Tribes Confront Gov. on Casinos

In a direct challenge to Gov. Arnold Schwarzenegger, Indian tribes that own major casinos are embracing what could be a $50-million initiative war to gain casino expansion rights without his consent, tribal representatives said Friday.

The initiative, if passed, would unravel deals struck last month by Schwarzenegger and five other tribes authorizing them to expand their gambling operations in exchange for large payments to the state.

In a decision made public Friday, a trade group representing most gambling tribes is endorsing the November ballot measure. Proposition 70 was launched months ago by the Agua Caliente Band of Cahuilla Indians, owners of casinos in and near Palm Springs, who already have spent $6 million on it. The endorsement carries the promise that other big casino owners in Southern California will spend millions more trying to persuade voters to approve the measure.

Proposition 70 would allow tribes unlimited casinos and whatever games they wanted on their reservations. In exchange, they would pay the state 8.84% of their net revenue, the corporate tax rate in California.

“We have all the support we’re going to need to have this campaign go all the way,” said Agua Caliente consultant Gene Raper. What the tribes will spend has not been determined, but they “have made major financial commitments,” he said.

The tribes’ decision to run with Proposition 70 rather than sign on with Schwarzenegger is a rebuke to the governor, and comes as he has faltered in his struggle to forge a budget compromise with legislators.

As the budget languishes, Schwarzenegger is threatening to campaign against Democrats in November. He could find himself spread thin if he must simultaneously battle the wealthy tribes over Proposition 70.

Less than a month ago, Schwarzenegger staged an elaborate signing ceremony with leaders of the five tribes, calling the pacts a major victory. But “clearly, the vast majority of tribes are not tripping over themselves to join onto the [Schwarzenegger] compacts,” said Adam Day, director of public affairs for the Sycuan Band of Kumeyaay Indians, owners of a large casino in San Diego County.

Even if Proposition 70 fails, tribes can continue operating their existing casinos under compacts negotiated with Gov. Gray Davis in 1999 and approved by voters in 2000. That deal requires tribes to pay the state a relatively modest $130 million a year, most of which is earmarked for poorer tribes.

Susan Jensen, a spokeswoman for the California Indian Nations Gaming Assn., said the organization unanimously endorsed Proposition 70 on Thursday, and made an initial $20,000 donation to the campaign. She added that “many other tribes also expressed their individual support.”

“This is obviously good news for Agua Caliente, which had faced the possibility of financing this [initiative] by itself,” said Michael Lombardi, a tribal gambling consultant.

The overall cost of the coming initiative war could rival the nearly $100 million spent in 1998 when tribes battled Nevada gambling interests and won passage of Proposition 5 to legalize Indian casinos in California.

The state Supreme Court struck down that measure. Davis then negotiated deals authorizing tribes to operate up to 2,000 slot machines each and limiting each tribe to two casinos.

Schwarzenegger modified the Davis deal by granting five tribes the right to unlimited slot machines in exchange for a one-time $1-billion payment, followed by annual payments of as much as $150 million a year, depending on the number of slots they added. The deal will be invalid if Proposition 70 wins.

“We think Proposition 70 is poorly crafted and will most likely undo the compact deals that the governor has negotiated, and potentially cost California taxpayers billions of dollars,” said Marty Wilson, one of Schwarzenegger’s top campaign aides.

Many of the wealthy Southern California tribes, initially willing to negotiate with the governor, balked at provisions of the Schwarzenegger deal. One permits unions to organize casino workers and another gives local government more say over casino expansion plans. Proposition 70 does not contain such restrictions.

Raper said tribes embracing Proposition 70 believed they had exhausted their options.

“There is not one tribe in our coalition that wouldn’t have been happy to sit down with the governor, face to face, and come to an agreement,” Raper said. “Not only has he not sat down with them, he has refused to meet with them personally.”

The November ballot will contain a second gambling-related initiative, pushed by card clubs and horse-racing interests. That measure, Proposition 68, threatens to break tribes’ monopoly on Las Vegas-style gambling in California by allowing 11 existing card rooms and five racetracks to obtain 30,000 slot machines.

In exchange, tracks and card rooms would pay 33% of their slot machine profits -- upward of $1 billion -- to local police, fire and education-related programs. Casino-owning tribes are sure to spend heavily to defeat the measure; they already have amassed $7.5 million for that purpose.

Schwarzenegger has established a campaign committee to defeat Propositions 68 and 70. It is unclear what other interests might fund opposition to Proposition 70.

Tribes that aligned themselves with the governor by signing the compacts last month are neutral on Proposition 70, at least for now. They could benefit by gaining expansion without the Schwarzenegger deal’s $1-billion price tag.

Three tribes represented by Sacramento attorney Howard Dickstein, who took the lead in negotiating the deal with the Schwarzenegger administration, may reconsider their neutrality.