Federal Court Decision – State Can’t Offer Slots For A Cut Of the Action

A major decison came down from a Federal court yesterday that could bring the process of Tribes negotiating with the state for more slots or new casinos to a grinding halt. For now anyway.

A federal court decision signed Tuesday but made public yesterday involving the Rincon Band Of Luiseno Indians of North San Diego County, has said that the governor can't demand money for the state's general fund from tribes wanting new gambling deals unless he offers something in return, and an exclusive right to slots isn't enough.

“We are disappointed in this unprecedented trial court decision,” said Schwarzenegger spokesman Aaron McLear, who vowed an appeal.

Rincon's lawyer said the decision is the first of its kind, and it could affect negotiations between tribes and governors across the country.

“The court has basically said, 'State, you're acting illegally when you demand from these tribes fees that help with the state's budget deficit,' ” lawyer Scott Crowell said.

Federal Magistrate Judge William McCurrine Jr. ruled that Schwarzenegger negotiated in bad faith with the Rincon band for an amendment to its 1999 gambling compact.

The judge said the tribe and the state should negotiate a new deal for more slot machines within 60 days, or he would appoint a mediator.

The governor will seek to delay the order until the appeal is decided.

“We continue to maintain that we negotiated in good faith,” McLear said.

But the tribe's lawyer said he expects the negotiation process will continue even if the case is appealed.

Another part of the same suit, in which Rincon is challenging a statewide limit on slot machines, is under review by an appeals court.

The decision has elicited mixed reactions among those who watch the $8 billion California Indian gaming industry.

“Hallelujah,” said Michael Lombardi, a consultant to several tribes. “That's good for all of Indian gaming. Thank goodness they can't tax us.”

Congress never intended for casino proceeds to end up in state coffers, he said.

Cheryl Schmit, who heads a coalition of state groups opposing unregulated gambling, said the decision would hamstring the governor during negotiations.

“This decision is bad for California,” Schmit said.

The tribe has 1,600 Las Vegas-style slot machines at its Harrah's Rincon Casino & Resort north of Valley Center and wants to add 900.

But negotiations since 2003 have gone nowhere, primarily because the tribe won't agree to state demands for a share of its gambling profits – provisions its competitors have accepted in exchange for more slots.

The tribe says that demand is a tax, in violation of the Indian Gaming Regulatory Act, the 1988 law that set the ground rules for tribal gaming.

The judge agreed.

“It is difficult to regard the state's proposed plan as anything more than a tax when it functions as a tax,” McCurrine said.

He pointed out that a state-hired economist estimated that the general fund would receive nearly $38 million a year from the additional machines, while the tribal government would get $1.7 million.

Under its compact, the tribe contributes $1.3 million a year to a state trust fund for non-gaming tribes. It also has made payments to San Diego County for road improvements near the casino.
In 2005, the 650-member tribe retained about $61 million of the $250 million that gamblers lost at its casino. The rest went to payroll, supplies and other expenses.

In court last year, Deputy Attorney General Peter Kaufman argued that the payments to the general fund aren't a tax because the state is giving the tribe something in return: an exclusive right to offer casino gambling.

Under provisions the governor has included in recent gambling deals, tribes would be able to stop making payments to the state if non-Indians set up competing wagering operations.
Rincon's lawyer argued that it already has that because the California Constitution gives tribes a monopoly on Nevada-style gambling.

The judge agreed, saying that “the state must provide other meaningful concessions to Rincon.”
Finding that the state's demands are an illegal tax doesn't invalidate other tribes' compacts that include similar provisions, McCurrine said.

But Schmit said it could affect the governor's negotiations with tribes looking to expand gambling. “I hope he would not negotiate until he has this resolved,” she said.

Howard Dickstein, who negotiated the Pala band's compact calling for unlimited slot machines, said he didn't think that would happen.

Some tribes, such as Pala, are willing to pay into the general fund in order to get more machines and make more money, he said.

“The reality for each tribe will be very, very different,” Dickstein said. “Some tribes want compacts now.”

Full Article:
http://www.signonsandiego.com/news/metro/20080501-9999-1n1rincon.html