A pre-pandemic weekend night would normally fill casinos and racetracks up and down the corridors of New Mexico to the brim with both locals and tourists. But on a Saturday night in the late summer of 2020, Ohkay Hotel Casino is one of just five tribal casinos open.
The state has 14 tribes that operate more than 25 gaming operations, and as tribal leaders wrestle with cashflow, more are slated to reopen soon. The monthslong closures this spring and summer mean New Mexico is already missing millions in revenue-sharing that's not likely to rebound any time soon.
This night, cars pack into the parking lot of the casino under an enormous glowing sign that's shrouded in a thin veil of smoke from nearby wildfires. Inside the huge building north of Española, row upon row of people face the bright flashing screens of slot machines and a virtual blackjack table guided by a busty woman on a digital screen.
The casino scene is almost typical—except for the darkened and cordoned-off bar. Workers take gamers' and employees' temperatures at the entrance and provide an option to record one's name and phone number to aid in COVID-19 contact tracing. Other pandemic-related changes mean power has been turned off on every other slot machine to promote a semblance of social distancing, and some games have plastic curtains between them that sway in the forceful air conditioning.
Outside the casino, Jeanny and her husband stand near their Texas plates, having just just left the casino for the night. The couple (who asked SFR not to use their last name and who did not follow state orders to isolate upon arrival) is making a crosscountry trip, and the Ohkay Casino just happened to be on their way.
Stopping here "feels safer than a Walmart," Jeanny says, as her husband makes dinner on the tailgate of the car. She also notes that New Mexico is significantly more strict than other states the couple has visited since COVID-19 hit. In Louisiana, they weren't required to wear masks in gaming complexes, for example.
New Mexico's public health orders, enacted mid-March, include no large gatherings; closures of municipal facilities; and limited capacities for hotels and restaurants, among other kinds of businesses. While these rules don't apply to sovereign nations, Gov. Michelle Lujan Grisham has urged them to keep gaming closed.
Compliance with the request is a mishmash: Ohkay Owingeh Pueblo's Ohkay Hotel Casino closed March 19 and reopened June 15, and the Isleta Resort and Casino opened June 15. Others, like the Navajo Nation gaming spots, remain closed. This Friday, Pojoaque Pueblo is preparing to reopen its three casinos: Buffalo Thunder Resort and Casino, Cities of Gold Casino and Hotel and Jake's Casino.
In an average fiscal year, those operations would bring in tens of millions of dollars for the state's general fund through the tribal revenue-sharing compacts provide thousands of jobs and support the sovereign nations that run them.
This year, some tribes that relied heavily on gaming revenues are taking hits in the face of continued closures, particularly in the form of stalled economic development plans and job losses.
State economists are planning for tribal revenue sharing and gaming tax revenue to be negatively impacted until at least 2021, maybe even into 2022, contributing to larger shortfalls for the state and tribes. What happens next will depend on the path of COVID-19 and when casino doors reopen.
The Navajo Nation shut down gaming completely in March and has yet to reopen its three casinos in New Mexico or the two in Arizona. Brian Parrish, CEO of the Navajo Nation Gaming Enterprise, says the board of the enterprise primarily made that decision in a "collaborative effort" with the tribal government.
"Our concern was if we opened too soon and patrons came into the casino and bring the virus with them and it gets picked up by our team members, when they go home to visit their families, if they're living away from their home chapters, they could carry it right back home and spread a whole other wave of the pandemic across the nation," Parrish tells SFR.
While the closures have kept people from gathering in an enclosed space or attracting potentially infected tourists to the nation, which has been hard hit by COVID-19, it also led to the layoff of 1,040 employees in July and August—90% of the casino staff. Parrish says the enterprise kept people paid and at home until it spent cash reserves.
Along with the source of jobs that has now dried up, the casinos are a major direct investment. The tribe financed the casinos for the operator and receives a return on the investment, which Parrish describes as "significant dollars" going back to the Navajo Nation.
However, the enterprise has had to put payments on hold for now and stopped the development of new business projects because income dropped to nothing.
The enterprise has continued to pay for important services on the Navajo Nation, such as law enforcement, utilities and emergency fire services, he says.
"The temporary suspension of the debt service, it's not something where the obligations are being forgiven…It's just a temporary interruption in the payments," Parrish says, noting payments will resume when the casinos reopen and the enterprise receives anticipated federal CARES Act funding.
