Tribe's South Bend site may challenge existing gaming operations

Pokagon tribe ramps up pressure on casinos

The Pokagon Band of Potawatomi Indians’ entrance into the casino business and its expansions in that industry have all been in Michigan — a state where tribes own more than 20 casinos.
2016-12-06
Reading time 4:32 min
The Pokagon Band of Potawatomi Indians’ entrance into the casino business and its expansions in that industry have all been in Michigan — a state where tribes own more than 20 casinos.

But the Pokagons’ next step in expanding its gaming operations is in Indiana — which doesn’t have any tribe-owned casinos but relies on state-regulated casinos as a significant source of tax revenue.

The Pokagons’ plan to build a large casino as part of a tribal village with housing and health facilities on South Bend’s southwest side will remake that corner of the city. It also could have wide-ranging impacts on other casinos in Indiana.

Pokagon leaders announced last week that the federal Bureau of Indian Affairs approved the tribe’s application to take the 166 acres in South Bend into trust, which clears the path for the $400-million project to proceed.

The tribe has not set out an exact timeline for when the South Bend casino will open, but the plan is causing some concerns for other casino operators in Indiana

While those privately owned casinos pay roughly 30 cents on each dollar of revenue in taxes to the state, the Pokagon Band — as a sovereign nation — would have a competitive advantage by not being subject to those same taxes and regulations.

This is coming at the same time that Indiana casinos are facing increased competition from casinos in neighboring states — including the Four Winds Casinos the Pokagons own in New Buffalo, Dowagiac and Hartford, Mich.

According to the Indiana Gaming Commission, the state’s 13 casinos paid almost $605 million in wagering and admission taxes on a total win of $2.2 billion during the 2016 fiscal year, which was the 12-month period from July 2015 through June of this year. It marked the seventh straight year of decline since Indiana casinos paid $876 million in taxes on a total win of $2.8 billion in fiscal 2009.

Matt Bell, president and CEO of the Casino Association of Indiana, said the organization is working on a study to quantify the fiscal impact that the South Bend casino will likely have on other casinos in the state.

Bell said the association doesn’t have a position on whether the Pokagons’ casino should be built and hasn’t worked to oppose the plan.

As a sovereign nation, they have every right to engage in this practice, he said. And they have a history of doing it well

Bell, a former member of the Indiana House of Representatives, said it will be important for state legislators to understand the South Bend casino’s impact and decide whether they need to change the tax and regulatory policies that fall on existing casinos.

“We think you’re going to see an impact to the properties across the northern tier of Indiana, from East Chicago and Hammond to Gary. Obviously, Michigan City will probably be most impacted,” he said.

Even the racinos in central Indiana will likely be affected, Bell said. Racinos are race tracks that also have casino games.

“Are they welcoming the competition? Probably not,” he said. “But they are preparing to compete for business.”

Local impact

As Bell mentioned, Blue Chip Casino in Michigan City is the closest Indiana casino to the Pokagons’ site in South Bend. Therefore, Blue Chip — which opened in 1997 and employs more than 1,000 people — will likely feel the largest impact from the new competition. It’s also just 12 miles from the Pokagons’ original Four Winds Casino, which opened in 2007 in New Buffalo.

Blue Chip’s owner, Las Vegas-based Boyd Gaming Corp., reacted to the launch of the New Buffalo casino by investing $300 million in a new casino boat in Michigan City and an adjacent 22-story hotel that included additional restaurants, entertainment venues and a health spa.

Still, Blue Chip’s gaming revenue fell sharply after Four Winds’ opening.

After seeing revenue increase each year during its first decade of operation, Blue Chip’s total win fell to $209 million during the 2008 fiscal year, down from $267 million the previous year. The taxes that Blue Chip paid to the state tumbled from $95 million to $65 million during that same year-over-year period, according to Indiana Gaming Commission reports.

In the 2016 fiscal year, Blue Chip paid $46 million in state taxes on a total win of $162 million

A Boyd Gaming spokesman did not respond Friday to The Tribune’s request for a comment on the Pokagon property in South Bend.

Ed Feigenbaum, publisher of the Indianapolis-based INGroup newsletters, including Indiana Gaming Insight, said a Pokagon-owned casino in South Bend would have some advantages over other casinos in the state.

“They’re losing one third of every dollar they earn at Blue Chip to taxes and their local development agreement. The only taxes (the Pokagon casino) would pay, if you even want to call them taxes, would be what they negotiate with the state,” Feigenbaum said.

“The ability to offer tax-free meals, tax-free gasoline, tax-free cigarettes offers them a significant marketing advantage,” he said. “They’ll have more to invest in their property, to market their property. They can offer more promotions and give away more for free.”

According to the Michigan Gaming Control Board, the Pokagon Band has distributed more than $51 million to local governments and more than $149 million to the Michigan Economic Development Corp. through revenue-sharing agreements since 2007.

Also, the Pokagon Fund — a foundation the tribe established in 2007 — has awarded more than $22 million in grants to local governments and nonprofit groups in the New Buffalo, Dowagiac, Hartford and South Bend areas

The tribe negotiated an agreement with South Bend officials, announced in March, that will pay 2 percent of the South Bend casino’s annual net win to the city government. The minimum annual payment will be $1 million. The agreement also listed $5 million in donations the tribe will make to local initiatives and organizations over a five-year period after the casino opens.

Those benefits, in part, are what led to the organization of the Michiana Pokagon Alliance, a group that includes business people, local union leaders and other community members who want to support the tribe’s South Bend development.

Brad Toothaker, the president and CEO of commercial real estate firm Bradley Co., is one of the Alliance’s board members. He said the creation of health and education programs for Pokagon citizens, investments in the larger community and moves to diversify into non-gaming businesses have demonstrated that the tribe’s growth is good for the region.

“We see that they see a far bigger picture than just the casino business,” Toothaker said. “It’s not a large corporation dropping a unit just to add to their stock of units. It’s a vested, local, community business.”

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