When did the Tribe begin talks with Lansing for a casino?
This project has been in the works for over a year. When we began talking with the City of Lansing about this opportunity, both of us signed a confidentiality agreement. This was in the best interest of the Tribe and the City in order to protect the project.
How much money does the Tribe currently have into the project?
Right now, the Sault Tribe does not have any money into the project. The developer, Lansing Future, has a pre-development budget of $5 million and a temporary casino budget of $5 million, none of which is the Tribe’s money.
How much will the Sault Tribe spend on the project?
The developer will cover all upfront costs. The specific details are contained in a Turnkey Development Agreement entered into by the Sault Tribe and the developer. In general, the developer has agreed to provide funds for all costs and predevelopment expenses. This includes any legal fees incurred by the Tribe, as well as the costs associated with establishing our legal right to conduct gaming and constructing and opening the temporary casino. Assuming we are successful in establishing our legal right to conduct gaming, the developer will then assist the Tribe in obtaining the necessary financing for the permanent casino.
So, the Tribe will never put any money into this project?
No. In order to put the land into trust which will qualify it for gaming, the Tribe must purchase the land with interest out of the Self Sufficiency Fund as stated in the Lands Claim Settlement Act. The first parcel of land we need to purchase will be $280,000. Prior to signing on the transfer of land, funds will be secured in order to provide our elders with their annual check in the amount that it would be if that money had not been used. There is a second parcel of land that will need to be purchased after the land is taken into trust, and that purchase price will be $960,000.
How is this project different that Greektown Casino?
This project is far different. This casino, unlike Greektown, will be operated just like our five Kewadin Casinos up North. We will be regulated by the National Indian Gaming Commission, not the Michigan Gaming Control Board. We will not pay the high taxes the Detroit casinos pay. Greektown at times paid nearly 30% in taxes to the city and state. Now they pay 20.2%. Greektown casino also had to pay an annual $8 million regulatory fee to the Michigan Gaming Control Board. We will not have these payments in Lansing and we will have far less debt than Greektown did. The situation is different, the partners are different, and the regulation is different.
What will the Tribe pay to this developer?
The Tribe will pay a developer fee of 14% of operating profit (after payment of expenses, but before debt) for seven years. After seven years of operation, we will not owe the developer anything. We are estimating our operating profit to be $150 million per year, based on revenues of $275 million. In addition, the Tribe would be responsible to repay the developer up to $10 million in initial legal and start-up costs but only if the project is successful. We would not be where we are today with out the developer putting his money into this project.
When do you expect to break ground on construction?
By early summer, we expect to complete our purchase of the initial parcel and submit our application to the federal government (U.S. Department of the Interior) to place the land into trust. Because the Tribe’s Land Claim Settlement Act gives us the absolute right to this process, we expect a prompt and favorable determination. We recognize, however, that legal challenges are likely to occur that may slow the approval process. Groundbreaking will occur, and construction will commence, once we have those approvals.
Who else is helping to fund the project, what is their financial contribution, and what do they own?
Other than Lansing Future, no party is providing funding for the project. The casino will be 100% owned by the Sault Tribe. Lansing Future will not own any portion of the casino. Under its agreement with the Tribe, Lansing Future will recover its initial costs only if the project is successful. Assuming the project is successful, Lansing Future will then also receive a fee paid for a limited period of time as a percentage of operating profits and paid only after expenses of the casino have been satisfied. When the Tribe is ready to construct the permanent casino the developer will help the tribe to secure financing, probably through an investment bank or similar investor that specializes in funding these types of large projects. This institutional investor will serve strictly as a lender and will not be an owner.