Grant to help trout farm fish for new markets

Sunburst Trout Farms in Haywood County plans to add jobs and expand its operations thanks to a grant from the U.S. Department of Agriculture.

The farm received a nearly $300,000 Value Added Producers Grant from the USDA to help expand its market, namely finding new customers to buy more trout. The grant will help with everything from hiring a sales person to the upfront cost of trout fingerlings, which are then raised to full size at the farm.

Sunburst, founded by Richard Jennings, is a third generation family owned and operated company that processes fresh ready-to-cook and ready-to-eat trout products.

“The main goal is to stabilize things financially here,” said Sunburst’s Chef Charles Hudson. “We couldn’t have done it without that funding.”

The project, which will begin in April, will include purchasing more trout fingerlings, hiring new marketing and processing workers and installing new software to increase ordering efficiency. The plan is estimated to cost $500,000. The company was awarded $10,000 from the North Carolina Value-Added Cost Share Program in addition to the USDA grant.

Sunburst in particular hopes to increase business during winter months. The months of January, February and March are typically very slow for everyone in the mostly tourist-dependent region. The majority of Sunburst’s customers are within three hours of its Haywood County location.

But if the company is able to spread to new states, it could see more money rolling in throughout the year. One possible market is Florida, which gets a seasonal influx from people trying to escape the winter chill elsewhere.

“They (Florida) are busy when we are slow,” Hudson said.

Sunburst does not hatch its own trout from eggs but rather purchases them from trout hatcheries in Western North Carolina. The grant will allow them to increase the number of fish it purchases and therefore the number of trout it is able to sell.

Sunburst hopes to add about 100 new customers a year with the help of the grant funding.

To market the extra fish, Sunburst will also create a new marketing sales position. The job will include extensive travel and focus on expanding the company’s current market in the Southeastern U.S. Most of Sunbursts customers are restaurants, though their products are also available at some grocery stores.

Sunburst will add another two other positions to help carry the extra workload at its facility.

Last year, Sunburst sold about 250,000 pounds of trout. This year, it hopes to sell more than 300,000 pounds, Hudson said.

“It’s going to be a really good thing for not only us but for the county as a whole,” Hudson said.

Jobs at what price? Jackson has long history of extending questionable loans

Supporters of Jackson County’s revolving loan program describe the financial give-outs as a tool in the county’s economic toolbelt, a boost to deserving businesses that can’t receive critical, even lifesaving, financial help through banks.

But five defaults since 1993 when the loans started, out of a total of nine loans, raises serious questions about the program.

It’s been awfully easy — too easy, county leaders admit — for businesses in Jackson County to get loans without providing adequate collateral should the company go under.

Jackson has flat-out lost $525,000 since starting the program because of businesses folding. Another $420,000 is on the line, with the exact losses depending how much the county can recoup from selling off collateral.

“It is not just a gift or a grant,” said Jackson County Chairman Jack Debnam, who has strongly advocated for stiffer loan restrictions. “If it is a grant, call it a grant. If it’s a loan, certain criteria should be met.”

The revolving loan fund is nowhere close to being tapped out. Despite having $820,000 in outstanding loans, there is another $756,000 in the kitty.

Revolving loans are generally considered high risk, used to help start-ups or struggling businesses with an injection of capital when banks won’t. But those needing that help most are generally the least able to afford payback. That has certainly been Jackson County’s experience.

How loose has Jackson County’s definition of collateral been? The worst-case example involves QC Apparel. When the company recently went belly up after years of protracted sinking, Jackson County found itself the proud possessor of $5,000 worth of sewing machines.

Board minutes from August 2006 show the board of commissioners at the time agreed to let the textile manufacturer, which made such goods as pillowcases and bed-in-a-bag materials, off the hook. In a restructuring of the company’s loan, commissioners voted to release the house of QC’s owner Clemmy Queen as collateral in favor of the company’s equipment.

Now the county is about to sell these used machines at what will inevitably prove less — a lot less — than the money owed, according to Jackson County Manager Chuck Wooten.

QC Apparel owes Jackson County a total of $426,000 in loan money and back rent for space at the now county-owned former Tuckasegee Mills building. Given the estimated $5,000 value of the sewing machines, the county is left with a large difference to write off.

The latest company to default on its revolving loan with the county is Metrostat, a small Internet service provider. The company announced it would close three months ago and could not pay back some $250,000 in outstanding loans it owed the county and town of Sylva.

Metrostat had put up fiber optic lines as collateral, and the county and town are in process of selling off those fiber lines— but they won’t recoup the full balance owed on the loan.

The county might also find itself in possession of equipment for making biodiesel due because of a default by Smoky Mountain Biofuels.

But the county hasn’t totally curbed its appetite for non-standard collateral. When making a $289,000 loan to an AM radio station last month, the county agreed in principle to accept the federal license of the radio frequency as the primary collateral backing the loan. Federal regulations prohibit frequencies from being put as collateral, however, so the county is working with the prospective station owner to find a substitute.

 

Another county, more revolving loans

Now another local government wants to get in the revolving loan business. Macon County is considering instituting a program of its own, ostensibly to boost the creation and staying power of local businesses. And, just as in Jackson County, leaders there are touting the system as a good method of igniting the engines of economic development. In this weedeater-like two-cylinder economy that once roared at a mighty 10 cylinders (think Ford F-250 pickup truck), any possible forward motion has moths-to-flame attraction for county leaders and business entrepreneurs alike.

“I’m thinking of a business person out there who might want to expand a business, and needs some money to get off the ground,” Macon County Commission Chairman Kevin Corbin told fellow board members during a recent meeting. “Banks aren’t interested in such small loans.”

Macon County Attorney Chester Jones, who was ultimately asked to review possible mechanisms for such a county loan program and report back to the board, cautioned prudence.

“You’ve got to structure the deal so that at the end of the day, the deal will be beneficial to the public,” Jones said.

And that’s exactly what’s in question next door in Jackson County: With that outstanding bill to its revolving loan program of just more than $800,000, supporters are hard pressed to easily defend and explain exactly what the public benefit might be.

Commissioner Joe Cowan, the longest serving commissioner on the board, said he believes the issues date to how and why the revolving loan program was conceived: job creation at any price.

“The whole purpose was to create jobs,” Cowan said. “Whether you made money, you didn’t, or even if you lost a little.”

Over time, Cowan said, people involved in the loan program had different views, and proper collateralization fell by the wayside as job production became ever more emphasized. Loans were extended to businesses that were “fixtures in the county and to good people,” the commissioner said, “but somehow we (the county) just let them get money without sufficient collateral. The county bent over backwards to protect job growth.”

Despite the defaults, county taxpayers aren’t directly losing dollars because of the loans. Money to get the revolving loan fund started from grants. Although the revolving loan fund hasn’t been a drain on the county’s tax coffers, the question remains, however, whether it has done the job as promised: to help build and boost economic development in Jackson County.

Debnam touted Sequoyah Fund’s solid track record and methods of extending loans, which requires prior in-depth scrutiny of an applicant’s financial status, as a possible model for Jackson County. This Eastern Band of Cherokee Indians’ regional loan program has used casino dollars to help provide training and technical assistance to more than 1,000 individuals and extended more than 135 loans totaling almost $4.6 million since 2001.

