Weighing Casino Cash vs. Problems

California lawmakers gave their blessing last week to a handful of new Indian gambling pacts that would give the state an infusion of cash -- $1 billion now, then up to 15% annually of the tribes’ slot-machine take.

On the other side of the country, disgruntled residents of southeastern Connecticut, home to the world’s biggest casino, offered words of caution: Tribal gambling money comes at a price.

Foxwoods casino, looming 19 stories above the New England foliage, pays the state of Connecticut a quarter of its annual revenue from 6,400 slot machines. Last year, Foxwoods and Connecticut’s other sprawling Indian gambling palace, the nearby Mohegan Sun casino, together put nearly $400 million into the state pocketbook.

Yet to local officials like Nicholas Mullane, longtime leader of the nearby town of North Stonington, not nearly enough of that money flows back to the bucolic communities pummeled by casino traffic, crime and other problems.

“It’s like plunking Dodger Stadium in a small town, and 24/7 people are going to the ballgame,” he lamented. “We’re overrun.”

All over the nation, state governments are grappling with how best to offset the effects of the more than 350 tribal casinos that have sprouted since the federal government authorized states and tribes to negotiate gambling deals 16 years ago. Today, according to the National Indian Gaming Assn., tribal gambling is a $16-billion-a-year industry.

Federal law prohibits states from taxing tribes. And before they can hit the Native Americans up for some of their casino riches, states must offer something in exchange -- usually the exclusive rights to gambling for at least a portion of the state.

Just a third of the 22 states that have allowed Vegas-style slot machines on Indian land have won significant revenue-sharing agreements with tribes. And in some places, such as Connecticut, residents of areas affected by the presence of a big casino on their doorstep have been left irate.

Tribes with casinos are increasingly under the gun to share their wealth, mostly as a sizable percentage of profits from slot machines, the gambling world’s cash cow. The push is not just from communities surrounding the casinos but from cash-strapped states -- like California -- eager to balance their budgets with the help of tribal gambling money.

“When a few states started pushing the envelope, others said they needed to tap that revenue source too,” said Wayne Smith, former deputy assistant secretary of the Interior for Indian affairs under President Bush. “It’s a new era of compacts, with states wanting higher revenue-sharing from the tribes.”

In New York, the Seneca Indian Nation opened a Niagara Falls casino on New Year’s Eve 2003 that will let the state reap up to 25% of the slot revenue. Michigan, New Mexico and Arizona each get 8% under deals they’ve crafted. In Wisconsin, where the state take is a little more than 7%, Republican lawmakers have pressured Democrat Gov. Jim Doyle to get more from the state’s 11 tribes.

But most states with tribal casinos get far less. A study slated for release today by Analysis Group, a Los Angeles economic consulting firm, found that tribal casinos provided $759 million in assistance to state and local governments in 2003. Those contributions, which amount to about 4.5% of Indian casino revenue in the U.S., were made in a little more than half the 30 states with some form of Indian gambling, according to the report.

In California, Gov. Arnold Schwarzenegger has been criticized for failing to deliver on a vow to get 25% from the tribes. And he was able to coax only five of the state’s 64 tribes with gambling rights into signing the deals, which impose no limit on the number of slot machines that signatories can have.

Schwarzenegger’s chief negotiator, former state appellate court Justice Daniel Kolkey, argued that a Connecticut-style deal was not realistic in California. Connecticut, he noted, has only two tribal casinos, both in the heavily populated New York-Boston corridor and facing little competition. California has 54 tribal casinos spread across the state, with several more planned.

“California has a much more competitive climate, which would make it very difficult for tribes to pay 25%,” Kolkey said. Smith, the former federal Indian affairs official, said drawing parallels between states was “like comparing apples to rutabagas.”

Alan Meister, an economist at Analysis Group, said the compacts signed in Connecticut and New York were forged with tribes getting slot machines for the first time. Schwarzenegger was renegotiating existing deals, and thus had less leverage, Meister said.

