Tuesday, April 15, 2014

Glendale City Council Softens Stance on Tohono O’Odham Casino

By Patrick Sullivan

After years of losses in court and an estimated $3 million in legal fees, the Glendale, Arizona City Council appeared to ease its opposition to the location of an Indian casino in Glendale within the Phoenix metropolitan area and voted to begin formal negotiations with the Tohono O’odham Nation regarding the proposed West Valley Resort and Casino, which is projected to bring $300 million to the financially troubled city.

“We want to have a casino and resort near Glendale. It’s going to bring people into Glendale who will spend money, and we desperately need that. We’re so broke,” Councilwoman Norma Alvarez told local reporters. The City’s series of legal challenges and defeats, outlined below, have monopolized the City Council’s time and burned through its legal budget, and after a series of positive informal negotiations, the Tribe and the City appear closer to finding common ground.

The Council also decided in a narrow 4-3 vote to withdraw its support for HR 1410, Arizona Congressman Trent Franks’ federal legislation introduced to block construction of any tribal casinos in the Phoenix area, including the Glendale project, until 2027 when the existing Arizona gaming compacts expire. The withdrawal of the City’s support for Franks’ bill may ensure that the bill does not become law.

Glendale Casino Timeline:

1960: Federal dam projects flood large parts of the Tohono O’odham Nation reservation near Tucson.

October 20, 1986: Congress enacts the Gila Bend Indian Reservation Lands Replacement Act of 1986 to compensate the Tribe for its loss of land. Section 6(d) of the Act required the Secretary to accept land into trust in any of three counties, including Maricopa County, home to Phoenix and Glendale, but not “within the corporate limits of any city or town”.

November 27, 2001: City of Glendale adopts Ordinance No. 2229 annexing unincorporated Maricopa County land completely surrounded by the city of Glendale.

May 28, 2002: After a landowner’s challenge of the annexation in Arizona court, the City subsequently passes Ordinance no. 2258 “abandoning” the annexation.

November 5, 2002: Arizona voters pass Proposition 202 authorizing the State to enter into Class III gaming compact renegotiations with Indian tribes.

January 24, 2003: Secretary of the Interior approves Tohono O’odham Class III gaming compact.

August 21, 2003: Tribe anonymously purchases 135 acres of the unincorporated land within Glendale city limits, a prime casino location with access to the large Phoenix market.

January 28, 2009: Tribe submits application to Bureau of Indian Affairs to acquire 134.88 acres of Tribe’s Glendale land into trust status.

January 29, 2009: Tribe publicly announces intention to build a casino at the Glendale site. Casino opponents charge that the Tribe had promised to limit off-reservation gaming in metropolitan areas in talks prior to Proposition 202 and the 2003 compact.

June 23, 2009: To prevent the pending trust acquisition, the City adopts Ordinance No. 2688 deeming portions of the Tribe’s land to be incorporated into Glendale as of 2001, arguing that its own reversal of the 2001 annexation never became final.

March 10, 2010: Superior Court of Maricopa County grants summary judgment to City of Glendale holding that the 2001 annexation was valid and effective.

March 12, 2010: Tribe amends its trust application to ask BIA to proceed with 53.54 acres and hold the application for the annexed portions of the land in abeyance until the annexation issue was resolved.

July 23, 2010: U.S. Assistant Secretary of the Interior – Indian Affairs issues decision to accept 53.54 acres into trust, determining the land met all the requirements of the Gila Bend Act as the land is not “within” the city limits of Glendale, but withholds decisions on eligibility of the land for gaming.

February 3, 2011: Arizona Court of Appeals reverses the March 10, 2010, grant of summary judgment in favor of Glendale, holding that the 2001 annexation never became final and orders the City to pay Tribe’s legal fees.

March 3, 2011: U.S. District Court for the District of Arizona grants summary judgment in favor of the United States in challenge brought by the City of Glendale and Gila River Indian Community, concluding that the Secretary of the Interior reasonably applied the Gila Bend Indian Reservation Lands Replacement Act when he accepted the Glendale land into trust.

September 11, 2012: A split panel of the U.S. Court of Appeals for the Ninth Circuit affirms the District Court’s March 3, 2011, order granting summary judgment to the United States in Gila River et al. v United States. The dissenting judge called the decision by the Secretary to accept the land “an extraordinary assertion of power.”

April 11, 2013: Congressman Franks introduces federal legislation, entitled “Keep the Promise Act of 2013,” prohibiting gaming on the Glendale land.

