Navajo Nation: Two New Casinos
By Kathy Helms
WINDOW ROCK – Class II casinos in Chinle and Tse Daa K'aan are just a few spins away following the signing of loan documents last week by Navajo Nation President Joe Shirley Jr., Controller Mark Grant and Navajo Gaming Enterprise CEO Robert Winter.
“This is a historical moment for the Nation,” Shirley said. The president also signed documents that would extend the loan initially put up for the Navajo Nation's first casino, Fire Rock, located in Churchrock.
The $5.3 million loan includes $3.5 million for the Tse Daa K'aan gaming facility, to be located about 25 miles from Farmington in a modular building near the chapter house; and $2 million to fund the Chinle casino, which will be located in the shopping center.
The two Class II casinos will offer electronic bingo. “It's like a slot machine but it's run on the same odds basis as a bingo game is run,” Winter said Monday.
“Fire Rock Casino has been refinanced which, based on its profitability, has freed up a substantial amount of money. Combined with the four loans that the Investment Committee has supported and the Budget and Finance Committee has approved, it allows for the financing of four additional projects,” he said.
The combined loan plus equity from Fire Rock allows for $110 million to be allocated to build Twin Arrows. The first phase includes the casino, a four-star hotel and conference center.
“It also allows for $40 million to be spent to build a casino in Upper Fruitland outside of Farmington, and allows for the two small Class II casinos,” he said.
The Tse Daa K'aan casino is expected to open Oct. 1, followed by Chinle around Oct. 15 or Nov. 1. Groundbreaking also is expected in November at both Twin Arrows and Upper Fruitland, he said. Upper Fruitland is expected to be completed in November or December 2011, followed by Twin Arrows in early spring 2012.
“There will be small eating establishments in both Class II's. At the Twin Arrows there will be a 24-hour restaurant, an upscale steak house, a sports bar, a cabaret, and a food court,” Winter said, adding that they hope to build a European mineral bath spa shortly after completion of the hotel.
“I'm very happy to be part of this. This is a very big accomplishment by the Navajo Nation. It's all self-financed. There's no fees going to banks. All the interest goes back to the Nation, all the jobs are for the Nation. It's one of the largest self-financed projects undertaken by any tribe in the nation.”
Budget and Finance Committee Chairman LoRenzo Bates said that when the committee initially passed legislation to develop the casinos, a feasibility study conducted by gaming officials showed that all the casinos would be profitable. However, all parties agreed to conduct another feasibility study with regard to Upper Fruitland and Twin Arrows.
When that was done, in light of the economic downturn, the results showed that the two casinos were not expected to be as profitable as originally determined. A concern arose that in the event one of the two casinos was not profitable, where would the money come from to subsidize those losses.
“Based on that question, it was determined that all the other casinos that were up and running, including Fire Rock, could help subsidize the losses. That was a concern – a major concern,” Bates said Monday. “So you had two possibilities: One is to not do it, or figure out a way to do it. So the decision was that each of the facilities would downsize.”
Adding to the mix was getting the land for Twin Arrows into trust. “Usually it takes up to two years if not longer,” Bates said. The Navajo-Hopi Land Settlement Act and its requirements came into play, along with the ultimate decision to use $3.7 million of Navajo-Hopi money to buy the land.
Under the act, any land acquired must benefit Navajo relocatees who resided on Hopi Partitioned Land as of Dec. 22, 1974. Once selected, the land becomes a mandatory acquisition and the Secretary of the Interior does not have the discretion to deny the request for trust status, speeding up the process.
Another part of the fee-to-trust process requires the Office of Navajo and Hopi Indian Relocation, or ONHIR, which oversees relocation and has a trust responsibility to the relocatees, to approve selection of the lands which will be used to benefit the relocatees.
In 1980 Congress created the Rehabilitation Trust Fund, to be used for various purposes, including education and economic development. Oversight of the fund was given to the Navajo-Hopi Land Commission. Because under Title 12, gaming revenues cannot be distributed as per capita payments, rental revenues from the casino business will be given to the relocatees for their use and will be deposited into the fund.
During negotiations on use of the $3.7 million, the Navajo-Hopi Land Commission had its idea of terms and ONHIR had its idea, Bates said. “When those ideas came forward and you applied those ideas in terms of dollars to the overall cost of Twin Arrows, it didn't pencil out. It went into a loss.”
Language which mentioned payments “in perpetuity” caused financial problems in relation to whether Twin Arrows would be profitable. That put everything on hold, because if it wasn't profitable it would have put the burden on all the other casinos to subsidize the losses.
All parties involved sat back down and worked out the terms. “Everybody's happy at this point,” Bates said, and Twin Arrows now is expected to show a profit.
“I want to make it clear that Budget and Finance Committee and the Investment Committee stood back during this time because it was not within our authority to get into those negotiations,” he said. “It was the Navajo-Hopi Land Commission, ONHIR, and Gaming that had to work out those details.”
New legislation came forward and was approved by Budget and Finance, basically reducing the loan amounts for Twin Arrows and Upper Fruitland. Resolutions approved by the committee in May called for $125 million for Twin Arrows and $50 million for Upper Fruitland, compared to the reduced funding amounts of $110 million and $40 million, respectively.
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