Tribe Signs Landmark Union Labor Contract For Casino Dealers

The Mashantucket Pequot Tribal Nation has reached a tentative agreement with the United Auto Workers Union (UAW) for a labor contract and collective bargaining on behalf of 2500 of table-game dealers at Foxwoods Resort Casino in Connecticut. The agreement is unique both for its scale – Foxwoods is billed as the largest resort casino in the United States – and for the fact that it was negotiated in the context of Tribal law rather than federal labor law.

The agreement has several facets that differ significantly from typical union labor contracts. The Nation’s laws prohibit strikes by workers and lockouts by owners, so the contract does not contain a strike provision. In the event of a labor dispute that cannot be resolved through negotiation, the matter will be submitted to private arbitration for resolution. The contract provides an average 12 percent increase in dealers' wages over two years, changes the distribution of tips for dealers, includes programs to reduce repetitive stress injuries, and creates a 24-table smoke-free gaming pit for workers and customers who prefer a smoke-free environment.

For the UAW, the agreement is being heralded as a major victory in their union organizing efforts. "Working together, we proved casino workers can successfully exercise their right to have a union under tribal law," said UAW Region 9A Director Bob Madore. "Our settlement demonstrates what we have known all along: that tribal sovereignty and employee rights need not be inconsistent. We value the investment and jobs the Mashantucket Pequot Tribe has brought to Connecticut, and we look forward to promoting this exciting resort as a destination of choice for working families and union members across New England."

For the Mashantucket Pequot Nation, the agreement may provide a measure of financial predictability for its casino operations. The casino, by far the Nation’s largest revenue source, is behind in its debt repayments and has been working with creditors to restructure its financing. The agreement with the UAW sets wage and benefit rates for two years, and eliminates the potential for labor unrest or further legal battles with the union or the federal government.
 

Mashantucket Pequot Reaches Deal To Extend Foxwoods Casino Debt Forbearance

The Mashantucket Pequot Tribal Nation, owner of Foxwoods Resort Casino, has reached a new agreement in principle with its senior lenders to extend a debt forbearance agreement. The agreement is designed to provide more time to improve the casino’s cash flow and repayment ability as it works to restructure $2.3 billion of debt. The existing forbearance agreement would have expired January 20th; the new agreement extends the timeline to April 30, 2010.

The agreement in principle has been made with a majority of the Tribal nation’s lenders and will be finalized and executed shortly, according to the Tribe’s spokesperson.  The statement emphasized that the Nation's debt restructuring efforts are separate and distinct from operations at Foxwoods and will not have any impact on guests, employees, suppliers or business partners at Foxwoods or MGM Grand at Foxwoods.

“Foxwoods remains committed to providing its guests with its signature guest service, unparalleled gaming options, the very best in entertainment, and world-class services, dining and amenities,” according to the statement.
 

Ruling In Lac du Flambeau Casino Bond Case Highlights Tribal Sovereignty Power Against Creditors

When the Lac du Flambeau Tribe fell behind on repaying $50 million in bonds that financed its casino in northern Wisconsin, bond issuer Wells Fargo asked a federal judge to appoint a receiver to run the casino and increase payments on the debt service. As reported on Turtletalk, the judge refused based on principles of Tribal sovereignty, leaving the bank and bondholders with few legal options other than negotiating with the Tribe.

In 2008, the Lac du Flambeau issued bonds to provide capital for the construction and operation of its casino. The bonds carried interest at 12% and required a monthly payment from the Tribe of approximately $800,000. With the economy plunging and over $46 million still to be repaid on the bonds, the Tribe stopped setting aside money to service the debt. Wells Fargo then filed suit in federal court to appoint a receiver to run the casino, in accordance with the terms of the bond agreement the Tribe executed with the bank.

The Tribe argued that the receivership clause in the bond agreement was so broad that it was actually a management agreement that would require approval by the National Indian Gaming Commission. The Commission had not been involved in negotiating the deal and did not provide any approval, therefore the Tribe argued that the agreement was void. The judge’s refusal to appoint a receiver essentially validated that position, leaving Wells Fargo with no direct ability to take control over the casino’s operations. “The entire agreement is a void issue,” said Tribal administrator William Beson.

