Why are you most likely bankrupting your children’s future to pay back Lakes Entertainment when you don’t have to?  Or, is it that you still think that this project is going to be a financial success?

According to Lakes’ own estimates, the best a 1000 class II device facility can bring in is $66 million a year – and that is an optimistic number targeted to their shareholders.  The possibility of each device paying $172.00 per day in the current competitive market without Lakes help in managing the casino is non-existent (current plans are that your tribe leadership is going to manage the casino once it is built).  Recently, Sycuan published numbers for 2006 that work out to about $217.00 per Class III slot.

Lakes have stated that they are due anywhere from $35 million to $48 million per year from your profits depending on the construction costs.  They are going to take that much from the cash flow – that is: The casino will pay its employees and services, then pay Lakes and anything left over will be given to the tribe.  This will continue for the 1st 5 years.  For the next 5 years, the payment to Lakes will drop to $29 to $42 million per year.

If you doubt my figures consider this: Lakes is due $15M payable over 5 years ($3M a year) for development design services and $15M payable over 5 years ($3M a year) for construction oversight services.  They will “try” to obtain funding for the project and will then add the $29M your tribe has already borrowed to the cost of the design and construction.  Lakes will then use an interest rate of 5% over what they are paying for the loan to calculate payments over 10 years to pay back the loan. 

• Assuming the loan is $140 million (including the $29M) at 17% [Lakes can borrow the money at 12%], the payments would work out to $29M a year.  Valley View completed their 1306 slot; 62000 Sq Ft project in April of 2007 for $114M.
• If the loan climbs to $200M, your payments will be $41.8M a year. If you think that $171M is unreasonable to complete this project consider what your loan needs to cover – construction of the building and parking lot, construction of a septic system, start up costs including running water and power up to the project, buying the devices, hiring and training a staff, improvements to 94, etc.

On top of the $35 - $48M you will pay to Lakes each year, you will have employees to pay (500 employees earning $26,000 a year would work out to $13M per year), plus services to buy (running the waste water down to campo, electric bills, water bills, promotions, players clubs, bus services, etc. and so on - $10M a year?).  By realistic accounts your operational costs ($57M - $71M) will far outstrip your income (figuring 80% of Lakes optimistic figure of $66M is $54M).

About the only way anyone from the Tribe will see money from the casino before it goes bankrupt is by working on the construction crew, manning the blackjack tables, being a cashier, or being part of the management team.  There won’t be any profits after Lakes gets paid for the tribe to see.  How long is the tribe willing to run this business at a loss to pay back Lakes?  Is it worth it?