Law and Economics
Betting on Their Future
Flush With Casino Cash, American Indians Are Laying the Creative Legal Groundwork for New Ventures
Posted May 23, 2006 2:37 AM CDT
By Margaret Graham Tebo
Michael Taylor doesn’t dress the part of one of the most innovative and sought-after lawyers in Washington state.
There’s no natty power suit, no shiny wing tips, no calfskin briefcase. There’s just a middle-aged guy in khakis and an ’80s-style knit tie worn under a lightweight ski jacket.
Nor does Taylor’s office look much like he’s the head lawyer for the increasingly economically powerful Tulalip tribes (pronounced Tu-lay-lip), with whom he’s worked for the past 13 years of his 35-year association with American Indian tribes.
He does the tribes’ legal business out of a converted baseball shed on the edge of the parking lot near the tribal council building. The office, modestly described as ramshackle, has the decor of a bachelor pad and the smell of cedar, leather and old coffee.
Taylor has a second office on the tribes’ sprawling 22,000-acre reservation about 40 miles north of Seattle. It’s indoors but still wouldn’t impress most lawyers of his stature. But that’s the way Taylor, 62, likes things—functional, not fancy.
Outside the windows of the baseball shed and the tribal council office is a magnificent view of the blue waters of Tulalip Bay, an inlet of the Puget Sound. Soaring cedar and spruce trees frame the view, complete with a pair of eagles nesting in a high branch, which Taylor points out to a visitor. He’s been watching them for a few weeks and thinks they’ll soon be showing off their new offspring to the enthralled humans below.
It’s a sight that Taylor and the tribes hope to preserve against the encroaching interests of the outside world. As the Tulalips and others have grown wealthier over the last decade with the rise of casino gambling, concerns such as employment, taxation and planned growth are beginning to emerge.
Indeed, lawyers like Taylor are entering a new stage of legal issues: dealing with the successes that financial stability engenders. Those issues require innovative and unusual legal solutions, because Indian tribes are unlike any other corporation or jurisdiction.
“About once a month I get a call from a lawyer who wants to tell me about his great case against us. Usually, the client is someone who has been banned from the casino or who has gotten injured here,” Taylor says.
“The conversation usually starts with the lawyer quoting me state and federal statutes, and mentioning damages awards from court cases,” he continues.
“Once he stops to take a breath, I usually say something like, ‘Well, I can see you have done a lot of research on behalf of your client and really earned your fee. But I have to tell you: None of that applies here. This is Indian territory.’ ”
Under federal law, tribes are considered self-governing, sovereign nations. They have the right to establish and administer laws that apply on reservation land, both to tribal members and others who go onto tribal property. Like a state, a tribe can exempt itself from tort, contract and other forms of legal liability.
But doing so in blanket fashion would be economically unwise: Who wants to do business with someone who can’t be sued if the relationship goes sour? Those are the problems that Taylor and other tribal lawyers around the country are facing, and the solutions they devise must be as creative as the legal issues are different.
It Takes a Village
Among Taylor’s novel creations is Quil Ceda village—a shopping, gaming and hospitality center off Interstate 5 on property that is owned by the reservation.
From the interstate, Quil Ceda looks like a brand-new strip mall, sprouting beside the highway like thousands of other roadside shopping meccas across the country. There’s a Wal-Mart, a Home Depot, a McDonald’s and an outlet mall. This being a reservation, there’s also a large, bustling casino in the middle of it all.
This public space is the one spot where fancy reigns at Tulalip. There are large, graceful fountains; intricately patterned brick walkways; carefully chosen color schemes. There is enough parking for each of the tribes’ 3,600 members to park at least two cars, with room left over. But it’s the guests—the gamblers, shoppers and tourists—who park here.
Though the reservation has been here for more than 100 years, Quil Ceda Village is less than a decade old. It is, Taylor says, the first federally chartered municipality since Congress incorporated the District of Columbia in 1871.
The how—and why—of Quil Ceda’s unusual status is a glimpse into how some Indian tribes, flush with casino cash, are working to free themselves from dependency on the federal government and create a stronger economic, social and legal position for future generations.
“There’s never been a better time for tribes to start expanding their economic base,” says Stanley Speaks, the Northwest regional director for the federal Bureau of Indian Affairs. “Because of gaming, they now have the money to venture out and develop businesses that cost millions of dollars but contribute to the tribes’ long-term stability,” Speaks says. Attracting interest from large retail chains wasn’t hard. But convincing those chains that they could safely lease tribal land, instead of buying it outright, proved a harder sell, Taylor says. Among his key concerns was enforceability of contract provisions between the tribes and the retailers, as well as questions of employment law, tort liability and security.
