Tribal Government Gaming: from perceived threat to a model for economic development in Hawaii

In 2001, when I was Director of Research for the National Indian Gaming Association (NIGA) in Washington, DC, I got a call from a lobbyist in Hawaii to ask about the legal and political likelihood of a federally-recognized tribe from the mainland buying land in Hawai’i to open a casino. The lobbyist told me that a proposal to legalize gambling in Hawaii was being thwarted by the specter of far-away tribes moving to the State to open casinos without local or state permission. As a graduate of University of Hawai’i who had completed my Ph.D. dissertation research on tribal gaming in my home state of Minnesota, I was surprised to hear that this perceived “threat” of tribal gaming was being used as one of the major points of opposition to gaming legalization efforts on the island of Oahu.

I worked with then-NIGA Chairman Rick Hill to draft a letter to the Hawaii state legislature outlining Section 20 of the Indian Gaming Regulatory Act (IGRA) that described the process for tribal fee-to-trust acquisitions for gaming purposes. Our call, along with the letter from Chairman Hill, reassured the lobbyist – and ultimately the legislature – that tribal governments could not “bring casinos to Hawai’i” under IGRA without several levels of federal, state and local input, if at all.

Section 20 of the Indian Gaming Regulatory Act

While that original letter is lost to the fax machine era, it included at least the following information describing the process. Over the years, experts such as George Skibine have testified before Congress about the BIA process for considering so-called off-reservation gaming applications from tribal governments. No tribe has ever contemplated fee-to-trust lands in Hawaii simply because the 574 federally recognized tribes do not have ancestral lands in the islands.

If a tribal government wants to engage in gaming activities under IGRA on an off-reservation parcel of land, they must submit a fee-to-trust application to their regional Bureau of Indian Affairs (BIA) office. The basis for the administrative decision over whether to place land into trust for the benefit of an Indian tribe is generally established in the Indian Reorganization Act (IRA). The Secretary of Interior applies the criteria for trust acquisitions in what are commonly referred to as the “151” regulations (25 CFR Part 151). These regulations include consultation with local and state officials as well as compliance with the National Environmental Policy Act (NEPA), which allows significant public comment.

In a particular case where the acquisition is intended for tribal government gaming, the requirements of Section 20 of IGRA also apply. In particular, the BIA central and regional offices will determine whether the acquisition will qualify for one or more of the statutory exceptions to the prohibition on gaming on “after-acquired” lands contained in Section 20(a) of IGRA. Section 20 provides that if lands are acquired in trust after October 17, 1988, the lands may not be used for gaming unless one of the following statutory exceptions applies:

the lands are located within or contiguous to the boundaries of the tribe’s reservation as it existed on October 17, 1988;

the tribe has no reservation on October 17, 1988, and “the lands are located within the Indian tribe’s last recognized reservation within the state or states where the tribe is presently located;” the “lands are taken into trust as part of: (i) the settlement of a land claim; (ii) the initial reservation of an Indian tribe acknowledged by the Secretary under the Federal acknowledgment process; or (iii) the restoration of lands for an Indian tribe that is restored to Federal recognition.”Of course, no land in Hawaii would qualify for fee-to-trust status under Section 20 of IGRA given the clear language of the bill and the definition of Indian lands. The proposal for gambling in Hawaii failed to pass, but the threat of tribal gaming was not the reason for its defeat.

The 2021 Proposal for an Integrated Resort on Oahu

Twenty years later, the issue of tribal gaming was raised anew during a discussion about legalizing gambling in Hawai’i to address revenue shortfalls caused by the pandemic’s devastating impact on tourism. While the same concern about tribal governments buying land for a casino in Hawai’i was briefly raised, this time the tribal government gaming industry on the mainland seems to have emerged more as a model of economic development and autonomy than a threat to Hawaiian sovereignty.

In December of 2020, the Department of Hawaiian Home Lands (DHHL) drafted a legislative proposal to build a single Integrated Resort (IR) on the island of Oahu. While the latest bill appears to be defeated this session, there are several similarities between the DHHL proposal for limited gaming in Hawaii and the robust economic development model created by tribal governments both before and after the passage of IGRA in 1988.