 

Controversial history

The revolving loan situation in Jackson County verged on the bizarre in 2005. Commissioners’ relationship with the now defunct Economic Development Commission fractured amid questions about who was in charge of the revolving loan program. There were questions about whether favoritism played roles in some of the loan participants receiving unusually generous loan terms.

Ultimately, deputies were ordered to seize EDC financial records, and an auditor was brought in to review the group’s finances. The auditor eventually concluded the records were too spotty to perform a conclusive audit.

“The whole thing was ill-conceived from the beginning,” said Commissioner Doug Cody of the revolving loan program. “It wasn’t handled in a business-type manner.”

Today, there is no EDC in Jackson County, though there have been signs of resurrection by current commissioners — though probably in an entirely different form and unarguably under commissioners’ oversight and control.

The previous board of commissioners had likewise attempted to jumpstart the EDC, but had modeled the new entity, much like the old one, by sharing control with the towns. It wasn’t long before the newly hired EDC director resigned, claiming the entity was floundering because of a lack of clear structure and mission. The entire effort soon fell by the wayside.

Despite the loan program’s history of woes and current financial shortfalls, commissioners said that they support the concept of a county revolving loan program if the controls are tightened.

“I think it has its place,” said Cody, a fiscally conservative Republican.

Cody supported extending two recent loans made by the county, one to Jackson Paper for $250,000 (the Sequoyah Fund kicked in an additional $250,000) and $110,000 to local resident Roy Burnette who wants to get Sylva radio station WRGC back on the air. The station got an additional loan of $179,000 from the county’s separate economic development fund.

To qualify for the revolving loan fund, businesses must create a minimum of three jobs with a threshold of $10,000 for each job created. The economic development fund doesn’t have a specific job-creation threshold.

The loan to Jackson Paper was to rebuild the wood-fired boiler at the recycled paper manufacturing plant. The terms of the revolving loan was for 10 years at a 3.25 percent interest rate. The collateral is a second lien on 47 acres and buildings in downtown Sylva, which Wooten said last week should adequately cover the county’s financial exposure following any possible default.

The interest rate for Jackson Paper is the same rate as proposed by the Sequoyah Fund so that explains why it is higher, Wooten said.

“I suspect we would have loaned at a lower level if it had involved only Jackson County,” he said.

The county opted to give Burnette his loan at 2 percent interest, but the money isn’t being doled out until the county is satisfied with the collateral being offered. A move to put the county on the FCC license along with Burnette failed when the FCC flatly ruled out the idea. Wooten said he believes other collateral will prove satisfactory to the board, as did Cody.

Wooten knows his numbers: before becoming county manager, he worked for three decades as Western Carolina University’s finance officer. The revolving loan, he said, needs “to be a little more businesslike. This is not ‘angel’ funding.”

And when it comes to the collateral that underpins loans, the county really “does not want sewing machines,” Wooten said. “I do think we need to be conservative. But, it is something in our toolbox.”

 

Who got what and when? A history of  Jackson’s revolving loan recipients

• August 1993: Hensley-Dean, $28,090. Paid in full June 2001. Out of business.

• May 1995: Q.C. Apparel, $358,355; owes county $425,901. Loan terms renegotiated seven times. Out of business.

• December 1997: Clearwood LLC: $225,000; owes county $80,104. Out of business.

• June 1999: Southern Lumber: $218,000; paid in full July 2008. Out of business. County bought property and the owner used some of those proceeds to pay the loan off.

• May 2001: County Collections: $14,000; balance of $12,157 “written off” by commissioners. Out of business.

• August 2002: CMG, later Fraternal Composite Specialties: $325,000; owes county $82,452. They are current on payments though owing that money.

• November 2004: Metrostat Communications: $250,000; owes county $259,228. Out of business. Assets transferred to county and Town of Sylva to sell off, but likely won’t be enough to cover outstanding balance.

• August 2006: Smoky Mountain Biofuels: $148,000; owes county $160,357. Out of business. Assets and collateral still being determined.

• March 2011: Webster Enterprises: $70,000; owes county $71,158.26. Payments deferred until April 25, 2013.

• Current: A pending $110,000 loan to Roy Burnette in Sylva to get local WRGC back on the air. County still trying to determine appropriate collateral.

• Current: A pending $250,000 loan to Jackson Paper for repair work at the Sylva plant. That loan looks certain to move forward.

 

Where Jackson’s loan program started

Jackson County’s revolving loan has its genesis in a 1982 Community Development Block Grant for $750,000, a joint effort with the town of Bryson City. Tuckasegee Mills received $738,500 in a loan, and Jackson County received 50 percent of a payback — $553,973.

Another grant for Jackson County for $291,000 enabled a loan to a business for $285,500. Ultimately, the principal from the two grants totaled $654,750 — a nest egg for the revolving loan fund.

 

The three guiding principles for Jackson’s loan program

• Creation of new job opportunities and the retention of existing jobs … principally for people of low and moderate income.

• To further new business development or expansion within the county.

• To enable private business development that would not take place without loan assistance from the county.

Radio station wants loan from Jackson County

Prospective buyers of an AM radio station in Sylva could land a $289,000 loan from the Jackson County economic development fund in exchange for creating 11 jobs.

Jackson County commissioners already approved $179,000 of the loan and are poised to approve the remainder next week — if the county can figure out reasonable collateral should the radio station default. The money will primarily be used to purchase the radio license from its current owner, but since a radio station license is not very tangible, the county is hesitant about how it would serve as collateral for the loan.

Jackson County Attorney Jay Coward suggested another option: Jackson County’s name could be included as a co-license holder when filing for the frequency from the Federal Communications Commission.

“If not we would certainly have to rethink it,” Coward said of the loan.

The radio station, currently owned by Georgia-Carolina Radiocasting Co., went dead in August. Its owners cited a lack of revenue. Jackson County resident Roy Burnette, who once worked for WRGC and other local AM radio stations in the region, wants to get the station back on the air.  

Burnette says the new radio station would broadcast at 5,000 watts, reaching from Canton to Topton in Cherokee County, and that he would create 11 jobs.

By comparison, WCQS, the National Public Radio station based in Asheville, employees 12 fulltime and four part-time employees, said executive director Jody Evans on Tuesday.

Commissioners appear partly driven by a desire to bring back the local AM radio station in addition to the jobs themselves. Commissioner Doug Cody said he believes WRGC represents more than simply job creation, from instilling community pride to broadcasting emergency weather information.

“It is a service to the entire county,” Cody said.

Jackson County will not actually become any sort of “partner” in the radio station, even if the county does end up as a co-license holder, Chairman Jack Debnam said.

Maybe, maybe not: The idea has yet to be researched and vetted, Debnam said, adding that it would be Coward’s job to ferret out such answers before commissioners’ actually vote on the final piece of the loan next week.

