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Davis Helped Gambling Hit $6-Billion Jackpot

Only Nevada exceeds California's annual revenue since he signed casino compacts, bills.

October 31, 2002|Dan Morain | Times Staff Writer

SACRAMENTO -- Gov. Gray Davis, who repeatedly has said he endorses merely modest growth of gambling, instead has presided over a rapid expansion, fueled by the rise of casinos on Indian land.

Since Davis signed compacts with Native American tribes in 1999, his first year in office, revenue at Indian casinos has more than tripled, from $1.5 billion in 1999 to about $5 billion a year, and the number of casinos has grown to 50, up from 38 in 1999.

Davis also has signed legislation expanding off-track betting on horse races and ensuring that card rooms can continue to operate. The California Lottery continues to flourish as well, with more games and more people buying tickets than ever.

Altogether, revenue to casinos, card rooms and racetracks approaches $6 billion a year. Under Davis' watch, California operators' winnings has surpassed New Jersey's $4.3 billion, and is second to Nevada's $9.3 billion.

"For sure, California is the fastest-growing state in terms of gaming revenue, slot machine growth and employment," said Jason Ader, gambling industry analyst for Bear, Stearns & Co. "There are countries that could be comparable ... but not individual states."

The rise of tribal casinos has created a new political force in California, evident in campaign contributions and in local land-use disputes. Taken together, tribes have become among the state's richest campaign donors, having spent more than $120 million on ballot measures and legislative and statewide races since 1998. Davis has accepted $1.34 million from the tribes since he took office in 1999, and gambling interests altogether account for about $2.5 million of the $67 million he has raised in that period.

Major Test

Neither Davis nor his Republican challenger Bill Simon Jr. have discussed gambling in any detail during the campaign. The next governor will face a major test early next year when negotiations reopen over key parts of the compact with the tribes, including the number of slot machines that tribes can have. Simon and Davis refused in recent days to discuss how they would handle the negotiations.

At a recent campaign stop, Davis said he has kept his promise about "not letting the number of machines get out of hand." He portrayed himself as having had little choice about how he handled the compact negotiations in 1999.

"I'm responding to the will of the electorate," Davis said. He added that a 1988 federal law requires governors to negotiate with tribes over the extent of gambling. "I have to follow the law," he said.

Davis and tribal representatives cite economic gains for California Indians brought about by gambling. Employment by tribes grew to 35,000 in the last year, a 12% jump. "If tribes make money, good things happen," Davis said.

The 1999 deal, which was ratified by the Legislature and approved by voters, grants California's 105 bands of Native Americans exclusive rights to operate casinos with slot machines and various other games of chance on their land. Proposition 1-A, drafted by the Davis administration, permits casinos on Indian land. It amended a state constitutional provision, approved in 1986 when voters authorized the state lottery, that specifically barred "Nevada-style casinos" in California.

Under the deal, each tribe can have two casinos with a combined 2,000 slot machines, about the number in large Las Vegas Strip casinos. Tribes without casinos or with relatively small casinos were promised payments of $1.1 million a year from the bigger tribes.

"For too long, California's Indians have been denied the respect and dignity they deserve," Davis said in 1999. "That sad chapter in our history ends today."

His words marked an about-face for the state. Davis' predecessor, Republican Gov. Pete Wilson, had blocked tribes from any significant expansion. Federal authorities had sued to shut down the casinos.

Tribes reacted by spending $63 million to win passage of Proposition 5 in 1998. Proposition 5 would have given them the right to operate casinos of any size on their land, but the state Supreme Court struck it down in August 1999.

The compacts ended the uncertainty and launched a construction blitz.

"What the Davis administration did with those compacts was ... secure and legitimize the industry for the foreseeable future," said attorney Howard Dickstein, who represents five casino tribes. "That had a tremendous impact."

Tribes File Suit

But some have been critical of the compacts, which are based on a single template, complaining of ambiguity or that they give the state little power to regulate the casinos. Two tribes sued earlier this week seeking to clarify parts of the document. "The compact is woefully inadequate," said Sonoma County Counsel Steven Woodside, among the officials fighting unsuccessfully to stop an Indian casino, financed by a Texas company, in the wine country of Alexander Valley.

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