The Centers for Disease Control and Prevention released guidelines on how to keep gaming complexes safer from COVID-19, with risk decreased if there are no table games allowed and capacity is kept low. But tribes are able to create and follow their own safety guidelines without interference from state governments.
The Navajo Nation has developed an independent economic reopening plan. Restoring casinos is part of its fourth and last phase. At present, officials are enacting the second phase. Since March, the nation has closed Navajo-maintained roads to outside tourists and visitors and had a weekend curfew.
Parrish says upon reopening, the casinos plan to have full time healthcare personnel on site, temperature testing for employees and PPE for patrons when they walk in the door, as well as an overnight cleaning crew.
"Our concern is that getting to that fourth phase could take a significant amount of time," Parrish says.
In Northern New Mexico, the Pueblo of Pojoaque plans to reopen its three casinos on Sept. 4. The casinos are the pueblo's biggest employer.
Pojoaque Gov. Joseph Talachy says it's a necessary step to fund essential services on the pueblo after tribal leaders reconfigured the budget to spend 18% less this year than originally planned.
The casinos also act as a significant financial support because the pueblo has defaulted on its notes for the development of the Buffalo Thunder Casino. The fight between the pueblo and the state over Pojoaque's gaming enterprises is partly to blame for the default, Talachy says, and COVID-19 closures increased the debt. The loss of yearly casino revenue, which is typically around $25 to $30 million a year, pushed the pueblo even further into default, according to Talachy.
"[The closures] definitely cost the pueblo millions…Part of the decision [to open up] was that revenue from the casinos goes into government services, like the Boys and Girls Club, senior and wellness centers and early childhood development centers," Talachy says.
Gaming revenues also fund the tribe's governmental payroll, tribal police department, foster care system, daycare and water infrastructure as well as Pojoaque's education program that sends tribal members to college for free. The pueblo and surrounding community did not lose any of those services this year, but some economic development is delayed because of the loss of casino revenue, such as the building of a housing community.
The pueblo's gaming facilities employed around 800 people before the pandemic. Employees were kept on paid administrative leave until cash ran out, and almost all were furloughed, according to the governor.
It was the "right thing" to close in March, but Talachy says it's time to reopen now that the pueblo has developed safety protocols and the new case numbers on the pueblo and across the state have declined. Safety protocols will include mandatory masks and partitions between each game.
The Pueblo of Laguna is another of the few New Mexico tribes that decided to reopen one of its two casinos, Route 66 Casino Hotel, in June. But the casino is only open to New Mexico residents, according to Skip Sayre, the corporate director of marketing for Laguna Development Corporation.
"There were significant impacts on our cash reserves over the period of time that we shut down from about March 18 until June 24," Sayre tells SFR, though he would not comment on exact revenue numbers. "It provides dollars for tribal government services across the board: Police, fire, water, sewer, power, recreation, schools, all that stuff. The money goes to the Pueblo of Laguna and they decide as their government how to spend it."
As soon as Laguna closed its casinos in March, the corporation started planning on how to reopen in a different world from the one it operated in at the beginning edge of 2020. The plan included similar provisions to other open casinos: limited slot machines operating, a cap on capacity in the casino and the hotel; taking employees' and guests' temperatures; as well as the unusual step of only allowing New Mexico residents to gamble and stay at the hotel.
So far, the precautions appear to have worked. There have been no rapid responses from the Department of Health to Laguna's casinos, which the state deploys when one or more employees at a business tests positive for COVID-19.
"We spent weeks, thousands of hours, planning different scenarios for how we might open," Sayre says. "And when we got to the point where we developed a reopening strategic plan that we thought we could safely open, we took it to the Pueblo of Laguna, to the governor, to the tribal council. We presented them with what we thought would work."
The state’s financial shortfall
The tribes are not the only governments facing financial problems from the loss of gaming due to COVID-19.
The history of tribal gaming in New Mexico is fraught with legal battles. Lawmakers, governors and the sovereign nations within its borders struggled to work out a deal after the state legalized gaming in the 1990s. Many of the New Mexico tribes signed that eventual deal, called the 2001 Tribal-State Class III Gaming Compact. In 2015, the state negotiated a new deal with 17 tribes, of which 14 offer Class III gaming, such as slot machines, blackjack, craps and roulette. It is set to expire in 2037.
