Work continues on the Graton Resort & Casino on the east entrance in Rohnert Park, Wednesday June 26, 2013. (Kent Porter / Press Democrat) 2013

Rohnert Park casino's impact on existing gaming halls debated

CLARK MASON
THE PRESS DEMOCRAT

The opening later this year of the Graton Rancheria's huge casino in Rohnert Park holds the promise of economic betterment for its 1,300 tribal members, but also poses a threat in the form of powerful competition for other tribes with casinos.

The new gambling palace, conveniently situated along Highway 101 closer to the populous Bay Area, is predicted to siphon off customers accustomed to traveling farther north to River Rock, Sonoma County's only other Indian casino, as well as patrons of smaller casinos in Mendocino and Lake counties.

The Dry Creek Band of Pomo, which has enjoyed a 10-year monopoly on Indian gaming in the North Bay, is bracing for the hit to its River Rock Casino when the Rohnert Park facility opens late this year.

The new casino, rapidly rising next to the "Friendly City," will have 3,000 slot machines and 200 table games in a modern building, dwarfing the 1,200 slots and 20 tables in River Rock's tentlike structure on a scenic hill overlooking the Russian River and vineyards of Alexander Valley.

"There's no way with Graton coming online will we have the same revenue," Dry Creek Chairman Harvey Hopkins said. "I'm thinking 30 percent, or more, loss in revenue."

That could mean a loss of $37 million a year, based on 2010 income reports.

Hopkins predicts that smaller casinos to the north, which number six in Mendocino County and four in Lake County, also will feel the pain.

"It's going to strangle the other casinos that are up the 101 in Mendocino and Lake County. Their lifeblood is the Bay Area," said Doug Elmets, who represents five tribes, including those that operate Thunder Valley and Jackson Rancheria casinos, closer to Sacramento.

"The challenge smaller casinos will face is not only from Graton. They will be fighting tooth and nail for whatever scraps fall off the table," he said.

However, Graton Tribal Chairman Greg Sarris dismissed most of the predictions as conjecture and "hysteria." He contended that Graton's impact on existing casinos will be "minimal."

"The fact is, if you look at the Southern California model where big casinos are half an hour from each other, they're doing fine. There's enough to go around," he said.

He conceded some of River Rock's patrons initially may be curious and come to the Graton casino, which is expected to open by the first week of November. But he said "the clientele coming to us will be somewhat different."

Even small casinos clustered close to each other in Lake County "are doing equally well," Sarris said.

But one of those casinos, operated by Robinson Rancheria about 75 miles to the north in Upper Lake, filed an objection to Graton's state compact application last year, alleging the big new casino would interdict customers from Santa Rosa and the greater Bay Area.

Not only would it seriously threaten Robinson Rancheria's modest casino and others in Lake, Sonoma, Mendocino and Colusa counties, the tribe's business council claimed, it also will have negative impacts on tribal governments as far away as the Gold Country in the Sierras.

That sentiment isn't unanimous.

Coyote Valley Band Chairman Michael Hunter, whose tribe operates a casino with 250 slot machines and eight card tables north of Ukiah, predicted there will not be a major effect on his operation.

"Sure it will have some slight impact," he said, but added that the majority of Coyote Valley's customers come from Mendocino County.

Hunter said many of Coyote Valley casino's clients come to Mendocino County for other reasons, such as to visit the redwoods and wineries.

Even if it cuts into other tribes' revenues, both he and Hopkins said the Graton Rancheria deserves to benefit from the income and jobs.

"We hope their people have success from that," Hunter said, noting that "many of us have related family from different reservations."

"The biggest thing we have to keep in mind is there is enough economic development, enough commerce for everyone," he said.

Since California voters approved Las Vegas-style gambling on Indian lands more than a dozen years ago, it has grown to a $6.9 billion industry, with about 70 tribes operating casinos.

Experts say there is room for more growth, especially in the Bay Area, but some will come at the expense of existing casinos.

