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California Tribal Casino Compact Amendments: A bad deal for the state, local communities and most California tribes

dreier.jpg

By Peter Dreier, Ph.D.
Professor of Politics
Occidental College

Part 1 in a 3 part series

In August 2006, Governor Arnold Schwarzenegger completed negotiations with California’s five wealthiest Indian tribes to allow a vast expansion of tribal casino gambling in the state. If ratified by the state Legislature, the negotiated agreements, called “compacts,” would authorize the Agua Caliente, Morongo, Sycuan, San Manuel and Pechanga tribes to triple the size of their casinos, destroying the character of several local communities and relegating other California tribes to second-class status.

Worth an estimated $60 billion, the compacts are a financial windfall for the five tribes. (Office of the Governor, August 08, 2006, Press release. The press release puts the net win at $320 per day, per machine. The net win of 22,500 new machines over 23 years is thus an estimated $60.4 billion.)

But they are a bad deal for California taxpayers, local communities in which the casinos will be located and the non-compact tribes who are left out of the gambling bonanza. There is also a gaping lack of oversight of tribal casinos brought about by a recent court ruling. Although federal law grants state governors the power to negotiate with the tribes any “subjects that are directly related to the operations of gaming activities,” (Indian Gaming Regulatory Act. Public law 100-497-Oct. 17, 1988 100th Congress Sec. 2701 (32.C.vii), Governor Schwarzenegger failed to address these major shortcomings. For these reasons, the 2006 compact amendments should be rejected by the Legislature, and renegotiated to compensate the state properly for the exclusive right to operate casinos, give local communities a voice, protect the well-being of all tribes and ensure strong oversight of the tribes’ financial and other obligations.

This paper will examine the four major flaws associated with the proposed compacts:

• The amount of revenue guaranteed to the state falls far short of what other states have secured in similar agreements, and is not adequate compensation for the exclusive right the tribes are given to operate casinos in California.

• Local communities will have virtually no voice in whether, and under what conditions, the proposed gambling palaces will be built and operated.

• Five tribes, representing very few members, are reaping the lion’s share of the benefits of tribal gaming, while the remaining tribes struggle for economic and social survival.

• There is a lack of independent oversight of casino operations to ensure that the tribes’ financial and other obligations are met, and criminal activities are dissuaded.

In addition, this paper provides an overview of the tribal gaming industry, briefly reviews its history and examines its extraordinary political influence.

POLITICAL EXPEDIENCY TRUMPS PUBLIC POLICY

In one of the most memorable moments of his campaign in the 2003 recall election, Governor Schwarzenegger railed against Indian gaming tribes, branding them a “special interest” that did not pay their fair share. One year later, in 2004, the tribes spent $86 million on a statewide ballot initiative through which they sought to circumvent the governor and expand their gambling empires by a direct vote of the people. The governor led the “no” campaign, and the result was a resounding three-to-one margin of defeat for the tribes. (The governor signed new and amended compacts with nine tribes in 2004, but due to opposition from some of the state’s wealthiest tribes, those compacts have not been ratified by the Legislature.)

In 2005, the governor himself was badly wounded by a high profile defeat at the polls when a series of initiatives he sponsored was rejected overwhelmingly by voters. Facing what looked like an uphill battle for reelection, he brought in a new team of political operatives and high-level staff, including several aides to former Governor Gray Davis, who would help shape his policy agenda and aid his campaign in the fall of 2006.

One of the first tasks he tackled after the staff shake-up was to execute the amendments to tribal compacts with California’s five richest tribes. It did not escape notice among political insiders at the time that his success in amending the compacts brought with it the added political benefit of removing the tribes’ incentive to spend $20 million against his reelection. (See also Lou Hirsch, “Tribes, governor seek reconnection: Reps of Agua Caliente, Morongo bands to meet with him,”The Desert Sun, May 7, 2006.)

A coalition comprised of non-compact tribes, environmentalists, community activists, labor organizations and others convinced the Legislature not to approve these agreements in the final days of the 2006 legislative session. Now, the same compacts are under review by the Legislature in the current 2007 session, when they will be approved or rejected by lawmakers.


INDUSTRY OVERVIEW

Tribal gaming flourishes nationwide

Tribal casinos are the fastest growing segment of the U.S. gambling industry. In 2005, the last year for which data are available, total U.S. gambling revenues were $85 billion, of which $23 billion went to 424 tribal casinos nationwide.(Casino City’s North American Gaming Almanac, 2006-1007 Edition, Casino City Press, January 2007.)

Between 2004 and 2005, inflation-adjusted revenues were down for commercial casinos, charitable gaming, horseracing and sports betting, and were flat for lotteries.

By contrast, tribal casino revenues increased by 15 percent nationwide during that same time.

