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California Gambling Deals Concern

California Gambling Deals Concern

Only five of 63 tribe casinos went for the negotiations with the California Governor. The 63 had previously signed compacts with the state but only five were willing to go with the new state offer as many of the tribes did not like the terms or thought that the state was interfering with their tribal or casino sovereignty. One tribe, the Rincon Band or Luiseno Mission Indians filed a lawsuit in federal court to stop the new compacts. Another tribe, the Morongo Band, offered their own proposal to the state.

The five that signed the new compacts were two from northern California and three from the San Diego County. This revision is the first since the original signing in 1999. The previous compacts were ambiguous, with vague formulations and compromises that left both parties with questions that were not fully answered. Governor Schwarzenegger administration was anxious to renegotiate the compacts and gain a share of the tribal profits which are substantial. This negotiation was seen by some tribes as an opportunity to increase the number of slot machines in their casinos.

One of the East county tribes stated that this new compact is a winner for both sides. We felt the the Governor was fair, but a tough businessman. The deal extends the old compact by ten years. The real money part of the deal was that the 5 tribes would pay $1 billion and an annual payment for the new slots that would range from $3,500 to $25,000 per machine.

The new compact has some provisions in it that caused other tribes to walk away. The state wanted a way to handle customer complaints that were not being addressed properly, greater access for unions to organize the casinos and environmental oversight. Many of the tribes thought these new provisions were an invasion of the sovereign rights as a free body.

The one billion dollar payment was to come from a bond that the tribes would repay over 18 years with each tribe to pay a share of the annual bond payment. As an example Pala would pay $18.8 million a year while Pauma would pay $5.7 million a year.

The new compact increased the limit of 2,000 slot machines per tribe with an increasing fee per machine for those over the 2000 mark. The fees would start at 2001 machines at a rate of $12,500 per machine for a year and ratchet up to $25,000 per year for machines that a tribe had over 4,500 machines.

These slot machine fees would bring the state additional income of between $150 million and $200 million per year. Some of the tribes stated they would move slowly while others said they would test the desire of slot players by adding a few hundred slots. One thing is clear, the Indian casinos will continue to grow in income as they become bigger and add machines.

Under new compact agreements the Indian casinos are obligated to follow local building codes and safety regulations. They must abide by the tough California environmental regulations which is also part of the new compacts. The most important element of the new compacts is they will provide money to the state that needs every penny it can get from all manner of sources that the state can now tap. The compacts also make clear some of the ambiguous parts of the previous compact that was signed in 1999. This clarification will help both parties stay away from having misunderstandings. Now it will be interesting to see how the federal lawsuit is settled and will the other casinos come to terms with the state.

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