Report: Indian gaming boom slows

California Indian casinos will experience a continued decline in revenue through the first half of next year, but a recovery should begin in the latter part of 2010, according to a new study.

The state Indian gaming industry, which mushroomed over the past decade, posted its first contraction in 2008, a 5.6 percent decline. The deterioration will continue into next year, according to a report prepared by Fitch Ratings, an international credit rating agency.

The general downturn in the economy -- falling housing prices and high unemployment numbers -- will continue to erode revenues of Native American gaming operations.

The credit crunch is also threatening the ability of tribes to expand or build new casinos.

"The gaming industry in general is in a real retrenchment," said Megan Neuburger, a director at Fitch Ratings. "Going forward, we won't see the large-scale projects we saw over the last decade."

Indian casinos in California produced almost $7.4 billion in revenue in 2008, ranking behind only Nevada's gaming industry with revenues of $11.6 billion.

The only Indian casino in Sonoma County, River Rock near Geyserville, reported recently that its second-quarter revenue fell 7.4 percent as the gambling industry continued to feel the recession's pinch.

The casino, operated by the Dry Creek Rancheria, posted $31.1 million in sales for the quarter ending June 30, $2.5 million below the same period in 2008.

The largest Indian casinos are in Southern California, but there are several big ones closer to Sacramento, including Cache Creek in Yolo County and the newly opened Red Hawk Casino near Folsom.

Thunder Valley near Lincoln suspended construction on its hotel tower before resuming with a scaled-down project.

There are several proposals for large casinos in the Bay Area, including one in Rohnert Park proposed by the Graton Rancheria, that appear most directly impacted by the economic downturn.

The tribe's management partner, Station Casinos of Las Vegas, recently declared bankruptcy.

"Obviously, Station Casinos having its issue could derail the planning process," said Neuburger.

A Station Casinos spokeswoman last month said the bankruptcy had no effect on its plans for the Rohnert Park gaming resort, which would house 2,000 slot machines, a 300-room hotel, convention center and theater.

But the shaky credit markets cast doubts on the ability of tribes to find investors for their projects. Further complicating things, according to Fitch, is that two tribes that operate casinos in New Mexico defaulted on bond obligations, shaking the confidence of investors.

"Given the complexity of the legal issues involved in lending to a sovereign nation, many investors are likely to wait on the sidelines to see how these situations are resolved before they are willing to resume lending to tribal issuers," Fitch said in its report.

There are 106 federally recognized tribes in California and 57 that operate casinos.

Some with proposed casinos face not only uncertain timing of the economic recovery and a lack of capital, but more uncertainties in the regulatory approval process at the state and federal level.

The agency said the longer term outlook for the regional markets is brighter, especially for tribes with established casinos.

Some are better able to weather the pressure and Fitch expects the expansion will resume, only at a slower pace.

Neuburger said many Indian gaming operations are still profitable. Even in the recession the number of visitors reportedly have held up at some casinos, but patrons aren't spending like they did.

"They're not going out to the fancy steak dinner, or buying tickets for the show," she said.

Staff Writer Clark Mason is at 521-5214 or clark.mason@pressdemocrat.com.