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SACRAMENTO
-- SACRAMENTO -- Gov. Gray Davis, who
repeatedly has said he endorses merely modest
growth of gambling, instead has presided over
a rapid expansion, fueled by the rise of
casinos on Indian land.
Since Davis signed compacts with Native
American tribes in 1999, his first year in
office, revenue at Indian casinos has more
than tripled, from $1.5 billion in 1999 to
about $5 billion a year, and the number of
casinos has grown to 50, up from 38 in 1999.
Davis also has signed legislation expanding
off-track betting on horse races and ensuring
that card rooms can continue to operate. The
California Lottery continues to flourish as
well, with more games and more people buying
tickets than ever.
Altogether, revenue to casinos, card rooms and
racetracks approaches $6 billion a year. Under
Davis' watch, California operators' winnings
has surpassed New Jersey's $4.3 billion, and
is second to Nevada's $9.3 billion.
"For sure, California is the
fastest-growing state in terms of gaming
revenue, slot machine growth and
employment," said Jason Ader, gambling
industry analyst for Bear, Stearns & Co.
"There are countries that could be
comparable ... but not individual
states."
The rise of tribal casinos has created a new
political force in California, evident in
campaign contributions and in local land-use
disputes. Taken together, tribes have become
among the state's richest campaign donors,
having spent more than $120 million on ballot
measures and legislative and statewide races
since 1998. Davis has accepted $1.34 million
from the tribes since he took office in 1999,
and gambling interests altogether account for
about $2.5 million of the $67 million he has
raised in that period.
Major Test
Neither Davis nor his Republican challenger
Bill Simon Jr. have discussed gambling in any
detail during the campaign. The next governor
will face a major test early next year when
negotiations reopen over key parts of the
compact with the tribes, including the number
of slot machines that tribes can have. Simon
and Davis refused in recent days to discuss
how they would handle the negotiations.
At a recent campaign stop, Davis said he has
kept his promise about "not letting the
number of machines get out of hand." He
portrayed himself as having had little choice
about how he handled the compact negotiations
in 1999.
"I'm responding to the will of the
electorate," Davis said. He added that a
1988 federal law requires governors to
negotiate with tribes over the extent of
gambling. "I have to follow the
law," he said.
Davis and tribal representatives cite economic
gains for California Indians brought about by
gambling. Employment by tribes grew to 35,000
in the last year, a 12% jump. "If tribes
make money, good things happen," Davis
said.
The 1999 deal, which was ratified by the
Legislature and approved by voters, grants
California's 105 bands of Native Americans
exclusive rights to operate casinos with slot
machines and various other games of chance on
their land. Proposition 1-A, drafted by the
Davis administration, permits casinos on
Indian land. It amended a state constitutional
provision, approved in 1986 when voters
authorized the state lottery, that
specifically barred "Nevada-style
casinos" in California.
Under the deal, each tribe can have two
casinos with a combined 2,000 slot machines,
about the number in large Las Vegas Strip
casinos. Tribes without casinos or with
relatively small casinos were promised
payments of $1.1 million a year from the
bigger tribes.
"For too long, California's Indians have
been denied the respect and dignity they
deserve," Davis said in 1999. "That
sad chapter in our history ends today."
His words marked an about-face for the state.
Davis' predecessor, Republican Gov. Pete
Wilson, had blocked tribes from any
significant expansion. Federal authorities had
sued to shut down the casinos.
Tribes reacted by spending $63 million to win
passage of Proposition 5 in 1998. Proposition
5 would have given them the right to operate
casinos of any size on their land, but the
state Supreme Court struck it down in August
1999.
The compacts ended the uncertainty and
launched a construction blitz.
"What the Davis administration did with
those compacts was ... secure and legitimize
the industry for the foreseeable future,"
said attorney Howard Dickstein, who represents
five casino tribes. "That had a
tremendous impact."
Tribes File Suit
But some have been critical of the compacts,
which are based on a single template,
complaining of ambiguity or that they give the
state little power to regulate the casinos.