Dire Unmet Needs

The Department of DHHL is charged with developing land and lots to meet Native Hawaiian housing needs. According to the latest bill, “Current costs for infrastructure development…are in excess of $150,000 per lot. In order to fulfill the needs of the current waitlist, the department requires over $6 billion dollars for infrastructure costs alone to serve its beneficiaries. This significant sum is separate and apart from costs for maintenance of existing lessee communities housing nearly ten thousand beneficiaries, upkeep of several utility systems, and other costs… by conservative estimates, it will take the department at least another hundred years to meet the needs of its beneficiaries at current funding levels.”

Like tribal governments in the 1970s and 1980s, the DHHL faces an unprecedented and historic budget shortfall and must seek sources of revenue outside the usual government funding streams. The current pandemic and its impact on tourism in Hawai’i will lead to even more dire budget shortfalls to the State and ultimately, the DHHL. Like tribes on the mainland, there is no alternate solution for DHHL at this time and they are proposing a solution that creates a new industry, generates significant employment, enhances tourism opportunities and retains revenues that are currently lost to Nevada gambling interests.

DHHL Deputy Director Tyler Gomes, the bill’s author, testified that the proposed IR could generate between 2,000 and 7,000 new jobs, depending on the property’s size. When built out and operating, the IR could raise at least $30 million in annual revenue to be invested in moving beneficiaries off the DHHL’s housing wait list, which numbers about 28,000, and into new homes. Because gambling is currently prohibited in Hawaii, the development of a single IR on Oahu could bring significant revenues to meet the needs of DHHL beneficiaries while also creating jobs and economic development for the larger host community.

In his impassioned testimony, Director Gomes described the IR proposal as “the only solution out there that currently exists” to address the $4.5 billion shortfall in a budget needed to serve “28,000 Native Hawaiians living and dying on the wait list, as we wait for an idea that is not coming.” He also noted the fact that denying DHHL this opportunity for economic development uniquely harms Native Hawaiians since DHHL is one of the only organizations that has to generate its own revenues in order to operate, leaving it perpetually underfunded by design. At the hearing, Gomes made it “clear that the undertones of institutionalized racism continue to dominate the discourse. The lie that is told to Native Hawaiians and this department is that ‘it’s not the cards you’re dealt, it’s how you’re playing them’ and that is a dangerous one.”

Over years of evolving casino proposals in Hawaii, several legislators and DHHL employees have visited tribal communities to witness the success of tribal gaming first hand. The DHHL bill recognizes that there are successful tribal models to emulate:

“Evidence from over two hundred individual gaming facilities on federal trust lands in thirty four states, demonstrates significant economic activity through expenditures by casinos and their suppliers; job creation at the integrated resort and new businesses stimulated by increases in tourism, in State government, in education, and at suppliers to the integrated resort; wages paid to casino employees and all impacted businesses; taxes on all taxable economic activity; and direct gaming-related payments to the State and local governments.”

Several other components of the bill borrow from tribal economic development best practices, including the commitment to train local Hawaiian people for employment in the Integrated Resort, building the resort on land zoned by DHHL for commercial purposes, dedication of gaming revenues to providing specific Native Hawaiian services and a commitment to robust regulation of gaming.

The Opposition

It should be clear by now that the drivers of the DHHL proposal are similar to those of tribal government gaming, mainly the lack of viable alternatives for closing the growing gap between their community needs and their current and projected sources of funding. However, one of the more striking similarities between the DHHL proposal and early tribal gaming expansion is that these efforts are opposed not only by state actors who want to control gambling policy but also by commercial gaming interests in Nevada who want to protect the monopoly on their customer base.

The history of tribal government gaming in California reveals heavy investments by Nevada gaming interests to thwart any competition that could affect their reliance on California gamblers. Propositions 5 and 1A in California were vigorously opposed by commercial casino interests from Nevada who spent over $30 million in negative advertising and lobbying against tribal government gaming from 1998-2000. Until tribes opened casinos in the 1980’s, it was estimated that at least 35 percent of revenues in Nevada came from California gamblers. Gambling interests in Nevada undermined the efforts of tribal governments in California through heavy financial investments and negative messaging that went beyond gaming and attacked the tribes themselves, claiming they were already “rich” and did not need casinos anymore.