Wally Bowen, founder and executive director of the nonprofit Mountain Area Information Network in Asheville, described the potential for public-private license arrangement between the county and the station as unusual. Bowen said that he wasn’t immediately aware of legal barriers that would prevent such an occurrence.

“But whether it would be a good investment, one would really have to know more about the market and the assets involved,” Bowen said.

When asked about the likelihood of the AM radio station surviving in today’s advertising landscape, Jackson County commissioners said they were relying on the financial projections provided by the prospective radio owner.

— From staff reports

Imperial Hotel caught in civil suit over unpaid building materials

The Imperial Hotel in Canton has become entangled in a legal battle as a result of unpaid bills by a contractor.

Haywood County Builders Supply has filed a civil suit and lien against the hotel, owned by outgoing Canton Mayor Pat Smathers. The claim states that Smathers and his contractor Gary Cochran failed to pay for $29,084.93 in building supplies, such as lumber, paint, flooring, doors and nails. The supplies were used to renovate the old Imperial Hotel, which was built in 1911.

“It is what it is. I don’t agree with it,” Smathers said, adding that he didn’t want to “lambast anybody.”

Smathers said that the problem is between the contractor and Haywood Builders. Smathers said he paid Cochran for the cost of all the materials.

“Everything has been paid to the contractor,” Smathers said.

However, Cochran said Smathers still owes him money, and as a result he hasn’t been able to pay his bill with Haywood Builders.

Haywood Builders fronted the supplies and materials to Cochran for the job. Cochran would then wait to get paid by Smathers before paying the invoice with Haywood Builders.

“I paid as I got reimbursed,” Cochran said. “There is still money outstanding.”

To help cover the cost of the renovations, Smathers got a $90,000 grant from the North Carolina Rural Center to renovate the Imperial Hotel. It was a one-to-one matching grant, requiring Smathers to spend $1 of his own money for every $1 he got in grant funds.

He’s spent most of the money, according to the Rural Center. As of Nov. 10, the remaining grant funds totaled about $4,000.

The Rural Center also awarded Smathers a previous $25,000 grant for architectural and engineering plans.

Cochran said the grant process created a cash flow quandary. Bills for labor or materials must be paid for first and only then could he be reimbursed for the costs.

The grant money came in “slower than I ever thought,” Cochran said.

The county, which had to sign off on the grant and act as the fiduciary manager, requires both invoices and cancelled checks from Smathers before submitting an application to the Rural Center for reimbursement from the grant funds. Then, the center must process the application prior to reimbursing the money. This procedure can take several weeks.

Haywood Builders has also filed a civil suit against Cochran and Smathers. According to the suit, Cochran owes the building supply company an additional $186,954.96, plus interest and fees, for other projects.

Cochran said he sat down with Haywood Builders and tried to work things out many times but was unable to work out a payment plan.

“It’s been a downturn in the economy,” Cochran said. “We’ve been down for the last couple years.”

Last year, Haywood County issued 172 building permits for privately owned housing units — compared to 366 in 2008, according to data from the U.S. Census Bureau.

The firm representing Haywood Builders declined to comment.

New Cherokee Home Center fills a void

While the rest of the mountains remain mired in a construction slowdown, a new building supply and home improvement store opened in Cherokee last month, filling what seems to be a very real void.

A steady stream of construction workers on tribal building projects and a massive expansion at the casino have been frequenting the store since it opened four weeks ago. Saw blades break, nail guns run out of nails, the bolts brought to the job site are the wrong size.

But there wasn’t anywhere in Cherokee to buy them.

“You couldn’t buy a paint brush, a gallon of paint, a hammer or nail,” said Danny Wingate, who is vice president and a partner in the new Cherokee Home Center. “I had a guy come up to me the other day and say Mr. Wingate, I want to thank you. This cost me 22 cents but if you weren’t here it would cost me $5 and 22 cents because I would have to drive to Sylva to get it.”

Of course, Wingate isn’t going to make payroll and keep the lights on by selling nuts and bolts and pipe fittings. Cherokee Home Center is a miniature version of Lowe’s or Home Depot, stocking a little bit of everything a homeowner might need — washing machines, refrigerators, light fixtures, faucets — none of which could be found on the Cherokee reservation until now. Even simple tools like drills, lawn mowers, chainsaws and ladders weren’t available at any local stores.

Wingate invested close to $1 million to get the store up and running, most of that in inventory.

Wingate looks forward to his daily forays over the mountain to Cherokee from his home base in Waynesville, where he is the manager of the successful and longtime building supply store Haywood Builders.

Cherokee’s thriving economic scene fueled by Harrah’s Cherokee Casino and Resort is a welcome contrast to the rest of Western North Carolina, where the construction trade is still very much stuck in the recession. Sales at Wingate’s Haywood Builder’s store in Waynesville are off 65 percent from their high during the peak of the building boom.

“It is exciting to be doing something like this at time when people are still in a slow down,” Wingate said of the new Cherokee enterprise.

The venture wouldn’t be possible if not for the booming casino business and its trickle down effect  — from the salaries it provides local people, the annual cut every tribal member gets from casino profits, and the myriad tribal programs and services it funds.

The casino attracts 3.5 million guests a year. There are hundreds of hotel and motel rooms in Cherokee — and that means hundreds of potential plumbing malfunctions. Every time a hotel had a leaky faucet or broken toilet handle, they used to make a trip to Lowe’s in Sylva. The casino has its own stock room for the parts that commonly tear up in its hotel rooms, but inevitably they don’t have everything and have already been hitting the new Cherokee Home Store.

SEE ALSO: Casino a catalyst for re-discovery of Cherokee power

SEE ALSO: A rising tide lifts all boats

“They have hundreds of hotel rooms that tear up every day. They come in here with certain light bulbs, certain plumbing valves, certain knobs,” Wingate said.

There has also been a steady stream of construction workers working on the $633 million expansion of Harrah’s Cherokee Casino and Resort stopping in for parts and tools. At its height, the expansion boasted 1,100 construction workers and was the largest building project in the Southeast. While it is in the final stages now, it’s still the biggest construction site in the region and won’t be completely finished for a year — and there’s still plenty of money to be made selling to the contractors.

Crews building a fountain for the new casino entrance keep stopping in and buying concrete mix and epoxy.

“Nobody figures everything they need on a construction job. It makes sense to pick it up here instead of having to drive for miles,” Wingate said.

Wingate has also realized that with over 1,000 campgrounds and RV sites in Cherokee, travelers constantly need parts to fix or outfit their camping rigs.

Wingate and Haywood Builder’s manage Cherokee Home Center under a contract from its majority owner, tribal member and Cherokee businessman Chandler Ray Cooper.

 

A service to the tribe

The casino nets a profit of close to $400 million. Half goes to tribal members, and Wingate hopes to figure out just what kinds of things tribal members want to buy so he can stock them. Next week, he is bringing in a line of mattresses, something else you couldn’t buy in Cherokee.

“If we match the products up, appliances, bedding whatever it is, with what people want, we know they would prefer to spend their money at home rather than go out,” Wingate said. “We want to be everything they could get at a big box store.”

