Sunday, October 25, 2009

Local Newsaper: Tribal Stipends Under Scrutiny

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Today's front page headline in The Day newspaper of New London reads, "Tribal Stipends Under Scrutiny." The article is printed below as part of The Tribe In The Media series:

Tribal stipends under scrutiny
By Brian Hallenbeck
The Day
October 25,2009

Times were flush when the Mohegans sought the U.S. Bureau of Indian Affairs' approval of the tribe's plan for distributing gaming revenues.

After ensuring that the plan provided adequate funding for tribal government and economic development, among other things, the deputy commissioner of Indian Affairs signed off on the plan on July 16, 2001. It calls for 40 to 50 percent of the tribe's net gaming revenues from Mohegan Sun to be distributed to the tribe's adult members on a quarterly basis.

More recently, on Jan. 4, 2008, the office of the secretary of the Department of the Interior approved a Gaming Revenue Allocation Plan submitted by the Mashantucket Pequots. Under the plan, up to 30 percent of the net gaming revenues generated by Foxwoods Resort Casino (including MGM Grand at Foxwoods, which opened in May 2008) are to be distributed to tribal adults "to help advance their personal health, safety and welfare."

The plans, which the BIA requires of tribes that choose to make so-called per capita payments to members, have come under scrutiny in recent weeks, particularly in the case of the Mashantucket Pequots, who are seeking to restructure a debt load of more than $2 billion. Gaming industry analysts and the Mashantuckets' creditors are more interested than ever in how the tribe distributes its gaming revenue.

The creditors were alarmed in late August when Mashantucket Chairman Michael Thomas, addressing tribal members about the "dire financial times" facing the tribe, vowed to protect funding for tribal government and per capita "incentive" payments from further cuts. The pledge, which many within and without Indian Country considered irresponsible, cost Thomas his chairmanship. Placed on administrative leave and facing a tribal council vote to expel him from the council, Thomas announced he would not seek re-election Nov. 1.

"He's not that relevant at the moment," Jane Pedreira, a gaming analyst with Rye, N.Y.-based Clear Sights Research, said last week.

With Thomas out of the picture, the investment world is keen to learn about the tribe's funding of its tribal operations and the payouts its members receive. If they're having trouble finding such information, "it's not for our lack of looking," one investor said.

Plans' percentage breakdowns

Copies of the revenue-allocation plans, which The Day obtained from the BIA through a federal Freedom of Information Act request, detail the percentage breakdown of the tribes' allocation of their net gaming revenues. The Mohegans' 10-page plan specifies that 30 to 40 percent of the tribe's revenue is to be dedicated to tribal-government operations and programs, including investments and education; 5 to 15 percent to the general welfare of tribal members, including investments, health, housing, social services and youth services programs; and 10 to 20 percent to economic development, both gaming and non-gaming related.

The plan also provides for charitable contributions, funding for local government and "any purpose authorized by the Indian Gaming Regulatory Act" in amounts "deemed appropriate by the Tribal Council."

The per capita distributions - 40 to 50 percent of the tribe's gaming revenue - "shall be provided to qualified tribal members in equal amounts, unless determined otherwise by the Tribal Council," the plan says. Per capita benefits for minors are placed in trust.

The Mashantuckets' six-page plan specifies that 25 percent of the tribe's revenue is to be allocated to tribal government; 15 percent to the general welfare of tribal members; 25 percent to economic development; 5 percent to charitable contributions and 30 percent to per capita distributions.

Mashantucket per capita payments are paid monthly in amounts that vary based on a tribal member's age. Adult members, of which there are about 450, are divided into three age groups - 18 to 34; 35 to 54; and those considered tribal elders, 55 and above. Fifty percent of the payment for those 18 to 24 is determined by whether they are employed full time, enrolled full time in "a qualified school," in military service or in the ministry.

The plan specifies that the tribe provides full medical care and payment of educational expenses, including tuition, for those under 18.

A spokesman for the Mashantuckets did not respond last week to requests for comment on the subject of revenue allocation plans. Lynn Malerba, the newly elected chairwoman of the Mohegan Tribal Council, was traveling much of the week and conveyed answers to questions e-mailed through Chuck Bunnell, the tribe's chief of staff.

Malerba said her tribe does not publicly discuss details of its plan, and characterized the Mohegans' per capita payments as "modest." Reportedly, the payments are about $28,000 a year, a figure Bunnell would neither confirm nor deny. About 800 adult members of the 2,000-member tribe are eligible for the payments.

The Mohegan Tribal Gaming Authority, which operates Mohegan Sun, released preliminary financial results for its 2009 fiscal year in advance of last week's private sale of $200 million in senior secured notes. The authority said its distribution of casino revenues to the tribe during the fiscal year, which ended Sept. 30, totaled $72 million, and that it expects to distribute between $59 million and $64 million to the tribe in fiscal 2010.

"Much of the distribution ... funds tribal services and programs," Malerba said. "Our philosophy has been to support cultural preservation, education, health care, elder care and child care above all. Our priority is programs."

The chairwoman said the projected reduction in the authority's distribution to the tribe "is directly tied to decreases in casino revenues, which are an effect of the global economic downturn. … We remain deeply committed to honoring all our financial obligations."

Pequot payments higher

While the Mashantuckets have never disclosed their per capita payments, it's long been believed that they are considerably higher than those paid by the Mohegans. In August, a source who discussed the Mashantuckets' finances with The Day on condition of anonymity said the payments have been reduced in recent years and now range between $90,000 and $120,000 a year. Tribal members who spoke to The Day confirmed that payments are in that range.

Unlike the Mohegans, the Mashantuckets do not register their debt with the U.S. Securities and Exchange Commission and are not obligated to report their financial results. Sources, however, have said the tribe counts on $90 million to $100 million a year in Foxwoods casino revenues to fund tribal government and per capita payments.

Given the Mashantuckets' need to restructure their debt and the prospect that Connecticut's casinos will face increasing competition from virtually every direction in the years ahead, some analysts have questioned whether the tribe can maintain its current level of funding for tribal expenses.

"I personally don't have a problem with the tribe providing support to tribal members if they want to go to college, say, or to get training for better jobs," said Pedreira, the gaming analyst. "But I would object to 'disincentiving' them by paying them for doing nothing. You don't want to undermine them.

"What if Massachusetts (casinos) come in a big way and tribal members aren't prepared for careers? They miss the boat. … I'd rather see them keep it (gaming revenues) for a rainy day fund and to provide for training and education so members can stand on their own two legs. Perhaps in economic times like this you come in and help out."