New California Compact Deal Announced

James May
6/30/04

SACRAMENTO, Calif. - Amid much pomp and circumstance before about 1,000
people at historic Memorial Auditorium, Gov. Arnold Schwarzenegger, flanked
by several tribal leaders and other interested parties, announced his first
gaming deals with five tribes.

The compacts represent renegotiations of compacts signed originally with
former Gov. Gray Davis in 1999. Schwarzenegger campaigned last year on the
promise that he would wrest a greater amount from tribes for the state's
coffers.

"This moment is absolutely historic," said Viejas chairman Anthony Pico,
who presented Schwarzenegger with a book on the Kumeyaay people and a
blanket that Schwarzenegger wrapped around his famously ample frame.

The five tribes are the United Auburn Indian Community, the Rumsey Band of
Wintun Indians, the Pauma Band of Mission Indians, the Pala Band of Mission
Indians and the Viejas Band of Kumeyaay Indians. The first two are from
Northern California and the other three are from San Diego County in the
far south part of the state.

Among the details of the new agreement are that the tribes will
collectively float a $1 billion bond to the state, which they will pay off
over the next 18 years in yearly payments. The tribes will additionally pay
somewhere in the neighborhood of $150 to $200 million a year until the
compacts expire in 2030.

Schwarzenegger's office expects that the money will be raised from expanded
gaming operations. In exchange for the additional revenue the state will
allow the signatory tribes to lift a 2,000 slot machine cap set forth by
the 1999 compacts. However, the tribes will have to pay on a progressive
scale for these additional machines culminating at $25,000 per machine at
the highest end of the scale.

Additional slot machines can only be added to presently existing tribal
lands and currently operating gaming operations.

Signatory tribes will also increase their payments to the tune of $2
million annually to the Revenue Sharing Trust Fund, set up for non-gaming
tribes and those with small operations.

The state of California is also allowed a greater regulatory power over the
tribes in the areas of tort law, mitigation, the environment and state
inspection of machines.

The current liability cap on tribes is set at $5 million, and for the
signatory tribes it will be raised to $10 million per incident. It is an
interesting capitulation for the tribes as the liability cap had been a
sticking point in other tribal negotiations with the state over allowing
tribal police officers to receive full state peace officer status.

Binding arbitration in regard to patron disputes over machines and disputes
with local governments over environmental and infrastructure issues are
other facets of the new agreements.

Labor is also addressed in the new compacts and requires tribes to allow
workers "enhanced organizing rights," though it denies them the right to
strike.

Additionally, Schwarzenegger said that money from the $1 billion bond will
go to state transportation projects.

Speculations about Schwarzenegger's agreement to officially oppose a ballot
initiative in exchange for the signatory tribes to give up a greater share
of their revenue turned out to be accurate.

The initiative in question is one put forth by a select group of the
state's horse racetracks and card clubs that would force the tribes to pay
25 percent of their revenue to the state or lose their monopoly on gaming
in the state. Schwarzenegger now opposes both this initiative and another
being put forth by the Agua Caliente tribe that seeks to set tribal
payments at the current corporate rate, which means around 8 percent of
tribal casino profits.

"I will be working on this partnership [with tribes] to defeat the
proposition in the November ballot," said Schwarzenegger during the
ceremony.

Attorney Howard Dickstein, who represents the two Northern California
tribes that signed new agreements, said that this was perhaps the most
important aspect of the new agreements for the tribes.

"We have maintained the right to exclusivity," said Dickstein.

After the signing ceremony, Schwarzenegger, in contrast to his predecessor
Davis, made his now customary quick exit refusing to answer questions and
left the question and answer period to his subordinates. When asked why the
governor opposed the idea of setting the casino rate at the same as the
corporate rate, the lead negotiator for the state, Daniel Kolkey said that
there were key differences.

He said that the corporate tax rate does not include property taxes and
other fees levied against corporations. Furthermore Kolkey insisted that
since tribes have the exclusive right to operate casinos, unlike
corporations they could pay a greater share.

Some tribes are already objecting to the new agreements and one tribe, the
Rincon Band of Luiseno Indians has filed a lawsuit over the new agreements.
The lawsuit stems in part from a concern that by allowing some tribes to
lift the 2,000-machine cap it would create greater economic disparity
between the tribes who chose not to negotiate new deals to give more
revenue to the state.

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