Tens of millions of dollars hit the wallets of tribal members twice a year on per cap day. But many tribal members spend ahead, buying things in advance with the promise to pay when their casino checks come in. So Wingate has an in-house financing and credit department at Cherokee Home Center.

There’s also the commercial side of the business, and Wingate anticipates the tribe may be one of the store’s biggest customers.

The tribe has been engaged in a constant construction cycle for the past decade. Casino revenue has allowed the tribe to expand services, and with that comes new buildings: a massive public school, an emergency dispatch and IT center, a transportation hub, a new courthouse, soon a new jail — even a movie theater and skateboard park.

The tribe has a major housing division, and just keeping pace with the maintenance needs of the tribal housing developments, from government-run condos to a retirement home, is big business. The Cherokee Boys Club also builds tribal housing, with more than 40 new units planned for the coming year.

Cherokee Home Center acts as a distributor for construction materials for job sites, shipping truckloads of drywall, siding, you name it. It will soon have a lumber yard for builders to pick their stock if they choose.

It’s one thing to snag the low-hanging fruit — the big wholesale orders for truck loads of lumber, drywall and siding. But Wingate say he and Cooper are making a real investment in the community with a fully-stocked hardware and home improvement store, from paint brushes to shop vacs. Cherokee Home Center even has a line of construction clothing, from Carhartts to work boots.

“That’s the thing where it is a service to the community and a cost savings to the tribe,” Wingate said. “They were having to go elsewhere for all this, primarily to Lowe’s.”

Now the money can stay on the reservation with a Cherokee-owned business.

The money stays at home, plus it saves tribal workers gas money and work time.

“We are on a mission to try to meet the needs of the repairs they have,” Wingate said. “We find something everyday they need but we don’t have, and we promise to put it in stock.”

A rising tide lifts all boats: Per cap doesn’t make anyone rich, but it can change your way of thinking

Every year, members of the Eastern Band of Cherokee Indians get around $6,000, give or tax a few hundred here or there. In 1995, it was $1,190. In 2010, it was just over $7,000. It’s their cut, 1/28,890 of the net revenues at Harrah’s Cherokee Hotel and Casino, where the profits are divided 50/50 between operations and tribal members.

In the grand scheme of life, $6,000 is not an extravagant amount of money. When words like billion and trillion flash daily across headlines — numbers so big that even to grasp their breadth seems nigh upon impossible — $6,000 is a raindrop in the Pacific.

But Freeman Owle knows that $6,000 is more than that, really. Six thousand dollars is a powerful thing. It can open new vistas of opportunity and raise self esteem and change the face of an entire culture. And maybe buy a decent used car or a semester of college.

Owle has seen the tribe and the reservation change with the money — known locally as per cap, short for per capita — and for the better in nearly every way.

“I can’t see it as anything but good,” said Owle. He grew up here, then spent 13 years teaching in the Cherokee School System before heading over to Western Carolina University to teach there. He knows Cherokee, knows the people, and the change he’s seen from just this little bit of money is demonstrable.

SEE ALSO: Casino a catalyst for re-discovery of Cherokee power

SEE ALSO: New Cherokee Home Center fills a void

“I’ve seen more difference made in the self concept realm,” said Owle. When he was a kid, he said, keeping your head down was the order of the day.

“Before, they were just unobtrusively observing everything around them,” said Owle. In this post-per-cap world, his students and the ones coming after them, they’re engaging with the world instead of just watching it.

It’s hardly difficult to see the advantageous benefits of the casino in Cherokee. Brand new schools, brand new skate park, brand new, well, lots of things. But the benefits on an individual level are a slightly more difficult to track and quantify.

It’s easy to say that 473,000 square feet of new school is beneficial. But how do you measure the benefits of self esteem, or financial assurance?

 

Behaving successfully

‘Medically’ might be one answer.

Two long-term studies, one published in 2003 and one just this year, have studied the effects of per cap payments on the Eastern Band and its people.

The first was a Duke study looking at behavioral patterns in children. It was purely coincidental — researchers were looking at kids with problems acting out in school, and then, right in the middle of the study, something seemingly unrelated happened: the casino opened. And per cap checks started flowing freely.

Researchers discovered that, because of the small stipend provided by casino returns, parents were spending more time keeping up with their kids. The kids, in turn, acted out less and had fewer behavior problems, both at home and at school. Even if it didn’t have any effect at all on the parents’ lifestyle — workplace hours didn’t decrease, wages didn’t go up, because really, a few thousand bucks isn’t exactly a life of leisure — that small extra measure of financial safety led to great changes for their kids.

“Exploratory analysis suggested that the quality of parental supervision was linked to parents’ sense of time pressure,” researchers reported in a university newsletter at the study’s release. “Although the casino income did not lead parents to cut down on their working hours, it did seem to help them feel less ‘pressured,’ which may have helped them to devote more attention to what their teenagers were doing. Moving out of poverty was associated with a decrease in frequency of psychiatric symptoms over the ensuing four years.”

The second study, published in the Journal of the American Medical Association last May, was a follow-up to the first. So things were better for kids when their parents had that little extra income security. Would that persist for those children as they transitioned into adults?

The answer, apparently, is yes.

“The most important aspect of this follow-up into adulthood is to demonstrate that an intervention occurring in adolescence can predict outcomes in adulthood,” said the study results, which is a scientific way to say that the benefits of per cap grow with time.

The kids who did the best, who were most positively affected in the long-term by the change in their family income, were the youngest. The longer they were exposed to the new, per-cap norm, the less likely they would slip back into substance abuse and all the adult problems that grow from childhood misbehavior.

Per cap, however, like every good story, is not a tale filled only with sweetness and light.

There is a downside, and it manifested itself brazenly for years before the tribe could develop a good response.

That shortcoming, of course, is obvious: you can’t make people do good things with their money. And for 18-year-old tribal members, getting the money that’s been saved and invested for them, often since birth, was an invitation into enticing irresponsibility.

“We have 13 years of 18-year-olds getting money and wasting it, and there’s been a lot of bad stories about young people not knowing what to do with their money,” said Keith Sneed. He is the one who, in the end, engineered a way to at least try to keep the newly enriched from moronic financial choices.

Sneed, like Freeman Owle, was a teacher in the Cherokee School System for years before per cap. And like Owle, he saw the lot of the tribe change dramatically in its wake. But, he thought, it could be so much better. Sure, kids now know that they have opportunities, he said, but if they only opportunity they see is a Porsche they really can’t afford, how is that better?

So he created a course called Manage Your Money that’s now a requirement — along with a high school diploma or GED — for anyone wanting to collect their cash at 18.

 

A better life

In a broader sense, said Principal Chief Michell Hicks, what per cap and its companion, the tribal operations cut, have done is increase the standard of living for the Cherokee people. They have better schools and health care and recreation because of tribal operations, and they have nicer homes and stronger businesses and more solid financial footing because of the extra six grand in their pockets.

“I think, you know, any time you can change the living standard, it changes to some degree their mental capacity and it gives them more confidence to do better,” said Hicks.

