DECEMBER 2002

Big Doings In San Diego

Pechanga, Barona and Rincon build huge successes near the Southern California city

By Matt Connor

The history of Indian gaming is peppered with extraordinary, Horatio Alger-like stories of poor people who suddenly became rich thanks to the establishment of casinos and an advantageous geographic location.           

Take the Shakopee Mdewakanton Sioux of Minnesota, for example. Almost all of the Shakopee were on government assistance before casinos and per-capita payments turned many members of the tribe into millionaires in the early 1990s. Or the Mashantucket Pequot of Connecticut. Now among the wealthiest tribes in the nation, the Pequot once consisted of three old women holding out against state government pressure to remove them from their homelands.

Add to this remarkable —  if small — list of self-made tribes the Pechanga Band of Luiseno Indians. Today the Pechanga operate one of the more successful casinos in California, but it wasn’t always so. Indeed, perhaps the most amazing element of the Pechanga story is the brief span of time it took to boost each tribal member up from poverty.

“The only revenue source that my tribe had before gaming was a seasonal sand mining operation,” said Mark Macarro, Pechanga chairman. “That was always dependent on heavy rains occurring in the previous year. Nineteen ninety-eight was the last heavy rain year, for example. For three or four winters we have not had significant rainfall, which creates the sand in the wash to be mined. So when you have those low rain cycles you don’t have a lot of revenue.

“As a result there was a lot of poverty on the reservation,” Macarro continued. “We had a very active and long list of folks utilizing USDA food surplus programs, the food commodities program. Today nobody is eligible for the food commodities and nobody is at or near the median income line for poverty. Our casino opened in July of 1995 and it’s only been since 1997 that we started to make inroads on our poverty level. It’s been a fast-track for us.”

Located an easy drive from the major population center of San Diego, the tribe opened its new $262 million Pechanga Resort & Casino in June with 522 hotel rooms, 78 suites and 2,000 slots in an 88,000-square-foot gaming area, and it’s been packed ever since.

But it’s not the only fabulously successful casino in the San Diego area. Two other properties, Harrah’s Rincon Casino & Resort and Barona Casino, have expanded aggressively, with Rincon opening its $125 million property in August and Barona scheduled to open its new $260 million Barona Valley Ranch Resort & Casino expansion next month.

“You’re going to find that every tribe is unique, but Barona did it a little differently than everyone else,” said Barona Tribal Chairman Clifford LaChappa. “We’ve seen what Pala, Pechanga and the others have done, but I’m very proud of our property.”

The new Barona facility will pay tribute to the founders of the Barona reservation, which was a working cattle ranch when the tribe took over the property in 1932. Sprinkled throughout the golf course and emblazoned on the carpeting in the casino will be the names of the founding Barona families.

“My dad was a hard worker,” LaChappa said. “Life on the reservation when I was growing up was serene. But everybody was on welfare. Those days are gone and life has changed for everybody. It’s all for the good. I pay attention to a lot of the elders and try to respect them.”

Justified optimism

At Harrah’s Rincon, immediate success created overcrowding, and the Rincon Band of Mission Indians — along with management partners Harrah’s Entertainment —  announced another expansion just weeks after the grand opening.

“When you go into a new market, you’re always optimistic, but you never know for sure how it will turn out,” said Tom Dingman, Harrah’s Rincon’s general manager. “As it turned out, the demand and the business has been very good. So we converted the existing Pavilion — an events and entertainment area — into more slot space. At the same time we’re going to add more cashier windows and another service bar for cocktails. We’re going to spread out about 175 slot machines that had previously been in some areas where the floor was fairly tight.

“Simultaneously we’re starting some totally new construction to replace the Pavilion as well as add about 6,000 square feet of gaming space so we can add more slots and table games. We will add another full-service, high-action bar and another restaurant — a fast-food outlet that would satisfy the demand for someone looking for a quick, inexpensive meal. The conversion should be done [this month]. The new construction will be done and open by next July.”

The Rincon property currently features 1,500 slots and 35 table games on 53,500 square feet of gaming space, 201 hotel rooms and three luxury suites.

That Harrah’s announced a second expansion so soon after the grand opening is indicative of the increasing heat of competition and the high demand for gaming entertainment in the San Diego area.

“We have certain economic and demand models that we use as a company, when we’re looking at new markets or expansions, whether for ourselves or as a manager,” Dingman said “We have the corporate resources to do the work and the feasibility studies and look at the politics, and to analyze the situation anywhere in the country. We look at each market and determine the likelihood of the market’s success, and ultimately what it may grow to in a five- to 10-year period, which is as far ahead into the future as you dare to look. Clearly we see great opportunities here at Rincon going forward.”

Distinguishing Pechanga from the other properties, Macarro said, was the fact that the property is decidedly upscale and luxurious, an approach the tribe took for several reasons.

“We felt that it would be a competitive advantage, but we also felt that to go upscale was a matter of self-expression. It’s what we wanted to portray to the world about what Indian gaming could be. As well we felt that it would put us at a competitive advantage. We didn’t want to have another run-of-the-mill casino.”

“Run-of-the-mill” was an apt description for the Pechanga’s previous gaming enterprise, a kind of hodgepodge of units that, while highly profitable, wouldn’t have won any architecture or design awards.

“The existing casino was always seen as an interim project,” Macarro said. “It was never seen as a permanent facility. It was a combination of modular trailers and tents and butler buildings.”

The new construction was financed through a combination of syndicated bank loans (including from Bank of America and Wells Fargo) and from profits from the more conventional temporary casino.

For Macarro, the tribe’s success in the San Diego area has been tremendously gratifying. But a profitable casino/hotel/resort property is not the be-all and end-all for the tribe.

“I view this as laying the cornerstone for our economic and political future,” Macarro said. “It’s been a long time coming, and it means bringing to fruition our idea of self-reliance. We never intended a casino project to be the only means of economic development for our tribe. We would like to see other amenities or revenue sources created for the tribe, outside of gaming. That could be agricultural — citrus, avocado, vineyards — or property ownership and leasing, or any other number of things. There are a lot of things to look at and investigate.”

Veterans in the gaming wars

Unlike Pechanga, which opened about eight years ago, Barona has been operating gaming facilities in California for close to two decades and was a party to the landmark Cabazon Supreme Court decision that cleared the way for Indian gaming nationwide. It was the first tribe to offer high-stakes bingo and has been a leader in the industry ever since.

“If you’ve ever been to Foxwoods, it’s amazing to come over this hill and suddenly see this amazing facility spread out in front of you. Well, that’s really the way we are here at Barona,” LaChappa said, clearly in awe of his tribe’s accomplishments over the years. “You come over the hill and you get this amazing impression when you see our property and the beautiful green golf course.”

Overlooking the Barona Creek Golf Cub, the new Barona resort will feature 400 rooms with 35 deluxe suites and lakefront wedding chapel. The casino will have 2,000 slots, 54 table games and a 12,500-square-foot event and meeting center.

“As far as the business, the casino has given the tribe the ability to build new homes and create charter schools, community swimming pools, baseball fields, roads, infrastructure, provide health care and trust funds. It also gives us the ability to buy more land. We’ve bought 385 acres west of the casino, we’ve bought a 600-plus-acre ranch, and we purchased several other land parcels. We’re doing that for the future of our children and we hope to convert that into trust land.

“The most important thing, though, is that we are taxpayers, we’re givers, and we’re well-respected in the community.”

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