Gov. Arnold Schwarzenegger and one of the state’s richest Indian tribes are expected to announce a deal Tuesday that would send nearly USD 2 billion in casino earnings over the next two decades to the state’s general fund, much the way taxes are collected on other industries.
In exchange for giving up a previous deal that did not require the tribe to feed California’s coffers, the Agua Caliente Band of Cahuilla Indians would be allowed to increase from 2,000 to 5,000 the number of slot machines it operates, as well as open a third Palm Springs-area casino.
The tribe would pay the state 15 percent of its net earnings from the new machines and an increased share of revenue from its existing slots, said the Agua Caliente’s press secretary, Nancy Conrad.
„This is a deal that the tribe is very happy with, that all sides will be very happy with,“ she said. „Look at how much is paid out in business tax by others — it’s about 8.3 percent. This is well above that. The tribe is paying more than its fair share.“
A deal with the Agua Caliente tribe could allow Schwarzenegger to pacify another deep-pocketed political enemy in advance of his November re-election bid.
The tribe spent nearly $ 14 million two years ago supporting a proposition that Schwarzenegger opposed — a ballot initiative that would have allowed unlimited gambling for the next century on the tribe’s land. Schwarzenegger has maintained since his campaign during the 2003 recall election that the state’s tribes should pay their „fair share“ in taxes.
In recent months, Schwarzenegger has struck deals with the state teachers union and others who opposed his special-election efforts last year.
The framework of the Agua Caliente compact likely represents the best deal both sides could have hoped for, said I. Nelson Rose, a law professor at Whittier College of Law and a nationally recognized expert on gambling.
„The tribes didn’t have to negotiate; their compacts were rock solid,“ Rose said, referring to compacts the state’s tribes signed with former Gov. Gray Davis.
Those agreements allowed each one to have up to 2,000 slots and only required them to pay a small amount to two state funds — one to help cover local costs such as law enforcement around the casinos and the other to support tribes that did not have casinos.
Under the re-negotiated compact, Agua Caliente will continue to pay into the fund to help other tribes but will not pay into the fund for local governments. The tribe will be responsible for negotiating directly with neighboring communities to offset the cost of needed police patrols, traffic improvements and other infrastructure projects.
„Schwarzenegger probably got the best deal he could unless he was going to stand tough and tell them they weren’t going to get anything,“ Rose said.
The incentive for the Agua Caliente tribe was the opportunity to install more slot machines.
An administration official who asked not to be identified because the compact had not yet been signed said the Agua Caliente compact would last until 2030 and bring in as much as USD 1.8 billion to the state.
Annually, the tribe would be required to increase its payments to the state from USD 11.9 million to USD 23.4 million on its existing 2,000 slots. The tribe also would pay the state 15 percent of net earnings, or up to USD 58.5 million, annually from the new slots. Combined, the yearly payments to the state’s general fund could total USD 81.9 million.
The official said the deal also could make it harder for casino workers to unionize.
In general, the administration official said the deal achieved the governor’s three goals: maximizing the monetary benefit to the state; ensuring protections to local governments, including environmental concerns regarding new casino construction; and giving workers more protections, including in workers compensation claims.
If signed, the deal would have to be approved by a majority in the state Legislature, which has held up the past four compacts Schwarzenegger’s office has negotiated. At least one of those could be passed before the end of the legislative session later this month.
Rose said that if the Legislature agrees, the new compact could prompt other tribes seeking expansion of casinos in urban areas to re-negotiate with the state. Smaller tribes that couldn’t support larger casinos probably would opt to continue operating under the deals signed with Davis, he said.
Despite the new profits for the state, Rose noted the tribes still make out better in California than almost anywhere else. In Connecticut, for example, two large casinos pay almost $ 400 million annually to the state.
„It would be spread out over three casinos, but 5,000 slots would dwarf the largest Las Vegas casino. MGM Grand has about 3,000,“ Rose said. „The tribe’s got to feel good.“