Tribal pacts no quick fix
A barrage of television ads says that the gambling expansion compacts on Tuesday’s ballot would pump $9 billion into the state’s empty coffers and help avert a tax increase.
But it would take decades for the state to get that kind of money from the agreements reached with four Southern California Indian tribes -- and there’s no guarantee it would ever happen.
The compacts dictate that the state get at least $3 billion from the four tribes’ casino business over the next 22 years. Whether it gets more depends on how much, and how quickly, the tribes expand their casinos and whether their customers keep new slot machines busy.
It is unlikely they will expand quickly enough to help fix a projected $14.5-billion budget gap. Gov. Arnold Schwarzenegger’s financial experts assume new slot machines would not be installed until September at the earliest if voters approve Propositions 94, 95, 96 and 97, which would uphold the deals the governor struck with tribes and lawmakers approved.
Tribal leaders said in recent interviews with The Times and in testimony before the Legislature last year that they hesitate to rush into large-scale expansion.
“We have to go with the market,” said Daniel J. Tucker, chairman of the Sycuan Band of the Kumeyaay Nation. “We’re not going to go and just put in 3,000 machines and think it’s going to work.”
Opponents bristle at the ads, paid for by the San Diego and Riverside county tribes that made the deals with the state. One says that the compacts “will provide over $9 billion to fund essential state services without raising taxes or putting us further in debt.”
“They slapped a big number on the screen and in smaller print, or not at all, mention that that is over a period of two decades,” said Scott Macdonald, spokesman for the “No on Propositions 94, 95, 96 and 97" campaign.
Some of the ads say $9 billion is a two-decade total. And the four tribes say that they will be required to pay the state a combined minimum of $123 million a year -- even without adding a single slot machine -- if voters uphold the four compacts by approving the propositions. If the tribes add more machines, they pay more.
It’s not clear that all $123 million would land in the state treasury. Schwarzenegger has already proposed shifting $40 million in tribal revenue to ensure that 71 tribes with few or no slot machines get payments the state promised when it first struck gambling deals with Indians in 1999.
“Whether it’s $100 million or $500 million,” said Roger Salazar, spokesman for the tribes’ campaign, “it’s all money that can help stave off at least a few of the potential [state budget] cuts that are being considered.”
This much is undisputed: The battle over these gambling measures may become the most expensive initiative fight in California history. The huge sums of money spent to influence voters reflect the profitability of the tribal casino industry, estimated by experts at about $7 billion a year (as sovereign entities, the tribes are not required to publicly disclose their earnings).
So far, the tribes whose accords are at issue have sunk $104 million into the campaign. The opponents, bankrolled primarily by two other tribes that own casinos and a company that owns horse racetracks and a stake in a Las Vegas casino, have invested $34.5 million.
The contest is approaching the $152 million spent in 2006 over an oil-tax initiative. It’s enough to reach millions of Californians repeatedly with a slew of television ads.
The opposition ads call the gambling compacts “sweetheart deals” and say that the four tribes have donated millions of dollars in recent years to Sacramento politicians. They say the agreements will further enrich four tribes without increasing benefits to other California tribes, and they urge voters to “send these deals back” to be re-negotiated by Schwarzenegger.
Normally, tribal gambling pacts do not require voter approval. The casino deals were to have taken effect this month but were blocked by the referendums orchestrated by Bay Meadows and Hollywood Park racetrack owner Terrence Fancher, the United Auburn Indian Community, the Pala Band of Mission Indians and the hotel workers’ union Unite-HERE.
The four tribes seeking to expand have a combined membership of about 2,700. They are the Pechanga Band of Luiseno Indians, the Sycuan Band of the Kumeyaay Nation, the Morongo Band of Mission Indians and the Agua Caliente Band of Cahuilla Indians. Each now runs 2,000 slot machines in one or two casinos. Their new compacts update existing deals with the state, which will continue in force if voters say “no” Tuesday.
An economist hired by the four tribes calculated that in 2006 each of their slot machines generated, on average, $489 per day after paying prizes. That’s an average of nearly $4 million a day lost by gamblers at the tribes’ slot machines in Rancho Mirage, Palm Springs, Cabazon, El Cajon and Temecula.
