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Deal for urban casino imminent

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SACRAMENTO, Calif. - After having plans in the works for almost four years,
all appears almost a go for the first large scale urban casino in
California.

Not counting the United Auburn Indian Rancheria's Thunder Valley casino,
which sits at the very edge of the Sacramento metropolitan area, a new
massive casino on the site of an old card club in the city of San Pablo is
just a 10-minute drive from Oakland. And, depending on traffic, 20 minutes
from downtown San Francisco.

The proprietors of the new establishment would be the Lytton Band of Pomo
Indians whose main offices are located 50 miles to the north in Santa Rosa
in Sonoma County. The tribe has tried unsuccessfully since 2000 to build
the new facility but had been found wanting at the end of each previous
attempt.

Lytton gained the right to take the San Pablo site into trust in a rider
slipped in by Rep. George Miller, D-Calif., in an omnibus bill in 2000.
However, former Gov. Gray Davis opposed the plan and refused to sign a
gaming deal with the tribe because of his opposition to urban casinos.

Now, however, Gov. Arnold Schwarzenegger is singing a different tune.
Though Schwarzenegger has gone on the record as opposing urban casinos it
appears his stance has softened in the face of potential state revenue from
such a casino coupled with the fact that federal legislation established
the tribe's San Pablo property.

The Los Angeles Times reported that a deal between Schwarzenegger and
Lytton is imminent. It is rumored that the tribe has agreed to share as
much as 25 percent of its casino profits with the state, estimated to be
worth $125 million annually based on projected casino revenues in the $500
million range. This would automatically make the new casino potentially the
most profitable in the state.

Besides Lytton sources close to the gaming compact negotiations said there
are other tribes that are also included in the negotiating process and
these deals would represent the second round of deals signed by the
Schwarzenegger administration.

The new deals also represent a continued upward arc in revenue ceded to the
state that began under former Gov. Gray Davis last year. The first round of
deals were reached in June with five tribes and allowed the tribes to
expand their gaming operations beyond the original 2,000-machine limit and
ceded more revenue to the state than previous agreements.

However, though those initial Schwarzenegger deals are complicated and
involve a onetime-only $1 billion bond earmarked for transportation
projects and some set annual revenue going to the state, it still does not
match the 25 percent set in this deal.

The original compacts signed with then-Gov. Davis in 1999 had tribes only
paying into two funds - one for non-gaming tribes and tribes with small
operations and another fund for local governments. Under political pressure
in what proved to be the waning days of his administration, Davis concluded
a few compact deals that are eventually expected to cede to the state a
total of 5 percent of their revenue. In all of the new deals penned in the
last year, the signatory tribes still have to pay into the original two
funds.

According to the Indian Gaming Regulatory Act (IGRA) tribes must have held
the land in trust for the purposes of gaming prior to October 1987. Lytton
is an exception because they were part of a group of 40 tribes who gained
recognition in 1991 and fall into the exception category established by
IGRA that allows tribes who gain late recognition to acquire lands for the
purposes of gaming.

The tribe had previously attempted to develop a home base closer to their
ancestral home in Sonoma County's Alexander Valley, almost 80 miles north
of the San Pablo site, but was faced with stiff opposition from a local
homeowner's association. Eventually, the Dry Creek Band of Pomo overcame
local opposition and opened a casino in the Alexander Valley.

Potential opposition is likely to come from tribes who operate smaller,
more remote casinos in Northern California. Gaming consultant Michael
Lombardi who works for the Augustine Band of Cahuilla Indians blasts the
rumored agreements and contends that the move by Schwarzenegger is a power
play that threatens the future of Indian gaming in California.

"What we are witnessing here is the beginning of the end of Indian gaming
in California as we know it," said Lombardi.

Lombardi painted a potentially bleak picture of the future of Indian gaming
in California where urban casinos will dominate and other tribes operating
on their own land bases would not be able to compete. He also worries that
an urban casino could set off a backlash by the state's voters.

Lombardi also contends that this violates the spirit of Proposition 1A, the
ballot initiative that legalized Indian gaming, because he said that voters
were under the impression that tribes would only operate casinos on their
own lands.

Tony Cohen, an attorney who has worked with Lytton said that he could not
offer comment on the agreement since it is still pending. In the past,
however, supporters of the Lytton casino, including Cohen, have pointed out
that the project has firm backing from the local community of San Pablo and
that since this project sits on the site of a card club this project will
take place where gaming already exists.