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California tribes apparently don't exceed licensing limit

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SACRAMENTO, Calif. - Media reports that California Indian tribes have gone over the licensing limit set by Governor Davis appear to be erroneous.

Reports in several California newspapers cited as evidence a $34 million payment by a Sacramento area accounting firm to the state regarding gaming licenses. State and other sources say this is a gross oversimplification.

The issue is complex. Earlier in the year several tribes who signed the Pala gaming compact with Gov. Gray Davis participated in a drawing. There was some dispute between the tribes and the Davis administration over the exact number of machines allowable under terms of the compact.

The tribes adopted a number given by a non-partisan, legislative analyst which put the number of licenses allowable at nearly 113,000. The Davis administration said the tribes were only allowed to draw from a pool of 45,000. Since the Pala Compact included a privacy clause, the exact numbers did not have to be revealed to the public and were not immediately given to the Davis administration.

The question became whether the tribes would abide by the governor's numbers or whether hold to those of the legislative analyst.

Early this month, media reports began to surface alleging that tribes had gone over Davis' figure. As evidence they cited a $34 million payment by the suburban Sacramento Sides Accountancy Corp. to the state for the gaming licenses.

Michael Lombardi, an American Indian gaming consultant, says media reports were based on a figure that failed to take all factors into account. Gaming machine licenses for individual machines are $1,250. Lombardi says the erroneous conclusion was reached that tribes were over the limit when this number was divided into $34 million. There is much more to be taken into account, Lombardi says.

Firstly, Lombardi says , in addition to the machine licenses the tribes also made the first of their quarterly payments that go into a fund for non-gaming tribes. In the Pala Compact, gaming tribes agreed to make $1.1 million in annual payments to non-gaming tribes which the state would not subsidize in case of a shortfall.

"The real story here is that, for the first time, American Indian tribes are shelling out money to help poorer tribes so they can have services that the government has traditionally paid for," Lombardi says.

Secondly, tribes are obligated to pay additional amounts to the state based on a sliding scale based on the number of machines the tribes have, he explains. For example, larger casinos, with more than 1,250 machines, would have to pay more than $4,000 for each gaming device.

"Indian gaming is the most heavily regulated form of gaming in the world. For tribes to defy the terms of the compact would be bad business. I mean they're not stupid, they know that they could be shut down at any time. It would make no sense," Lombardi says.

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"When I saw the $34 million figure, I breathed a sigh of relief because I knew that they couldn't have gone over the number of machine licenses" says an Indian gaming attorney who wants to remain anonymous because she is involved in the process.

She says that even based on a conventional formula, $34 million would not be in excess of the gaming devices allowed. By doing simple arithmetic and taking a random figure like 30,000 licenses - a figure allowable under the Davis administration - and multiplying that number by 1,250, the sum would be $37.5 million.

Media reports, says the attorney, may have taken into account gaming machines "grandfathered in" to existence, machines in existence before the compact and not figured into new licenses issued.

The attorney also points out that the money had been accruing interest since the spring drawing. The payment was made on Aug. 9 and a large sum of money like this can accrue quite a bit of interest, she said. The money was held in trust in the interim by Sides Accountancy of Fair Oakes.

Calls to Sides Accountancy were not returned.

State sources also confirm there seems to be no discrepancy. Nathan Barankin, a spokesman for the California attorney general, says that while his office does not have all the information in at the moment he believes the tribes are in compliance.

"Based on the information we have, the tribes have not gone over the specified number of allowable licenses."

Hillary McLean, deputy press secretary for Gov. Davis concurs.

"We have no evidence to lead us to believe that the terms and conditions of the Pala Compact are not being abided by."

Gaming critics such as former California Lt. Gov. Leo McCarthy charged both tribes and the state with secrecy regarding licensing. Lombardi and the Indian gaming attorney say this is because of a stipulation in the compact designed to protect the interests of each tribe's business.

Jacob Coin, executive director of the California Nations Indian Gaming Association, said he feels media reports were too hasty to condemn the tribes.

"It's not wise and prudent to extrapolate a specific number based on the $34 million payment," Coin says. "We know that we are under a national microscope here and we are going to continue to be in compliance with the law."