California – the ultimate jackpot

California is the nation’s largest market for tribal casinos, with $7 billion in tribal gaming revenues in 2005. Today, California’s tribal casinos collectively take in more than all of the casinos on the Las Vegas strip. In the past five years, the growth rate of tribal casino gambling in California, at 25 percent, was far more than the national average.(National Indian Gaming Commission, Tribal Gaming Revenues by Region. Accessed January 2007.)

Notwithstanding its rapid growth rate, the industry’s expansion in California has been constrained until now by a state-imposed limit on the size of casinos – a limit that would be substantially eliminated by the proposed amendments to the compacts of five of California’s richest tribes.

California casinos fall into three categories:

small, rural casinos, with an average of 470 slot machines, and fewer than 300 employees. These casinos predominantly serve a remote, local market and are unlikely to attract enough customers to grow beyond their small size.

casinos located closer to mid-sized towns and highways, offering nearly three times more slot machines and square footage than the small, rural venues.

large casinos, of which there are 16, with an average of 2,100 slot machines and 2,000 employees each. These are located close to major population centers and are well-served by major highways.

_____Casinos Average Slots Average Employees
Large___16_______2,104__________1,956
Medium___8_______1,307___________794
Small____33________470___________288


Slots: The Holy Grail

Slot machines are the holy grail of the tribal gaming industry, and accordingly, the centerpiece of the proposed compacts. How many slots a tribe controls is the key to dominance of the tribal gaming market. Currently California has only one-third as many slot machines per capita as the other five largest tribal gaming markets in the country—a situation that increases the profits per machine and indicates the potential for growth in the State.

The governor’s proposed compacts would more than triple the number of slots for the five tribes. With up to 7,500 slot machines each, as allowed for in the compact amendments, these casinos would house nearly three times more slot machines than the MGM Grand, the largest casino on the Las Vegas strip. (State of Nevada Gaming Control Board, Non-restricted Count Report. September 30, 2006)

Slot machines are by far the single, greatest revenue generator of the tribal casinos. The Agua Caliente compact shows that each of its current 2,000 slots brings the tribe $130,000 in net profit annually. That amount, called the “net win,” is what is left after all player prizes have been awarded. Two thousand slots deliver $260 million per year to the tribe. Slots contribute 75 percent of the tribe’s total revenue but they add just eight percent to total operating expenses, making them a disproportionately favorable contributor to the bottom line. (Agua Caliente Band of Cahuilla Indians, Revenue Bonds, Series 2003)

Peter Dreier is the E.P. Clapp Distinguished Professor of Politics at Occidental College where he is the Chair of the Urban & Environmental Policy Program. He is coauthor of "The Next Los Angeles: The Struggle for a Livable City" and "Place Matters: Metropolitics for the 21st Century and writes frequently for the Los Angeles Times, The Nation, and other publications The original of this was published by the Urban & Environmental Policy Institute and is republished with the permission of the author.

Posted on May 23, 2007

Comments

Thank you Professor Dreier for taking the time to thoroughly research and address the issues. You hit the nail squarely on the head as opposed to Ms Carole Goldberg's recent article in the Sacramento Bee where she addressed none of these issues and chose instead to blame unions for costing the State $500 million in lost revenue. I appreciate your professionlism.

Posted by: Clark at May 23, 2007 02:26 PM

Professor Dreier, I look forward to your next articles on Indian casinos.
My blog is discussing issues on the Pechanga Reservation.
One point not mentioned is that Pechanga has disenrolled 25% of the tribe, so that the remaining members can have more per capita payments. They have illegally kept rightful members out via an illegal moratorium. They have gone against the will of their own people by not following the rule of law.
They have violated their members civil rights by denying them due process, including having attorneys present at the disenrollment hearing and appeal. They were not even allowed writing instruments.
I URGE all your readers and students, as well as your government contacts to look at the blog.
Pechanga SHOULD NOT be rewarded for massacring more Pechanga Indians than were killed in the great Temecula Massacre.

Posted by: PHunter at May 23, 2007 08:11 PM

KNBC did an expose of how Pechanga disenrolled a whole family of over 120, going against the research that their own expert provided.

http://www.nctimes.com/articles/2006/09/24/news/californian/20_45_019_23_06.txt

Watch the video at this address:
http://video.nbc4.tv/player/?id=64156

There is much to learn about Pechanga BEFORE they get more machines, especially when there are tribes that need it.


Posted by: OPechanga at May 23, 2007 09:51 PM

As pointed out by other posters, the Pechagna tribe has kicked out hundreds of long standing tribal members in a process called disenrollment on very flimsy evidence that would not stand up in a real court of law.

And yes we disenrollees were not allowed attorneys present at any hearings, we were not allowed to take notes at hearings, we were not allowed copies of any hearing transcripts, and we were not allowed to ask any questions at our appeal hearings.

The tribal council also ignored the fact that in July 2005 the tribe voted to stop all disenrollments but the latest large extended family, the Hunters, were still kicked out in 2006.

