Casino Foe Plans a Third Initiative

Under her initiative, the governor's office and tribes would negotiate the percentage, but it could not be less than 8.84% of the casinos' gross income. In exchange, each tribe could add 1,000 slot machines, the most lucrative game in any casino. Currently, 15 tribes have casinos with 2,000 slot machines each, the maximum allowed.

Schmit's measure comes a week after an initiative proposed by the Agua Caliente Band of Cahuilla Indians, owners of a casino in downtown Palm Springs and another off Interstate 10. The Agua Caliente's measure would require that tribes pay 8.84% of their net income to the state in exchange for the right to unlimited expansion of their casinos on tribal land — essentially the same as other businesses pay in taxes on corporate profits.

Card rooms and racetracks, meanwhile, are preparing to gather signatures on petitions to put a measure on the November ballot. It would grant them 30,000 slot machines, unless tribes agree to pay the state 25% of their winnings — roughly $1.25 billion a year.

Card rooms and tracks would pay the government 33% of their slot winnings, or about $1 billion a year, with most of it going to local police, fire and education programs.

Analysis

Three propositions

One (Agua Caliente) - Gives the tribes the ability to have an unlimited number of slot machines in exchange for 8% of their profits; the corporate tax rate in California.

Two (Card Clubs) - Gives card clubs entry into slot machine gambling, giving 33% of the revenue to the state, unless the tribes give 25% of their revenue to the state.

Three (Consultant) - Gives the tribes up to 3,000 slot machines total, up from the 2,000 already, in exchange for any percentage more than the corporate tax rate. Changes the state limit on number of gaming devices and sets it per tribe.

Background: Agua Caliente’s chairman, Milanovich, was the initiator of Prop 1A and Prop 5, both Indian gaming initiatives. 1A had technical errors; the biggest of which was that it did not change the state constitutional ban on Vegas style gambling. Prop 5 was passed the next election cycle. Milanovich also has been constantly fighting the state on the issue of reporting campaign donations, claiming that as a sovereign nation, they are immune to California’s campaign finance laws. Supporters of the plan include the largest casinos in the state (Fantasy Springs, Trump 29, Barona, Viejas, Chumash and Agua Caliente.)

Whereas the Indian lands in the state are in rural areas, card clubs are in urban areas; most of them in the Los Angeles area. They have longed to put in slot machines, and strongly back the initiative idea to allow them electronic gambling. Their mechanism is a fraud - if their initiative passes, the tribes no longer are required to have a compact for slot machines, since the Indian Gaming Act allows for unlimited gaming of any type permitted within the state.

The consultant’s plan gives limited expansion and murmurs are that her supporters are the smaller casinos in the state who want a chance to catch up to the larger ones; this is their vehicle. Pala, Eagle Mountain, Turtle Mountain are some of the rumored supporters.

Grey Davis signed a series of compacts that followed the model outlined in Prop 5, with some modifications for unions, etc. The flawed language in Prop 5, mirrored in the compacts, put in limits as to how many gaming devices each tribe could have and at the same time limited how many gaming devices would be permitted in the state. The total number of devices were divided up by the tribes in secret; the larger tribes taking the lion’s share and making it impossible for an outside party to know the division. Smaller tribes who want to get into the gaming business were virtually locked out; they could only have 349 gaming devices if they wanted to start a new casino.

Grey Davis briefly opened negotiations on tribal expansion but they were short lived; the soon to be outgoing governor wanted a 25% cut to go to the general fund; the tribes wanted to pay no more than the corporate tax rate. Arnold Schwarzenegger picked up on the 25% rate, using it in his campaign after the tribes dumped millions into Bustamante’s semi-campaign.

Whereas the initiatives can act as the baseline in compacts, the general legal belief is that the governor is not restricted simply to the initiative’s language. Any compact must also be approved by the state senate and assembly as well as the Secretary of the Interior who is not bound at all by the initiatives.

The background chatter at this point is that the larger tribes will support Milanovich’s signature drive, but if the card clubs get theirs on the ballot, they’ll just throw their support that since it just eliminates the compact issue totally. The smaller tribes know that urban slot machine gaming is economic ruin for them, and are planning on supporting an ‘alternative’ ballot measure (supposedly this third initiative) which will give them a shot at catching up to the larger tribes.

Back to today.

Milanovich’s initiative was intended as telling the governor what the tribes would accept, and using Schwarzenegger’s theory that if a deal can’t be made, the ballot box would be used to set policy. The card clubs know that their initiative sets the top end of the negotiations, and the small tribes know that their voice at the negotiating table is virtually nil since they can’t individually fund an expensive campaign. Other small tribes don’t want to use the ballot box at all - their belief is that the larger tribes are going to cause the repeal of the Indian gaming act and they’ll be left in the cold.

Behind the scenes the financiers of the larger casinos want negotiated compacts with as little public fanfare as possible, lest their involvements become a campaign issue. Most of the money came from south-east Asia, very quietly, and they’d prefer it to stay that way.

The future

A huge initiative battle would take a good amount of Indian money out of the November campaigns, and likely cost the Democrats tens of millions in campaign contributions across the country. The large California tribes have little out of state support, mostly due to finance deals they made (and Milanovich’s personality.) Whereas the large tribes would likely support their measure (or the card club’s), the smaller tribes will gain contributions from out of state casinos just to put Milanovich down. Again, costing Democrats a lot of bucks.

The Democrats in the capital are pushing for a quick negotiations for the compacts, but they have huge internal pressure to make sure those compacts ensure unions are created at the same time. Republicans are all over the place on the issue, some in the pockets of the large tribes, others not wanting gambling at all, and still others wanting the smaller tribes to develop more.

If you thought the Democrat presidential primary was going to be interesting, wait until this gets up a full head of steam. If a compact isn’t signed and ratified by June, all bets are off and you can expect 150 million to be spent by the three forces just in California on these campaigns.

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