Off Reservation Casinos

Background

It has long been held that federally recognized Native American tribes are considered sovereign nations that hold the right to self government within the boundaries of their tribal lands. This includes the right to engage in economic activity on reservation lands, specifically gambling.

Since the passage of the Indian Gaming Regulatory Act (IGRA), which provides a regulatory framework for gambling on tribal lands, tribal casinos have sprung up all over the country. With few exceptions, these casinos are limited to reservation land acquired before the enactment of IGRA, and can only operate games that are not specifically prohibited in they state in which the reservation is located. In the Northwest, there are 35 tribal casinos; 9 in Oregon and 26 in Washington. One casino in Washington is off reservation land. Currently, there are proposals for more off reservation casinos in both Oregon and Washington.

Issue

While tribal casinos are largely thought of as competition only to state lotteries, the truth is they are detrimental competition to other hospitality industry businesses. Oregon and Washington have the highest restaurant labor costs in the nation, and the steadily rising cost of employee benefits is creating an even greater hardship on Northwest restaurants. Off reservation casinos will be allowed to move into these markets and subsidize labor and benefit costs with large gaming dollars, adding increased pressure on hotel and restaurant employee retention. Most businesses will have no ability to compete. In fact, with minimum wage indexing and the lack of a tip credit, industry wide many are straining to cut costs just to stay in business. The simple fact is, in other states where the federal tip wage of $2.13 per hour can be utilized, full service restaurants are realizing a 340 percent lower labor rate on tipped employees than their Oregon counterparts. This gives those restaurants a much better chance to compete with the tribal casinos in their area.

States have no power to regulate activity conducted on a reservation∗; therefore tribal casinos are not subject to state minimum wage and tip credit laws. Other state labor laws that do not apply include workers compensation, state unemployment insurance, overtime, and mandatory day of rest. State income tax laws apply to non-Indians working at the casino, but not members of the tribe who work there. Federal income taxes do not apply to tribal governments.

Another area in which tribal casinos have an advantage is in their meal prices. Again, due to gambling revenue, they are able to offer meals at prices extremely lower than their local competitors. Restaurants simply cannot afford to lower meal prices; in fact, many are struggling to keep from raising prices. Also, with tribal casinos in close proximity to major metropolitan areas, distance is not an issue for the customer. This is devastating to the large number of area restaurants that will undoubtedly lose customers to the less expensive casino restaurants.

Location is another serious tribal casino issue. While the rights of tribes to engage in economic activity on their reservations is not in question, the change in laws and regulations needed to allow off reservation casinos causes a great deal of apprehension for many businesses. One off reservation casino will undoubtedly lead to more. The purpose of IGRA was to allow tribes to engage in economic activities on their land to promote their economic development and welfare. Tribes now argue that their lands are too distant from densely populated areas and major routes of travel, thus limiting the potential for economic success. However, looking at many reservations, major thoroughfares run through, or in close proximity to, tribal lands. A solution to this might be relocation of the current casino to a more advantageous location within the reservation.

Local impact from off reservation tribal casinos must also be addressed. IGRA provides that a casino may be operated off reservation land if it would be in the best interest of the tribe and its members and would not be detrimental to the surrounding community. This is extremely questionable as the impact from the increased traffic on community services, emergency services, public works, and local neighborhoods, not to mention the economic impact on local businesses, would obviously be substantial.

ORA Position

Aggressive changes to current federal and state gaming policies should not be made for the purpose of allowing off reservation casinos, tribal or private.