Tribes, state negotiate over casino revenues

By: EDWARD SIFUENTES - Staff Writer | Saturday, April 10, 2004 11:10 PM PDT ∞

California's booming Indian gambling industry, legalized just four years ago, is poised to grow even more.

Tribes and state officials are renegotiating their gambling agreements in an effort to increase Indian casinos' contribution to state coffers. Any deal is likely to give tribes more slot machines.

Besides the ongoing negotiations, which are said to be nearing fruition, there are four ballot initiatives related to Indian casinos. None of the measures would reduce the estimated $6 billion a year industry.

That may be because of a shift in the political ideology of the current and previous administrations in Sacramento. Whereas former Gov. Gray Davis sought to grow Indian gambling modestly, Gov. Arnold Schwarzenegger has suggested he doesn't mind how much it grows as long as the state gets its "fair share."

Some tribes say they already pay enough.

"How much more does the governor expect tribes to pay?" said Mark Macarro, the chairman of the Pechanga Band of Mission Indians, which owns a large casino in Southwest Riverside County.

"Amounts already being paid should not be ignored," he added. "In Pechanga's case alone it's over $70 million in direct economic impact, over $21 million to the state in fees, at least $4.4 million to Temecula and tens of thousands of dollars a year in charitable contributions."

Of the four initiatives, even one proposed by a leading critic of Indian gambling, the Sacramento-based Stand Up for California, would permit lifting the cap on slots at each Indian casino from 2,000 to 3,000. If an initiative should prevail at the ballot box, it would supersede any deal between the governor and the tribes.

The real contenders

Among the varying proposals, most gambling supporters and opponents agree there are only the state negotiations and two initiatives to watch. The initiatives, one backed by Indian tribes and one backed by racetracks and card clubs, offer different enticements.

Racetrack and card club owners offer 33 percent of their slot machine winnings, if the state allows them to have 30,000 slots at 16 of their gambling establishments. The measure would apply only if tribes don't agree to give the state 25 percent of their profits.

On the other hand, the Agua Caliente Band of Cahuilla Indians in Palm Springs in its initiative would give the state the equivalent of "state corporate tax rate," or about 8.8 percent of annual revenues in exchange for unlimited games, slots, casinos and 99-year gambling agreements. Their existing agreements have a 20-year life span and are set to expire in 2020.

There are five tribes in North County that operate casinos at the Pala, Pauma, Rincon, La Jolla and San Pasqual reservations. Santa Ysabel, near Julian, is expected to start building its own casino this summer.

Standing in the middle are the closed-door negotiations in Sacramento. According to reports, about a half-dozen tribes, including the Pala and Pauma bands in North County, are nearing a deal that would give the state at least $500 million and perhaps as much as $1 billion in a one-time payment.

"The governor is very pleased with where the talks are going," said Schwarzenegger spokesman Rob Stutzman last week. "We are in a positive place and are continuing to make progress."

Stutzman and tribal attorneys would provide no other details nor comment on a report that the deal hinged on a $1 billion payout to the state that would be financed through a tribal bond measure.

"There's a lot of speculation, most of it incorrect," said Howard Dickstein, an attorney for the Pala band in the negotiations. Parallel talks are continuing with other tribes, he said, as they work to negotiate "a fair contribution" from tribes by May.

Debating 'fair share'

At issue is how much the state stands to benefit from the booming Indian gambling industry in the state. Of the 107 federally recognized tribes in California, 64 tribes have gambling agreements with the state. About 50 have casinos and more are being planned.

The agreements, negotiated by the Davis administration, allow tribes to operate up to two casinos and a maximum of 2,000 slot machines. However, they did not require tribes to share their profits directly with the state.

Gambling "compacts," as they are called, require tribes to contribute money to two trust funds, one to share with poor, non-gambling tribes and the other to help defray the cost of regulating the industry, among other uses. Tribes contribute about $130 million annually to these funds.

Critics of Indian gambling say the deal is not fair to the state.

During last summer's recall election, Schwarzenegger charged that tribes were not paying "their fair share" of taxes and accused other candidates of pandering to tribes because of the $120 million he says they have spent to influence state politics during the last five years.

Schwarzenegger proposed that tribes pay $1.5 billion to the state, about 25 percent of their annual revenues, as their "fair share" contribution. The governor later revised his proposal to about $500 million.

The sticking point in talking about Indian casinos is how fair share is defined, some tribal leaders say. Most would agree to helping the state through its budgetary woes, but only to a point. The definition hinges perhaps on how desperately each tribe would like to grow its business.

The tribe's offer

The Agua Caliente-backed initiative would give the state what the governor wants, supporters say, while allowing tribes the flexibility to expand their businesses. However, it is unclear how many tribes, besides its sponsor, support it.

"The Department of Finance estimates that (the proposal) would generate hundreds of millions of dollars a year," said Gene Raper, a consultant hired to qualify the initiative. "Our estimates is that it would generate about $550 million, which is a little more than the governor had proposed in his budget. We think it's fair."

The consultant would not say how many signatures have been collected, but he said that the campaign would have enough to qualify the measure for the November ballot. They must collect 598,105 valid signatures of registered voters in the state by Aug. 9.

Raper said the 99-year agreement would allow tribes to finance larger projects and keep gambling where voters intended, on Indian reservations. With the initiative, tribes could keep the deal they have or choose to take the new compact.

"I don't think you are going to see more casinos, just bigger ones with more slots and more games," Raper said.

Unlikely alternatives abound

Cheryl Schmit, director of Stand Up of California, said her group has neither the time nor the resources to collect the 598,105 valid signatures the initiative would need to qualify for the November ballot. She said the intent was to give the governor an option should the negotiations fail.

"It would be a safeguard," she said.

The initiative would allow the governor to seek to amend the tribes' agreement with the state to require Indian casinos to contribute the equivalent of state and local corporate taxes in nearby communities, Schmit said.

An unlikely alternative is the proposal by Robert Wilson, a Studio City artist, that would legalize casino-style games for 28 years in Barstow and Oakland as a "pilot program."

"It's a good initiative," Wilson said. "It would bring millions of dollars to the community that it is in ... through taxes and business fees."

Wilson said he has neither the money nor the support to collect signatures.

Schmit and others say any deal that is struck during the closed-door meetings is likely to require the governor to denounce the initiative backed by owners of racetracks and card clubs. She added a warning to people who would sign the gambling petitions being circulated.

"The way I see them, they are both written by the gambling industry for the gambling industry," Schmit said. "If they think about it that way, they will be a little more cautious about signing."

The Associated Press contributed to this report.

Contact staff writer Edward Sifuentes at (760) 740-5426 or esifuentes@nctimes.com.

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