Copyright © 2013 Albuquerque Journal
Provisions in the Navajo Nation’s proposed new gaming compact is raising concerns among at least one of its tribal competitors, Laguna Pueblo, which contends it will alter the gaming landscape in New Mexico.
The Navajo Nation hopes state lawmakers will approve the compact in the coming legislative session.
“We understand and respect the need for the Navajo Nation to have a gaming compact with the state,” said Skip Sayre, who handles sales and marketing for Laguna Development Corp., the tribally owned entity that operates Route 66 and Dancing Eagle casinos just west of Albuquerque.
“But there are provisions in the proposed compact that concern us,” he said.
Those include proposals to: allow the Navajos to have two additional casinos; set a formula for revenue sharing on games initiated by “free play”; and exempt Navajo casinos from revenue sharing if Internet gambling is approved.
The Navajos have three casinos in New Mexico: Fire Rock Navajo Casino just east of Gallup; Northern Edge Navajo Casino just west of Farmington; and Flowing Water Navajos Casino east of Shiprock.
The Navajo Nation is one of five gaming tribes or pueblos that operate under a 2001 gaming compact and are negotiating new gaming compacts with the state in advance of those compacts’ June 30, 2015, expiration date.
Laguna and eight other gaming pueblos renegotiated their original 2001 gaming compacts with the state in 2007 and will operate under those compacts through 2037, Sayre said.
If the Navajo compact is passed as currently written, it will “completely change the state gaming landscape,” he said.
Sayre questions the viability of two more casinos in the state, saying recent studies indicate that the gaming market here – and particularly in the metro Albuquerque area – is showing “essentially no growth.”
A key indicator of overall gaming activity in the state adds credence to that claim.
The 14 New Mexico tribes that have gambling compacts with the state report their revenues to the state Gaming Control Board, but they are not required to make those figures public. The Gaming Control Board does, however, report “net win” figures – the amount wagered on slot machines minus payouts and regulatory fees. Tribal casinos pay the state a percentage of their net win which, last year, amounted to more than $68.3 million. But the money flow has slowed.
From 2008 through 2012, growth in tribal net win statewide averaged 1.6 percent per year, according to figures compiled by the Gaming Control Board. In the five years prior to that, growth in tribal net win had averaged 12.1 percent per year.
“We’re concerned about market saturation,” Sayre said.
State Sen. Steven Neville , R-Aztec, expressed similar concerns for northwestern New Mexico when Navajo Nation President Ben Shelly touted the new compact before the state’s Legislative Finance Committee in October.
“I’m just concerned we’re overdoing it,” Neville said then, adding that the Northern Edge Navajo Casino just outside Farmington has “devastated” SunRay Park, a racetrack/casino just nine miles east of Northern Edge.
The pueblos that renegotiated their compacts with the state six years ago are limited to two casinos apiece for at least the next 24 years.
Even though Navajo officials recently told the state’s Legislative Finance Committee they have no immediate plans to build the proposed additional casinos, Sayre said there’s concern the Navajos might eventually revive a 2004 plan to build a casino complex at To’hajiilee, just over a mile west of Laguna’s Route 66 Casino on Interstate 40.
That plan called for a 300,000-square-foot casino, a hotel/conference center, visitor center, travel center, golf course, recreational properties, RV park, industrial area and other amenities on a 647-acre parcel of tribal land.
“Locations for additional Navajo casinos have not been formalized at this time,” Derrick Watchman, CEO of the Navajo Nation Gaming Enterprise, which plans and operates Navajo casinos, said in a statement Friday. “Our focus remains on finalizing the compact in the upcoming legislative session.
“The compact will run for several decades, so any future growth … in New Mexico will be dependent on the markets during that time,” he said.
Such a complex would compete directly with Route 66 Casino – which provides about 1,100 jobs – but Sayre said the real concern is over-saturation of the Albuquerque gambling market.
“Recognizing the maturity of the Albuquerque metro gaming market over the last few years, if nothing else, should certainly be a consideration,” as state legislators consider the Navajo proposal, he said.
An unlevel field
After Laguna and eight other pueblos renegotiated their compacts in 2007, they made sizable capital investments at their casinos, Sayre said.
“We made those investments with the belief that we had a clear picture of what the competitive landscape was going to look like in New Mexico,” he said. “Adding two or three new casinos puts us at a disadvantage in terms of realizing some kind of return on those capital investments.”
The Navajo proposal would increase the tribe’s current revenue sharing with the state, which is currently set at 8 percent of adjusted net win, and essentially matches the rates agreed to by the nine gaming pueblos that renegotiated their compacts in 2007. The rates increase in increments based on levels of net win, and peak at 9.75 percent through 2015. That rate tops out at 10 percent from 2016 through 2030, and at 10.75 percent from 2031 through 2037.
Sayre also expressed concern that two other provisions in the proposed Navajo compact – one on so-called “free play” and the other on internet gambling – could become de facto benchmarks for all other gaming compacts.
Free play – an incentive offered by casinos that lets gamblers play a game for free – has long been a point of contention between casinos and state regulators.
The state contends that tribal casinos should not include jackpots won with “free play” as deductions from their net win calculations, said Peggy Hardwick, senior staff counsel with the New Mexico Gaming Control Board.
Only two gaming pueblos – Laguna and Ohkay Owingeh – are currently doing so, Hardwick said, adding that Taos Pueblo’s Taos Mountain Casino does not offer free play. The Navajo proposal to make 35 percent of free play jackpots subject to revenue sharing, Sayre said, further complicates the free-play issue.
“We think that adding what is essentially a third solution to the question of free play … makes it more difficult to reach a resolution” acceptable to everyone, he said.
Eliminating free play or “bonus play” across the board is not an option, Sayre said.
“It’s a huge marketing tool and a significant business expense,” he said. “But it has become an expectation of customers.”
Similarly, the issue of Internet gaming is in flux nationwide, and addressing it in the Navajo compact is premature, he said.
“That really caused us to raise our eyebrows a little bit,” he said. “The whole question of Internet gaming is highly uncertain.”
The proposed Navajo compact says that if the state or federal government were to authorize Internet gambling here, the Navajo casinos could stop sharing revenue with the state unless the Navajo casinos were also allowed to offer Internet gaming.
The state Legislature’s Indian Affairs Committee is slated to hear updates on negotiations of the proposed Navajo compact – along with those being proposed by Pojoaque Pueblo, Acoma Pueblo, Jicarilla Apache and the Mescalero Apache tribes – beginning at noon Monday at Buffalo Thunder Resort and Casino.
Journal staff writer Deborah Baker contributed to this report