Tribes divided over new gambling deals

By: EDWARD SIFUENTES - North County Times
This story has been corrected since the original posting. | Monday, December 24, 2007 5:10 PM PST ∞

The fight over four gambling agreements that would benefit several of the largest casinos in the state is pitting some American Indian tribes against one another.

The agreements, including one for the Pechanga band near Temecula, would allow their casinos to get even bigger. Each of the tribes could nearly triple the number of slot machines in their casinos.

Two tribes, including the Pala band in North County, are openly challenging the agreements through referendums, because, they say, the huge casinos would put them at a competitive disadvantage.

"It will hurt our business," said Pala Chairman Robert Smith, whose tribe also owns a large casino and hotel a few miles south of Pechanga's casino and resort.

Smith said the agreements allow the four tribes - the Pechanga, Agua Caliente and Morongo and Sycuan bands - to obtain slot machines at a fee based on a percentage of each slot machine's profit. He said those fees would be lower than the set fees, which can run up to $25,000, under Pala's agreement.

The four tribes have some of the best established casinos, which opened years before the state legalized gambling under Proposition 1A in March 2000.

Though most other tribes are standing on the sidelines, some have quietly expressed some discomfort with the agreements. Some say the public battle over the referendums will hurt the industry's image.

Bad precedent?

For its part, the Rincon band, which owns a Harrah's-brand casino in Valley Center, says the new compacts set too high a fee for slot machines. A tribal attorney said the fees amount to taxes.

The Rincon band has not publicly opposed the referendums.

"From Rincon's perspective, we don't oppose Agua Caliente or any other sovereign tribe entering into an agreement at a high tax rate," said Scott Crowell, a prominent tribal attorney who represents Rincon. "We do oppose the governor then taking that agreement and shoving it down Rincon's throat."

Sabrina Lockhart, a spokeswoman for Gov. Arnold Schwarzenegger, said that though there are some similarities, each agreement, also known as a compact, is negotiated individually.

"The governor negotiates in good faith, and since each tribe is unique the governor negotiates each compact on its own terms," Lockhart said.

Under its deal, the Pechanga band and the three other tribes would be allowed to add as many as 17,000 slot machines total to the 8,000 now at their casinos. Pechanga would be allowed to add 5,500 machines to its current 2,000.

In exchange for the additional machines, Pechanga would pay the state 15 percent of its net winnings on the first 3,000 machines it adds and 25 percent of the net winnings on the next 2,500 machines. The compact calls for a minimum payment of $42.5 million each year, up from $29 million under the current arrangement.

A different deal

As a result, tribes opposing the agreements say they would be forced to compete with some of the largest casinos in the country.

Pechanga Chairman Mark Macarro could not be reached for comment. He said in a previous written statement that he's perplexed as to why Pala would oppose its agreement with the state.

"We are disappointed," Macarro said. "Why a successful gaming tribe would try to block these new agreements and the billions they will generate for California is beyond us, particularly since we respected their recent agreements that gave them unlimited slot machines."

In 2004, Pala and four other tribes signed a deal with the state that allows them to operate as many slot machines as they like. But Smith said that deal is different from the Pechanga agreement, because it discourages growth through progressively higher fees - ranging from $3,500 to $25,000 per machine.

Smith said Pala's fees are higher than those Pechanga would pay under a rate based on a percentage of the slot machine's profit.

"Under our deal, we pay more per machine, theirs is the reverse," Smith said. "They are controlling the apple cart."

High stakes

In recent months, Pala has contributed more than $10.8 million to a campaign against the agreements, according to figures reported to the secretary of state. It joined a coalition against the agreements that includes a Northern California tribe, the United Auburn band; the owner of the Bay Meadows and Hollywood Park racetracks; and UNITE HERE, a service workers union.

The coalition amassed a combined war chest of about $17 million, according to figures reported to the secretary of state. That compares to the nearly $44.4 million collected by the four tribes to support their compacts.

The hefty sums are adding up to one of the wealthiest initiative campaigns waged in the state's history, some political observers have said.

Though tribal leaders say the campaign duel is strictly over business, some divisions go deep.

In the late 1990s, tribes that had casinos, including Pechanga, operated in a legal gray area. Gaming was not officially sanctioned by the state. And Pala was negotiating with Gov. Pete Wilson's administration to create what was touted as a model agreement to legalize gambling on Indian lands.

Macarro and other Riverside tribal leaders opposed Pala's plan because they said at the time that the agreement would limit the number of slot machines to 16,000 statewide.

Other people's battles

Some tribal leaders say they believe the state is once again trying to create a model template for future agreements. Rincon, for example, has tried to negotiate for more machines, but has been unsuccessful because it won't agree to the higher fees proposed by Schwarzenegger.

John Currier, a former chairman of the Rincon band who began a lawsuit against the state on the issue, said Rincon simply can't afford to pay the kind of money that other tribes, such as Pechanga, can. That's because Rincon's casino is in a much more remote location, 14 miles north of Escondido, where fewer customers are likely to go.

Pechanga's casino, on the other hand, is situated a few miles off Interstate 15, one of the most traveled north-south arteries in Southern California.

"Because they are in such lucrative markets, those payments are insignificant," Currier said about the agreements. "For tribes like Rincon, it puts us in a position where we would not get much (in return) or even lose (money) in the first three to seven years."

Other tribes say they are staying out of the fray, because it could be used by opponents of tribal gambling as a wedge to divide tribes.

"Viejas is staying out of this because we don't want to get into other people's battles," said Robert Scheid, a spokesman for the Viejas band in East County. "Each tribe must do what's right for their people, and we respect that. At the same time, all tribes need to make sure not to let tribal gaming opponents use this situation to divide and conquer."

Correction: The correct amounts for contributions given to campaigns for and against four tribal casino gambling propositions on the Feb. 5 ballot are $44.4 million in support and $10.8 million opposed, according to the California Secretary of State Web site as of Monday.