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The Trouble With Casinos

August 21, 2004

With Gov. Arnold Schwarzenegger signing a deal Thursday to bring the first major Indian casino to an urban area, all bets are off on how much money gambling can generate in California. Little wonder some Orange County officials bellied up to the trough with a proposal for a Las Vegas-style resort casino just blocks from Disneyland. Cities have only to swap a piece of land with an Indian tribe (with approval from the governor) and the free money starts rolling in.

Except that the money isn't really free. In 1998 and 2000, state voters folded their cards by allowing casinos on sovereign tribal lands where they would face minimal government regulation. In the once-bucolic Capay Valley near Sacramento, the huge and expanding Cache Creek Casino Resort has brought traffic that chokes California Highway 16, plus a big uptick in drug arrests. As many as 1 million Californians suffer from gambling addiction, a number likely to grow as casinos get closer to cities. Then there's drunk driving and a higher demand for police, fire and other services. No one knows the cost to local communities because no comprehensive study of the negative effects of Indian casinos has been done.

Balanced against all these negatives is the good that casinos can do. Reservations in far-flung areas of the state, once dusty slums, are now thriving. Big casinos can bring hundreds of relatively high-paying jobs with them. And although older facilities pay almost nothing to the state, renegotiated deals for some casinos will bring badly needed millions to state coffers.

For the latter, Schwarzenegger deserves credit. He was dealt a terrible hand by the voters and his predecessor, Gray Davis, who after the recall waived a rule that would have strengthened environmental protections in existing deals with the tribes.

Schwarzenegger's first round of new pacts with a few tribes in June called for a one-time payment of $1 billion and annual contributions to the state. Perhaps more important, these tribes will compensate local governments for negative effects of casinos, including heavy traffic and the cost of added policing. Thursday's deals with five tribes, though they would allow a 5,000-slot mega-casino in the Bay Area, contain even tougher concessions -- including, for the mega-casino, annual payments to the state of 25% of revenues. "I think it was the best we could possibly get," Cheryl Schmit, co-director of the anti-casino group Stand Up for California, said of the pacts.

Thursday's deals should serve as a blueprint for future pacts with tribes seeking to open casinos. Instead, the majority of tribes are poised to spend millions on the campaign for Proposition 70, which would allow them unlimited casinos and whatever games they wanted on tribal lands in exchange for annual payments of 8.84% of revenue. A competing measure on the November ballot, Proposition 68, would let urban card clubs morph into full casinos. So far, Schwarzenegger has a better track record than voters on casinos. The casino-owning tribes should find a much more wary electorate in 2004.

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