In addition, as also pointed out by others in this forum, there has been an illegal moratorium on new membership since 1997 even though the Pechanga constitution and bylaws says open enrollment is supposed to be every January.

But who can make the Pechanga tribe follow their own rules?

For for now, it appears nobody, as the tribe hides under the cloak of sovereignty.

Yes financial oversite, environmental issues, and labor issues are important considerations. It is also unfair that a few of the rich tribes are getting richer while other tribes have little or no piece of the pie but what about the rights of California citizens?

The California legislature is on record as supporting the Indian Civil Rights Act so rights issues should be at least as important as other issues when it comes to letting the Pechanga tribe expand its empire further.

Posted by: Temecula Man at May 23, 2007 11:12 PM

Knowing the difference between wrong and tight is of no consequence, however, there will always be some who through fear and intimidation will bend the will of the people. This is nothing new at pechanga the people that did this started over twenty years ago, Its a shame that the honest people were not able to stop the corruption when it first started, but Thad's the way of the world. My family were members who belonged to the res and it is our hope to be so once again. I look forward to reading more on the issues that all California are affected by there is something that can be done.

Posted by: Guerra Nunez aka White Buffalo at May 24, 2007 08:21 AM

As an Occidental alum, I look forward to seeing you prove how increasing the slots at five tribes will harm tribes in other parts of the state. These other tribes either have casinos already or are free to build them now. They aren't competing with the big five any more than casinos in Arizona, Nevada, and Oregon are.

As with opening Wal-Marts in Los Angeles or San Diego, I'd say the new compacts will have zero impact on tribes elsewhere. But you've implied that other tribes will suffer somehow. Good luck proving this thesis...you'll need it.

Posted by: Rob at May 24, 2007 09:33 AM

The publisher of this website is in cahoots with Jack Gribbon (UniteHere), Cheryl Schmit (Stand up for California) and others who seek to control California's Native American interests.

It deserves noting that several weeks ago, Mr. Russo meant to forward communications I sent to him/his blog to Ms. Schmit but mistakenly returned it to me.

Mr. Russo's intended note to Schmit included, "looks like we're getting to them."

Labor Unions have historically held power in Sacramento and dumped hundreds of millions into political campaigns and programs ... probably billions depending on the span of time you consider.

Now they face a formmidable adversary and they're pulling out all the stops. Not to mention it creates a platform to promote job stability for the likes of Jack Gribbon. Russo provides a forum for his old friend.

Ms. Schmit's group has ties to Las Vegas casino interests. Of all things, Schmit has backed the controversial proposal by the Lytton Band of Pomo Indians to open what would be the largest off-reservation casino in California, in the community of San Pablo -- a proposal that Senator Diane Feinstein and others have blocked in Congress.

Schmit has never opened her books and revealed the specifics of where "Stand Up for California" gets its funding; but most believe it's along the approach of those organization Jack Abramoff set up and funded with Ralph Reed and others.

Posted by: Frank Lee at May 25, 2007 12:49 PM

Ah, Mr. Lee is trying the guilt by association move. Very nice.

So let's see, Abrahoff was in cahoots with Agua Caliente Tribe,was he not? Some questions remain whether Morongo had ties.

Pechanga Tribal Chairman Macarro called unions corrupt, and that may have value, in the "takes one to know one" vein.

The Pechanga Enrollment Committee has ties to an imprisoned sex offender, whose word they took into consideration when they disenrolled families from Pechanga. 25% of their tribe!

WITHOUT A TRIBE

All is NOT pure just because it's involving native Americans. Macarro was caught in a lie in 15 seconds in the link above.

http://blog.myspace.com/paulinahunterofpechanga

Posted by: Paulina Hunter at May 29, 2007 09:10 AM

Professor of Politics or anachronism?
1) "... and it is not adequate compensation for the exclusive right the tribes are given..."? So the rights of sovereignty should be sold to Indians? The right is given by the State's constitution, Mr. Professor.
2) Who listened to the voices of the Indians when the communities developed around the reservations, encroaching on their resources of air, water, orchards, etc, etc?
3) "Five tribes get the lion's share while the other tribes struggle"...? Are you lacking the facts or the knowledge that Tribal Government Gaming Enterprises voluntarily share a portion of their profits with non gaming tribes? And please tell us again: Who put the tribes in the economic and social disadvantages position?
4) Short of demanding that Tribal Governments should make their Casino Enterprise earning public, there is no gaming jurisdiction in the United States that is more regulated, inspected,and supervised than Indian Gaming. You will also not find a single statistic that supports your claim of increased criminal activities linked solely to Indian Gaming.
So lay off making politics, Dr. Dreier, and teach political science in the balanced and objective manner that it deserves.
Make it a great day, Thomas

Posted by: Thomas Dullien Ph.D. at July 10, 2007 08:53 AM

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