Gaming Wars May Bring Slots to L.A.

Inglewood would become a gambling mecca, with so many slot machines it would rival the largest casinos on the Las Vegas Strip, under an initiative intended for the November ballot.

Hustler magazine owner Larry Flynt could install 1,000 slot machines at his card room in Gardena. Los Angeles and Orange counties combined would have roughly 20,000 slot machines, catapulting the two-county region into the ranks of the nation’s biggest gambling centers.

Over the weekend, companies that own card rooms and racetracks began deploying paid petition circulators to gather the 600,000 valid signatures of registered voters that are needed to put the initiative on the ballot.

For those commercial gambling interests, the measure is virtually a no-lose proposition. It would allow them to have 30,000 slot machines -- ending Indian tribes’ monopoly on the devices in California -- unless tribes agree to conditions that Indians say violate their sovereignty.

Most notably, tribes with gambling operations would have to pay 25% of their casino profits to the state. They would also be expected to comply with several laws from which they are now exempt. And every tribe with gambling operations would have to agree to all of the initiative’s terms; one holdout would break the monopoly for all.

The measure’s stated aim is to help solve California’s fiscal problems by extracting concessions from the tribes. But given the tribes’ aversion to its provisions, racetracks and card rooms almost certainly would get slot machines if voters approve the measure and courts uphold it.

“It is basically saying to the Indians, ‘Pay your fair share, or else. Or else you’ll lose your monopoly,’ ” said former California Atty. Gen. John Van de Kamp, who represents thoroughbred owners, who are among the initiative’s backers.

California tribes -- the only group currently allowed to operate slots in the state -- are preparing for an all-out war against the proposal.

“It needs to be killed,” said Mark Macarro, chairman of the Pechanga Band of Luiseno Indians. “It is deceptive.”

One tribe has taken steps to offer a counter-initiative for November that could increase tribes’ payments to the state somewhat but also would preserve their monopoly and give them the right to unlimited expansion.

And a citizen activist who has been a critic of unfettered expansion has filed a third measure that would limit the growth of gambling and force tribes to pay more to the state.

Tribes are talking about spending as much as $100 million to kill the racetrack and card room proposition. They are the biggest spenders in California politics, having dropped $140 million on initiatives and legislative and statewide campaigns since 1998. So far, tribes have chipped in $4.7 million to fight the initiative. Tracks and card rooms have anted up $1.17 million.

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‘It Is All About Money’

The stakes are high. Each slot machine can generate $300 a day -- more than $100,000 a year. Tribes have 60,000 machines in 54 casinos statewide. Card rooms and racetracks, their businesses hurting from the competition, want voters’ approval to divide 30,000 slot machines.

“There are billions of dollars at stake here,” said Jim Knox, director of California Common Cause, which has tracked the tens of millions spent by the gambling industry on state campaigns in recent years. “It is all about money.”

Part constitutional amendment and part statute, the 17-page proposed initiative would require tribes to renegotiate the deal they struck with former Gov. Gray Davis to retain their monopoly. Approved by voters in 2000, the Davis compact mandates that tribes pay about $130 million a year to aid cities and counties where casinos are located, and to help tribes that have small casinos or no gambling operations.

Gov. Arnold Schwarzenegger, seeking to close a multibillion-dollar budget gap, has entered into negotiations with tribes. He has called on them to pay as much as 25% of their winnings to the state, starting with $500 million in the fiscal year that begins July 1.

The initiative, titled the Gaming Revenue Act of 2004, seems simple enough. The preamble suggests that the measure is a remedy for California’s “unprecedented budget deficit of billions of dollars that particularly threatens funding for education, police protection and fire safety.” It would provide government with more than $1 billion a year.

But it would do much more. Tribes, which jealously guard their status as sovereign entities, would be expected to agree to a dozen specific requirements.

They would be expected to comply with some state laws that currently do not apply to tribes. For example, one provision would waive their immunity to lawsuits in state courts for actions stemming from incidents at their casinos.

They would have to attempt to comply with the California Environmental Quality Act when building or expanding casinos. And they would be required to reach agreements with cities and counties affected by their casinos to ease the effects of those operations.

There also are provisions requiring that tribes comply with state campaign finance disclosure laws, and pay for audits of their casino profits, which would be open to public inspection. Tribes currently do not publicly disclose their take from gambling, though outside experts peg the total figure at $4 billion to $6 billion annually. And while tribes generally disclose their campaign spending, many include disclaimers with their filings, saying they are submitting the statements as a courtesy.

The initiative states that “no tribe ... is required” to agree to the specific terms. But each tribe with an existing compact would have to agree to the terms within 90 days after the election results are final. And the federal government would have to approve the deal. Otherwise, tribes would lose their monopoly on slot machines.

