New casino games fuel growth in Cherokee, even as potential for gambling competition looms

08/23/2014 4:33 PM

08/23/2014 10:55 PM

On a sunny summer afternoon, the yellow earth-movers clanked and roared as they carved into the lush green mountains, scraping at the red dirt to make room for a new $75 million hospital.

The 140,000-square-foot building, with walls of windows and an open, courtyard feel, will eventually replace a bunkerlike facility nearby, half the size and consistently crowded.

“It’s going to be beautiful,” said Gayle Guilford, the hospital’s dental clinic manager.

Two years ago this month, the Eastern Band of Cherokee Indians began offering live dice and card games and expanded slot machine offerings at what is now a mini-Las Vegas tucked in the Western North Carolina mountains. It draws more than 3 million people a year to Cherokee just as the tribe is embarking on plans for a second casino in Murphy, about an hour away.

The expansion was made possible by state lawmakers, who allowed the games as part of a new 30-year compact with the tribe. Tribal leaders point to the rising hospital – and other crucial infrastructure funded by gambling proceeds – they are building as evidence of the agreement’s importance.

The big-dollar growth here also demonstrates what’s at stake as the Cherokees now face a threat of competition from a centuries-old rival: the Catawba Indian Nation.

The Catawba tribe, based in Rock Hill, S.C., unveiled plans a year ago for a $339 million casino in North Carolina on what it says is ancestral land. The Catawba filed paperwork with the federal Bureau of Indian Affairs to use a piece of property along Interstate 85 in Kings Mountain, outside Charlotte, for its proposed gambling operation.

The Eastern Band filed a formal letter in March to protest the Catawba application, for the first time detailing its opposition to the project on legal grounds and suggesting the proposal is not allowed under state and federal law.

In Cherokee, the gambling expansion boosted casino revenue in 2013 above $500 million for the first time ever, an influx that is reshaping the Oconaluftee River valley as the tribe spends millions to upgrade buildings and add services on the reservation.

“The Eastern Band Cherokee experience is that gaming can dramatically impact the lives of Cherokee families, particularly our precious children, in ways even we never dreamed possible,” Principal Chief Michell Hicks said in testimony before a U.S. Senate committee in July.

The Catawba plans for Kings Mountain unsettled Cherokee tribal members just as their fortunes were increasing. “Everybody is listening closely to see if anything is happening with that,” said Annette Clapsaddle, the executive director of the Cherokee Preservation Foundation.

Catawba Nation officials reject the Cherokee arguments against their project. But the opposition is likely to slow the application process, which is expected to take at least another year to complete.

Even if approved, a yearslong court battle could follow, much like the situation in South Carolina, where the Catawba Nation’s attempts to open a casino have been blocked by the state.

“What’s good for one nation should be good for others,” said Bill Harris, chief of the Catawba Nation. “We should all work together.”

More than the potential financial hit, some Cherokee are concerned that adding the Catawba casino would set a dangerous precedent and allow other tribes with ancestral roots in North Carolina to make similar land claims, spawning casinos across the state.

“We do not object to the Catawba’s having gaming on their reservation in South Carolina,” Hicks said in a statement. “Our opposition to the proposed North Carolina land acquisition is based on respect for traditional tribal territory.”

New games, new players

Now, the Cherokee tribe calls the Qualla Boundary home. More than 8,000 tribal members live on the reservation, which spans parts of five counties a 2-1/2-hour drive west of where the Catawba want to build.

The newly expanded Cherokee casino, which is operated by Las Vegas-based Caesars Entertertainment as Harrah’s Cherokee Casino Resort, is marked by three hotel towers that rise 21 stories into the night. The tribe spent $633 million on recently completed upgrades.

Inside, the low-lit gambling floor is bigger than the new hospital’s planned square footage. The 3,600 slot machines ding and chime in a digital trill broken only by occasional hoots and hollers from the 130 card and dice tables. Poker, roulette, craps and other such games are newly legal under the law and compact. The tribe first won approvals to offer slots and digital games in 1997 but was previously prohibited from offering the wider array of games.

Parked at a Triple Lucky 7 in a pit of high-dollar slots, Atlanta resident A. Craig swiped his Seven Stars member card and hit a button. His wife repeated the motion at a nearby machine.

“We’ve been here as many as 42-44 weekends a year,” said Craig, who works in computer security. “Since they’ve had table games the last two years, we’ve basically been players.”

Before then, they had visited about four times total. It’s not uncommon, he said, for him to spend $1,000 a weekend.

Craig is part of the new market of big-dollar players drawn to the expanded casino, many of which come from the Atlanta area.

The planned Catawba casino, a straight shot on I-85 from Atlanta, may tempt Craig, but his member perks – free rooms, free meals, free trips to Vegas, free cruises – likely will retain his loyalty in Cherokee for now, he said.

“I never expect to walk out with more money than I came in with, and I never lose more money than I expect to,” he said. “Pretty much it’s entertainment for us.”

