Fitch: Removal of STOF (FL) Chairman - No Impact on Ratings
STOF announced on Sept. 28, 2016 that its council voted 4-0 to remove the chairman from office, effective immediately. According to the release, the council acted on a recall petition filed by tribal members. The petition cited "various issues with policies and procedures of the chairman's office." A special election will be held within 30 days of the removal to elect a new chairman.
To the best of our knowledge, the action by the council is not related to any improprieties that may lead to sanctions or penalties by the federal or state authorities against the tribe or its gaming operations. Fitch gains additional comfort in that four of the five council members will remain in place, lending stability to the transition. Fitch will monitor the situation, which will include a dialogue with the management (potentially including tribal leaders).
STOF has a six-year track record of relative political stability while instituting sound financial policies and building reserves. In 2010, the tribe received a Notice of Violation (NOV) from the National Indian Gaming Commission (NIGC). The NOV alleged that certain council members had spent gaming revenues in ways not in accordance with the tribe's own policies. The complaints were addressed and the tribe elected a largely new council in 2011, including James Billie, who had been the chairman in 1979-2001. During his first tenure, Billie was removed for alleged misconduct.
Fitch generally views council and leadership turnover at the tribal level as a source of risk vis-a-vis political and policy stability. In rare instances with other tribes, tribal political instability has caused disruption in gaming operations. Fitch believes this risk for STOF is minimal given the tribe's long track record of stability through transitions of elected council members. Furthermore, for STOF's lenders and bondholders, government related risks are partially addressed by the debt's cash waterfall mechanism whereby the tribe receives gaming revenues only after the senior gaming and the tribe's special obligation bonds debt service is paid.