May 7, 2013: U.S. District Court for the District of Arizona rejects claims by State of Arizona that the Tribe’s 2002 gaming compacts prohibits new casinos in the Phoenix metropolitan area, rejecting the State’s claim that the Tribe misled voters in a ballot initiative allowing the compact and secretly planned to build in Glendale. The court orders additional briefing on the State’s claim that the Tribe breached an oral contract to not build the casino.

June 25, 2013: Arizona federal judge rules for the Tribe on the remaining breach of contract claims, holding that there was no agreement in the compact or enforceable oral agreement that the Tribe would not open a casino in the Phoenix metropolitan area.

July 9, 2013: Tohono O’odham Nation moves the Arizona federal court for an award of its attorney’s fees of over $4 million.

The support of the City and the defeat of HR 1410 in Congress would remove the most significant political hurdles for the Tribe. The prime location in Glendale and direct access to the large Phoenix market would guarantee success for the project. It would also guarantee fierce competition for the other tribal casinos already serving the lucrative Phoenix market.

Tuesday, April 8, 2014

Casino Location Impacts Long-Term Success

By Dennis J. Whittlesey

Location, location, location is a well-established mantra in the real estate business. Tribal casinos are not exempt – particularly in California, where tribal casinos are a dominating influence in the state’s gaming industry (card rooms being the other major gaming industry).

The impact of the Graton Resort & Casino in Rohnert Park, California, on the River Rock Casino on the Dry Creek Rancheria is a case on point. The River Rock Casino is some six miles west of the Geyserville, California, exit on U.S. Highway 101 on a two-lane road and up a narrow driveway to the top of a hill overlooking the Alexander Valley wine country. While the setting offers sensational views, it is not easy to get to. However, for 12 years it was the only casino in its service area. As a result, its location was of little significance until the Graton casino opened last November.

The Alexander Valley is one of California’s most productive grape-producing valleys and the home of some of the finest wines produced anywhere in the world. The land owners long ago organized as the Alexander Valley Association (“AVA”), and the organization has been an important and effective voice for the valley landowners and their primary industry. When Dry Creek first announced its intentions to develop a casino, the AVA leadership recognized that the Rancheria location was troublesome for many reasons, the most important of which was potentially heavy traffic through the pastoral community of Geyserville and the difficult travel for both cars and large trucks serving the casino along the two-lane road and up the hill on which the Rancheria was located. The AVA suggested that the casino be located on Highway 101 and identified available off-reservation sites. The Tribe understandably wanted to develop its casino project within the boundaries of the Rancheria, and with that in mind, the project was developed on the Rancheria hill, which required the development of water and sewer service, as well as a major construction project to “stabilize” the hill itself so that the casino facilities could even be constructed. The “hill stabilization” project alone cost the Tribe and its investors an additional $15 million.

Geyserville is some 30 miles north of the Graton casino in Rohnert Park, meaning that the Graton casino is more convenient to people in the high population areas of Marin County and San Francisco to the south. The Graton casino and resort also offers many drinking and dining venues – including several restaurants opened by celebrity chefs from the Bay area, as well as a resort hotel and extensive gaming stations throughout the property. And patrons save at least 40 minutes’ drive time each way on the multi-lane U.S. Highway 101, which Graton directly abuts.

The impact of Graton on River Rock has been significant. It reinforces the need to include in long-range planning for casino development the three key ingredients for any project placement: “location, location, location”.

Prior to the Graton grand opening this past November, the Dry Creek Pomo enjoyed a 12-year monopoly on gaming in the immediate vicinity and had the closest Highway 101 gaming facility to Marin County and San Francisco. During that time, the casino was so prosperous that the Tribe was making per capita payments in amounts reported to be $600 monthly to each of its 640 tribal members, who previously had little economic opportunity. The revenues for 2010 (the last year for which financial data is available) were reported to be $124 million, and River Rock employed more than 600 people. The Tribe itself had more than 60 full-time employees.

However, glory days do not always last. Since the Graton casino opened, the River Rock revenues have declined. Tribal officials state that their revenues have dropped by 30 percent. It has been asserted that the actual drop is greater. In any event, more than 100 of River Rock’s employees have moved to Graton, and the tribal employment has fallen from 60 to a reported “handful” of staff members. Also, the per capita payments are now reported to be substantially lower than what they were only a few months ago.

Adding to the economic troubles facing the Tribe is the report that it has an outstanding debt of $150 million owed to bondholders.

