Deron Marquez, who served as chairman of the San Manuel band of Mission Indians in Southern California from 1999 to 2006, says that the upside of his tribe’s bingo parlor is obvious. The tribe has more money to spend on health care, education, and housing. But the gaming business – particularly the payments that members of the tribe receive from it – has created problems, too. “For anyone in society who has addictive behavior, we are making addiction stronger with per capita payments. We’ve become the enabler.” But even for people who don’t have problems already, Marquez says it’s “hollow money. It’s just a new kind of government program – a tribal government program.”
The results are just like the results of government dependency anywhere. As Marquez notes, “The apathy becomes overwhelming. The payments can create an atmosphere [where] why would you have to do anything?”
To try to address this problem, the Seneca tribe recently ran a financial literacy program for high-school students, which sounded pretty elementary. The organizers gave the teens pretend checks and had them go to a “bank” to cash the checks or deposit them. Then they could spend the money on a variety of goods and services. Stephen Scott, who’s helping Senecas complete an application to open a credit union on the territory, explains to me that few of the kids saved or invested any of their money. And they seemed unwilling or unable to distinguish “wants from needs.” He shows me one of the play hundred-dollar bills from the exercise. On one side, it says “First Nations Development Institute.” On the other, it says “The Native Nations of America: In the Creator We Trust.”
For all they understand of its value and its potential to change their lives, the real money they receive on their 18th birthday might as well be Monopoly money.
But Scott, who has worked with other tribes that have benefited from casino revenues, says that Senecas actually have things more under control than most. When he worked for the Shakopee Mdewakanton tribe in Minnesota, they were giving out $80,000 to kids who had just turned 18. As a result of the handouts, he says, “There was no drive to work. No drive to further their education. It caused drugs and alcohol to be rampant. There was a lot of stress on families, the breakdown of families, addiction to gambling.”
Indeed, wasting the money is a largely harmless consequence of this windfall – compared to the alternative. For example, many young Senecas use the money to purchase drugs or alcohol. There’s a serious drug problem on the two territories. Every couple of miles, a pair of sneakers hangs on a telephone line, a sign that a drug dealer is open for business nearby. And government officials tell me that the dealers know when quarterly checks are sent out, so they’re particularly visible then. According to Scott, there’s also violence toward older members of the nation, who get larger checks. “Elders are being abused by their grandsons to support whatever habit they have. We have a lot of break-ins.”
The tribe has been debating various methods of either putting off the big check until these kids are older and more responsible or putting constraints on the ways the money can be used.
I meet two young women having lunch together in the vast common area of the tribal government building. While they pick at their takeout, we talk about how they came to be among the few in their cohort who went to college and stayed on the straight and narrow path to a career. They both graduated from high school just as the lump-sum payments were beginning, when the payments weren’t very large. One used her money to pay for some expenses while she was taking classes at the local community college. She tells me, “Some kids get a car, alcohol, or drugs.” She says that the local high schools should offer seniors classes on how to invest the money.
Her friend says that a lot of people blow the money on a vacation or even gambling. And it’s with a particular show of disdain that she talks about the ones who go into the casino or the bingo hall. “Gambling is a disease,” she tells me. “We go to the casino to eat and to watch people. They just stare at those machines,” she says, referring to the thousands of slot machines that line the floors of the casinos. “People lose their homes there.”
Of course, most of the people who go to the Seneca Allegany Casino and Resort are not Seneca themselves. They’ve traveled from all over the country to this enormous glass structure built into the side of a hill on the side of the interstate. The multilevel parking structure has spaces reserved for the most loyal customers.
It has become almost cliché to observe that casinos are depressing places. But they really are. In the Allegany Casino, there are pictures of nature everywhere – wild horses, sunsets over mountains – but almost no windows to speak of. Even the nonsmoking rooms reek of cigarettes. There’s no natural light inside, so customers don’t realize how much time has gone by while they’re throwing away their money. Indeed, it’s hard to find a clock anywhere in the cavernous facility. There are a few tables for card playing, but as the young ladies I ran into observed, mostly there are rows and rows of slot machines, each with different themes – beaches, fruit, cars.
By 8:00 A.M., a smattering of tourists have already planted themselves in front of these flashing screens. The crowd is mostly working-class. A lot of the customers are overweight and regularly call the waitresses over to order more soda. A disproportionate number of people are in wheelchairs.
The restaurants in the casino – there are at least three – feel like the ones in Disney World. They’re overpriced – think Manhattan steak house – but people pay to eat there because they don’t want to stop gambling, and, truth be told, you’d have to drive a ways to get a decent meal outside of the casino anyway.
But there aren’t as many customers as there were just a few years ago. And there are likely to be fewer in the future, because New York State recently granted licenses to three more large non-Indian gambling facilities, two in the same upstate area where the Senecas operate.
Although Governor Andrew Cuomo touts the expansion of casinos as a plan for economic growth upstate, most observers see a downward trend. The Mashantucket Pequot tribe, which runs the Foxwoods Resort in Connecticut, once paid its thousand or so members more than $100,000 annually from its profits, but in 2012 they got nothing. Some moved elsewhere in search of work. The casino was $1.7 billion in debt and was closing its nearby Pequot Museum for several months. Tribe officials wouldn’t explain exactly why, but according to the New York Times, most of the staff were laid off.1 Since then the museum has continued to close annually during the slower winter months.
