California and the West : Gambling Interests Raise Ante With Davis : Regulation: While the governor works to set growth guidelines for Indian casinos, similar concessions are sought by card clubs, racetracks and other gaming businesses.

Gov. Gray Davis met late last week in his office with California Indian leaders who were hoping to increase their stakes in tribal gambling casinos.

Later that same day, according to sources, he jetted to Palm Desert in Southern California for a political fund-raising dinner with prominent figures in the horse racing industry who are hoping to expand off-track betting.

Davis says he abhors gambling. Aides tell the story of Davis making one small legal bet years ago, losing his money and never returning to play again. Faced with Indian demands to broaden their gambling operations, Davis said recently he would permit only “modest” expansion.

But like most members of California’s political class, Davis is being courted by players from all sides of the table in the gambling industry. Huge sums are involved.

Davis received more than $750,000 in Indian contributions during the fall gubernatorial campaign. In June, the Gov. Gray Davis Committee received $75,000 from Hollywood Park racetrack. No accounts are available yet of how much money he received, if any, at the Palm Desert event.

If each of the gambling parties--Indians, card clubs, horse racing--gets a piece of what they want, Davis conceivably could preside over the biggest expansion of gambling in California history.

“It’s a classic gambling thing,” said one lobbyist representing groups opposed to increased state gambling. “Once the engine leaves, the train gets longer and longer. Typically, it crashes. But in this case you have a very powerful train pulling it: the Indians.”

Faced with the proliferation of gambling, Davis could be saved again by the courts. That was the case when Proposition 5, the voter-approved Indian casino gambling initiative, was struck down by the California Supreme Court last month.

Atty. Gen. Bill Lockyer told Indian leaders last week that a new gambling initiative petition being circulated by the Agua Caliente Indians in Palm Springs for the March ballot also has constitutional problems.

Davis’ own proposal, submitted to the Indians last week in an effort to avoid another costly initiative campaign, could more than double the number of slot machines operated by the Indian tribes, who in filings with the Legislature last year indicated that their casinos took in more than $1.5 billion.

Meanwhile, other gambling interests, appealing for fair play and equal treatment, want to enlarge their interests parallel to those of the Indians.

On Thursday, sources confirmed that Davis traveled to Palm Desert where he was a featured guest at a dinner hosted by prominent California racing figure R.D. Hubbard and attended by other racing industry leaders.

The governor’s office confirmed that Davis was in the Palm Desert area, but would not provide details about the meeting. Davis’ senior political advisor, Garry South, said only that most of the governor’s appearances are “scheduled months in advance” and that Davis’ anti-gambling stance is clear.

Hubbard, 63, is longtime chairman and CEO of Hollywood Park Inc., which sold the Hollywood Park racetrack to Kentucky’s Churchill Downs this spring. Hubbard still has extensive racing and casino holdings in California and other states, including Ruidoso Downs in New Mexico. He owns the Bighorn Golf Club in Palm Desert. In June, Hubbard’s company, Bighorn Properties Inc., contributed $9,000 to the Davis campaign.

Hubbard and other California racing figures want an expansion of off-track betting, which they say is necessary to save their sport.

On Friday, the day after the Palm Desert dinner, a last-minute amendment that would allow what the industry calls “account wagering” was added to a bill offered by Culver City Assemblyman Herb Wesson, a Democrat.

The bill, AB 1405, would essentially allow parimutuel betting from home. In an interview, Wesson said the bill had been in the works for several weeks. Wesson said he knew about the Palm Desert dinner but never spoke directly with Davis about the amendment, which will surface before the Legislature for consideration this week.

However, Hubbard, Wesson said, is a major industry supporter of the legislation.

Wesson said the main purpose of his bill is “to put bookies out of business.” But Wesson said it also is California’s chance to capture some of the revenue now taken by other states where the “account-wagering” or “home-betting” scheme is legal.

