Tribe to Give State a Slice of Slot Profit

After months of negotiations with dozens of Indian tribes, Gov. Gray Davis on Wednesday announced the first new gambling agreement with a California tribe that will funnel money directly into the state general fund.

The agreement with the Torres-Martinez Desert Cahuilla Indians of Southern California marks a breakthrough in the administration’s efforts to increase the state’s share of Indian casino revenue and ease the environmental impact of casinos on local communities.

Coming less than eight weeks before Davis faces a recall election, the agreement is a first step toward addressing what many critics say was the administration’s failure to drive a harder bargain with Indian tribes in 1999. But it also opens Davis to accusations that he is expanding gambling or trying to win favor with tribes, which have been generous campaign contributors.

The Torres-Martinez tribe has federal approval to put slot machines in an Imperial County truck stop along Highway 86 and is seeking land for a casino along Interstate 10 in Riverside County.

It agreed to initially pay the state 3% of the revenue from its first 350 slot machines. The state’s cut will increase to 4% of revenue in the second year of operation and 5% thereafter.

If Torres-Martinez generates typical revenue of about $100,000 a year from each of those 350 machines, the state’s portion would reach $1.75 million by the third year.

“I believe this compact serves the interests of the people of California,” Davis said in a conference call announcing the agreement. “At the same time it allows the Torres-Martinez tribe to engage in economic development ... for the aspiration of its members.”

Davis said his “highest priority” was to protect local communities affected by Indian casinos -- something he said the agreement accomplished.

Some analysts immediately questioned the timing of the announcement, which comes as Davis fights to save his job in the Oct. 7 recall election.

“I think it’s awful that he’s doing this in this period of time,” given the influential role Indian tribes have played in recent political campaigns in California, said Bill Thompson, a professor of public policy at the University of Nevada at Las Vegas and author of “Gambling in America: An Encyclopedia.” “Is this his way of putting his hand out to Indian tribes now?”

The tribe and the state couldn’t agree on a tax rate for an additional 1,650 machines that Torres-Martinez will be allowed to operate. Those machines will be the subject of future negotiations, administration and tribal officials said.

“We couldn’t be happier,” said Torres-Martinez Chairman Raymond Torres. “We weren’t forced [to share revenue with the state]. We could have walked away from that table anytime we wanted to. Our choice was to help the state of California.”

Torres said his tribe hasn’t taken a position on the recall.

Although administration officials and tribal leaders cast the revenue-sharing agreement as tailor-made for Torres-Martinez, its provisions will become the yardstick for Davis’ ongoing negotiations with other tribes, said tribal representatives and other experts.

California tribes don’t pay state or federal taxes on their casino revenue, estimated by many experts to be $5 billion a year. Some states require tribes to pay a portion of their revenue to the state treasury. Connecticut collects 25% from its two tribes, for example.

Many affluent tribes in California, though, are opposed to the Davis administration’s effort to increase the state’s share of gambling revenue. They reacted quickly to the announcement by pointing to the comments of the administration and Torres-Martinez officials that the agreement wouldn’t be imposed on other tribes.

“Both parties have stated that this should not be viewed as a model for anyone else, and we take them at their word,” said Jacob Coin, executive director of the California Nations Indian Gaming Assn. (CNIGA), which represents the state’s most affluent casino tribes.

Critics of the agreement pointed to a federal law that expressly prohibits states from taxing Indian tribes. But faced with growing demands on resources and worsening budget difficulties in recent years, a number of states around the country have turned to Indian casinos as a potential source of revenue.

The states’ bargaining position is generally that it will allow an expansion of gambling in return for a portion of the tribes’ income.

Deron Marquez, chairman of the powerful San Manuel Band of Mission Indians, said the provisions requiring the Torres-Martinez tribe to share revenue from its first 350 machines and to make direct payments into the general fund were unacceptable. He also objected to the requirement that the tribe reach a written agreement with local communities to address the off-reservation impact of its casinos.

“It’s another step by the governor to undercut tribal status as a sovereign nation,” he said.

The Torres-Martinez compact comes after representatives of some tribes have complained that Davis’ preoccupation with the recall had slowed talks on new pacts or on the renegotiation of old ones to nearly a standstill.

Davis took the first step toward increasing the state’s share of tribal gambling revenue in January, when he released a general-fund budget that assumed $1.5 billion from Indian tribes. In his May revised budget, he reduced that amount to $680 million annually.

Under the 1999 gambling agreements, 28 tribes that operated casinos before that time make payments into a “special distribution fund” that is supposed to address the effects of Indian gambling. Forty-one tribes pay into another fund that distributes money to smaller tribes and those without casinos.

The Torres-Martinez announcement stunned some tribes that had been seeking agreements with the Davis administration.

Robert Rosette, a Sacramento attorney, said the 11 tribes he represents -- including three seeking their first compacts -- said the terms of the agreement seemed reasonable. He also expressed frustration that his clients hadn’t been able to reach an agreement with the state, despite the willingness of his tribes to find common ground.

“This is probably a good sign that the compact process is moving forward,” Rosette said. “I’m just really interested to see what we’re going to be told, or what’s going to happen next.”

On the other hand, negotiations with the administration aimed at changing the agreements held by eight tribes he represents have been reduced “to a very slow crawl, if not a halt,” because of the administration’s emphasis on negotiating with tribes seeking their first agreement.

Local governments want any new agreements to give them a greater role in the growth and regulation of casinos. But some tribes have resisted, saying their status as sovereign nations makes them exempt from state environmental laws and local ordinances.

The Torres-Martinez compact requires the tribe to reach written agreements with Imperial and Riverside counties that will address the off-reservation impact of its gambling facilities. But some critics of the current agreements said the new compact doesn’t go far enough.

“I was hoping for something so much stronger than this,” said Cheryl Schmit, co-director of Stand Up For California, which works with communities seeking to reduce the environmental impact of Indian casinos. But, “it’s a step in the right direction.”