Posted on 06/26/2004 3:01:18 PM PDT by calcowgirl
SACRAMENTO -- No one knows how much money is plunked into slot machines and passed across blackjack tables each year at California's 54 Indian casinos, but events last week provided a breathtaking clue.
When representatives of five gaming tribes sat down with Gov. Arnold Schwarzenegger and signed new compacts that could usher in an era of unlimited gambling at Indian casinos, they promised to pay a combined $100 million a year to secure a bond that would pump $1 billion into the state this year.
How was that $100 million figure arrived at? It represents at least 10 percent of the tribes' net gambling revenues. Doing the math, that means just those five tribes collectively take in a minimum of $1 billion a year.
Included among the five tribes are four that operate some of the largest casinos in California, but there are at least that many others with casinos just as big or bigger, along with tribes with smaller operations.
Actual financial figures are kept private by tribal leaders, but the glimpse of gambling riches provided by the agreement suggests that California's Indian gaming industry is, as has been estimated, about a $5 billion-a-year enterprise.
One way or another, last week's announcement means that the state's gambling industry is destined to become bigger still, dwarfing the "modest growth" in gambling that former Gov. Gray Davis promised when he approved gaming compacts in late 1999, a deal that was overwhelming approved by voters a few months later with the passage of Proposition 1A.
Since that proposition took effect in May 2000, the number of slot machines at Indian casinos in California has ballooned from an estimated 19,000 to more than 53,000. It is certain to go up from there.
Before giving Schwarzenegger a gift of a handsome Indian blanket, the chairman of the Viejas Band of Kumeyaay Indians in San Diego County said the guarantee of exclusive rights to slot machines along with the payments of additional money will ensure healthy growth in Indian gaming in California.
'Much in common'
"Your government and mine have much in common," Anthony Pico told Schwarzenegger. "We share an investment in the economic progress of California."
How that growth takes place will be decided in November. Three options are now in play:
The general fund payments would be in the form of a per-machine annual fee on all new slot machines in excess of the current 2,000 limit.
In addition, tribes would agree to resolve development conflicts with local governments through binding arbitration, a provision that would give cities and counties leverage to negotiate for money to offset the added public services that casino development requires.
The revenue-sharing formula, which could work out to about 15 percent, falls well short of the 25 percent figure Schwarzenegger cited in his campaign, but his chief negotiator said last week that it quickly became apparent that the 25 percent goal was too ambitious.
Initiatives could alter it all
The compacts will take effect, however, only if two gambling-related initiatives on the November ballot are defeated. A statewide Field Poll taken late last month showed majority support for each initiative.
"We will protect this partnership by working to defeat the gaming initiatives on the November ballot," Schwarze-negger pledged. That promise is underscored by the formation of a special campaign committee that is gearing up to raise money and join the political battle.
The tracks and card clubs would pay 33 percent of their slot machine revenues in taxes, or about $1 billion a year that would go into a special fund to support law enforcement, firefighting and programs that support abused children.
With financial support from the likely beneficiaries, backers have raised more than $5.5 million. The largest contributors are Magna Entertainment, owner of Santa Anita and Golden Gate race tracks, $760,000; Pinnacle Entertainment of Las Vegas, operator of two Los Angeles-area card clubs, $750,000; Los Alamitos Race Course, $530,000; the Commerce Club and Bicycle casinos, $471,000 each; and Churchill Downs, owner of Hollywood Park racetrack, $453,000.
The opposition is funded mainly by the same tribes that signed the compact with Schwarzenegger last week: the United Auburn Indian Community, the Rumsey Band of Wintun Indians and the Viejas tribe have contributed $1.5 million each to defeat the initiative.
Schwarzenegger's new tribal partners will not join in the battle against the Agua Caliente initiative that, if passed, would give them a better deal than the one with the governor.
The Agua Caliente -- the only tribe in the state that operates two casinos -- has contributed $5 million to the initiative campaign. A spokesman said last week that the tribe is committed to pursuing the initiative, but the administration is expected to step up its efforts to get the Palm Springs tribe and others with major casinos to sign compacts similar to the ones completed last week.
"I have expressed a willingness to work creatively with other tribes," said Daniel Kolkey, chief negotiator for Schwarzenegger.
The biggest obstacle appears to be not the amount of money the state would receive from the compacts but the conditions that allow for binding arbitration of funding disputes with local governments and for the right of tribal casino employees to form unions.
Mark Macarro, tribal chairman of the Pechanga Band of Luiseno Indians, said the state's demand for binding arbitration with no limit on the amount that could be awarded cities and counties is an unacceptable condition that the state would never force upon a private developer.
"To agree to this condition would be an abrogation of our tribal sovereignty," he said.
