Casinos in North County expanding, upgrading
December 12, 2009

Though revenue is down for Indian casinos in California in the wake of the recession, two local tribes have pushed ahead with construction projects in hopes of getting a leg up on competitors once the economy picks up again.

North County's Pala Casino, Spa & Resort just completed a $100 million renovation to its casino and 507-room hotel along state Route 76. Upgrades include new and expanded restaurants, larger high-stakes gambling facilities and extensive hotel room and suite upgrades.

Meanwhile, Valley View Casino this week pinned down $35 million in bond financing for its new 108-room hotel under construction in Valley Center. The financing was the final piece needed to complete the $72 million project, of which 60 percent is being self-funded by the San Pasqual Band of Mission Indians, the casino owners. The hotel is expected to open in 2011.

The Pala and Valley View projects are examples of tribes trying to position themselves for an economic rebound. Some other Indian casinos, however, are taking a different approach.

The Pauma and Viejas tribes have said expansions are still in the works, but they've slowed down the schedule until the economy improves and debt financing become less expensive.

Pala saw signs that the economy was weakening 18 months ago when it started construction, said Bill Bembenek, Pala's chief executive. But it chose to push ahead anyway.

"It was really a decision by the tribe to have a long-term approach to their business," Bembenek said. "They made a decision to go forward even though we're in the midst of a pretty significant economic downturn."

The 10 Indian casinos in San Diego County don't disclosure their revenue, but managers say it has slipped as the economy worsened. Indian casinos in California took in $7.4 billion in 2008, down 5.6 percent from the prior year, according to the National Indian Gaming Commission.

At Pala, Bembenek said revenue is down. But he's encouraged because the casino is seeing more visitors than it ever has. They're just spending less. He added that room occupancy at the hotel has held up better than much of the county, posting occupancy of the mid-80 percent range.

Pala added 42-inch flat screen TVs, luxury armoires, iPod docking stations, new mattresses and other upgrades to all of its hotel rooms. The hotel has won a Four Diamond rating from the Auto Club for six years.

Earlier this year, Pala upgraded the casino, expanding the buffet and adding two restaurants. It also added a 15-table poker room and a larger High Limit Area with its own lounge and private entrances. Pala estimates the upgrades created 650 jobs during construction and will add 120 permanent jobs in food service, gaming and support services.

At Valley View, the development arm of the San Pasqual Band tapped into the Build America Bond program, which was part of the stimulus package passed by Congress last year. The program aims to help state and local governments finance building projects by lowering borrowing costs.

In certain instances, tribes can participate. The program lets tribes that have received a Tribal Economic Development Bond allocation to issue bonds and then receive reimbursement for a portion of the interest payments. The tribe sold the bonds this week. San Pasqual's development arm says it's the first tribally owned corporation to tap the program.

"With the current challenging credit market, we modified our hotel construction schedule until we could obtain financing at a reasonable rate," said Jennifer Bryant, chief financial officer for Valley View Casino. "This program helped make that happen."

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