Tribes looking beyond casinos in diversification attempts

Gillian Flaccus

Thursday, April 3, 2003 | 9:44 a.m.

UMATILLA, Ore. --- The vast gray-brown bluff overlooking the Columbia River is wind-swept and empty, save for a pile of rusted irrigation pipes and hundreds of Canada geese that flock to nearby wetlands. A rutted dirt road winds aimlessly across the flat scrubland.

Yet Les Minthorn, treasurer and tribal elder of the Confederated Tribes of the Umatilla, doesn't see desolation. He sees a planned $400 million gas-fired power plant that will bring in millions of dollars, attract new industry and play a critical role in diversifying a tribal economy now almost entirely dependent on gaming.

"One of the driving forces behind these projects and development is to see another revenue stream besides casino revenue," said Minthorn. "I think the handwriting's on the wall for all of us. Those of us who have the opportunity to do something with our land or infrastructure will all have to do something."

The Umatilla tribe saw unemployment drop from 37 percent to 17 percent and tribal coffers swell from $7.5 million to more than $87 million following the 1995 debut of its Wildhorse Casino Resort.

But now, concerns about the future of gambling and the sustainability of tribal economies are forcing the Umatilla -- and dozens of other tribes nationwide -- to pursue long-term, multimillion-dollar investments in everything from aeronautics to digital mapping.

More than 200 tribes -- just over one-third of all federally recognized tribes -- operate casinos in 29 states, said Jacob Coin, executive director of the California Nations Indian Gaming Association. Those casinos bring in an annual total of $10.6 billion.

But a lengthy legal dispute over whether states can regulate tribal gaming, as well as lobbying by Las Vegas interests for non-Indian gaming in California, has many tribal leaders anxious about the industry's future. The result is a boom in nongaming development on tribal lands funded, in large part, by casino revenues.

"There is a sense of urgency in Indian land to diversify tribal economies, which is why we're seeing tribal leaders invest in all forms of enterprises, from airline assembly plants to minimarts to shopping centers," said David Pallermo, spokesman for the California Nations Indian Gaming Association. "We've had tribes in California buy and take over ownership of banks."

In Banning, Calif., the economic diversification of the Morongo Band of Mission Indians has an added urgency because Las Vegas gambling interests want to see California legislation that would allow large-scale gaming on non-Indian land.

That, plus any increase in gaming regulations or a shift in public opinion, could threaten the tribe's casino revenue, said Robert Martin, tribal council member.

"Tribal gaming is controlled by a political body," he said. "It could be controlled so much by this political body that it could become unprofitable. I think the tribes have been very wise to assume that this is not something fixed and permanent."

Next month, the 1,000-member Morongo tribe will open a $26 million bottling plant for Arrowhead Mountain Spring Water, a subsidiary of Nestle Waters North America. The plant, which will bottle water from springs on Morongo tribal land, will create about 1,800 local jobs, he said.

The tribe will receive payments for 120,000 gallons of spring water a day as well as lease payments from Nestle for the property, said Mike Franceschetti, plant manager. He declined to give specifics of the deal, as did Martin.

The project is part of an aggressive diversification plan that began in 1997 after Casino Morongo opened. Other Morongo holdings include one of the largest Shell gas stations in the country, two restaurants, a mail order business and a travel center, said Waltona Manion, tribal spokeswoman.

These new enterprises are significant because tribes have direct control over the projects and are able to reap the benefits -- unlike the past when tribes would lease land to developers and receive only a small royalty, said A. David Lester, executive director of the Colorado-based Council of Energy Resources Tribes.

"We've been in a population explosion at least since the 1950s and tribal economic development is exploding with it," he said. "Public image of reservations is one of desperation and poverty, but more and more tribes are breaking through and becoming the economic engine of the regular economy."

The Umatilla tribe hopes its power plant, called the Wanapa Energy Center, will fuel the entire regional economy when it is complete in 2005. Both the city of Hermiston and the Columbia River Port of Umatilla, which are partners in the project, believe easy access to cheap power will attract new industry to the area.

That has already happened with the Mississippi Band of Choctaw, one of the first tribes to invest in noncasino projects.

The Choctaw, which opened their Silver Star Casino in 1994, own 22 businesses and are the majority owners of three more, including high-tech industries that produce geoimaging devices and a 1,200-employee auto parts plant in Mexico, said John Hendrix, the tribe's assistant director of economic development. The casino makes about $200 million a year, he said.

The tribe, which has more than 9,000 enrolled members, contributes $1.2 billion annually to the Mississippi economy and is the state's fifth-largest employer, said Creda Stewart, tribal consultant.

Hendrix said the tribe learned the importance of having a varied economy when the auto industry shifted south to Mexico, along with 2,000 tribal jobs in that industry. The casino and its revenue, which filled the void, could someday disappear as well, he said.

"If we hadn't been looking for the next best project, we could have been back to the high unemployment we had before," Hendrix said. "All business is cyclical and you need to have the next thing in place."

Minthorn, the Umatilla treasurer, can imagine a day when a significant portion of the region's needs are met by the Wanapa Energy Center. If the wholesale market goes well, the tribe could double the plant's output within a few years, he said.

"A plant with 1,200 megawatts would pretty much light up a city like Seattle," he said.