The Graton Resort & Casino raised their signature flower logo on the exterior of the building on Wednesday, August 21, 2013. (photo by John Burgess/The Press Democrat)

Graton Rancheria wields growing influence as opening of Rohnert Park casino nears

JEREMY HAY
THE PRESS DEMOCRAT

The Federated Indians of Graton Rancheria, a landless tribe eight years ago, now stands on the verge of great wealth as it readies to open the Bay Area's largest casino on the outskirts of Rohnert Park.

Through revenue-sharing deals with Rohnert Park and Sonoma County that could steer half a billion dollars to those jurisdictions over 20 years, the tribe already is a major actor in the North Bay.

And its leaders are clear about the tribe's desire to be an increasingly influential force in the region once its $800 million casino opens later this year.

"This opportunity will empower us to be important and engaged in this community on all sorts of issues and questions, particularly on questions of the land," Tribal Chairman Greg Sarris said, referring to casino income and to the tribe's oft-stated goals of preserving and restoring natural habitats.

"We'll have the financial resources to own the natural resources," he said.

But after nearly 13 years on the public stage — often in a withering spotlight of critical scrutiny — the sovereign nation of 1,300 people remains relatively unknown for a social and governmental entity of its size and potential sway.

However, public documents that include financial reports and audits obtained from the federal and state governments, as well as interviews with Sarris and others, add to the portrait of the Graton Rancheria.

Sarris, the tribe's chairman for 21 years, agreed to speak about certain subjects raised in the documents. About others, he declined, saying they are "in-house business and do little that profiles us as a people." He would not confirm or disclose any of the tribe's financial details.

The documents show how rapidly the tribe grew after its plans for a casino were announced in 2003; that it has received tens of millions of dollars in federal and state aid; and that this year it asserted considerably greater control over its Wilfred Avenue reservation property.

They flesh out the tribe's demographic makeup, and also show that it has divided among its members more than $12 million in funds that tribes with casinos pay to the state, which redistributes them to tribes without gambling operations.

Taken together, the documents show how the Graton Rancheria has worked to provide for its citizenry and other area Indians. They sketch out how the tribe developed and grew as an organization. They highlight its aspirations for influence and depict an entity that has, often adroitly, laid the groundwork to achieve that goal.

The Graton Rancheria's status as an Indian nation was restored by an act of Congress in December 2000, and in its early years, the tribe urgently sought funds to sustain itself.

On March 7, 2002, in Washington, speaking to the U.S. Senate Committee on Indian Affairs, Sarris appealed for money for his tribe. Until then, it had received $95,800 from the government, records show.

"We have no ability to hire an administrator and only limited ability to respond to the needs of tribal members," Sarris told the committee, describing how the tribe was using donated furniture and financial contributions from other tribes.

"We cannot even plan basic next steps because of the uncertainty about future funding," Sarris said, according to a transcript of the hearing.

That October, the tribe received $467,761 for housing programs from the federal government.

But the tribe's needs grew more acute as its membership spiked after Sarris announced in 2003 that the tribe would build a casino.

According to Indian Housing Plans obtained from the federal Housing and Urban Development Department's Southwest Office of Native American Programs — which in 2011 gave the tribe $686,125 — the tribe's membership nearly doubled to 1,055 from 2002 to 2004.

"Now you have a casino, and everyone's checking their ancestry," said one of the tribe's attorneys, Mike Pfeffer, in an April interview in which he recalled the rush of people applying for tribal membership.

Records show that through this June about $22.5 million in grant funds for housing and social service programs and for government operations has flowed to the tribe.

Through its various funding sources, the tribe has developed into a multimillion-dollar entity that helps support its members — about 500 of whom are under age 18 — with income supplements and social service programs that include housing assistance and employment training.

Tribal Council members and employees who manage the tribe's business are eligible for a 401(k) plan with a 4 percent employer match. As of 2011, the seven-member council split $240,000 a year in pay. That is about $100,000 less in compensation than when the tribe operated with a five-member council.

"They have an infrastructure and it's working like clockwork," said Bob Holden, grants management director for the federal housing department's Southwest Office of Native American Programs.