After 16 years, the tribe has gone a long way towards improving the basics of life, and now, said Hicks, they’re moving on to the next stage of growth with their wealth. The tribe can preserve its culture in language schools and museums and foundations because it can afford to. More Cherokee people can open new and nicer businesses in town because, thanks to per cap and tribal lending funds like the Sequoyah Fund, they can afford to.

And that’s where Hicks sees the tribe going in the future. Of late, there has been much talk of moving some of the eggs away from the Harrah’s basket. Casino revenues were down 8 percent this year and tribal population grew by 2 percent, so the amountof money in everyone’s pocket is shrinking.

But what about using the spoils of Harrah’s to decrease dependence on it, asks Hicks.

“I think that the next success is to really expand the economic base for Cherokee,” said Hicks, to get away from what have been called rubber tomahawk shops and get into the higher-end shops and restaurants. And to use per cap and tribal funds to do it.

Inez Sampson has been around since far before the payments started coming in. She, like many, believe that it helps.

“You can’t really buy a house or anything,” said Sampson, “but it helps. It helps you be able to do the things that you’d really want to do.”

And to realize that they’re there to be done.

Casino a catalyst for re-discovery of Cherokee power

Casino dollars, and lots of them, have brought the Eastern Band of Cherokee Indians newfound clout this past decade, from the legislature in Raleigh to the halls of Congress in Washington, D.C.

“It has put us at the table,” Larry Blythe, the tribe’s vice chief, said in a blunt assessment of the tribe’s political transformation since Harrah’s Cherokee Casino opened in November 1997. “I would say that we’ve always been recognized and listened to as an important tourist destination. But the political influence — we didn’t have the influence we have now.”

With gaming money came the benefits of being able to attract and hire the state and nation’s top lobbyists. Money also brought tribal leaders the ability to wine and dine state and national leaders when needed to try to influence votes and shape perceptions.

Gone are the days when Cherokee could ill afford to even send its leaders to Raleigh, much less to visit leaders in the U.S. House and Senate. Before the casino, Blythe said, the hard work of individual Cherokee leaders to build political bridges was hampered by being money-poor and, perhaps more importantly, by the perception of Cherokee and its people as politically insignificant.

“Lobbyist can open doors, and we can truly now step through them,” Blythe said. “And we can go en masse, and we can go in force.”

 

Bridging Indian and white

Sara Waldroop lives in Franklin, but she keeps a close eye on politics in her home community of Cherokee. She is an enrolled member of the Eastern Band, and the 74-year-old never misses voting in tribal elections. Waldroop was formerly the director of the board of elections in Macon County, and she now serves as chairman of that county’s election board.

You could accurately say that given her professional background, Waldroop’s political perceptions are a bit more honed than many. These days, for the most part, she likes what she sees — a principal chief, Michell Hicks, who has financial acumen (he once served as the tribe’s finance director) re-elected for yet another term, and a tribe that doesn’t shy from taking a leadership role in the region.

SEE ALSO: A rising tide lifts all boats

SEE ALSO: New Cherokee Home Center fills a void

That’s a far cry from the situation Waldroop remembers growing up, when Cherokee families such as her own lived paycheck to paycheck, running credit tabs at one of the two stores in that area. Her father worked for the Great Smoky Mountains National Park, and they lived in Ravensford and later in Smokemont Campground. Her grandfather was white (Major McGee, who grew up in Big Cove, spoke fluent Cherokee and who proved instrumental in reconstructing Mingus Mill), her grandmother, Cherokee. Waldroop, of the Yellowhill community, found herself with pretty much with an equal stake in two worlds, Indian and white.

She went to school in neighboring Bryson City. Waldroop doesn’t particularly remember there being notable differences between the Cherokee children and their white classmates. No overt racism, no particular distinctions made by adults. Then, as now, Cherokee children were not a novelty in Swain County’s school system, or in neighboring Jackson County. Besides, Waldroop said, no one had much money — Indians or whites. And that created a commonality that transcended race. Everyone was of the mountains, and no one had dollars to spare.

“I don’t think we had it any harder than anyone else,” Waldroop said. “So we didn’t think that much about it (any differences).”

Waldroop believes the addition of the casino, overall, has been good for Cherokee.

“It’s another world from what we had back in the 40s and 50s,” she said, adding that Cherokee tribal members actually seem more aware these days of their culture, and take real, visible pride in being Indian. When the casino was being built, some tribal members openly worried that Cherokee would lose its unique cultural identity.

Instead, Waldroop said, “the casino, I think, has really helped.”

 

Bridging white and Indian

Growing up at about the same time, storyteller and all-around regional personality Gary Carden was experiencing the flipside from Waldroop. A white kid from Jackson County, Carden washed dishes at the bus station in Cherokee for then manager Winona Digh, later Winona Whitetree.

“That was the best deal around, $12 a week,” he noted. “I remember coming into town in the early morning fog and seeing Fess Parker wading across the Oconaluftee with Buddy Ebsen. They were filming ‘Davy Crockett.’ A lot of Cherokees got steady work with the Disney’s film crew and some of them traveled to Mexico for the Alamo scenes because Disney felt that they looked like Mexicans. I later recognized some of my friends in the Mexican army that invaded the Alamo.”

It would be hard to over-emphasize the economic importance of tourism in those days, and “Davy Crockett” and the and the lure of real live American Indians helped draw the crowds to this remote corner of the Smokies. Stereotyping was rampant.

“Every day, I sat on the bridge with these Cherokee kids and our favorite thing to do was to watch the tourists,” Carden said. “We’d never seen them before. They were in Studebakers and Henry J’s. We sat out on the bridge and played this silly game where we tried to see the most exotic license plate — New Jersey, Minnesota. But most were from a 100-mile radius.

“They would sometimes pull up and stop, and of course I was this little white kid sitting there in the middle of all the Cherokee. They consistently thought the Cherokee couldn’t speak English. The drivers would roll the window and they would say ‘You got teepee?’ making a teepee motion with their hands. And to the girls, ‘You got papoose?’ and they would take our pictures. Little by little it caught on, and enterprising Cherokee gave them sheet-metal teepees and some of the girls brought their little brothers tied in a bed sheet.”

What developed was a strange new economy based on tourism and faux American Indian culture that was good each year for six months only.

“When the tourists left it was dead in Cherokee, but it created a tourist-oriented economy,” Carden said. “And of course, they had to pretend to be something they weren’t in order to stimulate that economy, and they did it for so long they forgot who they were. Today they are trying to go back to their authentic Cherokee culture.”

 

No longer reliant on tourists

David Redman helped develop that critical Cherokee tourist trade. A white man, he worked in Cherokee travel and tourism for years, starting in 1988. Like Carden, he saw the limitations of a local economy totally dependent on tourism.

“Unemployment was high in the region for decades, with Swain County reaching the 30-percent level,” Redman said. “It was even higher on the reservation. Prior to the casino, the tribe was probably the strongest tourism destination west of Asheville. However, the tourism season lasted between five and six months (May through October) with employees being laid off until the beginning of the next season.”

Pre-casino, the Cherokee experienced overt discrimination in the region and beyond, Redman said.

