos that were in the best interest of the tribe and not detrimental to the local community.

Some of the tribes that developed casinos early on have joined with Las Vegas and Atlantic City gambling interests to try to block off-reservation gaming.

Last week five senators from Nevada, California and Arizona wrote Interior Secretary Ken Salazar to oppose off-reservation gaming, saying it "violates the spirit" of Indian gaming law.