Part of the problem is competition. Gambling can only expand so far, warns E. J. McMahon at the Empire Center for Public Policy in Albany: “There is a finite market for this. There’s only so much revenue to go around.”
After that, you’re stuck playing politics to keep what you have. In his contribution to the volume Self-Determination: The Other Path for Native Americans, economist Ronald Johnson notes, “Now that it has been demonstrated how successful Indian gaming operations can be, there is no reason to suspect that gaming tribes will be spared the political pressures that beset the commercial gaming industry or any other successful industry dependent on governmental support or acquiescence.”2
Indeed, tribes have spent millions lobbying to ensure that they keep the corner on certain area markets. But they seem to have had limited success. Politicians want to get as much money as they can out of the gaming industry, which means, they seem to think, opening it up to more players. There’s an agreed-upon buffer zone, in which non-Indian casinos may not set up shop, around the New York Indian casinos. But the casinos are typically frequented by folks from outside the area, and now that there’ll be establishments much closer to New York City, it’s unlikely many people will head up to Allegany for their slot-machine needs.
Cuomo says that the new casinos will create more than 3,600 permanent jobs, including 1,300 in Schenectady County, 1,050 in Sullivan County, and 1,250 in Seneca County. “This is more job growth in Schenectady than has probably happened in a century, so it is exciting,” Cuomo sa
id.3
Well, maybe.
Seneca leaders, for their part, say they’ve seen the writing on the wall for some time now. They believe they got into the gambling industry just as it was reaching its peak. And although they’ve been happy to ride the wave, they do want to prepare for the future, which they hope won’t look like that of their brethren in Connecticut.
Michael Kimelberg is probably one of the main reasons that Seneca finances will survive the decline of gambling. Kimelberg spent part of his childhood on the territory. His mother was a member of the Seneca Nation, but his father was not. He spent some time in Albany but came back every summer to be with his relatives. His great-great uncle was the president of the tribe in the 1960s. His mother was very active in the nation’s leadership as well.
After attending college at SUNY Geneseo, Kimelberg went to the University of Washington for graduate school. He stayed in the Northwest to go into planning and development. By 2010 the nation had made some significant profits from the casino and was starting to think more about development projects.
Indeed, one advantage of the gaming revenues, even if they aren’t a panacea, is that they can be used to lure talented people back to Indian territories. The reversal of the brain drain has been more feasible in the Northeast and Northwest than for the plains Indians. Even though Seneca territory is in a depressed area of New York, parts of the territory are less than an hour from Buffalo, and there are other metropolitan areas relatively nearby as well. There are opportunities in the area for spouses of Senecas who want to come back to work for the tribe too. Rural South Dakota this is not.
So Kimelberg returned to be in charge of development and planning and then in 2012 became the chief operating officer of the Seneca Nation. He lives with his wife and family in Buffalo, drives a Mercedes station wagon and spends his days trying to figure out how to sustain and grow the wealth and influence of the Seneca Nation for generations to come. When he looks back on the debate the tribe had over whether to open the casinos, he says, “I think it was wise to be circumspect. . . . Folks like the Pequots were doing quite well, so there was certainly a lot there, but gaming is by no means a fantasy. . . . Credit has to be given to our policymakers early on, who recognized that gaming is a volatile industry.”
Kimelberg actually returned to New York a year after the nation hired his brother David. David Kimelberg had been working as general counsel for a venture capital group in Boston and was reluctant to return. But he too was persuaded. The tribe had committed $28 million over five years to diversify the tribe’s holdings. Seneca Holdings was formed as a limited liability company, with an independent board chosen by the tribal leadership. But how it was going to invest its money was a little less clear.
For the first few months he was back on the territory, David, who became the CEO of Seneca Holdings, wasn’t actually sure what he was supposed to be doing. A couple of years earlier, the tribe had applied for a license to operate a radio station. So David spent six months building a state-of-the-art commercial radio station. Which wasn’t exactly what he was hired to do. “It wasn’t an ask,” he tells me. “It was more of a directive.” But today the station “breaks even,” and he says it has created “a lot of social capital.” There’s a sense that David also built up the trust of some of the other community members with this project.
As an outsider who came back, David has faced skepticism from other Senecas. And one member of the tribal council asks whether I happen to know David, because I’m Jewish, and, well, you know.
In a meeting with three members of the tribal council, it’s easy to see some suspicion still bubbles beneath the surface. Jeffrey Gill, who worked as an artist and then had a career in law enforcement before joining the council, says that he supports David and Michael’s efforts. “The only disagreement I have with this administration,” he says, “is that the decision should be made by the tribal council . . . and not be pushed or placed in front of us that this is the way it’s going to be.”
