Casino Deals Said to Be Near

SACRAMENTO —  Asserting control over the future of gambling in California, Gov. Arnold Schwarzenegger vowed Tuesday to “rid” the state of two ballot initiatives on gambling and announced imminent deals authorizing four Indian tribes to expand their casinos.

The governor’s aides have been locked in talks with the four tribes for two months in an effort to compel them to pay more of their gambling profits to the state. In exchange, the tribes would gain the right to expand their operations.

“We are this close to a deal,” said Schwarzenegger, putting his thumb and finger close together. “We will be announcing it very soon.”

Once the deal is done, the governor made clear, he intends to campaign aggressively against the two propositions. “The initiatives that are out there will become meaningless,” he declared at a news conference, “and we will make sure we get rid of them.”

The tentative deals fall short of what had been Schwarzenegger’s stated goal of extracting 25% of gambling profits from the state’s Indian tribes -- a sum that would exceed $1 billion a year. Rather, he anticipates receiving 15% of their profits, after they pay jackpots, administration officials said. Only four of the state’s more than 50 tribes with casinos are part of the deal, at least for now.

Under the arrangement, the four tribes would give the state $1 billion to help Schwarzenegger close this year’s budget gap, estimated to be $14 billion. They would generate the $1 billion by using their blue chip credit rating -- one the state has not enjoyed for years -- to obtain a bond that the tribes would repay over the next 18 years.

Additionally, the tribes would make annual payments in coming years that could amount to $275 million, or roughly 15% of their casino profits. The payments would depend on the size of their casino expansions.

Tribes currently pay $130 million a year into a state fund, with most of the money going to tribes with small or no gambling operations.

By signing onto the new compacts, tribes would give up some of their sovereignty, agreeing to let the state inspect their facilities to ensure that they complied with California building codes and allowing auditors to inspect slot machines to ensure that they were functioning as promised by the casinos.

The deals, which would remain in place until 2030, would replace the 20-year compacts that Gov. Gray Davis and tribes negotiated in 1999 and that voters ratified in 2000.

Several Southern California tribes with large casinos have not joined in the talks. But Schwarzenegger predicted that additional tribes would sign on once details were final.

“Four gaming tribes are part of this deal,” he said. “As soon as we sign this deal there will be other tribes that will be joining us. The big tribes, very important ones. So that’s very exciting news.”

The agreements would require legislative approval, which is expected. The tribes’ money would help Schwarzenegger sign his proposed $102.8-billion budget by the July 1 start of the fiscal year.

The governor has established a campaign committee so he can raise money to battle the November initiatives. He would lose control over the issue if voters approved either of the initiatives. One of the measures could authorize 30,000 slot machines at five existing horseracing tracks and 11 card clubs. The other would allow unlimited casino expansion on Indian reservations.

“What we want is to protect Indian gaming. We want to have the Indian gaming tribes pay their fair share to the state, and it looks like we are on that road,” Schwarzenegger said. “We want to make sure they have the gaming and we support them, as much as they are supporting the state with their contributions.”

The card room-racetrack measure would require that tribes pay 25% of their gambling profits to local government. If any tribe balked at that or any of several other provisions, the tracks and card rooms would split 30,000 slot machines and give 33% of their casino profits to local police, fire and education-related programs.

The other measure, pushed by the Agua Caliente Band of Cahuilla Indians, owners of casinos in and near Palm Springs, would require that tribes pay the state 8.84% of their net income -- significantly less than gross casino winnings. In exchange, they would obtain the right to expand as they saw fit on reservation land.

Gene Raper, representing the Agua Caliente Band, said he was undeterred by Schwarzenegger’s announcement, adding: “We always felt he would oppose us.”

“The governor has never been with the Indians,” he said.

Schwarzenegger hopes that the negotiated package will be ready for a vote before lawmakers adjourn for the year in late August. Assembly Budget Committee Chairman Darrell Steinberg (D-Sacramento) said there was considerable legislative support for expanding Indians’ gambling rights.

“I don’t think there is a whole lot of controversy over the direction of the compact negotiations,” he said. “We have confidence the end result will be a positive one.”

Representatives of the tribes involved in the talks were also upbeat Tuesday.

“I’m very hopeful and optimistic that we will be able to sign it next week,” said attorney Howard Dickstein, who represents three of the tribes involved in the talks: the Pala Band of Mission Indians, owners of a casino in San Diego County; and the Rumsey Band of Wintun Indians and United Auburn Indian Community, which operate casinos in the Sacramento area.

The fourth tribe is the Viejas Band of Kumeyaay Indians east of San Diego. Representatives of several other tribes met with Schwarzenegger administration officials Tuesday to be briefed on the deals.

The governor plans to oppose the card room-racetrack initiative in part because the facilities are in urban areas -- and “he doesn’t want urban gaming,” a senior administration official said.

Schwarzenegger is negotiating separately with a small band of Indians that plans to install slot machines in San Pablo, a San Francisco Bay Area city.

Administration officials did not provide reporters with drafts of the gambling compacts. Rather, officials familiar with them offered their interpretation of the language. They said the Schwarzenegger deals would clear up many of the ambiguities in the deals struck by Davis, while also ensuring that tribes paid what officials called their “fair share” to the state.

Schwarzenegger aides also said the deals would ensure that tribes helped ease the impacts of their casinos on local government by complying with some environmental requirements and making payments to affected areas. The deals would also require that wealthy tribes continued making payments to help tribes in rural areas that had small casinos or no gambling operations.

Under the current compacts, individual tribes cannot have more than 2,000 slot machines, the most lucrative game for casino owners. Each of the four tribes involved in the talks operates about that many slots.

Under the proposed deal, the administration official said, the tribes would pay, for example, $12,000 for each new machine up to 2,500 slots; $13,200 per machine for each one between 2,501 and 3,000 slots; and up to $25,000 per machine for each new one over 4,500. That would amount to about $275 million a year from the four tribes.

The one-time payment of $1 billion would be used for transportation, and would be repaid at a rate of $100 million a year for 18 years. The administration official said the $100 million represented 10% of the four tribes’ current “net win,” the amount the casinos earn after they pay gambling winners. That means the four tribes at the table had combined net winnings of $1 billion in 2003.

Roughly 15 tribes operate at or near the 2,000-slot machine maximum. The state has more than 50 tribes running casinos.

Backers of the card room-racetrack initiative vowed to press ahead.

Greg Larsen, representing the card rooms and racetracks, called the governor’s proposal a “far, far cry from that 25% from all the tribes” that Schwarzenegger had sought during the campaign. “Voters have said to us ... they believe 25% is a fair share, and they expect that,” Larsen said.

The tribes involved in the deals would cease having to make the bond payments if they lost their exclusive right to operate slot machines to non-Indians. And they would gain the right to sue to block racetracks and card rooms from installing slot machines, the administration official said.

Under the deals, casino patrons would gain limited rights to arbitrate disputes with casino owners and appeal to state courts. Labor unions would gain some leverage to seek to organize workers at the casinos, although at least some of the tribes involved in the talks have labor pacts in place.