The Dry Creek Pomo is now disenrolling members. One of the disenrolled Dry Creek members is the former Tribal Chair who oversaw the planning, construction, and development of River Rock. A recent notification of another round of disenrollments has been circulated, and among the next 75 to be expelled are the two daughters of that former Tribal Chair. Fewer tribal members typically equates to larger per capita payments to the remaining members. This is a pattern of conduct that has occurred within several tribes experiencing economic downturns in casino operations.

As already noted, the 12-year run was wildly successful for the casino and the Tribe. However, the inevitable development of competition has become reality. The development of Graton to the south on Highway 101 will soon be matched by a smaller tribal casino proposed for Cloverdale, which is only 9.5 miles north of Geyserville and also abutting Highway 101. Yesterday’s “great” location can quickly become today’s “challenging” location, and this underscores the need for careful consideration of potential future competition and the selection of the best available site for a casino development.

Tuesday, April 1, 2014

Detroit Casinos’ February Revenues Decrease From Same Month Last Year

By Ryan M. Shannon

The Michigan Gaming Control Board (“MGCB”) released the revenue and wagering tax data for February 2014 for the three Detroit, Michigan commercial casinos. The three Detroit commercial casinos posted a collective 0.6% decrease in gaming revenues compared to the same month in 2013. Aggregate gross gaming revenue for the Detroit commercial casinos in February increased, however, by 15.2% compared to January, continuing a trend of increase between January and February in prior years.

MGM Grand Detroit posted higher gaming revenue results for February 2014 as compared to the same month in 2013, with gaming revenue increasing by 2.4%. MGM Grand Detroit continued to maintain the largest market share among the three Detroit commercial casinos and had total gaming revenue in February 2014 of approximately $47.6 million.

MotorCity Casino had monthly gaming revenue exceeding $37.2 million, with revenues decreasing by 2.7% in February 2014 compared to February 2013. Greektown Casino had monthly gaming revenue of nearly $25.8 million and posted a 2.9% decrease in revenues for February 2014 compared to the same month in 2013.

Tuesday, March 25, 2014

Jo Ann Davidson and Timothy Wilmott Keynote Mid-America Gaming Congress

The inaugural Mid-America Gaming Congress will be held on April 9th at the Hyatt Regency hotel in Columbus, Ohio. A kick-off reception will be held at the Hollywood Casino the preceding evening (April 8th) for Congress participants and speakers. The Congress will wrap up with a reception at the Scioto Downs racino in Columbus the evening of the 9th. A room block has been established at the Hyatt Regency – make your reservation quickly while the room block special rate is in effect.

The Congress kicks off with a keynote address by Jo Ann Davidson, the Chair of the Ohio Casino Control Commission. The luncheon keynote address will be presented by Timothy Wilmott, the CEO of Penn National Gaming, Inc.

Five panels composed of leaders in the gaming industry will substantively discuss Mid-America’s competitive marketplace, the prospects for Internet gaming, unregulated gaming activities, the regulatory environment, and the Wall Street and banking industry views of current opportunities in the gaming marketplace. The Congress will focus on what is happening and what may happen in the near future in the Mid-America states from Pennsylvania in the East to Iowa in the West. The Congress panelists include representatives from each of the effected jurisdictions, as well as representatives from Wall Street and the banking industry.

Complete details of the Congress, including room block information and a listing of the panels and panelists, are available at the Mid-America Gaming Congress website, midamericagamingcongress.com.

Tuesday, March 18, 2014

Nevada and Delaware Enter Into Interstate Compact to Pool I-Poker Players

By Peter J. Kulick

On February 25, 2014, Nevada Governor Brian Sandoval and his Delaware counterpart, Governor Jack Markell, signed the first interstate compact to allow the pooling of I-gaming patrons in the two states. The interstate compact is a potential watershed event for the expansion of interstate I-gaming in the U.S. As the battle to authorize I-gaming in the U.S. has shifted from Congress to the statehouses, many I-gaming advocates and legal commentators have floated the interstate compact concept in order to address liquidity concerns.

The Nevada-Delaware compact only addresses I-poker and will allow the two states to pool I-poker players. The compact ostensibly attempts to address the liquidity issues for smaller states. That is, states with a smaller population base may not have a sufficient pool of prospective gamblers to support an interstate market.

The compact allows each state to retain the right to regulate the operators licensed in the respective jurisdictions. The compact further provides that each state would retain the revenue generated from the players located in that state, regardless of the location of the licensed operator. The compact also requires each state to join a “Multi-State Internet Gaming Association” in order to facilitate the implementation of I-gaming offerings of each member state.

