fr cherokeeA massive load of debt left the shoulders of the Eastern Band of Cherokee Indians last week following enactment of legislation to pay off $96 million in loans accrued for the new Cherokee Indian Hospital and the tribe’s wastewater treatment plant.

op minickIn his 1961 inaugural address, John F. Kennedy famously said, “Ask not what your country can do for you — ask what you can do for your country.”

Today the challenge posed by Kennedy might read: “Ask not what you can do for your country — ask what your country is doing to you.”

In the current political debate, the word ‘debt’ has become ubiquitous. Cherokee is no exception, where discussion of the debt of the Eastern Band of Cherokee Indians — and how, precisely, to dispose of it — has dominated the election season since it began this spring.

With one month to go until the election for chief, vice chief and tribal council, voters are standing up at every public forum to ask questions about the debt while candidates are touting their plans to eradicate it.

Meanwhile, the finance department for the tribe has gone on a massive public information campaign: opening a forum on the tribe’s website, starting a hotline where people can e-mail questions and get an answer back from a finance officer and leafleting the reservation with brochures entitled things like “A Closer Look at Tribal Debt.”

One question seems to underlie the whole discussion: how much, exactly, is the debt?

Answers from different sources have been many and varied, and depend very much on where you stand politically. The incumbent chief and vice chief claim the tribe’s debt is manageable. The challengers claim it has ballooned out of control.

It’s often said that numbers don’t lie, and with tribal debt, these are the raw numbers as of June 30, the end of the last fiscal year.

The tribal government has two debts it’s paying off directly: $57.2 million is still owed on the $107 million school complex and $10.8 million is still owed on the Sequoyah National Golf Club.

There’s also an $8.9 million series of loan guarantees that the tribe backs for the Cherokee Historical Association’s line of credit, the Tribal Bingo Enterprise and Balsam West, a broadband enterprise the tribe has a stake in.

If you take the position of the tribe’s finance department and Principal Chief Michell Hicks, that’s all the debt the tribe has — $76.9 million.

But then, of course, there’s the casino debt.

The casino is undergoing a massive expansion project, for which the tribe’s casino enterprise has secured a $650 million line of credit. So far, the enterprise has tapped $494.3 million of it.

Deputy Financial Officer Kim Peone expects that not all of it will be spent when the expansion is complete, and she doesn’t consider that tribal debt at all.

The casino is an entity of the tribe, but is run by a separate group called the Tribal Casino Gaming Enterprise. The gaming enterprise, not the tribe itself, is responsible for the casino’s half billion in debt.

But here’s where politics comes into play. The current administration running for re-election is adamant that tribal debt shouldn’t include casino loans.

And it’s true that, if the casino defaulted, the bank wouldn’t come looking for the tribal government’s assets.

“We’re not ignoring the impact that a default would have on this tribal government and the services that we provide to this community,” said Peone. “But the casino debt is not guaranteed by the tribe, it’s guaranteed by TCGE.”

From that perspective, there’s $76.9 million in debt. Meanwhile, the tribe’s designated account it makes debt payments from has just over $134 million in it.

Simple math tells you that the tribe could pay the debt off today, but according to Peone, choose not to because that money is earning more interest than the debt is costing.

“Currently, the interest rate on that loan is less than the funds that we’ve invested in,” said Peone. “From year-to-date, that fund has earned 4.5 percent as opposed to 2 percent in a loan.”

On the current schedule, she plans to have both the school and golf course loans paid in full by 2014.


Casino debt part of bigger picture

But opponents say you can’t remove the tribe from the casino; they’re inextricably linked.

For starters, profits from Harrah’s Cherokee Casino accounts for roughly 90 percent of the tribe’s operating budget. If more of those profits were diverted to making debt payments, the tribe’s budget for providing services to enrolled members — such as schools and medical care — would be impacted.  

Patrick Lambert, a challenger for the position of principal chief, said he thinks it’s impossible to separate casino debt from the tribe.

“It’s all tribal debt,” said Lambert, pointing out that the tribe’s operating budget would plummet precipitously were anything to happen to the casino debt.

This is Lambert’s second time going for the chief’s seat, and though he lost by a slim margin in the 2007 election, he defeated Hicks in the July primary. He is a lawyer for the Tribal Gaming Commission.

Lambert said he is concerned, too, about just where the tribe is investing its money to get such good returns, asking if such investments are too risky.

“I think it’s pretty clear on debt. I come from a background of small business, and so I understand about debt and borrowing and those type of issues,” said Lambert. “Debt is a necessity, but it’s also something you can’t let get out of control. We need to control the spending so we can start applying more of the revenues we do have to overall debt.’

Right now, said Peone, the tribe puts 8 percent of every dollar it spends to paying off its non-casino debts.

The casino pays $20 million a year on its debt, plus more on interest.

Both principal chief candidates have promised to pay down the debt if they are elected, though that could be plus or minus a few hundred million depending on what you consider “the debt.”

The current administration is out to prove that the tribe is on sound financial footing, especially compared to other municipal governments.