The bill would permit gamblers to obtain PIN numbers that they could use to make bets at racetracks all over the country using their home telephone or Internet connection.

The high court’s rejection of Proposition 5 once again will make gambling a dominant issue in state politics, especially during the final week of the legislative session. And the fight probably will spill into the election next March.

California Indian tribes that operate casinos shattered all records for campaign spending on a state ballot measure last year, shelling out $63.2 million to win Proposition 5’s passage in November. Opponents led by even wealthier Nevada casino corporations spent $25.4 million opposing the measure.

Voters approved the initiative 62% to 38%. But the state Supreme Court struck it down in August, concluding that Proposition 5 violated a state constitutional provision that prohibits Nevada-style gambling.

So the Indians and their army of lobbyists, lawyers and consultants, are back in the Capitol--as are lobbyists for Nevada casino corporations, and California-based card clubs and racetracks, which see Indian casinos as competitors that drain away customers.

On the side, California operators, through a series of bills like Wesson’s measure, will be pushing legislation to expand their operations.

More than 300 Indians from 67 tribes, plus consultants, lawyers and lobbyists, converged on Sacramento last week in what they called a “gathering of nations,” trying to reach agreement behind closed doors with Davis’ negotiators.

Davis met twice with tribal members. At the second meeting last Thursday, Indian leaders and Davis’ aides emerged to say that they were close to a deal. One of the Indians even had given Davis an eagle feather.

It quickly became apparent that there was no deal.

“So far, we have not seen anything that is acceptable,” said Richard Milanovich, chairman of the Agua Caliente Indians in Palm Springs.

In part, the fight comes down to numbers of slot machines. The about 40 California tribes that now have casinos operate 15,000 machines. Davis’ proposal would double that number, and make them legal devices under state law.

Davis also proposes that the tribes pay a tax that could run $500 million a year or more, and share a significant part of their proceeds with tribes in remote locations that don’t have casinos.

The restrictions “threaten our livelihood,” Milanovich said.

One way or another, California voters almost certainly will be subjected to a multimillion-dollar campaign, much like the one that dominated the November election over the tribe-backed Proposition 5.

Milanovich’s tribe is sponsoring a new initiative. He believes it solves the problems cited by the court by simply making Proposition 5 part of the state Constitution.

He intends to start submitting signatures to county registrars of voters Tuesday. If there is no deal by Thursday, when lawmakers leave town for the year, Agua Caliente will submit its remaining signatures to get the measure on the ballot.

As if the feeling of deja vu weren’t strong enough, two powerful Democratic lawmakers--Senate President Pro Tem John Burton and Sen. Richard Polanco--who had competing measures last year on Indian gambling probably will square off again this week.

Burton, of San Francisco, has a measure that would ask voters to approve a constitutional amendment that would permit Indians to operate slot machines and card games.

Burton’s constitutional amendment also would require that the tribes sign compacts with Davis limiting their expansion--a step that Polanco says imposes restrictions that are too severe on the tribes.

Polanco of Los Angeles is closely allied with the tribes. He has competing legislation that would place a measure on the March ballot similar to the Agua Caliente proposal, but with provisions he believes would ensure it would withstand legal challenges. If he succeeds, the Agua Caliente initiative probably would be shelved.

Polanco calls his measure a “comprehensive solution.” It would make slot machines legal in California and give a relatively small number--100--to county fairs to help them generate revenues.

Organized labor, meanwhile, has a significant stake in whatever happens.

The Hotel Employee and Restaurant Employee International, which represents workers at Nevada casinos, opposes the Indians’ efforts, largely because the tribes insist that their sovereignty is threatened by union efforts and have blocked their organizing attempts.

Burton, a labor ally, has the power to block any deal and probably would do so if union representatives believe any deal fails to provide them with the legal footing necessary to mount organizing drives.

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Times staff writers Mark Gladstone in Sacramento and Tom Gorman in Riverside contributed to this story.