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Casino Deals Said to Be Near

Governor details how four tribes would give state 15% of profits and allow some inspections. He vows to fight two gaming initiatives.

June 16, 2004|Dan Morain and Evan Halper | Times Staff Writers

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."

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