Under the 2015 compact, tribes pay the state of New Mexico between 2% and 9.5% of revenues depending on multiple factors, such as cash flow and the terms of the compact. The percent owed will increase again in most cases in 2030. The tribes also pay the costs of regulation by the New Mexico Gaming Control Board.
Tribal revenue-sharing dollars that typically go into the general fund have been cut by more than a third between February and April, from $73.4 million to $47.2 million, according to the state's latest general fund accrual reports. Workers in casino hotels lost 1,846 jobs since COVID-19 closures and freestanding casinos lost 2,216 employees, according to the New Mexico Department of Workforce Solutions.
"The biggest impact is going to be to FY20 and to some degree FY 21 as things start to reopen and it may take some time for that recovery to take place," says LFC Chief Economist Dawn Iglesias in an interview with SFR. "But in FY20, we were looking at about a $37 million hit to FY20 tribal revenue-sharing to the general fund and then about a $19 million hit to the gaming excise tax for the general fund."
Iglesias describes those figures as a "pretty significant impact" of $55 million total in FY20 alone. She expects tribal revenue sharing to dip in FY21 by an estimated $23 million and the gaming excise tax collections to drop about $15 million from what would have otherwise been expected in a world without COVID-19.
"And then from there, we are also expecting things to potentially be down in FY22, though that expectation might change a little bit," Iglesias says.
The tribal revenue shares and gaming taxes are one of the many sources that funnel into the state's general fund, which collected $6.3 billion in recurring revenues from July 2019 through April 2020. Finance officials attribute the drop to other industries in peril, such as oil and gas, mining and manufacturing. So far, it amounts to a 4% decline compared to the same period last year.
The state also maintains something called the Office of the State Gaming Representative, which monitors compliance with the tribal gaming compacts and historically releases a quarterly tribal revenue sharing report that would give an even fuller picture of the hit to the tribes and pueblos.
But reports analyzing the first quarters of 2020, including when COVID-19 hit, are not yet available, according to State Gaming Representative Raechelle Camacho.
There is no set timeline for its release, she says.
"It sounds like [COVID-19] had a large impact on several of the tribes that I've spoken to over the last several months," Camacho tells SFR. "In terms of figures of true impact, I'm not sure how large that is going to be in the end or what it's at right now."
Racing in New Mexico
Gaming taxes from the state's racetracks, licensed nonprofit veteran's and fraternal casinos and the 97 licensed bingo and raffle operators also provide income for the state, but revenue has trickled to almost nothing, too.
While the gaming taxes paid by racetracks and nonprofits like veterans halls that have games are a lesser portion of the money that goes into the general fund, they still make up a $19 million hit to the state. In particular, the purse money for the races has declined significantly, since it is largely driven by casino revenue.
Monthly payments to the state from gaming taxes halved in one month, from $6.1 million in February to $2.8 million in March, according to general fund reports.
At Zia Park Casino Hotel and Racetrack in Hobbs, for example, the purse money went from about $220,000 a day in pre-COVID times to less than $85,000 now, says Beverly Bourguet, a New Mexico Racing Commission board member and a horse breeder and racer.
"It's a costly operation for the tracks to run, but yet we have 10,000 people in our state that are involved in some factor in our racing industry," Bourguet tells SFR as she drives to Ruidoso Downs for a race. "Those people are expecting the commission to provide an opportunity to race. They have horses that they've invested in, the owners, the trainers, these horses are bred to run and they need to be out training."
Some tracks have reopened with 25% spectator capacity for the stands and the restaurants as well as pari-mutuel wagering on the races. But onsite gaming remains closed.
Jeremy Romero, a new member on the New Mexico Gaming Control Board, which oversees the five licensed racetrack operators in New Mexico, says the board hopes to work with casinos and racetracks to get the industry going again after COVID-19 restrictions are lifted.
That could potentially include loosening regulations around gaming and legalizing online gambling, which happened in other states after the 2008 recession as legislators tried to boost state economies.
"We're going to have an open mind from a board perspective to look at all options on the table at this point because let's face it…we're, as a whole, in unprecedented times," Romero says. "We fully anticipate to work together…not only with the five casinos, but in conjunction with the state tribal gaming compact to work together and to rebuild the industry again, to be a leading economic engine for the state of New Mexico."