“Employees in the tribal program I managed would often complain that area businesses would not accept personal checks and that they were treated differently than non-Indian customers,” he said. “I would take my staff to a Christmas breakfast, sometimes to Pigeon Forge, other times to the Dillard House or Grove Park Inn. Customers’ eyes were on us, and there was a definitely feeling of coolness.”

That said, being white in Cherokee then wasn’t always easy, either.

“How was a white man working for an Indian tribe being accepted?” Redman said. “First, with a huge amount of distrust — a shipload of distrust. Trust between the white and Indian isn’t immediate and mutual. I felt that I had the trust of some Indian co-workers only after five years or more.”     

The casino has changed that. Racism certainly still exists here as it does everywhere, and stereotypes of Indian culture live on, too. But the casino, a vast and hungry employer of the region, has helped further mix white and Cherokee. Both work in the managerial ranks, and in a large corporation such as Harrah’s, hard work is the way to climb the corporate ladder.

Cherokee scholar John Finger, a retired professor from the University of Tennessee at Knoxville and the author of several books and academic writings on contemporary Cherokee culture, said he started paying attention to the tribe in the mid-1970s. The changes, Finger said, have been profound.

“I’ve seen the tribe become more economically prosperous, the end result of both the tourist and gaming industries. They seem much more in tune with modern American business and life.”

Like Waldroop, Finger believes the casino has actually strengthened and deepened the Cherokees’ ties to their culture, “making them more aware of their status as Indians, particularly Cherokee Indians.”

And, even as tribe members’ cultural awareness has awakened, the Eastern Band of Cherokee Indians has emerged as a potent political and economic force for all of WNC.

A witness to the Cherokee renaissance

The Eastern Band of Cherokee Indians has a resilient, independent spirit. When the U.S. government forced the majority of the tribe to head west to Oklahoma on the Trail of Tears, those who remained were the defiant ones, and it is their offspring who now form the nucleus of the tribe. It is these Native Americans who are using the profits from what was originally a controversial casino to help rediscover their cultural identity.

Prior the construction of Harrah’s Cherokee Casino, the Eastern Band were a poor tribe with little influence. Tribal members who lived in Cherokee struggled to make a living in a tourism-dominated economy. Because there was little industry and because the region was so isolated, the area around Cherokee, Swain and Graham counties perennially topped the state in unemployment, averaging around 25 percent for many years when the state first started keeping statistics.

Much of that changed with the coming of casino profits. The tribe found itself with a newfound wealth and power. What’s noteworthy in this transformation is how that money has been used to invest in Cherokee and its people, when it could have gone to line the pockets of only the most powerful.

The Cherokee Preservation Foundation might be the most notable symbol of this transformation. The Foundation was created as part of the second gaming compact with the state in 2000, and it has funneled millions of dollars into cultural, historical and economic development projects on the Qualla Boundary and surrounding region. Those investments include the Cherokee language immersion program, a Native American art institute, helping restore rivercane for traditional basketmaking, investing in traditional Cherokee arts such as metalsmiths, making broadband more available in rural Western North Carolina and dozens of other worthwhile projects.

The tribe itself has built a new school that uses green technology and celebrates tribal traditions, invested in health care and public safety, and is teaching its youth how to wisely manage the per capita payments they receive from casino profits. It also helps each of its high school graduates pay for college. Men and women who work for the tribe earn good wages and benefits.

In other words, the tribe is investing in itself, its people and its traditions. When you talk to members of the tribe today, the pride in what is happening in Cherokee is obvious.

There are still problems in Cherokee, just as there are everywhere in this country. But over the past decade those of us who live here have witnessed a resurgence among the Eastern Band that surpasses what most thought possible when gambling was first approved. They’ve used the casino profits wisely, to say the least. That’s a credit to the Eastern Band members and its leadership.

(Scott McLeod can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..)

High stakes casino expansion tests the theory: If we build it, will they come?

When a new federal law in the 1990s opened the door for Indian tribes to build casinos, it set the stage for economically-depressed reservations to become masters of their own destiny, to create wealth where none existed before and improve the quality of life for their people.

“Some have and some haven’t,” said Darold Londo, general manager of Harrah’s Cherokee. “Cherokee was willing and able to make tough decisions that didn’t come easily within the tribe. They were wise and courageous to have done what they did.”

While the casino appears from the outside to be a shining beacon of money, launching the enterprise took more than flipping on an “open” sign and watching the money roll in.

“It took a lot of smart, difficult work with a lot of people in the tribe and Harrah’s to market this operation,” Londo said. “It blew the expectations of the tribe and Harrah’s away. It was more successful than people had ever expected.”

A decade later, Cherokee found itself once again at a crossroads. Since the casino first opened in 1997, there had been growth spurts followed by plateaus.

“We knew there was another plateau coming,” said Principle Chief Michell Hicks said. “At some point, like any product, it gets stale. The customer loses interest. If you don’t keep it fresh there is a risk of losing the customer base.”

The risk of doing nothing — of watching the casino grow old and tired — seemed much worse than the leap of faith by the tribe to go for another expansion.

“It is making sure the casino stays ahead of the customer wants and needs but also make sure we can push the profit level as high as we can possibly can,” Hicks said.

The tribe embarked on a massive $633 million expansion in 2007 to remake the casino and hotel into a luxury resort.

Since then, however, the recession has taken its toll on casino profits. Revenue fell for three consecutive years following a high in 2007. Cherokee was not alone. The trend was industry-wide.

But the decline led many in the tribe to question whether the massive expansion was ill-conceived.

The outlook is improving. Profits are up 10 percent for the first six months of the year over the same six months last year. It’s a sign perhaps not so much of a better economy, but that pieces of the expansion coming on line: the third hotel tower is humming, the concert venue is in full-swing, new restaurants are opening every few months.

 

Was it worth it?

A big question still looms in the minds of tribal members: was the expansion worth it? It came at a cost — $633 million to be exact. And now the tribe must pay off that debt using its cut of casino profits.

The expansion must reap enough new business to justify the cost — otherwise it could hurt the tribe’s bottom line instead of help, the massive debt eating away at profits.

But that seems unlikely.

“Any business decision you will look back and say ‘should we have done it, should we have not,’” Hicks said.

But for Hicks, he still believes it was the right move, particularly given the bargain interest rates the tribe could get.

As for the recession, however, Hicks admits the timing wasn’t ideal.

“With regards to the economy it didn’t match up as well,” Hicks said.

Cherokee is smart for remaking the casino into a resort, according to Vin Narayanan, a national casino industry expert and managing editor of Casino City Press.

Had Cherokee remained static and not pushed for a massive expansion, its outlook five years from now would not be good. The casinos faring poorly right now are those offering little to guests other than a gaming floor lined with slot machines.

But resort-style casinos, with onsite hotels, shopping and dining: “that has been a proven formula for success,” Narayanan said.

Cherokee had been somewhere in between: not a simple slot-parlor, but not a full-fledged resort either. The new resort amenities will not only attract new guests, but also younger guests.

It will also diversify their revenue stream. Less than a decade ago, 80 to 85 percent of revenue for Vegas casinos came from the gambling side.