The interstate compact is a significant development for advocates of regulated interstate I-gaming because it provides an initial framework for such arrangements. However, Nevada and Delaware are both states with relatively small populations. Thus, a legitimate question arises whether the two states collectively will have sufficient player liquidity to support the development of a viable I-gaming market. The compact does open the door for other states to join in the future. Whether the compact framework is attractive to other U.S. I-gaming jurisdictions, such as New Jersey, remains to be seen.

Thursday, March 13, 2014

Tribe Files Suit to Block California Compact Referendum

By Dennis J. Whittlesey

The landmark ballot referendum proposing to reverse the California Legislature’s ratification of two off-reservation tribal casinos is being challenged in state court litigation seeking to block the referendum from appearing on the general election ballot in November.

The North Fork Rancheria of Mono Indians has just filed the litigation in Madera County Superior Court proposing to preserve the compact signed by Governor Jerry Brown in July 2013 and approved through operation of federal law on October 22, 2013. Formal notice of the compact approval was published in the Federal Register on that same day. The status of the second compact likely will be determined in this litigation although that tribe is not a party to this litigation.

The Legislature approved the two compacts pursuant to California’s state law requiring legislative ratification of such documents. California is one of the states requiring legislative confirmation of tribal compacts. California’s Constitution allows statutes enacted by the Legislature to be challenged through petition and referendum, and the required number of signatures to put the measure on the ballot was collected within the requisite period of time. The petition drive was conducted by a Sacramento area casino watchdog organization and was funded primarily by two casino tribes and a New York City investment firm that has a significant investment in one of the tribal casinos opposing the project. The latest estimate of the total amount spent in the petition/referendum effort is $2 million.

The new litigation challenges the referendum on two major legal theories. The first theory alleges that the compact is final because federal law allows tribes to conduct casino gaming so long as the state does not – as a matter of criminal law and public policy – prohibit such gaming activity. However, the gaming must be conducted in accordance with the provisions of a compact negotiated by the Governor and approved by the Secretary of the Interior. Thus, the state court will have to address whether a post-ratification challenge at the ballot box can be used to deratify a compact that has been approved by the federal government pursuant to applicable federal laws. The second theory raises the question of whether legislative ratification of a contract between the State and a tribe is subject to the petition/referendum process.

The stakes in this litigation are enormous for California and its booming Indian gaming industry, as well as neighboring states that permit casino gaming operations. This is litigation that likely will be in higher courts before it is fully resolved.

Tuesday, March 11, 2014

Five Major Indian Gaming Issues to Watch in 2014

By Dennis J. Whittlesey

The New Year is well under way, and any number of Indian gaming issues will be debated over the next 10 months. The resolution or non-resolution of some of them could have significant and long-lasting impacts for Indian Country in general and tribal gaming in particular. High on anyone’s list of issues to watch are five that are in active discussion and even controversy.

1. Internet Gaming

Much of the current debate concerns potential state legislation authorizing I-gaming, with concerns raised about states in which tribes have an exclusive franchise for gaming. Another area of concern is that various states have extended to tribes various forms of “exclusivity” for their gaming, including (a) geographical and (b) specific types of gaming, such as slots. The tribes have made financial concessions to those states in return for some form of exclusivity, and protecting their position could be difficult if the scope of I-gaming would breach any exclusive rights ceded to tribes.

As for federal legislation, there seems to be little chance for action in 2014, but proponents continue to hold out some hope. For example, Senator Lindsey Graham (R-SC) has just proposed legislation for interstate I-gaming. Initially, little enthusiasm for his proposal has been expressed by Democrats or his fellow Republicans.

There are strong voices in Indian Country demanding that tribes have a place at the table when any legislation is proposed, regardless of the forum. The current phenomenal financial success of Indian gaming ensures that they will have a seat at the table, but the greater issue is whether it will be a united voice.

2. Off-Reservation Gaming

When the Indian Gaming Regulatory Act became law on October 17, 1988, Congress specifically provided that tribes can conduct gaming on “Indian lands” as defined as of the date of enactment. However, Congress realized that many recognized and non-recognized tribes seeking status clarification would be excluded from ever conducting gaming with a fixed date for lands qualification. That fact led to enactment of IGRA’s Section 20 – Gaming on lands acquired after October 17, 1988, which established various exceptions to the fixed date barrier. These exceptions provide a number of pathways through which tribes can secure “Indian lands” status for after-acquired lands. Among them was the provision at Section 20(b)(1)(A) providing that tribes unable to qualify for any of the other statutory exceptions could seek approval for gaming on “off reservation” lands.