A partial portrait of the tribe's membership and its priorities emerges from the annual Indian Housing Plans it has filed since 2002 with the federal Department of Housing and Urban Development.

The tribe has its roots in the Coastal Miwok and Southern Pomo populations of current-day Marin County and southern Sonoma County. It has had no central physical site since the federal government terminated its tribal status in 1958 and distributed its 15-acre rancheria near Graton to families then living on the property.

While many tribal members still reside in the tribe's historic areas, others are spread throughout the region and beyond. The new 254-acre reservation — the Rohnert Park casino site — has no residential structures.

In 2002, the tribe said it had 577 members and had identified 11 low-income families who lived in substandard housing needing rehabilitation.

The next year, the tribe reported to the government that it had hired a housing administrator and started a rental assistance program.

The 2003 report said the tribe had 426 families, 57 of those elderly. It also said that 50 of its families lived in crowded conditions. Of its members, 64 percent were low-income, the report said.

For the first time, the tribe that year said that if it had enough funds, it would try to provide housing assistance to non-member Indians.

By 2008, the Graton Rancheria's housing program was providing rental assistance of $650 a month to Indians who were qualified veterans, disabled or elderly. It also was giving rental assistance to other income-qualified Indians, $450 a month for six months. And it was offering one-time $1,500 grants to help families with security deposits.

By that year, the tribe was rehabilitating two homes a year and holding workshops on hazardous housing conditions and managing finances. And it had expanded its service area from Marin and Sonoma counties to include Napa, Mendocino, Lake, Yolo, Sacramento and Solano counties.

Notably, in 2008 the tribe got about 40 percent more money for the housing program than it did in 2003. But its membership had grown much more than that — by an eye-opening 94 percent.

The 2008 report listed 1,159 members and 827 families, 150 of which were elderly and 154 of which lived in substandard housing.

In 2012, the tribe's report shows, it budgeted $145,000 for homebuyer assistance; $295,000 for programs providing up to 36 months of rental assistance; $300,000 for housing rehabilitation; and $50,000 for housing-related counseling.

In the case of housing, the reports may be an incomplete gauge of the extent of tribal members' needs. That's because the funds the tribe gets are based on its base roll, the number of members it had when it was federally restored in 2000. That number was 568, less than half the current figure of 1,300.

While the tribe's housing and welfare programs may be less than adequately funded, the benefits extend well beyond the needs of the members they serve, experts say.

"When you get these federal dollars and you start running these programs, almost automatically you start to give people administrative experience, you start building capacities," said Stephen Cornell, co-director of the Harvard Project on American Indian Economic Development.

That internal capacity took the tribe years to develop, according to audits of its financial statements and activities from 2002 through 2012 done by outside accounting firms.

In its first five years, the tribe went through four housing coordinators, lost its chief financial officer and experienced high turnover in its accounting department, the audits say.

Specific problems included tax- and payroll-related errors to the tribe's detriment: it withheld monies from tribal council members' paychecks that it shouldn't have; it also overstated its own tax liability to the federal government.

In 2006 public furor over the casino was at a height and the tribe was receiving anonymous threats of violence. That prompted the tribe to implement security measures, including $94,000 at Sarris' home on Taylor Mountain, that year's audit said.

The value of those residential security arrangements should have been classified by the tribe as income, the audit said.

In addition, the audits found that the tribe's controls over its federal grant programs were weak; it was late filing mandatory audits and housing program reports, and it had not spent its federal grants in a timely fashion.

In its 12 years, the tribe also has gone through at least three tribal administrators, a job that now is held by Tribal Vice Chairwoman Lorelle Ross. Two of those administrators were contacted but would not comment for this article, citing confidentiality agreements they had signed.

By 2010, however — the year the tribe's reservation in Rohnert Park was taken into trust by the federal government, the problems were cleared up. The audit of that year's financial statement showed no material weaknesses in its financial statements or federal grant programs.

And by 2013, the tribe's ambitions and organizational acumen were on full display, illustrating how far it had come as a self-governed nation since the days when Sarris had to plead for money.

On Feb. 1, Graton Rancheria became the first United States tribe to win, under the 2012 Hearth Act, the right to lease its lands without federal approval for purposes ranging from business and industrial use to housing.

