Tribe ends interest-only payments for gaming ventures
With much of the conversation taking place in closed session, the Eastern Band of Cherokee Indians Tribal Council passed a trio of resolutions Aug. 3 pertaining to the tribally owned EBCI Holdings LLC.
According to one of the resolutions, the Danville casino project, originally expected to cost $650 million, is now projected to carry a price tag of $675 million “due to increases in construction costs and the addition of a temporary casino facility.” On May 15, a ribbon-cutting was held for the temporary facility, with the permanent casino expected to open in the fourth quarter of 2024. In July, EBCI Holdings CEO Scott Barber told The Smoky Mountain News that the temporary facility boasts 1,000 machines and is “performing well.”
Caesars Virginia, which is the tribe’s partner on the project, obtained a Virginia gaming license in April.
Perhaps the most controversial of the three measures was a resolution submitted by Painttown Rep. Michael Stamper and Wolfetown Rep. Mike Parker establishing a repayment plan for the margin credit loan that EBCI Holdings took on to execute the projects in Indiana, Virginia and Kentucky.
The tribe is approved to take out a maximum of $230 million through the loan, said Finance Director Brandi Claxton, and still has $26 million to go to hit that maximum. The loan is collateralized through funds in a tribal investment account, she said.
“Thus far we’ve paid only interest,” Stamper said. “We need to begin a process to start paying the principal so that interest number goes down.”
The resolution requires the tribe to pay $10 million toward the principal during the current fiscal year, to come from excess gaming funds, and to establish a recurring line item to pay down $10 million of principal annually, starting in fiscal year 2024.
The lack of principal payment on the loan and the use of tribal investments as collateral has become a flashpoint in the unfolding tribal election season. Multiple candidates have taken issue with what they describe as irresponsible spending and a complete lack of uncommitted funds in tribal coffers. But according to Claxton, the tribe’s decision to pay only interest for the time being has been to its benefit.
“This fiscal year, the interest on the debt was $10 million I believe, but the earnings that we made by having that money invested was $40 million, just this fiscal year,” she said. “So we actually earned a lot more than the interest.”
If the tribe had liquidated $230 million from its investment accounts to cover the debt, she said, it would have missed out on the $30 million it netted by paying only interest.
But that’s not how Tribal Council saw it. After a 20-minute discussion during which no video was broadcast and media was not allowed in the room, the body came back into open session to take its vote. The measure passed with only three members opposed: Vice Chairman Albert Rose, Yellowhill Rep. T.W. Saunooke and Big Cove Rep. Teresa McCoy. Afterward, Rose said he wished to change his vote to instead support the resolution but was told vote switching was not allowed.
McCoy said she voted against the resolution not to express her opposition to repaying principal but to show her dissatisfaction with the tribe’s commercial gaming ventures as a whole.
“I understand what Rep. Stamper is doing,” she said. “I get it. But how we can sit here and do business for the Eastern Band and not be more cautious with $20 million, it just blows right over my head. When I campaigned, I hear the need in the community, and not one person said, ‘Teresa, we need more gaming.’”
Next, Tribal Council approved a resolution that clears an administrative hurdle to the Danville casino project. In 2021, the body passed a resolution that included a limited waiver of sovereign immunity for EBCI Holdings related to the Virginia project, a necessary step for the tribe or its entities to engage in business with non-tribal organizations. But since then, the company has formed new LLCs underneath it to carry out the project. The tribe’s partners and lenders want to make sure that these new LLCs are also covered by the waiver.
“There’s no new money being requested or authorized by this,” said Attorney General Mike McConnell, who submitted the resolution. “This is required to move forward with the project, and it does not increase the liability of the tribe.
After a 10-minute discussion off-air, Tribal Council came back to approve the resolution unanimously.
Later in the day, Tribal Council approved a resolution that Principal Chief Richard Sneed submitted to allow EBCI Holdings to hire consultants to “establish connections and build relationships.” The entirety of this discussion occurred off-air with media not allowed in the room, lasting about 30 minutes. The resolution does not include a dollar amount for these consultant services and states that the request is due to the tribe’s need “to build relationships in neighboring states and communities.”
The EBCI has long had lobbyists in Raleigh and Washington, D.C., but now it has state-regulated gaming interests in three states outside North Carolina: Virginia, Kentucky and Indiana. In August 2022, it approved one-year agreements with the firms JigSaw, Capitol Resources, McGuire Woods and Troutman Pepper. Following the resolution’s passage Aug. 3, those agreements, which had been set to expire Aug. 31, will be renewed for another year.
All three resolutions await signature from Principal Chief Richard Sneed to become effective.