Casino profits down elsewhere

At the national level, tribal casino revenue has remained essentially flat for years. The National Indian Gaming Commission, an independent federal regulatory agency, reported in July that nationwide revenues were $28 billion in fiscal year 2013, up just $100 million from the year before, or less than one half percent.

Elsewhere, casinos are closing amid competition and an oversaturated market. Harrah’s Tunica in the Mississippi Delta shuttered earlier this year, and multiple casinos in Atlantic City, N.J., are closing soon.

The Cherokee casino is better situated without competition from Georgia or Tennessee, where gambling is illegal. An Indian Gaming Industry Report by Casino City Press, a market research company, said revenue increased at Harrah’s Cherokee by 3 percent in 2012, but it fell short of the 5.8 percent growth in 2011.

Last month, the Eastern Band’s chief told the Senate committee that gaming revenue totaled $513 million in 2013, the first full year of the new games. But tribal officials declined to release additional gaming revenue figures. Under the compact, the tribe must file audits with the state attorney general each year, but it has so far not complied, state officials said.

For comparison, a previous study by UNC-Chapel Hill commissioned by the tribe identified 2008 as one of the casino’s best years, with $450 million generated from gaming.

In 2015, the Cherokee will open a second casino on tribal land in Murphy, about 60 miles to the southwest of Cherokee, near the Georgia and Tennessee borders. The new compact enabled the $110 million project, and the tribe expects a net increase in gambling revenue of $50 million.

The new casino will feature about half as many games as the current Cherokee casino and will employ upward of 1,000 people. The larger casino employs more than 3,000. Both provide an economic bump in poor areas of the state, a reason lawmakers struck a deal with the tribe.

Where the money goes

Of the casino profits distributed to the tribe, half is divided among the 15,000 registered tribal members in two checks a year.

The payments totaled about $7,700 in 2012, according to published reports. The first check this year, distributed in June, was for $4,023.

For tribal members under age 18, the money is collected and held in trust until they earn a high school diploma or receive an equivalency degree and take a financial management course. Otherwise, the money is not distributed until age 21.

The other half of the tribe’s portion funds local government operations and services to address persistent problems on the reservation, such as financial illiteracy and diabetes.

Much of it shows up in construction projects such as the new hospital. The growth has been steady in recent years: a $5 million downtown revitalization initiative, a $13 million affordable housing project and a $20 million justice center.

Just three years ago, the tribe added a $130 million school for kindergarten through 12th grade with a 3,000-seat arena and a football stadium that rivals the local university’s. And in July, the tribe opened a $4.1 million youth center in nearby Robbinsville.

“You can build stuff when you have money,” said Lynne Harlan, a tribal member, as she drove past all the new development on a recent reservation tour. “You can reinvest in your community when you have money.”

Under the compact, the state receives 4 percent from the live table games in the first five years, a proportion that increases into the future. The state expected to get $2 million to $3 million from the new games, but state budget officials could not verify the figures for the first years.

For the new Cherokee casino in Murphy, Gov. Pat McCrory would need to sign a similar revenue-sharing agreement, but the potential terms remain unclear. A McCrory spokesman said the discussions have not begun.

Before 1997, when the tribe opened a one-room casino under the first gambling compact signed by Gov. Jim Hunt, Harlan said the reservation was entirely dependent on seasonal tourism for revenue.

As she drove the main road through town, busy with summer visitors headed to the Great Smoky Mountains, the 50s-era tourism culture remained evident in faded drive-in motels, souvenir shops selling blowguns and a live bear exhibit.

“It’s a small percentage of what we operate on now,” she said of tourism dollars. “We didn’t have as many services then either.”

Still, the potential competition for gambling dollars from the Catawba is adding urgency to an effort underway on the reservation to develop a more diversified economy, one that looks past tourism and the casino into luring the technology and knowledge industry to the area.

The Cherokee Preservation Foundation, which receives up to $7.5 million a year from the compact for economic development and cultural projects, is helping lead the discussion.

“Many individual jobs are dependent on the gaming industry, but with any business, there is a threat of competition or the downturn of the markets,” said Clapsaddle, the director. “That’s probably one of the biggest concerns on the table.”

‘Success story’

The Catawba Nation is the only federally recognized tribe in South Carolina. It has nearly 3,000 members, about two-thirds of them on the Rock Hill reservation or in surrounding counties. But chief Harris has highlighted the tribe’s longtime aboriginal roots in North Carolina as he looks to build a casino across the border after similar efforts in South Carolina have been blocked.

“We were in the state before there was ever a state,” Harris said in an interview.

Harris said he has made two courtesy calls on the Bureau of Indian Affiars in Washington but said there is no timetable for action on the tribe’s land application. He said he expected Cherokee opposition but hopes they could someday work together, perhaps on package deals for casino consumers.

“They refuse to talk,” he said.

If the Kings Mountain casino received approval, Harris said he can envision a similar boon for his tribe, including hospitals, schools and payments to members. Schools could help keep the tribe’s culture alive through additional curriculum, he said.

“Our dream was never to alter what the Cherokee are doing,” Harris said. “It was to mimic what the Cherokee have done. The Cherokee are a success story.”

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