High stakes The promises and pitfalls of Indian casino gambling

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Special Report Part One

For the better part of its 201-year history, the small dairy farming community of Verona, N.Y., was little more than a blip on the road between Utica and Syracuse.

Ten years ago, the town’s highway exit was one of the least used on the 641-mile New York State Thruway that cuts the state in half, north and south.

Then something happened.

Motorists began to pour into the little town to try their luck at the town’s biggest attraction, the Oneida Indian Nation’s Turning Stone Casino Resort.

The casino has brought tourists here – more than 4 million last year – and has made Verona one of the Thruway’s busiest interchanges. Besides the traffic and the associated tourism dollars, the casino also brought a swift and at times contentious change in the region’s power structure, stemming from the once-impoverished Oneidas’ newfound wealth and influence.

“If you had a double-wide [mobile home] before the casino, you had it made,” remembered Kandice Watson, a 36-year-old Oneida, as her two adolescent daughters giggled and turned handstands in the bare living room of her boyfriend Clint Hill’s soon-to-be finished three-bedroom home. It’s the first and only one on the reservation with a basement.

The basement, the first room Hill showed visitors on an impromptu tour, is in all ways ordinary. But it still is a source of pride for the 47-year-old tribal council member who remembers all too well, he said, when many Oneidas lived in squalor and tribal leaders had few economic options to lift the tribe out of poverty.

The 1,000-member tribe’s territory until only recently consisted of a 32-acre reservation dotted with donated mobile homes salvaged from the Johnstown, Pa., flood of 1977.

Ten years after Turning Stone, the tribe owns 16,000 acres in Oneida and Madison counties. From its casino operation alone, it has realized more than $260 million in profits during the past five years. With that money, the tribe has funded housing for the elderly, an early learning center, a cookhouse, several expansions of the tribe’s health center and other projects.

The Oneidas’ rags-to-riches story is one Maine’s Penobscot Nation and Passamaquoddy Tribe hope to emulate as they seek voters’ permission this November to open a $650 million casino in southern Maine.

Unlike the Oneidas, the Maine tribes must seek voter approval because courts have ruled the Maine Indian Claims Settlement Act of 1980 supersedes the federal Indian Gaming Regulatory Act. It is the gaming law that has allowed other federally recognized tribes across the nation to have casino gaming.

Although it is not part of the November referendum, the tribes also have floated the idea of a $30 million satellite casino in Washington County, an area plagued by unemployment, especially among the native Passamaquoddys, a fifth of whom reported in the 2000 Census that they had no jobs.While studies have shown that most Indian casinos, particularly those far from population centers, do little to improve a tribe’s economic fortunes, few would dispute that the Oneidas have hit the jackpot with Turning Stone.

Watson, who now works in the tribe’s education department, didn’t have to reach far back into her memory to recall darker days on the reservation, where only a handful of the Johnstown-era trailers remain.

The mobile homes, many of which are run down with littered front yards, more often than not are owned by members of the tribe’s more “traditional” faction that, by and large, does not approve of casino gambling and refuses to work there although the tribe guarantees its members some level of employment, said tribal officials.

“I don’t think you have to live in poverty and make baskets to be a real Indian,” said Watson, who lives just down a newly paved road from Hill in her own $120,000 home, which the tribe helped build last year with a $50,000 down payment and a loan guarantee. “A lot of things have changed around here.”

Casino fever

Verona isn’t the only place where things have changed.

Since the 1988 passage of the Indian Gaming Regulatory Act, 226 tribes in 24 states from California to Connecticut have started operating casinos, according to the National Indian Gaming Commission.

The resulting $13 billion industry has many other tribes – notably the Penobscot and Passamaquoddy – positioning themselves to claim their share of the gambling pie.

Gaming experts say the industry is poised for growth in population-rich New England, now served by only two casinos. Both of them, however, are among the world’s largest, combining for more than $2 billion in gross revenues each year.

Both Foxwoods and Mohegan Sun, less than 15 miles apart in southern Connecticut, are within easy driving distance of Boston and New York. Proximity to such population centers has been the key ingredient for success among Indian casinos. Some have been more successful than others, and just 13 percent of them accounted for two-thirds of the $13 billion in gross revenues in 2001.

Supporters of a Maine casino say the Penobscots and Passamaquoddys, should they be able to secure a site in southern Maine, are in an enviable position to tap into the Boston market. The tribes could stand to split $50 million a year from the operation, according to supporters’ projections, which foresee another $100 million for the state.

“We’re all going to win with this,” said Passamaquoddy state tribal Rep. Fred Moore III during a recent breakfast meeting of the tribes’ three governors at Pleasant Point. “This is our opportunity to … establish our own economic base.”

Casino opponents are frank in their disbelief of the revenue estimates. But even if they were accurate, critics maintain they would not be enough to offset the economic and social costs of a casino, including increased crime, traffic and bankruptcies.

Several large businesses – including L.L. Bean and construction giant Cianbro – have come out against the project, saying it would sap the already scarce work force for small businesses.

“Maine needs businesses that bring real, enduring value to people’s lives, not additional burdens and hardship,” L.L. Bean company spokesman Rich Donaldson said in a statement.

Despite the organized opposition, recent polls suggest growing support for the casino in a state not altogether foreign to games of chance.

Even with the absence of a full-fledged casino, Mainers still wagered a total of about $300 million last year – $148 million on the Maine State Lottery, $66 million on horse racing, $25 million on bingo and $48 million on other games of chance, according to state and industry sources.

Asked what the deciding factor should be in voters’ minds come November, Moore simply rubbed his thumb and fingers together.

“Money,” he said. “Money and jobs.”