If the U.S. Department of Interior rejected the compact, the card rooms and tracks would receive the 30,000 slot machines. And they would get slots if a court struck down any of the requirements.

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Legal Questions

“Voters are left with the impression that there is a choice. But there is no choice here,” said Philip R. Recht, whose firm, Mayer, Brown, Rowe & Maw, represents a coalition of tribes opposing the initiative. Tribes’ attorneys are contemplating a suit to kill the initiative before it gets to the ballot. They say that the proposal violates the state constitutional requirement that initiatives encompass only a single subject and that it conflicts with federal law governing tribal sovereignty.

“What’s clear immediately to me is that, the way it is drafted, it would violate federal law in a host of ways,” said attorney Frank Lawrence, representing the San Manuel Band of Mission Indians, owners of a casino outside San Bernardino. Calling the proposal a sham, Lawrence said its backers “know it violates federal law.”

Professor Nelson Rose of Whittier Law School, retained by the card rooms and racetracks, dismissed many of the tribes’ arguments.

“I understand the emotional appeal of the word sovereignty,” Rose said, contending that the measure wouldn’t infringe on the tribes’ rights unless they chose to open a casino or renegotiate their compact. “Tribes don’t have more sovereignty than the state. Tribes have casinos because the people of California amended the Constitution to permit it. The people should have the right to amend the Constitution again.”

Attorney Barry Fadem, who wrote the initiative, anticipates all manner of lawsuits from the tribes. “We’re prepared,” he said.

“It is voluntary on the part of the tribes,” Fadem said, referring to the deal offered in the initiative. “If tribes don’t want to voluntarily agree with any of the terms, they still have a 20-year compact with the state.”

But tribes would no longer be the only gambling interests to have slot machines -- the most profitable game in any casino.

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Taxing Gaming Revenue

Under the measure, card rooms and racetracks would pay local governments 33% of their slot machine gambling revenue if they received slots; that could be as much as $1 billion annually. The money would go to a variety of programs, with 30% for local police, fire safety and education of abused and neglected children. Tribes with no casinos would receive $1.2 million a year each. Programs to help gambling addicts would receive $3 million a year.

In Los Angeles County, cities with large card rooms would become home to gambling palaces. In Gardena, for example, Flynt’s Hustler card room would receive at least 1,000 slot machines, as would another card room, the Normandie Casino.

Flynt said in an interview that he had been involved in the initiative’s planning from the beginning and intended to spend $1.5 million to help ensure its passage. Altogether, backers could spend $30 million.

“Are we gambling? Sure,” Flynt said. “We are gambling that Indians would not be willing to step up to the plate.”

Inglewood also would become a gambling center. Under the initiative, its Hollywood Park racetrack would get 3,000 slot machines, and the Hollywood Park card club could get 1,700 slot machines. Tracks and card rooms could amass additional slots by buying the rights to the devices from other operators. Between the racetrack and the card room, Hollywood Park could get as many as 5,700 slots.

At that level, Hollywood Park would have more slots than any single casino in Nevada. Inglewood, in exchange, would receive 2% of the take. If the slots netted $300 a day, the city would be entitled to $12.5 million annually, plus money for police and fire services. Altogether, Los Angeles County would have close to 20,000 slot machines -- more than all but a handful of states. If the machines generated an average of $300 a day, the county would receive $22 million a year.

But the initiative caps the amounts that card rooms and tracks would pay. The initiative grants them a tax break that would exempt them from having to pay future hikes in state or local taxes.

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(BEGIN TEXT OF INFOBOX)

Expanded gambling

Card rooms and racetracks would get 30,000 slot machines under a potential ballot initiative that would expand Nevada-style gambling beyond Indian casinos. Proponents of the initiative said this is how the slots would be allocated:

*--* Number of Los Angeles County slot machines Commerce Casino, Commerce 1,700 Bicycle Club Casino, Bell Gardens 1,700 Hollywood Park Casino Inglewood 1,700 Hawaiian Gardens Casino, Hawaiian Gardens 1,700 Crystal Park Casino, Compton 1,000 Normandie Casino, Gardena 1,000 Hustler Casino, Gardena 1,000 Hollywood Park racetrack, Inglewood 3,000 Santa Anita racetrack, Arcadia 3,000 Orange County Los Alamitos racetrack, Los Alamitos 3,000 San Diego County Oceans Eleven Casino, Oceanside 800 San Francisco Bay Area California Grand Casino, Pacheco (Contra Costa County) 800 Golden Gate Fields racetrack, Albany (Alameda County) 3,000 Bay Meadows racetrack, San Mateo (San Mateo County) 3,000 Artichoke Joe’s Casino, San Bruno (San Mateo County) 800 Lucky Chances Casino, Colma (San Mateo County) 800 Allocated to smaller card room operators who could lease them to the above facilities: 2,000

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