Taylor says no tribe has ever successfully fended off annexation attempts by a county or local government that wanted lucrative Indian land. Sometimes the government decides to annex the land despite a tribe’s objections simply because the majority of employees or users of the subject property are not Indians.
Once a commercial enterprise grows to a certain level, the majority of patrons and many employees will be non-Indian, says Taylor, because most tribes simply don’t have enough people to go around.
So Taylor set out to make sure that the Tulalips reaped the benefits of their careful planning for economic diversity and future security. He decided to create a separate town. As an independent municipality, Quil Ceda Village could not be annexed by another government entity, he reasoned.
Taylor drafted an enabling act for the Tulalip tribes to create a political subdivision, got the tribes’ board of directors to pass it, and sent it off to Washington, D.C., for approval by the BIA, which must sign off on just about everything tribes want to do.
The next step was to charter Quil Ceda Village. Under the charter, Quil Ceda’s initial board of managers was appointed by the tribes’ board of directors. Eventually, Quil Ceda’s leadership will be elected by the eligible voters of Quil Ceda—who happen to be, under the terms of the charter, the members of the Tulalip tribes. This step also had to be approved by the Bureau of Indian Affairs.
To raise the money for the infrastructure, Taylor proposed that the tribes issue municipal bonds. Under the Indian Tribal Governmental Tax Status Act of 1982, Congress declared that federally recognized Indian tribes can sell bonds. Taylor applied to the Internal Revenue Service for a formal opinion that the act also gives political subdivisions of tribes the right to sell municipal bonds. The IRS confirmed that Quil Ceda, as a wholly controlled political subdivision of qualifying tribes, has the authority to issue bonds. The arrangement also has other advantages, says Taylor. For example, Quil Ceda can pass measures to encourage outside investment in the shopping center without binding the entire Tulalip reservation to those same measures. Thus, Taylor says, the Tulalips can develop the shopping center area while keeping the remainder of the reservation rural, as the members prefer.
As a matter of contract, Quil Ceda tenants are encouraged to hire Indian workers, and most give precedence to Indians—both Tulalips and other tribal members—over non-Indian workers. Still, Taylor says, the project has brought many jobs to non-Indians in the area because the need for employees continues to grow faster than the Indian population.
The BIA’s Speaks says there have sometimes been tensions between tribes and surrounding communities over increased congestion, as well as fear of crime waves and overpopulation near Indian developments.
But, he says, tribes have become much more savvy in recent years about dealing with and appeasing local authorities. When governments near reservations figure out the number of non-Indians who will find work in developments such as Quil Ceda, they quickly become more embracing.
Speaks says that roughly 75 percent of workers at most Indian-related businesses are not Indians, simply because there are not enough tribal workers to do all the jobs that development brings. He estimates that about 60 percent of the 45 tribes in his region now have businesses besides gaming, and all of them provide significant jobs for non-Indian labor.
Tensions with Outsiders
But relationships between tribes and local communities are not all wine and roses. “There’s a great tension between maintaining boundaries and welcoming non-Indian society to the reservations,” says Gabe Galanda, who runs the Indian law department of a major Seattle law firm.
Galanda notes that some members of Congress whose districts include reservations have fought against allowing tribes to buy more land. Many even oppose tribes buying back land owned by tribal members or outsiders.
Galanda says the opposition hinges on several related concerns. Often communities oppose expansion of areas where casinos can be legally built, citing the morality problems some see with gaming.
But an even bigger motivator for many local and state governments, Galanda says, is what they see as an encroachment of tribal territory into areas that were under state or local control. More economically powerful tribes that don’t have to answer to local authority worry some non-Indian communities, he says.
And then there is the issue of taxes. As sovereign entities, federally recognized Indian tribes have the ability to levy and collect taxes. But to collect taxes, there has to be something to tax. Retailers and other potential developers of reservation land worry about extra taxes cutting into profits. State and local governments worry about losing sales and property taxes to tribes. For the retailers, the solution is to negotiate contracts with the tribes that prohibit collection of any taxes that would raise the retailers’ overall tax burden beyond what it would be if the store were built off the reservation. When developers, retail or otherwise, buy land from an Indian tribe, the land becomes part of the county. If it is adjacent to a municipality, it might be annexed. Developers can then make deals with those taxing authorities, as well as the state, to assure the profitability of their developments.
