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Gaming tribes need to save for rainy day

SALT RIVER PIMA-MARICOPA INDIAN COMMUNITY, Ariz. - American Indian gaming revenue may go away some day, making it important for gaming tribes to plan for a rainy day, according to the chief financial officer of a successful casino tribe.

Michael LaLonde, chief financial officer of the Salt River Pima-Maricopa Indian Community near Phoenix, thinks tribes face political risk from states, resistance from the non-Native community, and bad publicity from the national media.

"Without doubt, Indian gaming revenue is not guaranteed to last forever," said LaLonde in an article written with consultant Bill Birnbaum, president of Birnbaum Associates, Costa Mesa, Calif.

The article, "Use of Gaming Revenues: Balancing the Short and Long-Term Needs of the Tribe," is posted at Birnbaum's www.indianstrategy.com.

Gaming tribes with excess revenue "after funding services, infrastructure improvements and operation of their government" therefore need to think clearly about what to do with it, the two write. They need to balance short-term strategy: the per capita payout - with long-term strategy: "they can devote most of that money to prepare for 'a rainy day.'

That's because "the continuance of revenues is far from a 'sure bet'. There's some risk that this source of funds may actually be in jeopardy."

Political risk will come from increasing tension with states, who because of federal cutbacks are "making ever-increasing financial demands on the tribes."

Non-Native communities adjacent to Indian gaming operations are becoming more resistant, the two report.

"Claims of increased traffic, increased need for police protection and loss of quality of life are becoming troublesome constraints to establishment, continuance and expansion of Indian gaming casinos."

Finally, bad press like two recent articles in TIME magazine and other "gaming-critical journalism" isn't helping, either.

The two feel "those tribes which invest a significant portion of gaming revenue for such eventuality are demonstrating responsible financial management."

In effect, they say, these tribes are creating an insurance policy, "asking their members to forego cash today for continuance of services in the future." Investments can include "economic development projects, new businesses, or an investment portfolio."

A tribe can invest tax-free, the two write, and a larger portfolio "may enable it to negotiate a higher rate of return. The tribe's larger portfolio also makes possible the hiring of more professional investment management."

Balancing per-capita payouts and investments will vary with each tribe, they say, but each tribe should consider six questions:

*When might casino revenue go away?

* What services for members are required in the longer term?

* How many people will require services?

*How much will such services cost?

* Will other revenues grow or shrink?

* What is the likely return from a safe investment?

Coupling how much a tribe will receive on its investments with an assessment of how soon gaming revenue will go away, "the tribe can then determine the ongoing cash investment required to build such nest eggs - thus to provide for the tribe's future financial needs."

In another article on the Birnbaum Associates Web site, "Strategic Planning for Native American Communities," Birnbaum assigns vision responsibility to the tribal council, strategy to administration, and tactics to the individual divisions or departments of the tribe.

He recommends an educational workshop on strategic planning, to "build enthusiasm for the process." Using an actual case, "participants will then extend their thinking into the needs of their own community."

Next comes the council's planning sessions, which may include analyzing surveys of community members. Then, the vision can be developed in a series of one-day meetings.

The administration's planning sessions follow, and when their strategy is developed, the departments also should have planning sessions to develop action plans.

Once strategy has been put into action, reviews may happen about annually for the council, quarterly for the administration, and more frequently at the department level.