The judge’s decision means the Tribe is not legally responsible to pay back the money, said Monica Riederer, the Tribe’s attorney. However, she said that does not mean the Tribe will completely renege on the debt. “They will do whatever they’re legally required to do,” Riederer said. Meanwhile, investors and Tribes across the country will no doubt closely monitor the impact this situation has on the ability of Tribal entities to obtain future bond financing. Having no ability to enforce collection of a bond debt is “a nightmare for investors,” said Megan Neuburger, an analyst who follows the Indian gaming industry for Fitch Ratings. “It’s sort of an investor’s worst-case fear.”

 

Cohesive Tribal Government Is Critical For Economic Development

(Ken Lambert/Seattle Times)

While the appropriateness of government intervention in private business is a hotly-debated topic around the world, a clear truth is emerging closer to home: cohesive and sound governance is a crucial element for economic development in Native American communities. The proof comes both from success stories such as Tulalip and Pechanga, as well as the cautionary tale currently playing out within the Snoqualmie Tribe.

The Snoqualmie Tribe regained federal recognition in 1999 and last November opened a showpiece casino a half-hour from downtown Seattle The casino, financed with $375 million in debt, was conceived as a means of bringing prosperity to the Tribe's approximately 600 members. Instead, political infighting has brought turmoil, reduced revenue, and uncertainty regarding the Tribe’s economic future.

The problems stem from socio-political divisions that divided the Tribe’s governing body and rendered it unable to function effectively. "They were a split council and would not come together for joint meetings off and on since May," said Judy Joseph, superintendent for the Bureau of Indian Affairs (BIA) Puget Sound Agency. "To maintain a government-to-government relationship, they have to be a viable Tribal government," Joseph said. "If there is any question about that, it causes red flags to go up, and they were split, they were not meeting."  In August, the Tribe's administrative offices were padlocked and some of its federal funds frozen. Elders stepped in to dissolve the council and take charge until new elections could be held — but they had no constitutional authority to do that. The Tribe was facing the prospect of the U.S. government assuming administrative control of the Tribal government. The BIA offered mediation this month, which resulted in reinstatement of the council that was in place before the disputed May election.

Meanwhile, the new casino has only been producing one-fourth of the revenue originally budgeted, and its operations are mired in administrative and regulatory problems. Unresolved federal audit findings could expose the Tribe to significant liability, and until recently federal funds allocations to Snoqualmie were frozen by the U.S. government. To address these significant issues, the Tribe's general membership will meet this month to consider election procedures and set a date for a new council election.

While dissension and differences of opinion are common for any political entity, the need for Tribes to maintain a solid, functioning government structure is of paramount importance for both political and economic purposes. Both the federal government and private investors are wary of contributing capital in places where leadership is in doubt, making it crucial for Tribes to demonstrate that their decision making bodies and procedures are stable.

New Federal Policy May Open Door For Off-Reservation Casinos

As reported in the Wall Street Journal, the Department of Interior is reconsidering a Bush administration policy that limited Tribes from developing off-reservation casinos unless the sites were within “commuting distance” of the reservation. The new policy would eliminate that proximity requirement and allow Tribes to build casinos on trust land farther from their reservations – and thereby likely closer to larger population centers that would offer more customers. Some areas Tribes are considering are actually on their ancestral lands, but were separated from the Tribe’s main land base through 19th Century treaties.

Over 20 Tribal 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 want to develop a casino along the Columbia River Gorge, and the St. Regis Mohawks have plans for a site in the Catskill Mountains, about 350 miles away from the Tribe's reservation -- but less than a two-hour drive from New York City. Some state governors such as David Paterson of New York and Arnold Schwarzenegger of California have come out in favor of certain projects in recent months.

Despite concerns about the economy, some off-reservation casino projects near major population centers have been able to line up financing for construction and operations. A private investment company 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.

Tribes across the country have opened hundreds of casinos since the 1987 U.S. Supreme Court ruling that loosened state restrictions on Tribal gaming. In 1988, Congress authorized development off-reservation casinos. Interestingly, some Tribes that developed the first casinos are now working to block off-reservation gaming by other Tribes, and Senators from Nevada, California and Arizona wrote Interior Secretary Ken Salazar to oppose off-reservation gaming, saying it "violates the spirit" of Tribal gaming law.