Two tribes sued earlier this week seeking to
clarify parts of the document. "The
compact is woefully inadequate," said
Sonoma County Counsel Steven Woodside, among
the officials fighting unsuccessfully to stop
an Indian casino, financed by a Texas company,
in the wine country of Alexander Valley.
The governor publicly has been ambivalent
about gambling, often vetoing bills one year,
then signing similar measures later. In 1999
and 2001, he rejected bills to permit more
mule racing and allow horse tracks to increase
the size of purses, thus adding to the appeal.
"I do not personally favor gambling, and
I certainly do not encourage others to
gamble," Davis said as he vetoed the mule
racing bill. "Therefore, I am not
generally inclined to support measures that
allow more than a modest expansion of
gaming."
Davis reversed himself this year by signing a
single bill allowing more mule racing and
richer purses. With the growth of gambling has
come conflict. In San Diego County, there have
been disputes over a tribe's demand for water
for its resort, and the county's eight casinos
worsen sprawl.
"Nobody anticipated the wildly dramatic
dimensions of the development," said
state Sen. Steve Peace (D-El Cajon), who like
most legislators voted for measures approving
tribal casinos. "Clearly, we made a
mistake. I don't know how to fix it."
In the state's rural reaches, residents can do
little to stop casino development. That has
become obvious at the Dry Creek Rancheria in
the Alexander Valley, a prime wine grape
region.
Atty. Gen. Bill Lockyer in July wrote to the
Pomo Indians complaining that they failed to
comply with the compact's safety and
environmental provisions, and asking to meet
to resolve the dispute. Three months later,
construction crews financed by Nevada Gold
& Casino Inc., of Houston, remain hard at
work, having bulldozed the tops of hills to
accommodate a casino with 1,600 slots.
Gamblers already play slot machines in a
finished section.
There are no water or sewer lines to the
casino. Water is trucked up, and sewage
trucked out. Sonoma County Fire Marshal Jack
Rosevear warned in an affidavit of fire danger
on the brush- and oak-covered hillside. A
blaze "could present a serious problem
for guests in terms of panic from smoke and
possible fire exposure," Rosevear said.
The road to the casino may be too narrow for
firetrucks to squeeze past fleeing vehicles.
The tribe's attorney, Frank R. Lawrence,
responded by telling Sonoma County officials
that they have no authority over the
construction, and warning that if they return,
they're "at grave risk of personal
individual liability in a federal civil rights
lawsuit that the tribe is presently
contemplating."
Looking for Help
If Davis' first term has brought security to
the state's gambling industry, the winner of
Tuesday's election may be tempted to look to
the industry for help with California's
returning budget shortfall.
Given that tribes pay no state taxes on casino
profits, the next governor could agree to
raise the cap of 2,000 slots machines per
tribe so long as tribes help the state solve
its fiscal crisis by paying some form of fee
or tax. Connecticut, home to the largest
Indian casino, receives 20% of the operation's
slot machine revenue.
Slots are especially lucrative, with each
device bringing in $100,000 or more a year.
Ten tribes have 2,000 slots each, or nearly
that number. Some may seek to remove the cap.
"The tribes hope the governor would be
open to letting the market decide," said
Jacob Coin, director of the California Indian
Nations Gaming Assn., a lobby group in
Sacramento. Aware that tribes may be asked to
help bail out the state, Coin said:
"Clearly, there will be a search for more
revenue."
Exactly how many slot machines the tribes can
amass under the current company remains in
dispute.
The hastily drawn agreement is ambiguous on
this key point. Davis initially contended that
the compacts limited tribes to a combined
total of no more than 40,000 slots, twice the
19,137 machines in operation in 1999.
The nonpartisan state Legislative Analyst
contends the compact permits 113,000 machines.
Taking a middle ground, the California
Gambling Control Commission places the number
of machines authorized under the compact at
61,957.
Citing the latest number of 44,913 machines in
operation, Davis said the deal he struck
"allowed for a modest increase in the
number of machines.... I think we've kept our
promise."
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