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CNIGA Tribes Vote Unanimously to Support Proposition 70

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SACRAMENTO, Calif. - In a move to regain leverage in the casino compacting
process with the state, the tribal members of the California Nations Indian
Gaming Association (CNIGA), voted unanimously to support a proposal by a
Southern California tribe that will appear on the November ballot.

The measure, which qualified for the California ballot last month, was put
forth by the Agua Caliente Band of Cahuilla Indians and has been
re-christened Proposition 70. The measure seeks to limit contributions from
tribal gaming establishments to that of the corporate tax.

CNIGA, which represents 64 California tribes also made a $20,000 donation
in support of the measure.

The measure is in direct conflict with the compacts signed last month
between Gov. Arnold Schwarzenegger and five tribes from both Northern and
Southern California. The governor had run in last year's recall election
with the promise that he would wrest money from California's gaming tribes
using the catch phrase "fair share."

"Fair share" as defined by last month's new compacts meant that signatory
tribes had to pay for a $1 billion bond to the state and make increased
annual revenue payments to the state's general fund, something that was not
required when the first round of compacts were signed between former Gov.
Gray Davis and the tribes in 1999.

Though political pressure forced Davis to sign a few later compacts that
managed small allocations that went to the state's general fund, eventually
topping off at about 5 percent of their profits, these were no where near
the amount that the new Schwarzenegger compacts have netted for the general

Also, the latter Davis compacts did not lift a cap of 2,000 machines that
were required in the original compacts, whereas the Schwarzenegger compacts
allow signatory tribes to expand as far as they are willing to pay for it.
Under the terms of the new compacts tribes can pay a fee that gets
progressively steeper per machine over the original 2,000 limit.

Proposition 70 would allow tribes unlimited expansion without having to pay
the extra fee as well as setting the payments at the corporate tax rate,
which is estimated at about 8.84 percent of net revenues, which would be
paid into the state's general fund. In addition, gaming would also be
expanded to include card games that are currently outlawed in California.

There have been various estimates on the exact percentage that will be paid
by the Schwarzenegger compacts to the state. Much of it seems to depend on
the amount of revenue generated by each tribe though machine licenses
beyond the original 2,000-machine cap in the ensuing years until the
expiration of the compacts in 2030. Estimates have ranged from a low of a
10 percent rate to a high of 18 percent. Gov. Schwarzenegger's office
estimates that it is about 15 percent.

However, what is intractable is that tribes will have to pay a rate of
about 10 percent for several years to pay off a $1 billion bond that was
floated and earmarked for various transportation projects.

When Agua Caliente had initially made the proposal, it was at least
partially in reaction to a nascent ballot measure put forth by a select
group of the state's card clubs and racetracks that also subsequently
qualified for the November ballot.

The card club/race track initiative, known as Proposition 68, seeks to
force tribes to pay 25 percent of their revenue within the first few months
after passage or lose their monopoly on Nevada-style gaming, including slot
machines, by allowing 30,000 machines at the sponsor race tracks and card

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For several months it was unclear where Schwarzenegger stood on the card
club initiative and it was speculated that he was using his stance on the
initiative as leverage during his subsequent compact negotiations. As part
of the deal with negotiating tribes, after the compacts were signed,
Schwarzenegger came out against the card club initiative and has maintained
opposition to Proposition 70 throughout.

Schwarzenegger spokesman Vince Solito, who works in the governor's press
office said that his boss opposes Proposition 70 because it would take away
power from the state to oversee certain concerns such as environmental

"Essentially, [Proposition 70] would prevent the state from exerting any
kind of sensible control," said Solito.

Solito also claimed that Proposition 70 would allow unregulated gaming
expansion by allowing tribes to expand beyond the 2,000-machine limit
without having to pay for the extra machines, something that could increase
gaming establishments at a faster rate than having tribes pay extra for
machines over the 2,000 limit.

Though he was unavailable at press time for this report, Agua Caliente
Chairman Richard Milanovich has said in previous reports that he thinks his
tribe's proposal is fair because it allows the marketplace to decide the
expansion of gaming - rather than what he sees as the artificially imposed
number of 2,000 machines.

Milanovich also has said that the corporate tax is fair and that it would
represent a fair amount for tribes to pay because they would be on the same
tax footing as other state businesses.

Though the majority of California tribes now support Proposition 70, the
question remains on how the five tribes that signed the new compacts will
react. If passed there would at least be legal questions, since there are
clearly contradictory elements between Proposition 70 and the recently
signed compacts.

Until this point the signatory tribes to the new compacts have taken a
neutral position. Recent press reports indicate that they might change
their stance.

Attorney Howard Dickstein represents three of the five tribes that signed
the recent compacts with the Schwarzenegger administration. Though
Dickstein did not say outright whether the tribes would officially oppose
the measure, he did say that his client tribes were not in support of
Proposition 70.

"The chances of them [his client tribes] supporting [Proposition 70] are
nil," said Dickstein.

Dickstein felt that while Proposition 70 would mean increased short-term
profits the initiative would injure a long-term partnership with the state.

CNIGA declined further comment on the matter and referred press to a short
news release announcing their support. The short release essentially said
that the tribes voted in favor of support after Agua Caliente Chairman
Milanovich made a short presentation.