"The market has not really shown saturation. There is an opportunity to pick up new gamers," said William Thompson, a gambling expert who teaches at the University of Nevada in Las Vegas.

He said that Graton's new casino just off Highway 101 will have a distinct advantage, especially over River Rock, located four miles from Geyserville via a winding two-lane road.

The Graton facility is projected to generate $418 million in annual gambling revenue by its seventh year. Some of that, Thompson said, will be from poaching some of the 1.3 million annual visitors that visit River Rock, which generated $124 million in revenues in 2010, the last time it publicly reported income.

"A lot of people in San Francisco would be willing to get on the 101 and go directly to a casino, where they would not take an extra half-hour to take two-lane roads," Thompson said.

"It's going to be tough on the existing casinos," he said, adding that they must make sure they provide good customer service and offer something more than just gambling, perhaps adding better food and other incentives.

Casinos may need to offer more "free play," Elmets said. "They are going to have to redouble their effort to market to locals and figure out ways to cut costs. And they will have to figure out a way to develop a new niche for their casino attraction," he said.

A banker who specializes in tribal financing issues was more sanguine about prospects for all the casinos:

"The market is so large in this greater vicinity, that while it (Graton) might have some impact on the competitive properties, there is still enough of a market to keep them (River Rock and other casinos in the area) going and in business," said Kristi Jackson, senior vice president and co-founder of Tribal Financial Advisors.

But Dry Creek Chairman Hopkins said Graton's impending opening and the impact it will have on River Rock already has caused his tribe to delay charitable payments it makes to Healdsburg District Hospital and other causes.

He said some of the revenue-sharing agreements, such as money the tribe funnels to the Sonoma County Sheriff's Office, schools and roads, could be affected.

"It's going to be disaster for some of the tribal members for programs we have," he said of housing and education stipends that are derived from casino revenue.

If revenue drops 30 percent or more, he said, the monthly $600payment to adult tribal members may go down. He also fears River Rock will lose a number of well-trained staff "from the executives all the way to the janitors."

"We've already seen that happen with card dealers," he said, noting that 20 to 30 employees have jumped ship for Graton.

Hopkins said the tribe is developing alternative forms of revenue, including opening a new tobacco shop at the casino and bottling its own wine from nearby vineyards it acquired.

But the competition from Graton also has thrown into question River Rock's long-term plans to build a permanent casino structure and hotel.

A couple of years ago, the tribe restructured some of its $200 million bond debt. It's whittled down $30 million of that and hopes to reduce it by another $30 million this year, according to Hopkins, but "no way with Graton coming on line will we have the same revenue stream."

As the tribe continues to reduce debt, he said, it hopes to borrow money for a 150- to 200-room hotel, a more modest version of a $300 million Tuscan-themed, luxury hotel and casino the tribe announced it planned to build before the economy soured and financing evaporated.

Alex Bumazhny, a director with Fitch Ratings in New York who specializes in analyzing the Indian gaming market, said the Dry Creek tribe will have a hard time raising money for expansion.

He said the fact that Dry Creek restructured its debt in 2011 by extending the maturity of its bonds to existing bondholders indicated lenders thought River Rock was overextended.

"Graton was probably the biggest factor," he said of the caution River Rock's lenders had even two years ago. "For them to borrow will be pretty difficult, at least until the dust settles."

Hopkins predicted River Rock will rebound a year after the Rohnert Park casino opens, when the novelty wears off. Bumazhny disagrees.

"The hit (to River Rock) will be more or less permanent," he said. "Graton should not have a problem competing, or matching anything River Rock will do."

But Hopkins said Sonoma County's first casino will endure:

"It's given this tribe a lot of opportunity for education. There's a lot of people now who are new homeowners. It's done a lot for us, and we will survive. We'll bounce back."

You can reach Staff Writer Clark Mason at 521-5214 or clark.mason@pressdemocrat.com.

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