‘A new day’

Upon completion of its planned $300 million expansion, Turning Stone will be roughly the same size as the proposed Maine casino and draw from about the same population – approximately 4 million – within a 100-mile radius.

To date, those market conditions have proved lucrative for the New York casino, where annual profits have increased 55 percent to nearly $70 million since 1998, according to a December 2002 report sent to potential investors in the Oneida resort.

Amid the carnival-like racket inside Turning Stone on a recent day, not a quarter could be heard clinking into the blinking, whirring slot machines. Instead, transfixed, mostly middle-aged gamblers inserted patented debit cards to keep track of their winnings, or more often, their losses.

In the past five years, those losses have proved a windfall for the Oneidas, who have watched gaming revenues jump 40 percent to $180 million last year, according to the report. Unlike what is intended under the Maine referendum, the Oneidas are under no obligation to return money to the taxpayers because of a deal they struck with Albany politicians.

The steady cash flow has allowed the tribe to turn down more than $5 million in guaranteed federal assistance from the Bureau of Indian Affairs, the embattled government agency charged with managing the trust fund set up for the nation’s 562 tribes.

Besides forgoing federal money, Oneida leaders are quick to rattle off the tribe’s charitable endeavors including $4 million for town schools, which their children attend, and $7 million toward the town-reservation water system.

More meaningful than charity, however, the casino has guaranteed some level of employment to all Oneidas, about half of whom were unemployed before Turning Stone’s opening, tribal officials estimated.

The Oneidas employ 3,300 people, about 90 percent of whom are non-Indians, making the tribe far and away the largest employer in the two-county area, where layoffs and base closures have sent thousands packing over the past decade.

Last year, the tribe paid $79.5 million to its employees, about 2,700 of whom work at the casino resort.

“We could have depended on the government without having to lift a finger,” tribal council member Brian Patterson said. “But we chose to be self-sufficient and, unlike some of these companies that close down, we’re not going anywhere.”

Patterson’s optimism about the tribe’s future is supported by the U.S. Census Bureau, which recorded a 155 percent increase in the per capita income, when adjusted for inflation, among those who live on the reservation, from $4,241 three years before the casino to $14,533 in 2000.

“It’s a new day for us,” Patterson said.

Strained relations

Although the tax-exempt Oneidas and their employees have prospered to varying degrees since Turning Stone’s opening, Verona has missed the boat, town officials say.

The town, comprising five hamlets with a combined 6,500 people, was home to about 200 working dairy farms as recently as 20 years ago. Eleven farms now remain, with the rest reduced to crumbling silos and deserted buildings amid overgrown fields.

Many of the now-deserted farms and the thousands of acres on which they sit, were bought – in many cases for more than their assessed value – by the Oneidas with their newfound wealth, according to town officials, who bemoan the loss of property tax revenue that follows each new purchase by the tax-exempt tribe.

Apart from Turning Stone, which was built on some of that former farmland, Verona’s economic transformation has been limited to a few convenience stores – most of which are owned by the Oneida Nation – and a mom-and-pop restaurant just off the highway.

“There was once the thought that the Oneidas would do for Verona what Walt Disney did for Orlando, but that didn’t happen,” said town supervisor David Reed, who longs for more taxpaying businesses. “Look around. There’s no McDonald’s. There’s no Wendy’s. There’s not much of anything outside of the casino.

“We don’t have much,” Reed continued. “But then again, as a town, we’ve never tried to get much.”

Reed, a former judge, has proved the tribe’s unlikely ally after winning his current post three years ago on a self-described “anti-Indian” platform.

During his campaign, Reed blasted the Oneidas for not paying their fair share to the town while pursuing a 1998 lawsuit that named dozens of local landowners as defendants and sought to reclaim 300,000 acres in central New York, including the town of Verona.

Reed still keeps a bulging scrapbook of newspaper clippings filled with photographs of agitated townspeople pointing fingers and fuming over the Oneida lawsuit. The anti-Oneida fever rose to such a pitch that Reed resigned his judgeship amid accusations that he fronted what some dubbed a “hate group” protesting the Oneida lawsuit.

Now, behind Reed’s desk hangs a photograph of smiling tribal leaders handing him an oversized check for $50,000, the first quarterly installment of the tribe’s voluntary annual payment.

While the lawsuit still is pending, the Oneidas agreed to drop the individual landowners as defendants. And many in town – including Reed – have changed their tune about the tribe’s newfound prominence after town and Oneida officials were able to negotiate the tribe’s annual $200,000 payment in lieu of taxes.

“They’re not going anywhere and neither are we, so it was time we worked together,” said Reed. In forging a partnership with the tribe, he also is negotiating a deal to build a much-needed $20 million water and sewer line expansion for the town and to accommodate the resort’s near doubling in size.

But it’s clear that some resentment remains.

On the screen door of a dilapidated white house on the two-lane road out of Verona, a homemade poster reading “Oneida Indian Land Claims” is crossed out with a red circle and a slash.

“We’ve come a long way,” Reed explained. “But we have a long way to go.”

While the Oneida casino has much in common with a proposed Maine resort, supporters of the Maine project stress that the legislation behind it was designed to avoid conflicts, not to mention the hard feelings, like those seen in Verona.

The proposed Maine law, an amendment to the 1980 Maine Indian Claims Settlement, would prohibit building the casino on Indian land, thus making it subject to local property taxes, estimated at $5 million annually should the casino be located in Sanford.

The law would provide a 25 percent cut of the slot revenues – estimated at $100 million annually – to the cash-strapped state.

Those provisions might have gone a long way in easing Verona’s – and to a lesser extent, New York’s – transition to a gaming-based economy, according to Reed.

“It sounds like [Maine] might be on the right track with this,” he said.

Tomorrow: The state of the tribes