“Now it is almost 50-50. Almost half their revenue is coming from dining, hotels, the shopping, that whole thing,” Narayanan said. “It is not just about gaming.”

Cherokee’s casino competition doesn’t just come from Atlantic City, the Gulf Coast or Vegas. It is competing against cruise lines and Disney World — the whole sphere of entertainment dollars.

At least revenues are climbing again now. If not for the expansion, they could be flat or still dropping.

Londo predicts the Cherokee casino won’t get back to past profit levels until 2012 — three years ahead of the rest of the industry.

“In the industry they are not projecting a return to those types of levels until 2015. That is a testament to the capital investment in this property that we’ll return much sooner to previous levels,” Londo said.

Hicks points out that 2010 would in fact have held steady from 2009 if not for three bad months in the winter, when Cherokee was surrounded on three sides by landslides blocking the way to Western North Carolina. Rockslides shut down Interstate 40, U.S. 64 and U.S. 441, essentially blocking all routes to Cherokee from points west.

“We had some variables there we couldn’t control,” Hicks said.

 

Protect the monopoly

While the economy has tempered the tribe’s hopes for the expansion, things could be much worse: gambling could be legalized in North Carolina or a surrounding state.

That should be the tribe’s biggest fear, according to Narayanan.

“States are in a world of hurt from a revenue standpoint,” Narayanan said. “If the North Carolina budget becomes bad enough, they might bring in an industry that is willing to get taxed at a ridiculously high rate. A few hundred million in revenue starts to look pretty good.”

That’s exactly what’s happened in some New England states, putting a major dent in Atlantic City’s monopoly, and thus its profits.

“It is like McDonald’s and Burger King, there is a finite amount of fast food revenue that the industry is competing for,” Narayanan said.

Closer to home, the state of Ohio sanctioned four casinos in the throes of recession budget woes. Each will rival the number of games offered at Cherokee, and two are resort-style casinos carrying a construction price tag of close to $1 billion.

As the only game in town, Cherokee has a clear advantage. The next closest casino is a day’s drive any way you slice it: the Mississippi River, the Gulf Coast, Atlantic City, or the many casinos run by northern and mid-western Indian tribes, from Oklahoma to Iowa.

But that advantage only goes so far. The rest has taken the blood, sweat and tears of an entire tribe to realize.

“The thought that we aren’t in a competitive market based on our geography is a false perception,” said Londo, general manager of Harrah’s Cherokee. “There is a percentage of gamers that are relatively promiscuous. They will travel to the right environment for them. In some cases, it is just as easy to hop on a plane. Nobody has the lock on that business, even if they have a geographic advantage.”

The lack of competition can even be a turn-off. Some gamers like the action of casino-hopping.

“Some people if they are going to make an effort to game they want options and choices,” Londo said.

Cherokee’s sprawling casino expansion does its best to make up for that.

“Here we were very deliberate in creating zones, so it had a different look and feel because people do want that change in scenery,” Londo said. Different lighting, different music, a different mood — and different luck.

The marriage between the tribe and Harrah’s has been a happy one. Harrah’s brings the expertise and know-how to running a casino. The tribe benefits from its name recognition and cross-marketing of other casinos.

In return, it gets a management fee, based on a percentage of the profits.

“As we’ve grown in our capabilities, Harrah’s has learned as much from us as we learn from them,” said Erik Sneed, construction oversight liaison for the expansion. “We’ve been very smart in the way we do our business to stay ahead of the curve.”

Ultimately, Harrah’s is a corporation, while the tribe is beholden to social, cultural and civic goals. Their goals aren’t mutually-exclusive, but there are differences, Londo said.

“What you will find inherent for tribes is they want to prevail over a longer period of time, whereas companies beholden to Wall Street want to focus on short-term results,” Londo said.

Cherokee is more interested in ensuring revenues will still be strong five years from now and less concerned about the current state of business affairs, Londo said. And the tribe also wants to provide jobs for tribal members and see them promoted in the company.

 

In the trenches

When 46-year-old Londo took the helm at Harrah’s Cherokee in 2006, the tribe was eyeing an expansion in the neighborhood of $400 million.

Not big enough, Londo thought. He believed Cherokee had more market potential than that. It meant “going bigger, and a lot bigger in some cases,” Londo said.

But there’s a fine line.

“Nobody wants to be in a facility that feels empty, that lacks excitement and enthusiasm,” Londo said. “If you were going to err you would err on the side of being just a little smaller than a little too big. It feels energetic.”

Londo has Ojibwa ancestry, though he didn’t grow up on a reservation. His parents ran a restaurant in Milwaukee. His first memory is as a five-year-old boy, filling an ice chest in Londo’s Lounge.

He went to West Point, and became a captain in the military, flying Cobra attack helicopters and then training other pilots. He got his MBA on the side, then quit the service and went to law school. After working 10 years in the field of business law, he landed a job with Harrah’s in Atlantic City 2002 and rapidly rose through the ranks.

Londo is cool and calm by nature, to be expected from his West Point education and military training. He exudes the virtue of self-discipline.

The expansion on the horizon was a major drawing card for Londo to leave Atlantic City and move to comparatively rural Western North Carolina.

Londo lives in Sylva with his wife and three kids, ages 12, 16 and 17. As far as the family is concerned, it stacks up to their past life just fine.

“My wife probably enjoys it the most. She says if you have a Wal-Mart and a Lowe’s you are good-to-go,” Londo said.

“I would have been a lot less excited to come here if Cherokee wasn’t on the eve of exploiting its growth potential,” Londo said.

Londo instantly immersed himself in the master planning for the expansion.

No decision seemed to small for Londo to weigh in on. Where should valet parking drop-off be? How many seats should the buffet have, or the concert venue? Which would be better, a new Italian restaurant or a steak house? As for retail, a ladies footwear shop or consumer electronics?

A master planning committee of the casino’s top management and architects had their own “situation room” dedicated to the expansion, where such details were hashed out.

“There was a time when I was in design, construction and right-sizing type meetings three-and-a-half days a week,” Londo said.

But it was his forté and he loved it.

“The military trains you to plan, plan, plan. Planning is important,” Londo said.

When the tribe set its sights on a major expansion of the casino, one of the first steps was a critical casino-hopping tour in Atlantic City to check out the competition. Far from a sightseeing junket, however, the team had a rigorous itinerary, visiting several casinos a day with notepads in hand.

Those on the trip each had their own take-away goals. Rather than honing in on the price points for buffet menus, Sneed was on a big-picture quest.

“For me, it was about the quality of the experience. How do you design a space that is beautiful and fabulous but is still functional?” Sneed asked.

He also wondered how amenities were integrated into the gaming floor. Restaurants and shops were one thing the casino lacked, and in addition to sheer square-foot expansion of the gaming floor, the amenities would be a major focus of construction.

How are drink windows tucked in to the gaming floor? How close does the food court come to the tables?

The master plan team didn’t close the books once ground was broken. They were constantly refining.

“That blueprint or playbook that you established isn’t set in stone, so as conditions change you can adapt to it,” Londo said.