When the Connecticut agreement was negotiated in the early 1990s, Foxwoods had table games but no slot machines. The state agreed to let the tribes have slots only if it received a big portion of the revenue.

Foxwoods, run by the Mashantucket Pequots, grew explosively. Aside from its huge array of slot machines and 350 table games, the resort has more than 1,400 hotel rooms, nearly two dozen restaurants and a golf and country club. It features such entertainers as Bill Cosby and the Dixie Chicks.

About a dozen miles away, the Mohegan Sun offers more than 6,000 slots in a sprawling casino complex. The money the two casinos put into state government will make up 4.7% of Connecticut’s $14.5-billion budget for 2005, according to the state’s Office of Fiscal Analysis.

Few of California’s casinos are likely to grow as large as Foxwoods or Mohegan Sun. But gambling in the state could expand astronomically, provided that tribes are willing to let Sacramento have a share and that enough of them sign up for Schwarzenegger’s no-limits deal.

The flip side of the benefits to state coffers, however, is a host of costly problems for neighboring residents, say leaders in some of the 20 towns ringing Connecticut’s two gambling sites.

Preston, a town of 5,000 near Foxwoods and not far from Mohegan Sun, saw traffic volume balloon to four times its previous level, said Robert Congdon, the town’s chief elected official and a member of the Connecticut legislature. Tour buses now pour through town. Yearly ambulance calls have jumped from 200 before the casinos opened to 1,000 today.

Congdon said the town had spent millions of dollars fighting the Mashantucket Pequots over their effort to buy land throughout the region. Though the acquisitions were touted as a good investment that would return tribal lands to their original inhabitants, town leaders in Preston considered them a threat to their tax base, their only real revenue source. Over in North Stonington, Mullane cites social ills aplenty, which he attributes to the two casinos.

“People gamble, they lose their money, they wipe out their savings, they max out their credit cards, wipe out their pension. Then if they can’t borrow from friends, they steal,” he said. “We’ve had embezzling from car dealerships, from some of the towns, even from Dunkin’ Donuts.”

Mullane’s town gets about $500,000 a year from what the casinos pay the state. But that doesn’t begin to cover North Stonington’s extra costs, he said.

Congdon said the city of Bridgeport, population 140,000, received a bigger cut than all 20 of the towns around the casinos combined. “The big cities had the political clout to put their hands in the cookie jar first,” he said.

Jackson King, general counsel for the Mashantucket Pequots, said the tribe had no voice in how the casino money was distributed.

“Selfishly speaking,” he said, “we’d get a lot less griping from our neighbors, most of whom are already quite well off financially, if more money went to them.”

King added that the flow of patrons to Foxwoods may have boosted traffic but said it also provided a huge number of jobs to the region and other pluses. Although the casino is not unionized, employees receive generous medical, dental and eye care coverage as well as no-cost pharmaceuticals, he said. The Pequots have endured grumbling from fellow tribes as well, King said, with many suggesting that the prosperous Connecticut bands set the revenue-sharing bar too high.

Congdon sees the same game board in a different light. States need to fight tribal gambling, he said, not link arms with it.

“The states are being shortsighted by going along with gaming as a means of balancing budgets,” he concluded. “The social costs aren’t worth the short-term gains. If it hasn’t already, I think California is about to learn that lesson.”

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Revenue sharing

Indian casino giving to state and local governments in 2003

*--* (in millions) Connecticut $396.4 California $131.6 Arizona $42.9 New York $39.0 New Mexico $36.9 Wisconsin $32.0 Michigan $31.5 Minnesota $16.1 Louisiana $10.2 Oregon $8.8 North Carolina $5.0 Idaho $4.8 Washington $2.9 South Carolina $1.0 Alaska $0.3 Maine $0.1 Total* $759.4

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*Data may not sum to total due to rounding.

Source: Analysis Group