Pact May Allow First Major Urban Casino

Gov. Arnold Schwarzenegger is preparing to sign new gambling agreements with several Indian tribes, including one that could spawn California’s first major urban casino -- something the governor has said he opposed.

The Bay Area facility, a short drive from Oakland and San Francisco, could be one of the world’s largest gambling halls, as large as five Costcos, with up to 5,000 slot machines, multiple sources said Monday.

The agreement would require that once the 259-member Lytton Band of Pomo Indians opened the facility, now the site of a card club called Casino San Pablo, it would pay up to 25% of its gambling profits to the state. That would be a far larger percentage than what five other tribes agreed to pay in pacts they signed with Schwarzenegger in June and would equal payments by tribes that operate the nation’s largest casino in Connecticut.

If the casino were to earn $500 million a year, the state could receive $125 million. The city of San Pablo, a hardscrabble town of 32,000 people that had a $2-million budget shortfall this year, and Contra Costa County would get additional millions.

Administration officials declined to comment on the agreement. But other sources said the governor was attempting to complete deals with Lytton and a handful of other tribes in time for lawmakers to approve them before the scheduled conclusion of the legislative session next week. Approval is expected.

“There will be a number announced later this week with significant revenue sharing,” a person involved in the negotiations said Monday.

An aide to Assembly Speaker Fabian Nunez said, “We expect something later in the week.”

Schwarzenegger campaigned last year against the influence that tribes exert in Sacramento. But facing multibillion-dollar budget gaps, he has struck alliances with some tribes in the hope of generating money to help state finances.

The Lytton deal is being put together as card clubs and horse racetracks are sponsoring Proposition 68, a November initiative that could end tribes’ monopoly on slot machines in California and allow them at the clubs and tracks. Opponents say Proposition 68 would lead to more Nevada-style gambling in urban areas. But the Lytton pact would authorize a major urban casino before the November vote even takes place.

San Pablo City Manager Brock Arner said a Lytton casino would bring with it as many as 2,100 jobs and give the city, which has a $12.5-million budget, up to $4.8 million annually.

Like the five tribes that struck deals with Schwarzenegger, tribes entering the new pacts could have as many slot machines as their markets would allow, as long as they pay the state.

Unlike the previous Schwarzenegger deals, Indians entering into the new accords have no gambling or relatively small casinos and would not be expected to make one-time payments of $1 billion to the state. But Lytton’s payments to the state would be greater than the roughly 15% that the five tribes earlier agreed to pay.

Although the governor has said he opposes urban gambling, Schwarzenegger’s aides have said that under federal law, the governor has little choice but to negotiate with recognized tribes, including the Lytton band. The man Schwarzenegger ousted in last year’s recall, Gov. Gray Davis, sought to block the casino, arguing that voters did not authorize urban casinos when they approved Proposition 1-A in 2000, which legalized Indian casinos.

In exchange for agreeing to pay up to 25% of its earnings, Lytton would be guaranteed exclusive rights to operate slot machines within a 35-mile radius. The previous Schwarzenegger deals also granted tribes exclusivity over slot machines in their areas.

Under Proposition 68, tribes with casinos would be required to pay a fourth of their profits to local government programs and meet an array of other requirements. If they balked, 11 existing card rooms and five racetracks would divide 30,000 slot machines and pay a third of their profits to the local programs, or more than $1 billion annually.

Foes of the measure say the deal with Lytton could undercut the card room-racetrack arguments that all tribes with casinos should pay a fourth of their profits to the state or local governments. But backers of the initiative appeared unfazed Monday.

“We believe 25% is the fair share that Californians want,” said Greg Larsen, spokesman for the Yes-on-68 campaign. “But this is only one of more than 50 gaming tribes in California.”

Larsen said a close review of the language in the new compacts may show that the tribe would be paying less than 25%.

Dan Schnur, one of the strategists for tribes opposing Proposition 68, contended that the new compacts could be a “death blow” to the initiative.

“These compacts provide money to help deal with the state’s transportation crisis,” Schnur said, adding that Proposition 68 would provide no money for road and transit projects.

Lytton’s original home was in what is now the vineyards of Sonoma County. But U.S. Rep. George Miller (D-Martinez), whose district includes San Pablo, inserted language into legislation in 2000 creating a new reservation at the 9.5-acre site of the Casino San Pablo card room.

In a recent filing in connection with a federal environmental impact statement, Lytton described the project by saying it would be 500,000 to 600,000 square feet and include multiple stories. Big-box stores commonly are 100,000 square feet.

In addition to nearing a deal with the Lytton band, the Republican governor’s negotiators are engaged in talks with the Fort Mojave tribe in far eastern San Bernardino County, the Coyote Valley Band of Pomo Indians near Ukiah, the Buena Vista Band Rancheria and the Ewiiaapaayp band of Indians in eastern San Diego County.

Details of those deals could not be obtained Monday.

The Coyote Valley Band of Pomo Indians already owns a casino near Ukiah north of San Francisco, which has been operating without a state compact authorizing it.

Fort Mojave, located outside Needles, has land in Nevada, Arizona and California. With the deal, it would be entitled to casinos in each of those states.