If developers, such as retailers, merely lease the land, it remains part of the reservation. But, under federal and state law, sales taxes are still collected and remitted to the state because the retailers the owners of the businesses are not exempt from those taxes merely by being located on a reservation.
For the state, it’s a sweet deal. It doesn’t have to make any concessions or put up any money to get a large new tax base. At Quil Ceda, for example, all the utility work for roads, sewers, water lines, electricity, etc., was paid for by the tribes. The Tulalips even contributed money for work on a new interchange from the interstate, which also benefits nearby communities. The tribes also hire, train and pay their own police force. But the state gets all the sales tax money. Though some of the money eventually makes its way back to the local economy in the form of county and local grants and revenue sharing, the tribes get none of the tax money in return for their infrastructure investment and ongoing administrative expenses.
“The state right now is engaged in theft,” Taylor says.
The Tulalips and other local tribes have long lobbied the state legislature for a return of some of the tax dollars their reservations generate. John McCoy, a member of the Tulalip tribes, is also a member of the Washington House of Representatives. His primary goal for years has been to push through a revenue sharing bill, but his efforts repeatedly fall just short.
Though Taylor will neither confirm nor deny specific plans, it seems clear that the tribes’ next move will be to sue Washington State in federal court to try to force some revenue sharing.
This changing relationship between Indian tribes on the one hand and federal, state and local governments on the other represents a monumental shift in the way Indians and non-Indians have historically viewed one another.
Tribes have long been seen by federal and state governments as dependent on government largesse and oversight. For years after Indians were herded onto reservations in the late 19th century, they had almost no means of economic survival. Tribal reservations were often in remote areas, and they provided only fishing and logging as potential industries.
Many tribes subsisted on these activities but found their ability to branch out hindered by a tangle of untested federal and state rules about tribes’ rights and responsibilities, by racist attitudes about their capability to manage economic development, and by a cultural tendency for the tribes to keep to themselves. Some Indians needed government help in the form of welfare and similar programs to get by.
The uncertainty about the legal status of business conducted on reservation land historically kept economic development away from tribal property, except where tribes were willing to sell parcels of land to outsiders. Through the decades of the 20th century, many tribes, including the Tulalips, lost large pieces of their reservations through sales to non-Indians.
In some cases, when the money was desperately needed, the sales were made knowingly, if reluctantly. In other cases, individual tribal members may have been scammed out of family parcels by unscrupulous outsiders who took advantage of Indians’ cultural misunderstanding and mistrust of money.
“You have to understand,” says Tulalip member Patti Gobin, assistant real estate coordinator for Quil Ceda, “we don’t have a cultural history of money. “Even when I was a kid, most of the Indians I knew didn’t deal much with money. Exchanging cash for something is a ‘white man’s’ thing. It’s a foreign concept to traditional Indian culture,” she says.
The Tulalips now own about 60 percent of the land on their reservation. The rest is owned primarily by non-Indian families and a few companies that bought it decades ago. The tribes hope eventually to buy back most of the reservation land. Each time a parcel comes up for sale, the tribes evaluate the feasibility of buying it. Along the reservation’s southeastern edge, most of the prime waterfront property is privately owned by non-Indians, some of whom have built so-called McMansions near the much more modest homes of tribal members.
But by the late 1980s and early ’90s, many tribes had become much more sophisticated about using tribal sovereignty to their advantage.
They lobbied Congress, tested the limits of their sovereignty in federal court, and essentially midwifed laws such as the 1988 Indian Gaming Regulatory Act, with which Congress authorized gaming on reservations.
The House Edge
In just a few years, many tribes’ near-century of poverty, dependency and despair flip-flopped. Gaming brought fistfuls of cash to tribes across the country lucky enough to have land bordering the interstates that bring right to the tribes’ doorsteps tourists with a lust for slots, table games and grand-scale bingo.
Some tribes simply hand over the massive gambling profits from their casinos to members on a per capita basis. Others give out $10,000 or more a month to each officially registered member of the tribe, including children, according to Taylor.
Still others recognize that fostering two or three generations of people with no need to work will ultimately lead right back to poverty, so they reinvest profits into economic development and improvement of the quality of life for tribal members as a group.
The Tulalip leaders decided that merely handing out per capita payments was not best for current and future generations of tribal members. Instead, they set a course to broaden their economic base—hence the stores at Quil Ceda—and to reinvest profits in activities that benefit the community as a whole. They do hand out small per capita payments, but, Gobin says, “nothing you could retire on.”