Similar strategies have been deployed in Hawai’i in the past and are suspected to be happening now as well. At least one Nevada company is transparent about its reliance on a steady stream of gamblers flying into Las Vegas from the islands. In 2021, the Boyd Gaming CEO admitted on his February conference call that the company relies heavily on gamblers coming from Hawaii, where gambling is illegal, and that in 2020, Boyd’s downtown gaming revenues declined 63 percent to $257.7 million. This downtown decline is due almost entirely to the lack of Hawaiian gamblers who generally fly via airline charter service from Hawaii to stay in Boyd’s downtown Las Vegas properties. With Hawaii’s pandemic response limiting non-essential travel to Nevada, Boyd and other companies got a preview of what might happen if Hawaiian gamblers stayed home to play permanently rather than just to comply with the lockdown.

Like the early days of tribal gaming expansion, not every tribal citizen or tribal community is convinced that opening a casino is the best alternative for economic development or self determination. In Hawaii, there was opposition to the proposal from Native Hawaiian beneficiaries who felt there must be a better way for DHHL to fund services and provide homesites. While not everyone agrees that gaming is the only or best option, tribal governments and Native Hawaiian organizations share unique obstacles for meeting their community needs due to their reliance on colonial structures that were set up to fail.

Denial of Sovereignty through Denial of Gambling

Tribal governments in the United States are the only governments who have to operate businesses in order to fund basic services for their citizens. The history of broken treaties and underfunded programs drove tribal nations to create the tribal gaming industry as a way to meet their own economic development needs. In Hawaii, the State Constitution contains similar promises to fund Native Hawaiian programs, but funding shortfalls are historic and on-going and it appears that the pandemic will extend the likelihood that state funds will fail to meet the needs of Native Hawaiian programs and services.

On January 26, 2021 the Hawaii State Commission on the Status of Women submitted a Gender Impact Statement to the Hawaii State House of Representatives. The document came right to the point with regard to the problem that DHHL is trying to address through its gaming proposal:

“The Commission is cognizant that the ongoing debate over gambling to provide revenue for Native Hawaiians has generated public controversy. The real controversy, however, lies in the role of racism in creating cash-strapped Native Hawaii organizations. The idea that DHHL has to raise money, absent adequate support of the State Legislature, is rooted in the framing of DHHL that ignores historical responsibility for the State of Hawaii to provide adequate funding for DHHL as an agency.”

This statement mirrored the points made by several state legislators at the hearing on February 5, 2021. Rep. Daniel Holt, an Oahu Democrat and the committee’s vice chairman, said he’s “not trying to blame anybody, but as one of the few Hawaiians in the Legislature, somebody’s got to say something. $4 billion to build homes for the 28,000 people on the wait list, and we have no plan. This is not about a casino; this is about funding for Native Hawaiians,” Holt said. “Both of our Hawaiian organizations in the government get nothing. The Office of Hawaiian Affairs gets $15 million. The DHHL, [is consistently told] ‘We’ll see what happens every year, guys.’ [[DHHL funding] Depends, depends, you know. [Funding for DHHL is one of] the conditions of statehood, it’s in the [State] Constitution. It’s about priorities — and [Native] Hawaiians are not a priority.”

At the end of the day, State Rep. Sean Quinlan, an Oahu Democrat and chairman of the House Economic Development Committee promised to address DHHL needs with something other than gaming:

“We’re talking about building homes for Hawaiians, in their own home, in their own place. This is where they’re from. It is painful to me that every two years, I swear an oath on the Hawaii constitution, then every two years, we fail to follow up on that oath with the money that Hawaiians are owed in our state constitution.”

The Hawai’i State Commission Report closes with a renewed commitment to solving the problem by first identifying the proper cause: the structure that prohibits DHHL from functioning properly due to its reliance on funding that never comes: “Stereotypically, the only State agencies that are required to raise funds in order to fulfill their mission falls along lines of gender and race stereotyping. DHHL should not be forced to generate funding from its own land and from Native Hawaiian beneficiaries. The Commission is committed to ensuring that Native Hawaiians are adequately supported by [the] State and Federal Government.”