The new agreements allow Agua Caliente and Sycuan to expand from 2,000 to 5,000 slots, while Morongo and Pechanga could each go from 2,000 to 7,500.
The largest tribal casino complex in the United States, Foxwoods Resort Casino in Connecticut, has 7,000 slot machines.
Under their existing compacts, the four tribes do not contribute to California’s overall budget. But in addition to the guaranteed $123 million a year the tribes would pay, the new deals give the state 15% of the revenue from as many as 3,000 new slot machines per tribe, and 25% of the revenue from additional machines above that number through 7,500.
In testimony to the Legislature and in interviews with The Times, the four tribal chairmen have said they could not install more than 1,500 additional slot machines without expanding their casinos or building new ones.
“We can accommodate, I believe it’s an immediate 1,500 devices on our floor currently without expanding at all, which we would believe would help us meet current market conditions,” Pechanga Chairman Mark A. Macarro told a Senate committee in April.
“The ability to go beyond that, which could require more floor space and more physical plant space, is something that we’re leaving to future tribal leaders of Pechanga,” Macarro said.
Morongo spokesman Patrick Dorinson said that tribe could fit 1,000 more slot machines in its towering casino and hotel along Interstate 10 and an additional 500 in the tribe’s old bingo hall.
Agua Caliente Chairman Richard Milanovich said recently that his tribe could put 1,000 new slot machines in its Rancho Mirage casino and 200 more in its Palm Springs casino.
And Tucker of the Sycuan Band told a Senate committee last year that probably 1,000 more slot machines would fit into its El Cajon casino, even though three times that many are allowed under its agreement.
In his testimony, Tucker said there may not be enough gamblers to keep all of the permitted slot machines in play in any case.
“We have to go with the market,” Tucker said. “There’s 10 casinos in San Diego County, so the competition is getting pretty fierce.”
Economist Alan Meister was hired by the four tribes to do an economic analysis of the compacts. He said he was given access to proprietary information about tribal revenues and business plans, and concluded that even with a gradual expansion, the deals could generate a total of $10.2 billion for the state by 2030.
“They have people standing in line to play,” Meister said. “That shows that for the supply, there’s excess demand.”
A new survey suggests most Californians have not visited an Indian casino. In a Times/CNN/Politico poll conducted by Opinion Research Corp. last week, only 35% of 2,212 adults said they or someone in their immediate family had been to a tribal casino.
California voters gave tribes a monopoly on Nevada-style gambling eight years ago, after proponents argued that such businesses could lift Native Americans out of poverty and provide jobs.
(BEGIN TEXT OF INFOBOX)
Here are some of the claims that the campaigns on both sides of Propositions 94, 95, 96 and 97 make in their television ads:
Claim: The compacts triple the money four tribes pay to the state.
Fact: The four tribes pay nothing to the state’s overall budget now. Together, they pay at least $123 million a year under the new pacts.
Claim: Gambling revenues will be shared with non-gambling tribes.
Fact: Tribes with smaller casinos, or none, already get $1.1 million a year from richer gambling tribes. The new deals do not guarantee more.
Claim: Not one penny is guaranteed for schools.
Fact: Money from the tribes would not count toward guaranteed school funding. It would go to the general fund, spent at the discretion of the governor and Legislature.
Claim: Tribes themselves calculate what they’ll pay the state.
Fact: Tribal financial officers calculate payments, but state regulators have authority to audit the tribes’ financial records and equipment.
Claim: A Vegas casino owner and two racetracks are paying for the campaign against the compacts.
Fact: A key donor to the opposition campaign is Terrence Fancher, whose companies own Hollywood Park and Bay Meadows horse tracks and a stake in a Las Vegas casino. More than half the “no” side’s money is from United Auburn Indian Community and the Pala Band of Mission Indians -- both allowed unlimited slot machines under their own compacts.
Sources: No on the Unfair Gambling Deals, Coalition to Protect California’s Budget & Economy, Times research