While some questions remain unsettled, the Tulalips are taking some of the net profits from the casino and shopping center and investing in their future.
The tribes knew that the key to making the gambling money work for future generations was to reinvest it in two crucial areas: broadening the economic base, so there would be other sources of income if the gambling money ever dries up, and building a network of tribal services that benefits the members collectively.
One bright morning, Gobin showed off some of the areas of the reservation that non-Indians rarely see. At one stop, she pointed to a network of a half-dozen long, low-slung buildings. This is the tribes’ new foster care center, where Indian children who have been removed from their parents for abuse or neglect are cared for until placements can be made with Indian families willing to raise them.
The buildings resemble the longhouses that were the traditional communal living quarters of the Tulalips for hundreds of years. Large family groups of 30 or so people lived in one building with each nuclear family having its own space and the center of the house, near the ever-present fire, used for group activities.
“Indian kids used to be taken off by the state if we couldn’t find them a home quickly because we had nowhere to help them. Now, they most often get placed with Indian families, and they stay here on the reservation—their home,” says Gobin.
Another stop shows off the gleaming new senior citizens center, where elderly members of the tribes receive free assisted-living services in residence when they can no longer live alone. Those who don’t live here can come for hot meals and social activities. The senior center is on prime waterfront property—evidence of the tribes’ reverence for their elders, according to Gobin.
Another recent addition of which Gobin is justifiably proud is the new Tulalip Health Center. Here, members of the tribes can get free medical care for life—a prospect that was nearly unimaginable in Gobin’s grandmother’s day, she points out.
The tribes also have a fish hatchery, a public golf course and a Boys & Girls Club that focuses on teaching Indian heritage and culture. Future plans include a resort hotel and a museum of Indian culture.
All of these places, except the fish hatchery, have been built within the past decade and will serve generations of Tulalips, Gobin says.
One thing the tribes do not have, intentionally, is their own public school. Gobin says tribal leaders recognize that their children need exposure to the broader world, and that is best gained by going to school with other local children, not just tribal members. Though the tribes would love for the nearby Marysville school district to build on tribal land, Gobin says there are no plans for an Indian-only school.
Gobin admits, though, that there are still flaws in the system the tribes are creating. For example, while tribal members get free health care at the medical clinic, nontribal family members, even though they may live on the reservation, are ineligible for medical care there.
Many Tulalips are married to nonmembers, and most of those nonmembers have local jobs—some working for the tribes—that do not provide health insurance.
What are the odds?
Even as lawyers like Taylor and Galanda help the tribes face such knotty problems, there always is the fear that the gaming-cash well could dry up.
No one knows how long gambling will be a meal ticket, Taylor says. Congress could change it tomorrow by outlawing Indian gambling.
Or, more likely, states could start allowing gambling outside reservations, as some already do with riverboat casinos.
Then, too, there’s the question of just when the public might reach a saturation point where the amount spent on gambling levels off or even declines.
At the same time, most of the tribes that are now economically healthy are growing. The Tulalips expect their membership to double within 30 years.
At that rate, there is no way there would be enough gambling profit to go around in just two to three generations, according to Taylor.
Many tribes are growing organically; others are growing because long-absent members are returning after a generation or more, proving their right to be recognized so that they can share the gambling profits.
“The Indian culture says the leaders must look seven generations into the future when making decisions about what’s best for the tribe. That factors into decisions about what to do with our casino money,” says Gobin, whose father, uncles and brothers all have served on the board of directors of the Tulalip tribes.
As she was speaking, hundreds gathered for a traditional funeral on a clear, chilly morning. The funeral was for a 35-year-old mother who was not a tribal member, though her husband and children are.
In February, a virulent pneumonia swept through the reservation. Lacking health insurance, the mother delayed seeking medical care from a local hospital until her symptoms became severe, and she died.
Although the rules prevented the tribes from helping the woman while she was alive, her neighbors rallied around her family.
After the funeral service held inside the tribal council building, percussionists played traditional cadences on huge drums as pallbearers carried the casket to a waiting hearse.
In Indian tradition, this ritual, known as “drumming out the body,” calls upon the spirits to accept the spirit of the deceased into the communion of ancestors, according to Taylor. As the drums thundered, the eagles circled and the blue waters of Tulalip Bay sparkled in the sun.
Margaret Graham Tebo, a lawyer, is a senior writer for the ABA Journal.