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Tuesday, July 30, 2013

The Graton Godzilla Invades San Francisco Bay


The Federated Indians of Graton Rancheria Tribe is on track to soon open its huge casino and resort in Rohnert Park, California, at a site adjacent to U.S. 101 in Sonoma County. The best information available is that this will occur prior to December 31, and the project is expected to dwarf the competition throughout Northern California. As discussed below, the casino will be massive with a wide range of collateral attractions, including dining and live entertainment, and is destined to cash in on the fact that it will be the closest casino to San Francisco.

The Tribe has worked with Station Casinos of Las Vegas for years to finally gain the necessary approvals for the location, and Station, in turn, has been unwavering in its support for the Tribe and the project. Together, these two business partners have overcome many obstacles that included two relocations from the originally proposed site and widespread opposition to any project from various anti-gaming groups.

As the headline above suggests, this project is enormous and will indeed be the Godzilla of the Highway 101 corridor. Moreover, it promises major financial returns for the Tribe, its 1,300 members, and Station Casinos. Station has been the developer and soon will be operating the casino project pursuant to a management contract and is certain to realize substantial profits from the Graton Resort & Casino.

Project scope is beyond anything anticipated when it was first proposed. For example, the project financing was an $850 million package, which reportedly is the largest financing in the 25-year history of Indian gaming. The casino will open with 3,000 slot machines and 200 table games, and it will employ approximately 2,000 people. The dining services will include multiple outlets, including four fine-dining venues. The facilities will include multiple lounges and bars and facilities to house concerts and other live entertainment.

The facility is projected to generate some $420 million in annual gaming revenue by its seventh year, from which Sonoma County will receive annual payments of $9 million. While there is no projection as to the number of visitors per year, at least one analyst estimates 2.5 million visits as “on the low end” of what is probably projected by the casino team.

With all of this anticipation, the question quickly becomes where these customers will come from and how existing Northern California casinos will be affected. The obvious answer is that Graton will adversely affect all of its casino neighbors, and the closest already is predicting at least a 30 percent drop in revenue. That facility is operated in the Alexander Valley to the north by the Dry Creek Rancheria, and it has enjoyed a 10-year monopoly in Indian gaming in the North Bay Area. However, its tent-like structure at the top of a steep hill will not compare with the modern facilities being constructed at Graton, nor can its 1,200 slots and 20 table games. Dry Creek Chairman Harvey Hopkins recently predicted the 30 percent loss in revenue, which would be a decrease of some $37 million a year on the basis of the Dry Creek performance for 2010.

Further up Highway 101 are six casinos in Mendocino County and four in Lake County, and their remote locations definitely will suffer at the hands of the new competition. The Colusa Resort in Colusa County also has stated its recognition that Graton will negatively impact its business.

Moreover, many analysts are predicting the Graton casino could even negatively impact two major casinos in the Sacramento area some 100 miles to the east: Thunder Valley near Roseville and Jackson Rancheria Casino in Jackson. A recent financial offering circular for a casino in a rural section of Amador County (which also is home to the Jackson Rancheria) was recently withdrawn, and several gaming experts suggested that the potential financial impact of the Graton project probably contributed to the failure of that financing.

Graton is taking a powerhouse project into an area where there is no comparable competitor. Moreover, the size and sophistication of the project has the already-identified potential to draw customers from as far away as Sacramento and Amador County. The negative financial impacts suffered by various casinos will spill over to employees and business partners, as well as any local governments with local services agreements, since any provisions for revenue sharing likely would have to be modified.

Godzilla has arrived, and the stakes have been raised.