Rincon Tribe Files Suit Against Governor

The Rincon Indian band is challenging a long-standing practice in which states ask for cash when negotiating with Indian tribes trying to open or expand casinos.

The lawsuit, filed in San Diego federal court, accuses Gov. Arnold Schwarzenegger of negotiating in bad faith for an amended compact.

Rincon has 1,600 slot machines at its Harrah's casino north of Valley Center, which is operating under a 1999 compact. It wants to boost that number to 2,500 but can't without striking a new deal with the governor, who is demanding millions of dollars for the state's general fund.

“The state has now stepped over the line,” said Scott Crowell, one of Rincon's lawyers. “We're not willing to pay a tax into the state to be used as discretionary general fund revenue.”

The tribe said the contribution the governor wants is effectively a tax, and that's outlawed by the 1988 Indian Gaming Regulatory Act.

State officials said the payments are legal because the tribe gets something in return – more slot machines and the exclusive right to offer casino gambling in the state.

“When the governor negotiates compacts, he is looking at what is best for the state, the tribe and local communities,” said Schwarzenegger spokeswoman Sabrina Lockhart.

The tribe counters that it is entitled to more slot machines. It says the exclusive right to gambling is already in the state constitution, so that's not something it should bargain for.

In essence, the band is seeking to invalidate the assumptions behind compact negotiations nationwide, said Howard Dickstein, a lawyer for Pala, one of Rincon's competitors that has agreed to revenue sharing.

“This is an uphill battle for the tribe,” he said.

The governor's lawyers say the 600-member Rincon Band of Mission Indians is making plenty of money and should share the wealth.

Harrah's resort collected $242 million from gamblers in 2005 – $381 a day per slot machine, or more than three times Las Vegas averages, according to court filings.

The state contends that Harrah's Entertainment Inc., the largest casino operator in the world, is so good at its business that the Rincon resort is more profitable per machine than any of its competitors. After paying the casino's expenses and Harrah's management fee, the tribal government got about $60 million in 2005, according to the court papers.

“Yes, that's a lot of money,” Crowell said. “But it's money that's earned for tremendous government services here at Rincon. . . . We shouldn't be punished for the success that we've had.”

The case will come to a head today, when a federal magistrate judge in San Diego is scheduled to hear arguments from the tribe and the governor's lawyers.

The governor is asking the judge to throw the case out.

The tribe wants the judge to find that the governor has negotiated in bad faith and that a mediator should choose between the last offers from both sides.

Regardless of the judge's decision, the case is likely to be appealed, Crowell said. He said the tribe is entitled to 2,000 slots under its 1999 compact and said the governor has failed to negotiate in good faith on the additional 500 slots it wants. Without more slots, he said, the casino will not be competitive in the growing casino market.

State officials say they have negotiated in good faith and point to the fact that they have reached deals with 19 other tribes, including Pala and Pauma.

Each of those deals calls for tribes to turn over as much as 25 percent of slot revenues to the state's general fund. Schwarzenegger has touted the income as particularly important to balance the state budget.

The governor's lawyers say that Rincon's existing deal, reached in 1999, gives it “extraordinary financial benefits” and that the state isn't obliged to expand the number of slot machines without getting something in return.

Rincon originally sued the governor in 2004, when it sought to invalidate deals he made with five other tribes – including San Diego County's Pala, Pauma and Viejas – allowing them unlimited slot machines in exchange for payments to state coffers.

The tribe has since dropped its attack on those deals and has repeatedly tried to negotiate with the governor. Each time, the talks fell apart because the state demanded a share of the slot revenues and Rincon didn't want to give it.

State officials argued that even if the tribe gives the state millions, it will still make more money from the extra machines than without them.

Crowell scoffed at that argument, saying the state would get nearly all the new profits.

An expert hired by the state during negotiations projected that the extra machines would bring in $39 million more a year after expenses. The state's share represents all but $1.7 million of that.

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