David started with a difficult task, though. As he notes, it’s hard to match the margins of gaming. “It was a $750-million-a-year business, which delivers incredible margins.” And the tribe had a “monopoly advantage” on gaming as well. Other sectors weren’t going to deliver those margins, but as David notes, the nation has some advantages in other areas. “We are a sovereign nation within the U.S. . . . We have some tax efficiencies. We have regulatory advantages. We have all these really cool things that could be leveraged.”
Indeed, the Seneca people have a long history of leveraging their sovereign advantages, beginning with selling cigarettes and gasoline tax-free on the reservations. For many years after states imposed sales taxes on those two commodities, businesses on Indian territories attracted customers with their significantly lower prices. Although their economies weren’t exactly thriving as a result, many small businesses were able to pull in some pretty startling margins – one Seneca leader suggests that business owners regularly made 300 percent profit on these items.
In 1991, profits began to taper off with the settlement of the case of Oklahoma Tax Commission v. Citizen Band, Potawatomi Indian Tribe of Oklahoma. The Supreme Court held that although tribes needn’t charge tax to their own members, they did have to collect tax if they sold cigarettes to nonmembers. Enforcement of the law was difficult, for obvious reasons. Are you really going to prove that you’re an Indian every time you buy cigarettes? What counts as proof? Why can’t you buy them for someone standing outside the store? In principle, it could be no more difficult than checking someone’s ID before the purchase of liquor. But in some areas, enforcement was simply nonexistent, because the reporting procedures for taxation required by the federal government and by the individual states weren’t the same as the ones on the territories.
The real change came in 2010 with the passage of the Prevent All Cigarette Trafficking Act (the PACT Act), whose goal was to halt the sale of untaxed cigarettes online. The main idea was to limit the sales of cigarettes to minors – who knows how many kids were going online to order their smokes? – and to limit the black market in cigarette sales, which the feds said was being used to fund organized crime and even terrorist activities. The major effect of the new law, though, was to ensure that online and mail-order retailers couldn’t evade state and federal taxes.
The result, explains Michael A. John, the manager of the Small Business Incubator Program on the territory, was “major economic devastation” on the territory. The businesses that weren’t meeting the reporting requirements had to close down. For others, without the advantage of being able to offer cigarettes tax-free, their profit margins plunged. John says that the problem was that these businesses simply couldn’t undercut the competition off the reservation anymore.
Which brought the tribe to their second sovereign advantage: gambling. Although many tribes had traditions of playing games of chance, such as dice, there was little effort to turn these into moneymaking enterprises until the 1970s. In that decade, several tribes, including the Seneca, opened up bingo parlors and other small-scale gambling operations. The state governments, though, wanted to have jurisdiction over these businesses. They argued that not only should they be able to limit the number of casinos and bingo parlors, they should get a share of the revenue.
The 1998 Indian Gaming Regulation Act (IGRA) largely cemented the notion that in this regard, Indian lands were sovereign and answerable only to the federal government, not to the state governments. So, for instance, it’s the FBI that has jurisdiction over Indian casinos, not local or state police.
But as states started to allow and expand gaming operations off the reservation, that sovereign advantage began to evaporate. Which left David Kimelberg looking for the next big thing, the third sovereign advantage.
“What we did,” he tells me, “is we went all in on government contracting.” As David notes, “we have some very interesting contracting preferences by virtue of being the Seneca.”
Se
neca Holdings is now a sort of umbrella company for several contracting firms. The company can be taken to court by other parties in case there is a dispute. Seneca Holdings has its own board. As David says, “If things go sideways, then [other parties] have full recourse.” But the suit can’t go any higher up the chain. In other words, the nation’s other assets can’t be taken in any legal action. Not only does this protect the Seneca tribe, it gives its business partners assurance that the tribe won’t try to use its sovereign status to evade the federal or state laws by which their contracts are governed.
Seneca Holdings has formed four operating companies – one for construction, one for telecommunications, one for IT, and one for security. Anywhere from 50 to 80 percent of their work is for the federal government, including the Department of Defense, the Army Corps of Engineers, and the Bureau of Indian Affairs. Seneca Holdings companies have built an anti-terrorist center in Schenectady. They handle the telecom and IT needs of an army base in Florida. And David hopes they’ll soon be closing on a contract to put up antennae for an army base in South Korea. They operate in 33 states as well as overseas.
The Seneca companies have what the Small Business Administration refers to as 8(a) certification, which means they’re eligible for preferential treatment from the federal government because they’re owned and controlled by members of an economically disadvantaged group. Even when they’re bidding for private contracts, though (with firms like Wal-Mart), they often have an advantage, since there are major companies that – for public relations purposes, if not legal ones – give preference to female- and minority-owned businesses.
Still, David insists that the Senecas couldn’t have been as successful as they have with these companies if they weren’t doing good work. Other nations, he says, have made the mistake of assuming that business would just fall into their laps once they were 8(a) certified. “It’s not a be-all [and] end-all,” David says. “It’s a great entrée,” but the Seneca companies have had to actively seek both the federal and private contracts they want – and do a good job too. Federal work, especially, he says, is “incredibly relationship-driven.” If you can show that you do good work, they’ll hire you again.
The New Trail of Tears Page 7
