Tribe’s Measure Offers Tax Deal

Opening a new front in a coming battle over gambling, a wealthy California Indian tribe has proposed an initiative that would expand tribes’ casino operations and protect their monopoly while requiring them to pay the equivalent of a corporate profits tax on their earnings.

The proposition, a state constitutional amendment, would permit tribes to offer all casino games, including craps and roulette, something they cannot do under current state law. And it would allow them to operate as many casinos on their reservations as they chose, with as many slot machines as the market would bear.

In exchange, tribes would pay 8.84% of their gambling profits to the state -- the rate that California corporations are taxed on their profits. Tribes would make such payments as long as they retained their state monopoly on Nevada-style gambling.

The proposal by the Agua Caliente Band of Cahuilla Indians comes as five California horse-racing tracks and 11 card rooms push an initiative that would let them operate 30,000 slot machines and pay $1 billion a year, or 30% of their net earnings, to a variety of local programs. The money would be earmarked for law enforcement, firefighting and education for disadvantaged children.

Both of the measures are intended for the November ballot.

The Agua Caliente Band’s move also coincides with Gov. Arnold Schwarzenegger’s effort to extract more money from the 53 tribes that have gambling operations in the state. The Republican governor has called on tribes to pay as much as 25% of their net earnings to the state -- starting with $500 million in the coming fiscal year.

In a telephone interview, tribal Chairman Richard Milanovich said the measure was aimed at countering comments by Schwarzenegger during and since the recall campaign that tribes should pay their “fair share” to the state.

“The initiative is intended to mitigate the idea that we don’t pay our fair share,” Milanovich said. “The idea of us paying our fair share resonates with the people of California.”

The Agua Caliente Band, which owns a casino in downtown Palm Springs and another off Interstate 10, is prepared to wage the initiative fight on its own, although it is seeking help from other tribes, Milanovich said. He estimated that promoting the initiative could cost $50 million.

While not commenting on the proposal, Schwarzenegger spokesman Vince Sollitto said, “The governor prefers and intends to negotiate with the tribes on his terms and timetable.”

He said “preliminary discussions, including face-to-face meetings, have already begun and are continuing” between Schwarzenegger’s negotiators and some tribal representatives.

Currently, the Agua Caliente Band and most other tribes that own casinos pay about $130 million into state funds that aid tribes with little or no gambling income, and help local governments defray costs associated with casinos. Milanovich estimated that, if voters approve the measure, the Agua Caliente would pay roughly double the $9.4 million it paid into the funds last year.

Tribes satisfied with their current compacts would not have to agree to the terms of the initiative. If they agreed to the provisions of the Agua Caliente Band’s initiative, the governor would have no ability to alter those terms. They would remain in place for 99 years.

The two casinos operated by the 412-member Agua Caliente Band have a combined 2,000 slot machines, the maximum allowed for a single tribe under the compact negotiated by former Gov. Gray Davis in 1999.

The band’s reservation encompasses more than 23,000 acres in the Palm Springs area, including a square-mile parcel in downtown Palm Springs. Given its prime location in the desert resort town, with its plentiful customers, the tribe could expand its gambling operations significantly under the initiative. But Milanovich said there would be limits.

“We don’t want to be Las Vegas. We don’t want the garishness,” he said.

The Agua Caliente have had disputes with city officials over fees the band should pay to cover city services. Some residents have organized to oppose a redevelopment plan that would benefit the tribe. And the band has been enmeshed in a battle with the Hotel Employees and Restaurant Employees over the union’s effort to organize workers at its casino and hotel.

“The Agua Caliente tribe is the poster child for what can go wrong for Indian casinos,” said Jack Gribbon, political director for the union in California. “I’m excited about the fight. Why should they get a 99-year compact?”

Greg Larsen, spokesman for the initiative by card rooms and racetracks, criticized the tribal initiative as offering unlimited expansion of Indian gambling.

“We’re pleased to see a gaming tribe recognizes its responsibility to contribute its fair share to California,” Larsen said. “However, we believe the unlimited expansion of Indian gaming, with any games in any quantity in a 99-year monopoly that their initiative calls for, is not what Californians want.”

The initiative by the card rooms and tracks would grant them slot machines if tribes failed to make a series of concessions, including agreeing to pay the state 25% of their annual earnings, estimated at $4 billion to $6 billion a year.

Dan Schnur, consultant to tribes attempting a coordinated campaign against that measure, suggested the Agua Caliente Band’s initiative is not part of the overall campaign. That effort will be aimed at making “sure voters understand that card clubs and tracks are looking to enrich themselves at the expense of the people of California.”

“We all agree that the most important objective is to defeat the gambling expansion initiative being proposed by the card clubs and the racetracks,” Schnur said. “Different people have different ideas about how best to accomplish that objective.”

The Agua Caliente Band submitted its proposed ballot measure to the state attorney general’s office, which must review it and forward it to the secretary of state before the tribe can begin collecting qualifying signatures.

Backers of many measures for November are already gathering signatures, or soon will be. The Agua Caliente probably would pay a premium -- perhaps $2 million or more -- to gather the 600,000 signatures of registered voters needed to put the measure to a statewide vote.