RELATED PARTY TRANSACTIONS

9 Months Ended

Jun. 30, 2011

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

RELATED PARTY TRANSACTIONS:

Distributions to the Tribe totaled $14.6 million and $10.2 million for the three months ended June 30, 2011 and 2010, respectively, and $23.7 million and $48.7 million for the nine months ended June 30, 2011 and 2010, respectively.

The Tribe provides governmental and certain administrative services to the Authority in connection with the operation of Mohegan Sun. The Authority incurred expenses for such services of $6.9 million and $7.0 million for the three months ended June 30, 2011 and 2010, respectively, and $20.6 million and $21.0 million for the nine months ended June 30, 2011 and 2010, respectively.

The Authority purchases the majority of its utilities, including electricity, gas, water and waste water services, from an instrumentality of the Tribe, the Mohegan Tribal Utility Authority. The Authority incurred costs for such utilities of $5.3 million and $6.0 million for the three months ended June 30, 2011 and 2010, respectively, and $16.3 million and $18.6 million for the nine months ended June 30, 2011 and 2010, respectively.

In September 2009, the Tribe made a $10.0 million loan to Salishan-Mohegan, which was used to repay revolving loans under the Salishan Credit Facility. The Mohegan Tribe Promissory Note matures on October 18, 2011.The Mohegan Tribe Promissory Note accrues interest at an annual rate of 15.0%. Under the terms of the Mohegan Tribe Promissory Note, as amended, accrued interest from November 2009 through October 2010 was paid at a monthly rate of 3.0%, with the remaining 12.0% due at maturity; and from November 2010 through maturity, all accrued interest under the Mohegan Tribe Promissory Note is payable at maturity. The Authority incurred interest expense associated with the Mohegan Tribe Promissory Note of $374,000 for each of the three months ended June 30, 2011 and 2010 and $1.1 million for each of the nine months ended June 30, 2011 and 2010, respectively.

In February 2011, the Tribe agreed to lend Salishan-Mohegan up to $300,000 to fund its working capital requirements pursuant to a revolving commercial promissory note. In May 2011, Salishan-Mohegan entered into an amendment to the terms of the Mohegan Tribe credit facility to increase the borrowing capacity from $300,000 to $1.0 million. The Mohegan Tribe credit facility matures on October 18, 2011. The Mohegan Tribe credit facility accrues interest at an annual rate of 15.0% payable at maturity. As of June 30, 2011, Salishan-Mohegan had $600,000 drawn on the Mohegan Tribe Credit Facility and $400,000 of borrowing capacity thereunder. The Authority incurred interest expense associated with the Mohegan Tribe Credit Facility of $15,000 and $18,000 for the three months and nine months ended June 30, 2011, respectively.

The Authority leases the land on which Mohegan Sun is located from the Tribe under a long-term lease agreement. The agreement requires the Authority to make a nominal annual rental payment. This lease has an initial term of 25 years and is renewable for an additional 25-year term upon expiration.

In addition, in July 2008, the Authority entered into a land lease agreement with the Tribe, replacing a prior land lease agreement, relating to property located adjacent to the Tribe's reservation that is utilized by Mohegan Sun for employee parking. This agreement requires the Authority to make monthly payments equaling $75,000 until maturity on June 30, 2018. The Authority classified this lease as a capital lease for financial reporting purposes due to the existence of a bargain purchase option at the expiration of the lease.

The Authority previously leased a building located adjacent to Mohegan Sun from the Tribe. In September 2010, the Tribe contributed the building to the Authority. The Authority expensed $12,000 and $36,000 relating to this lease for the three months and nine months ended June 30, 2010.

In September 1995, the Tribe adopted the Mohegan Tribal Employment Rights Ordinance, as amended from time to time (the “TERO”), which sets forth hiring and contracting preference requirements for employers and entities conducting business on Tribal lands on or adjacent to the Mohegan Reservation. Pursuant to the TERO, the Authority and other covered employers are required to give hiring, promotion, training, retention and other employment-related preferences to Native Americans who meet the minimum qualifications for the applicable employment position. However, this preference requirement does not apply to key employees as such persons are defined under the TERO.

Similarly, any entity awarding a contract or subcontract valued up to $200,000 to be performed on Tribal lands must give preference, first, to certified Mohegan entities submitting commercially responsible bids, and second, to other certified Native American entities. This contracting preference is conditioned upon the bid by the preferred certified entity being within 5% of the lowest bid by a non-certified entity. Contracts in excess of $200,000 are awarded to the lowest commercially responsible bidder, on a competitive basis, with preference to certified Mohegan entities and then other certified Native American entities in the event of a matching bid. The TERO establishes procedures and requirements for certifying Mohegan entities and other Native American entities. Certification is based largely on the level of ownership and control exercised by the members of the Tribe or other Native American tribes, as the case may be, over the entity bidding on a contract.