Talks likely to intensify
Over the next several weeks, talks between the administration and the tribal governments of the Agua Caliente, Pechanga and other tribes that operate large casinos will likely intensify. If no agreement is reached before the fall political campaign is engaged, voters can expect an expensive campaign aimed at winning their favor.
The last time a full-scale campaign over Indian gaming was waged, with Proposition 5 in 1998, the total amount spent by supporters and opponents topped $90 million.
Organized gambling interests (from Nevada, IIRC, primarily Bally Manufacturing) funded the tribes' initiative to get a toehold in this state, believing that Californians might be against gambling in general but would make an exception by taking compassion on the plight of the Indians by handing them a monopoly franchise. Now that the tribes have that footing, the gambling interests want to cut them out of the deal.
IMHO, as organized gambling saturate the market from state to state, the net revenue to the host states will drop while the social costs continue to climb. Thus, the real question should be, is organized gambling something we really want? I have serious doubts that the public, having seen that what resulted from "Indian gaming" was quite different than was proffered, is really so hungry for more organized gambling, much less as much as we now have in the pipeline.
Gambling produces very little net wealth. While there are those who can play responsibly, it destroys many families and robs their children. I question the real value of abetting it in return for the mirage of substantial tax revenue net of the real expenses for the increased demand for social services that results.
Hogwash.
No one at the state level knows what percentage of profits, either net or gross because the tribes don't have to fully disclose their net profits to the state. That's why a percentage of profit was not incorporated into the compact nor was it advertised when the deal was done.
Best guess from insiders. Less than 4%. Lots of money was left on the table if this compact is judged by nation wide standards for similar compacts.
For the first 500 slots over 2,000, tribes will pay annual fees of $12,000 per machine. The fees increase, in 500-machine increments, up to $25,000 apiece for slots over 4,500.What blows me away is the unlimited expansion of their gambling operations that Arnold is now allowing. He didn't get anywhere near the 25% of revenues that he demanded in the campaign, but gave away the store anyway. Vegas in its entirety has about 200,000 slot machines. I believe we will surpass that level within the decade. There was a cap before of 2,000 per casino and 62,000 statewide. They are already at 53,000 with new casinos being developed and the Vegas casino interests moving in to "help" the tribes. California may soon look like Nevada... with all the poverty but none of the glitz. :-(
It appears the unions won't be complaining either. The new agreements offer them new inroads as well. From the San Diego Union-Tribune
Provisions drawing the most ire in Indian country are those that compel the tribes to allow union organizing and to submit to third-party arbitration for disputes involving off-reservation impacts and patron or employee grievances.And from the New York Times:
In addition to forging an alliance with the Indian tribes he once reviled, Mr. Schwarzenegger also won the support of a major union, the Building and Construction Trades Council of California, whose president, Bob Balgenorth, stood on the stage with the governor during the ceremony. The union, which customarily supports Democratic candidates and causes, donated tens of thousands of dollars last fall to defeating the recall initiative that swept Mr. Schwarzenegger into office. It is likely to gain jobs from highway projects that will be financed by the new casino revenue.
stars...
a soft breeze...
crickets chirping...
ROFL... thanks...
I can hear the waves now... ;-)
Wee the people of the Indian nation, in order to form a more perfect union...
I responded with a very timid "Hogwash!"
You then paraphrased an article in the SDUT: "I had read before that the average slot machine brings in $100,000 per year in net revenue. If true, that would support an approximate 10% number" which is probably accurate.
But it's beside the point because it's a percentage of slot machine revenue, not net gaming revenue.
Other states charge from 15% to 30% of net gaming revenue. Arnie left a lot on the table in his rush to fulfill a campaign promise and stave off a growing structural deficit in 2005/2006 fiscal year but at least it's a start....with 5 tribes.
The significant benefit of the agreement, getting scant statewide coverage, is that it forces these 5 tribes into binding arbitration with local governments when the tribes create increases in local infrastructure costs. Before the agreement the tribes had no legally compelling obligation to participate in these costs.
Next there'll be a tax on crickets chirping while the casinoes suck the losers dry!
First they taxed productivity and that wasn't enough for them to squander. Then they found a way to tax wastrels, spendthrifts and addicts!!!
This will be so dramatically up lifting to society in CA. But that's ok. We already have Sodom and Gomorrah!!!
I think you and I are mostly in agreement. I meant not to disagree with anything you said, but to offer some additional input.
I am disappointed that so much was left on the table... particularly since so much was given away in the form of expansion. The billion $ headline overshadowed the limited annual income in future years, the years where a new deficit appears to be looming large.
The binding arbitration is indeed an improvement.
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