Sacramento – Blaming a punishing economy, the Sycuan band of El Cajon on Thursday walked away from a multibillion-dollar gambling agreement that it had pursued for years and spent USD 6 million to defend.
The deal authorized an expansion from 2,000 slots the tribe now operates to as many as 5,000 machines plus an option for a second, off-reservation casino on newly acquired lands that include the former Singing Hills Country Club.
The agreement, or compact, was signed more than two years ago by Gov. Arnold Schwarzenegger and Sycuan Chairman Daniel Tucker. But it was never ratified by the tribe’s 78 adult members, as required by a little-noticed clause.
The decision ultimately could cost both the tribe and the state billions of dollars.
“It is with sincere regret that Sycuan is unable to take advantage of the August, 2006 amended compact between our tribe and the state,” Tucker said in a letter delivered Thursday morning to the governor.
The current economic climate makes “proceeding under the amended compact financially imprudent at this time and for the forseeable future,” Tucker wrote.
“We are doing everything we can to avoid having to lay off our valued employees and are continuing to restructure operations to mitigate the impacts of an extremely challenging economic environment,” he added. “In these circumstances, even a modest expansion would be impossible.”
The decision was greeted with glee by local opponents of Sycuan’s plans to expand its gambling operations and build a destination resort in the Dehesa Valley, a rural retreat served by two-lane roads.
“I’m kind of dumbfounded,” said Bill Bengen, leader of a local group known as Residents Against Gambling Expansion. “We thought after the referendum passed earlier this year that the battle was lost. It’s quite a turn of events.”
In February, voters approved Sycuan’s compact and three others that had been challenged with statewide ballot measures. The four tribes, which included Pechanga of Temecula, spent more than USD 100 million on the campaign. Sycuan contributed USD 6 million to the effort.
A few months later, Schwarzenegger’s administration surprised lawmakers when it disclosed that the state would not be receiving USD 30 million anticipated from Sycuan because the tribe had not ratified its compact.
A deadline to execute the deal had passed, but Schwarzenegger agreed to give the tribe an extension that was set to run out on Jan. 1.
“We’re disappointed but understand the tribe’s situation,” said Camille Anderson, a spokeswoman for the governor.
Two years ago, Schwarzenegger and Sycuan Chairman Tucker posed for photographs after both signed the agreement that promised to be lucrative for the tribe and the state.
Sycuan had agreed to pay much more on its existing slots, roughly 10 percent of net winnings or USD 20 million a year. It also agreed to pay up to 15 percent on the additional 3,000 slots.
Over the life of the deal, which would have run through 2030, the state would collect an estimated USD 1.6 billion, Schwarzenegger’s administration said. The tribe would have received at least several times that.
In addition, the compact authorized an off-reservation casino on some 1,600 acres Sycuan has acquired in recent years, lands that adjoin its reservation and include the former Singing Hills resort and golf course.
Off-reservation gaming proposals have become increasingly controversial and the Department of Interior declared three years ago that it would no longer even consider compacts that authorized gaming on “lands that are not now, and may never be Indian lands.”
George Skibine, acting assistant secretary for Indian Affairs, had warned the provision permitting an off-reservation casino could pose a problem for Sycuan’s compact when it reached the Interior Department.
But the agreement was submitted with three other compacts from California, all of which reportedly got lost at Interior and were not rediscovered until after a 45-day review period had lapsed. That left federal officials no alternative but to “deem” them approved, as required by federal law.
Opponents of Sycuan’s compact notified Interior Secretary Dirk Kempthorne in July that his agency had granted final approval to a gaming agreement that had not yet been ratified by the tribe.
The Bureau of Indian Affairs referred the matter to its attorneys but to date has taken no action. A spokeswoman for that office declined to return repeated telephone calls Thursday.
Although Sycuan decided not to exercise its new deal, it retains the right to build a second casino under its existing compact. But it will no longer have language blessing a casino on its newly acquired land.
The tribe also has added several hundred bingo-based machines to its casino. Many electronic bingo machines are considered “Class 2” gaming devices not subject to state regulation or fees under federal law.
But state gaming agents concluded that at least some of Sycuan’s bingo machines are considered slots under federal criteria. That has prompted a state review of whether the tribe has violated the 2,000-slot limit in its existing compact.
Sycuan Chairman Tucker declined to comment beyond his letter to the governor. But analysts and others said the decision reflects a sharp economic downturn that has cut deeply into tribal and commercial gaming profits nationwide.
Viejas, Pechanga and other tribes have layed off hundreds of employees and expansion plans have been shelved indefinitely by tribes who operate some of the most successful casinos in the state.
Sycuan’s was one of five large new gaming agreements that Schwarzenegger negotiated during the summer of 2006. Several of those tribes, such as Pechanga and Morongo of east Riverside County, have scaled back expansion plans.
Megan Neuburger, a Native American finances specialist with Fitch Ratings, noted that all of those compacts significantly increased the state’s cut of the tribes‘ gaming revenue.
“The terms of these compacts,” Neuburger said, “were negotiated at a time when it was a much more optimistic climate.”