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July 28, 2014

Economic Diversity in Indian Country: Two Success Stories

Tribal gaming is the most successful, visible, and controversial economic driver in Indian Country. The Indian Gaming Regulatory Act of 1988 was intended to promote the federal policy goals of “tribal economic development, tribal self-sufficiency, and strong tribal government.” Now, 241 tribes out of 565 federally recognized Indian tribes conduct gaming operations, and Indian gaming revenues totaled $26 billion in 2011. 

Despite that success, Indian reservations remain the most impoverished communities within the United States. Indian gaming faces inevitable competition from both non-Indian commercial casinos and internet gaming. Tribal economies must diversify, because gaming alone is not enough to bring most tribes out of poverty and bring jobs to Indian Country in the long term. Realizing this, most gaming tribes have implemented diversity initiatives. Here are two success stories in which visionary and committed leaders have diversified and strengthened tribal economies.

Winnebago Tribe of Nebraska and Ho-Chunk, Inc.  

The Winnebago Tribe of Nebraska’s experience is a roadmap for other tribes hoping to diversify. The Tribe’s first casino was a success, but competition from non-Indian gaming expansion quickly cut into revenues. In 1994, the Tribe created Ho-Chunk, Inc., a tribally owned corporation. Ho-Chunk now employs 1,400 people in 24 businesses in 10 states and 5 countries in construction, government contracting, green energy, and information technology. Ho-Chunk has grown to $230 million in annual revenue.

Ho-Chunk CEO Lance Morgan believes that reliance on gaming revenue is unsustainable and that true diversification is necessary to sustain tribes over time. He wrote in 2003, “Most tribes are using gaming dollars to create make-work type jobs, pay out per capita payments, dabble in economic diversification and pump up old social programs designed in another era.” He believes that diversification efforts require commitment, political stability and continuity, and limiting per capita payments. Morgan added that staggering tribal board terms is “the one structural device that has the most chance of creating an economic, political, and legal environment where success is gradual, sustainable, and tribally oriented.” 

Tulalip Tribes and Quil Ceda Village 

Meanwhile, the Tulalip Tribes of Washington have taken full advantage of a prime location 30 minutes north of Seattle on Interstate 5. The Tribes built a successful first casino in 1992, but even then recognized the need for economic diversification. The Tribes invested gaming proceeds in a municipal corporation to build roads, sewers, and a wastewater treatment facility for a business park called Quil Ceda Village. In 1998, Home Depot and Wal-Mart signed on as anchor tenants. Between 2003 and 2008, the Tribes built the 2,000-machine Tulalip Resort Casino, a 100-store outlet mall, a large concert venue, and a 12-story hotel for the casino. Today, Quil Ceda Village businesses, including the casino, generate over $720 million annually and employ 3,600 tribal citizens and area residents.

Stan Jones, Sr., who served as the Tribes’ Chairman for most of his 44 years on the Tulalip Board of Directors, was instrumental in Tulalip’s success. After completing eighth grade, Jones joined the Marines and served in Japan at the end of World War II. Jones worked in logging camps and as a fisherman, and he became a fishing rights activist in the 60s and 70s. His testimony was part of the government’s successful prosecution of the 1974 Boldt litigation recognizing tribal treaty rights of Washington tribes to half of the salmon catch in “usual and accustomed fishing grounds.”  United States v. Washington, 384 F. Supp. 312 (W.D. Wash. 1974). The decision propped up the tribal salmon industry at Tulalip. Jones then became the first Chairman of the National Indian Gaming Task Force in 1982 and subsequently negotiated a gaming compact with Washington in 1991. Jones says Tulalip was guided by the need for jobs for tribal members, a health care center, education, and protection of tribal culture. The Tribes use the proceeds from their businesses to fund those initiatives and  have repurchased allotted land within their reservation. The Tribes now control three-fifths of the 22,000-acre Tulalip reservation, up from a low point of only 600 acres. 

Conclusion

If one thing is clear from these examples, both Tulalip and Winnebago have benefitted by reinvesting gaming revenue into tribal businesses. Some tribes distribute revenue from gaming or judgments for the tribe via “per capita” cash distributions to help tribal citizens meet their own economic needs and spread the benefits of tribal success directly to tribe members. Other tribes choose to reinvest the revenue to create jobs and tribal programs for their members. While tribal business can reinvest these revenues tax-free, tribal members must pay taxes on distributions. Gaming tribes must balance the immediate needs of poverty-stricken tribal citizens and the need to make long-term investments in their economies. 

Lance Morgan has called gaming dollars “Indian country’s one big chance to set us up for decades of growth and prosperity.” Tribes that built a workforce, business expertise, and financing relationships though gaming can extend those competencies to new businesses. While there is no formula for lasting diversification, the Winnebago and Tulalip, along with many other successful entrepreneurial tribes, have shown that strong leadership, an emphasis on the long-term wellbeing of the tribe, and allowing new businesses time and resources to grow are crucial elements of success.

© Copyright 2014 Dickinson Wright PLLC

About the Author

Patrick Sullivan, Attorney, Litigation, Dickinson Wright Law Firm
Associate

Mr. Sullivan represents clients in tribal, state and federal litigation, regulatory matters before various government agencies and negotiation of intergovernmental agreements between Indian tribes and state and local municipalities. He holds an M.B.A from Portland State University and helped build several successful software companies. Mr. Sullivan’s popular articles in the Gaming Legal News are frequently republished in high-profile law blogs and online publications.

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