"It has to be considered a big step forward from the point of view of tribal self-determination," Cornell said.

Most immediately, that allowed the Graton tribe to dictate, in a way that previously might have required a long and costly approval process, the terms under which the casino's 13 restaurants will operate.

By requiring the businesses to lease the casino space from the Graton Rancheria, the tribe was able to easily impose terms that the restaurants have to pay employees 10 percent to 30 percent more than the prevailing Bay Area wage for similar jobs.

"That was key for us," Sarris said. "I wanted those restaurants, each of the leases and the terms to be determined by the tribe, not the BIA (Bureau of Indian Affairs).

Other tribes still are trying to get Hearth Act approval, said Sarah Stevenson, an attorney with the Indian law group of Modrall Sperling Lawyers in Albuquerque, N.M.

"I think it speaks to a certain level of governmental organization and commitment of the ... tribal government to really want to get out in front of this," Stevenson said of the Graton Rancheria.

"It took knowing who to talk to and when to move," Sarris said.

The Hearth Act approval opened the door for the tribe to develop the remainder of its 254-acre reservation in Rohnert Park as it sees fit, providing projects are subjected to a tribal environmental impact report.

There are several development alternatives for the property that the tribe ruled out before moving ahead with its casino. Those included a shopping center, an office complex and a vineyard — all of which required startup capital the tribe had no access to then, but now does.

Sarris in June said that the plans are first for a 200-room hotel that will complete the resort. Blueprints are being reviewed now and it may get underway next year, he said.

Then, he said, the tribe intends to start an organic farm that will hire disadvantaged youth, young people who have aged out of the foster care system, undocumented workers and low-risk parolees.

Beyond that, he said, "That land will never be developed."

Today, the tribe's investment in the Graton Resort & Casino, with 3,000 slot machines, 146 table games and 13 restaurants, nears $1 billion, making it one of the largest development projects in county history.

To get to where it is today, in 2010 it agreed to take on a greater debt when it renegotiated its management contract with Station Casinos, then in bankruptcy.

The change hiked the casino company's management fee to 27 percent of net revenues from 24 percent for the final three years of its seven-year contract. The maximum percentage allowed without special approval from the National Indian Gaming Commission is 30 percent.

The new contract also pushed up the interest rate on the tribe's debt to Station Casinos to 13 percent, instead of the prime rate plus 1.5 percent. That led to millions of dollars in increased costs for the tribe because the prime rate varied from about 3.25 percent to about 8 percent since 2003.

By December 2011, the interest the tribe owed on its debt, primarily for the purchase of its reservation land, was $63 million, up from $50 million in 2010. The tribe's total debt to Station Casinos reached $224 million that year.

However, experts said the new contract is in line with industry standards.

"The agreement is well within the norm," said attorney Rory Dilweg, a partner with the Los Angeles firm of Tilden, McCoy and Dilweg, who has worked on such management contracts nationwide.

A year ago, with its final approvals from the state and federal government in hand, the tribe multiplied its debt by securing $850 million in loans and bond financing for the project's final push to open.

Those funds were to be used to build the 322,000-square-foot casino and repay $194 million to Station Casinos for the advances it has made to the tribe over the past 10 years, including for the 2005 purchase of the Wilfred Avenue property.

As enormous as the debt is, observers say the Graton Rancheria has steered itself to the edge of an enormous win.

"This tribe finds itself in a very fortunate position," said Kristi Jackson, co-founder and vice chairwoman of Tribal Financial Advisors, a Los Angeles investment bank that specializes in tribal financing.

"They're poised, by the account of just about every person involved or not involved, to make an enormous amount of money," said Jackson, whose bank was not involved in the Graton project, which Standard & Poor has projected will bring in $440 million annually by 2016.

A separate market analysis performed for Station Casinos in 2012 projected an annual net gambling revenue of $522 million.

"Because they've entrusted the development to someone who is very skilled, who really knows what they're doing, this is going to be a home run," Jackson said.

You can reach Staff Writer Jeremy Hay at 521-5212 or jeremy.hay@pressdemocrat.com.

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