The opposition is calling for a check on spending and reigning in the debt.

And when voters visit the polls September 1, it may be the best numbers that win.

Principal Chief Michell Hicks hinted last week at a renewed effort to bring live dealers to Harrah’s Cherokee Hotel and Casino, in a ceremony renewing the management contract between the Eastern Band of Cherokee and Ceasars Entertainment.

At an event christening the first phase of the casino’s $650 million expansion project, Hicks said the tribe continues to lobby Gov. Bev Perdue to allow live card dealers at Harrah’s. Currently, the state limits the tribe to electronic gambling only.

“We’ll continue to push her to do the right thing,” said Hicks, who is running for a third term for office this year. Hicks said he hoped the governor would wake up and “smell the roses” on the issue, but later said that such negotiations were an ongoing process rather than specific haggling with the state.

“The Eastern Band of Cherokee is continually trying to impress upon all elected officials and state leaders the importance and value of an expanded gaming enterprise,” Hicks said in a later statement. “We maintain a cordial and productive relationship with the Governor’s office and the state legislature officials and look forward to continuing that relationship.”

Negotiations for live dealers and table games — slot machines, craps, roulette and other Las-Vegas style games in addition to live card dealers — stalled last year when a video poker company brought suit against the state. The suit claimed the governor had no legal right to negotiate with the tribe for increased gaming freedom. The same company hamstrung talks in 2009 with a separate suit, which charged that allowing video gambling in Cherokee, but nowhere else in the state, was illegal and unfair.

Harrah’s General Manager Darold Londo said that while the casino wasn’t involved in talks to bring the stepped-up gaming to Cherokee — that’s between the tribe and the state — it would certainly be a boon to the business if it came.

“I’d like to think that we would offer a full-service casino experience,” said Londo. “With our proximity to Atlanta and Charlotte and Knoxville, where you have people that fly to other places to play those games, if we offered those things they could come to Cherokee instead.”

The tribe’s renewed interest in negotiating comes at a time when casino distributions are down — 16 percent according to Hicks — though he and Londo both said they’re hopeful the new expansion, which includes expansive luxury suites for high rollers and is the largest construction project in the Southeast, will crank up revenues again.

As the primary election for principal chief draws closer, however, many in Cherokee are asking how the tribe can pull its focus away from Harrah’s and diversify its revenue portfolio.

Currently, 87 percent of the tribe’s income is generated by Harrah’s. The proceeds are split evenly, with half being divvied up among tribe members and the other half funding tribal operations and programs.

Hicks himself has said that the tribe needs to move away from the casino-as-cash-cow model, and a central tenet of his platform is eradicating the debt.

The Eastern Band now hold almost a billion dollars in debt — $650 million of that is from the major expansion underway at the casino, an endeavor approved by tribal council in 2007.

Critics, including opponents running against Hicks for chief, have questioned whether it was wise to take on so much debt.

Hicks said he has a plan to eradicate the debt completely within the next four years, though he hasn’t spelled out the details of how he’ll do it.

Moving forward, he said, the tribe should look less to gaming and more to its historical traditions, especially arts and crafts.

“To generate gross receipts you’ve got to create business, and we’ve got to change our view of what Cherokee is about,” said Hicks. “We’ve got to get creative by using the thing that we’re better at than anybody else.”

While he conceded that Cherokee couldn’t compete with tourist Meccas of Gatlinburg and Pigeon Forge — they just have less real estate to work with — their selling point is the deep cultural heritage and quality craftsmanship the Cherokee bring to their crafts. This, he said, should be the basis of the new, diversified Cherokee economy.

But even as the call for fiscal diversity is made on all sides this election season, Hicks is still behind the push for live dealers, saying it would bring more jobs and dollars into the economy and help decrease the debt he’s promised to demolish.  

New suites cater to the high rollers

The crowning touch of Harrah’s new hotel tower is its range of newly opened luxury suites, reserved for casino high-rollers and VIPs.

The suites feature expansive mountain views, designer furnishings and subtle touches of opulence, like TVs in mirrors, marble logless fireplaces, 5-person Jacuzzis and wrap-around porches. Some even sport names like Crisp Hydration

The 21-story Creek Tower, the third hotel tower on campus, is part of a larger $650 million expansion of the casino.

The expansion includes a 3,000-seat entertainment venue that opened last fall, an 18,000-square-foot spa, Asian gaming room and additional poker room and will double the footprint of the casino floor.

New restaurants and retail stores will bulk out the space, too; Southern kitchen queen Paula Deen installed one of her renowned restaurants there earlier this year, while Italian chain Brio and the Ruth’s Chris steakhouse franchise are scheduled to move in by the end of 2012.

It’s currently the largest hospitality expansion project in the Southeast and, when finished, it will boast the most hotel rooms in the Carolinas.

The Eastern Band of Cherokee contract the casino’s management to Caesars Entertainment, which runs more than 50 casinos and seven golf courses across the globe. Harrah’s Cherokee has been in business since 1997 and opens its doors 24 hours a day.

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