Off-reservation approval is not easy and has rarely been granted in IGRA’s 25 years. While past Presidents have been reluctant to honor this statutory path for gaming status, the Obama Administration has been more amenable to such considerations. Most readers know that the Governors were given a veto over such applications after the Secretary of the Interior has first determined that the trust application should be granted. This veto – which was carefully considered during the drafting of the IGRA – was a major concession to the Governors who are lawfully empowered to act on behalf of their states.

Referendum challenges can also play a significant role in the off-reservation process. The North Fork Rancheria of Mono Indians of California has carefully negotiated the path to compact approval for an off-reservation casino after some 10 years of work, but now faces a threat that would wipe out its ability to proceed with development of the casino project. The threat arises out of the fact that California is one of a handful of states that require the state legislature to ratify tribal gaming compacts once approved by the Secretary of the Interior and the Governor. The State Constitution provides for state ballot consideration by the electorate of any state law upon submission to the Secretary of State with petitions containing sufficient valid signatures to invoke the referendum. Petitions challenging the legislature’s approval of the North Fork Compact with the required number of signatures have been certified by the Secretary of State, and the Compact approval will be on the November ballot for affirmation or rejection. The Referendum’s legality reportedly is being examined by attorneys interested in the North Fork casino development. This one is worth watching for sure.

3. State Renegotiations of Compacts Due to Expire

Class III tribal-state compacts are expiring in New Mexico, and the State has attempted to negotiate new compacts with provisions for revenue sharing not previously included. While the Governor has been largely successful, several of the Pueblo tribes have refused to accept the new demands for revenue sharing, and one – the Pueblo of Pojoaque – has filed suit in federal court claiming that the State has not negotiated in good faith as required by the Indian Gaming Regulatory Act. The State’s demand for revenue sharing is cited as bad faith negotiation.

There are other states in a renegotiation mode, starting with Florida which currently is in compact talks with the Seminole Tribe, owner of the Hard Rock franchise and seven tribal casinos, including major facilities in Tampa, Hollywood, and Coconut Beach. The negotiations are private, but the State won major financial concessions from the Tribe only a few years ago, and it is reported that further concessions are being sought by the Governor. Given the scope of Seminole’s Florida operations as well as its ownership of the Hard Rock brand, this negotiation is being closely watched throughout Indian Country.

4. Indian Gaming as Part of a Major Regulatory Reorganization of Gaming in Florida

As discussed above, the Seminole Compact negotiation is a big deal, both for Florida and Indian gaming in general. The Tribe’s negotiating team will be as experienced and savvy as any in the country. Whether the State can match it will be the story of this negotiation.

5. Tribal Disenrollments for Blatantly Financial Reasons

Over the past several years, there have been a series of publicized tribal enrollment revocations of enrolled members – including former tribal leaders – and their entire families. This phenomenon is disturbingly common and apparently limited to gaming tribes that make periodic per capita payments of casino revenues to enrolled adult members. Many tribes have found that, as tribal populations grew, the periodic – often monthly – revenue distributions had to be reduced since revenue growth was not matching the population growth. One solution is to reduce the tribal membership by expelling members, resulting in a smaller tribal population which, in turn, allows the tribe to return individual payments to their previous higher levels.

There is virtually nothing the expelled members can do. Legal challenges cannot be mounted due to tribal sovereign immunity and are routinely dismissed. Moreover, while the federal Indian Civil Rights Act of 1968 ostensibly offers legal protections to the victims of enrollment revocations, the reality is that the law is toothless and is not the vehicle through which individual Indians have gained much of anything in the way of rights protection. And the Bureau of Indian Affairs rarely takes any action, reiterating a long-standing position that the issue of tribal membership is purely an internal tribal matter and not something in which the federal government will – or even should – become involved.

Among the most notorious “enrollment reductions” are those implemented by the Pala Band of Mission Indians of California, the Picayune Rancheria of Chukchansi Indians of California, and the Nooksack Tribe of Washington. Each (i) has operated a tribal casino for years, (ii) has been making per capita payments to its enrolled members, (iii) has now disenrolled scores of members, and (iv) began disenrolling members after experiencing downturns in casino cash flow and was forced to reduce per capita payments.

To read the complete article, please check out the latest edition of Gaming Legal News.