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Cabazons request tax-free bonds to fund resort project

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WALNUT CREEK, Calif. - An unusual request by the Cabazon tribe has left an obscure state agency in quite a quandary. It seems as if the tribe has requested $181 million in tax exempt bonds for a tribally owned resort project.

The Cabazons requested the tax exempt bonds from the California Statewide Communities Development Authority, marking the first time a tribe has made such a request in that state. The authority is a state agency jointly sponsored by the California State Association of Counties and the California League of Cities and is authorized to issue bonds for government construction projects.

Authority general manager Jerry Burke says his agency typically receives requests for bonds on municipal projects such as low-income housing and projects for non-profit groups. He says that the authority has issued bonds to Indian tribes before, but usually for community projects such as health centers.

Burke concedes that the tribe may have a case because of tribal sovereignty and that the resort, as a tribal governmental enterprise, would not necessarily meet the same standards as a private developer.

"It's a fascinating problem and a good public policy issue," says Burke.

"There is not an easy answer because here we have a legitimate government that is building something that resembles a private enterprise."

The authority, says Burke, has to weigh the pros and cons of the issue and ask such questions as whether the resort will represent adequate public interest.

Though the authority can issue the bonds, Burke reports that his agency is one of three possible avenues for the tribe to get the tax-exempt bonds. The tribe went to the authority on the recommendation of Riverside County, from whom they could also request the bonds. The state of California is the third possible avenue to request the tax-exempt bonds.

The tribe is seeking the bonds as part of the first phase of a resort project near the tribally run Fantasy Springs Casino, and would be located on the tribe's reservation east of Palm Springs. Along with a full service hotel, the Fantasy Springs resort features a 97,000-square-foot convention center and a large parking garage. The Riverside (Calif.) Press Enterprise reported that the Cabazons' casino will also expand.

Cabazon spokeswoman Nancy Tarascio says that it is natural that the tribe try to find the best possible business deal and says though this is the first time something like this has been requested in California, there is precedent: the Seminole tribe in Florida received tax-exempt bonds for construction of a tribal enterprise.

Tarascio claims the project is unlike that of a private project in that the Cabazon tribal members receive public services from the money generated by the tribal enterprise. She points to the benefit to the local economy since the tribe estimates the creation of 700-plus jobs by the resort facility.

Published reports indicate that the tax-exempt bonds would save the tribe $35 million while Tarascio places the figure closer to $40 million. The tribe, says Tarascio, would then turn around and, since tribes are exempted from local taxes, pay a voluntary $20 million, or half of their savings to the county of Riverside.

The Cabazons are backing the bond with $10 million and Tarascio says that there is no danger to taxpayers if something were to go catastrophically wrong with the project.

"People need to understand that a bond is not a line of credit and according to the rules, the bond holder and not the taxpayers are responsible," says Tarascio.

Another potential factor is that the state of California is facing a $24-billion revenue shortfall. It is unclear whether or not this will effect the state1s decision to issue the tax-exempt bonds.

The final decision by the authority will not be made until late October. Burke says that his agency needs more time to gather information and look into the state of Florida's Seminole case. "This is not a black and white issue, and we need a little time to think and deliberate over this matter."