Most notably, the advent of alcohol. Talk about a game changer. The casino was dry — like the rest of the reservation — until just last year. Plans were rapidly redrawn to include bars and walk-up drink windows on the gaming floor.

The recession also led the casino to scale back the square-footage for the spa.

The expansion is taking the casino from 1,600 to 2,400 employees. Londo makes an hour each week to drop in on the new hire training sessions — averaging about 30 new hires a week right now.

“How are we expanding when the rest of the economy is contracting?” Londo asked after hitting the highlights of the expansion. “It’s magic. We can’t figure it out either.”

Cherokee is consistently a top performer out of 17 Harrah’s casinos in the country. Once a week, the general managers from every Harrah’s hold a conference call to compare numbers.

Likewise, Londo reports to his boss at Harrah’s corporate headquarters almost daily. Londo has goals to meet — not just for the year, but every month and every weekend. Every Monday, his boss wants to know: how was weekend performance? Did you meet your goals? Did the promotions do as well as expected?

“If not, what do we do about it?” Londo said. “That’s how myopic we get.”

It’s hard to gauge just how high the bar should be for Cherokee. Harrah’s expects growth from one year to the next, but setting revenue goals has been complicated by the economy, with even the most well-versed industry experts flummoxed over how much of a hit casinos could expect in the recession.

But in Cherokee, it’s been doubly complicated. Will new revenue from the expansion off-set the recession? Or for that matter, finally introducing alcohol?

Londo flipped an imaginary coin in the air with his thumb when asked how Harrah’s even begins to set profit expectations for a property in such flux. But he quickly donned his business demeanor and returned to casino-speak.

But Londo’s remaining time in Cherokee is probably short. With the expansion due for completion next year, Londo is looking for that next move.

Extortion or fair share? State wants cut of casino revenue in exchange for live dealers

To hear many Cherokee leaders on the eve of last week’s tribal elections, the tribe is incredibly close to striking an agreement with Gov. Beverly Perdue that would allow live dealers at the casino, perhaps within weeks.

Two letters from the governor’s office to the tribe in August indicate the truth is murkier than the political message, however.

In return for those live dealers Cherokee maintains would lead to a surge in gaming dollars, North Carolina wants a slice — perhaps more accurately described as a chunk — of the casino-revenue pie.

Exact dollar amounts aren’t detailed. But reading between the lines of a politely worded argument between the tribe’s attorney general and general counsel for the governor, the two parties are clearly at odds over exactly how much the cash-poor state can realistically expect to squeeze out of the Eastern Band of Cherokee Indians.

“They are not close,” said Perdue’s spokesperson, Chris Mackey, when asked Tuesday how near negotiations are to finalizing between the tribe and Perdue.

The state, under federal law, can’t tax casino profits or sales taxes on casino purchases, because the tribe enjoys sovereignty. The state can, however, demand a percentage of gaming revenue in exchange for giving the tribe gambling privileges.

The state initially wanted the tribe to give up a share of all revenue from the entire resort: the existing gaming machines, the new table games, along with hotel, restaurants, spa, concert revenue, retail shops, you name it.

That tack was sidelined, however, by the Department of Interior, which ultimately has to approve any “revenue sharing” arrangement between the state and the tribe. Oversight by the federal agency attempts limit what states demand of tribes to a reasonable amount.

But there’s the rub: What’s reasonable? While the state was forced to back off demands for a cut of all resort revenue, the sides are still at odds over what’s on the table: all gaming revenue, including existing gaming machines, or only revenue from newly introduced table games with live dealers. Another option being debated is a direct, flat payment to the state each year rather than a percentage based cut.

Negotiations with former Gov. Mike Easley several years ago reached an impasse, but were rekindled with Perdue this year. Easley had demanded too great a share of revenue, and neither side was willing to budge.

The tribe can’t play hardball forever, however. Getting live dealers at the casino is critical to the tribe’s financial wellbeing: The Eastern Band has a $633-million expansion to pay for at a time when the recession has taken a toll on casino business.

“If they don’t get table games it is hard to see any of this succeeding,” said Vin Narayanan, Managing Editor of Casino City Press in Atlantic City and an expert on the industry. “That is the first thing.”

The casino can’t diversify its audience, or attract a younger generation of gamblers, without table games and live dealers, according to Narayanan.

“Young players play table games. Young players don’t play the slots,” Narayanan said. “Casinos know they have an aging demographic that is attracted to the slots. If you have 4,000 seats of all slots your demographic isn’t going to get any younger.”

 

Action in Raleigh next week

If the tribe can reach an agreement with the Democratic governor — which state Sen. Tom Apodaca, R-Henderson County, sympathetically described as akin to hitting a rapidly moving target — the Eastern Band does appear to have the votes necessary for passage in the General Assembly, Apodaca said.

The General Assembly is expected Sept. 12 to signoff on allowing the tribe and Gov. Perdue to renegotiate a gaming compact that would allow live dealers. Perdue noted in the proposed legislation that she “desires to amend the compact,” provided the tribe and state can reach an actual agreement.

Despite the blessings of the General Assembly anticipated next week, the letters from the state reveal the critical agreement with the governor might not be easily won anytime soon, however. Cherokee hasn’t exactly gotten the cart before the horse, but this horse sure is proving difficult to saddle and ride.

While the state clamors for a cut of gaming revenue, the tribe has a wish list of its own that includes more than live dealers. The tribe also wants the state to guarantee its gambling monopoly — a promise not to allow any other casinos anywhere in the state for the 30-year duration of the gaming compact, or until 2041.

The state doesn’t appear willing to go that far.

“We believe the area of exclusivity should be focused on Western North Carolina, recognizing that this protects the tribe from an encroaching competitor while at the same time it avoids binding the hands of future governors and legislatures,” read one of the letters from the governor’s office.

In earlier negotiations that allowed the tribe’s existing casino operation, the tribe was made to give up some of its gaming revenues (at least $5 million a year) for the good of the region. The Cherokee Preservation Foundation was formed to award grants to worthy economic development or cultural initiatives across the mountains, not just on the reservation. The state is willing to reduce the amount the tribe has to funnel to the Cherokee Preservation Foundation if that’s what it takes for the state to get the cut it wants for itself.

Ultimately, the negotiations between the tribe and the state are playing out like the ultimate poker game. A cash-strapped state that’s eager to claim a cut of casino revenue; a debt-burdened tribe that needs live dealers. Only time will tell who has the better hand.

Smokey Mountain News Logo
SUPPORT THE SMOKY MOUNTAIN NEWS AND
INDEPENDENT, AWARD-WINNING JOURNALISM
Go to top
Payment Information

/

At our inception 20 years ago, we chose to be different. Unlike other news organizations, we made the decision to provide in-depth, regional reporting free to anyone who wanted access to it. We don’t plan to change that model. Support from our readers will help us maintain and strengthen the editorial independence that is crucial to our mission to help make Western North Carolina a better place to call home. If you are able, please support The Smoky Mountain News.

The Smoky Mountain News is a wholly private corporation. Reader contributions support the journalistic mission of SMN to remain independent. Your support of SMN does not constitute a charitable donation. If you have a question about contributing to SMN, please contact us.