LET THE GAMES BEGIN; A review of 2004

Author:
Updated:
Original:

The year 2004 was another busy one for the Indian gaming industry. In order
to get 2005 started on the right foot, let's take a look at last year's
industry highlights (or "lowlights" in some cases) and the "Let the Games
Begin" wish list for the new year.

In Minnesota, loud voices spoke up demanding that the state's gaming tribes
"pay their fair share" to the state by "sharing" a portion of casino
revenues. Last January, Republican Gov. Tim Pawlenty called on Minnesota's
gaming tribes to "voluntarily" renegotiate their compacts to give Minnesota
a "better deal," by which he meant to coerce the tribes into making revenue
sharing payments to the state. Minnesota's 11 Indian casinos currently
operate under compacts negotiated and signed in 1989; these agreements make
no mention of revenue sharing nor gaming exclusivity and carry no
expiration date.

In October, with the aid of an overturned top hat and a magic wand,
Pawlenty produced the figure "$350 million" which he claims is the tribes'
"fair share." He even invited tribal leaders to an Oct. 27, 2004 meeting to
discuss ways that tribes could begin to pay their "fair share" - only one
tribe sent a representative. Indeed, Indian country's basic response to
Pawlenty's quest for a "better deal" was to ignore what one observer termed
a "summons" rather than an "invitation."

Pawlenty's insistence that Indian gaming in Minnesota is a $10-billion
industry has no basis in fact, nor does his notion of a "fair share."
Nonetheless, he has repeatedly said that if the tribes do not pony up some
gaming dollars, he will invite commercial casino operators to set up
operations in Minnesota. On Dec. 30, 2004, TwinCities.com reported that
Pawlenty, by the end of January, will recommend to state legislators that
they legalize commercial gambling in the Gopher State. According to the
report, there are likely sufficient votes in the state Senate to "approve
some sort of casino legislation."

Despite a year-end flurry of wheeling and dealing, the Great Catskill
Casino Follies are no closer to being resolved than one year ago. This is
because Republican Gov. George Pataki has signed more agreements (four)
than he has casinos to offer (three), and because three of those agreements
are with tribes from outside New York.

The governor's agreement with the Cayuga Nation of New York to settle the
Cayuga land claim in exchange for a Catskill casino appears solid, although
state and federal approvals remain pending, as do actual compact
negotiations.

Pataki's other three agreements, however, with tribal governments based in
Oklahoma and Wisconsin, rest on rather shaky ground. No tribal government
has ever successfully crossed state lines for gaming purposes. A number of
eastern tribes forcibly relocated westward in the 1800s now have
governments in areas other than their ancestral territory; allowing them to
"return home" to conduct gaming is a Pandora's box that the federal
government would rather not see opened. None of these three deals are
likely to come to fruition.

Pataki says he will recommend that the state General Assembly authorize two
more Indian casinos for the Catskills, which is by no means a certainty.
Indeed, before the dust settles, we may see that the governor, by
overextending himself and dealing with "out-of-state" tribes, has created
bigger problems for himself, the tribes and New York state.

Continuing with the "out-of-state" theme, the Wyandotte Nation of Oklahoma
attempted on its own to secure gaming rights in Kansas City. The Wyandottes
opened a small 50-slot-machine casino there in April, only to see it
quickly shut down by the state Attorney General. The month prior, NIGC had
ruled that the site was not Indian country for the purposes of gaming,
despite the fact that it had once been reservation land. In October, a
federal district judge ordered the state of Kansas to return the
Wyandottes' 50 slot machines and over $500,000 in cash seized in the raid;
the judge also ruled that the casino must remain closed until the status of
the land upon which it sits is determined.

In March, responding to considerable dispute over the blurry line dividing
Class II gaming from Class III, the National Indian Gaming Commission
formed its Class II Game Classification Standards Advisory Committee.
Comprised of seven gaming experts from throughout Indian country, the
committee is charged, according to the NIGC Web site (www.nigc.gov) with
establishing "technical standards and procedures for the classification and
approval of electronic, computer and other technologic Class II gaming
machines and aids utilized in Indian gaming operations." The committee's
third draft regulation was posted on the Web in November 2004 and is
expected to take effect in June 2005.

Election Day 2004 featured gaming-related referenda in several states.
Approximately 58 percent of Wisconsin voters, in a non-binding referendum,
approved a proposal to allow the construction of an $800 million casino, to
be owned by the Menominee Nation, at a greyhound track in suburban
Milwaukee.

Voters in Oklahoma gave their assent to Question 712 by 59.5 percent to
40.5 percent. Among other things, the measure allows for Class III gaming
to take place at Indian casinos, gives the state regulatory authority over
tribal casinos for the first time and provides for revenue sharing to the
tune of 4 percent of the first $10 million in slot machine revenue.

Some 59 percent of voters in Michigan voted in favor of Proposal 1, an
amendment to the state Constitution requiring all future proposals for slot
machines to gain approval from both local voters and the state legislature.
Michigan's existing Indian casinos are exempt, allowing them to continue to
operate without being subjected to retroactive voter approval.

In Washington state, 61 percent of voters rejected a proposal to end the
slot machine exclusivity enjoyed by the state's Indian casinos. This of
course prevents commercial competitors from moving in to take market share
from Washington's 18 gaming tribes. The proposal, Initiative 892, would
have permitted over 18,000 slot machines to be put into play in
restaurants, taverns, bingo halls, card rooms and bowling alleys across the
state.

Two much-ballyhooed gaming proposals went down in flames as California
voters soundly rejected both Proposition 68 and 70. Both initiatives would
have allowed for expanded commercial competition in California to the
likely detriment of the state's still-exploding Indian gaming industry,
which did suffer defeat in that tribal casinos will not be allowed to
expand into urban centers.

WISH LIST FOR 2005

In last year's wish list, we only asked for three things. Unfortunately,
despite the relative importance of these requests for the industry as a
whole, we got none of them. One of those requests was a strong move toward
resolution of the Great Catskill Casino Follies; but because Gov. Pataki's
shenanigans appear more likely to hopelessly complicate the now 3-year-old
circus than to bring resolution to anything, we'll simply re-ask for the
other two items on last year's list.

Revenue sharing guidelines: Fiscal shortfalls in state capitals across the
country have led to increasingly brazen attempts by various state
governments to coerce tribes into "sharing" casino revenue. Although IGRA
prohibits states from taxing Indian gaming operations, BIA officials and
many tribes have recognized that a quid pro quo arrangement, in the vein of
revenue in return for exclusivity, may be beneficial to both state and
tribe.

Certain states and state politicians have, however, somehow come to the
conclusion that they have a "right" to revenue from Indian casinos
operating on tribal land - currently, Minnesota is the most vocal. Such
actions ignore and even trample on Indian sovereignty. While many tribes
may be willing to negotiate their compacts to include reasonable revenue
sharing, state officials wielding high-handed, confrontational attitudes
will only roil the waters.

To be sure, formulating guidelines to satisfy every possible contingency
that may come up in the government-to-government relationships between 50
states and more than 560 tribes is a formidable task. Nonetheless, we urge
industry regulator, the National Indian Gaming Commission, to take the lead
in devising reasonable guidelines to prevent states from getting their
hands on too much of revenue representing Indian country's tax base.

Crossing state lines: As we said in the 2004 wish list, the ability and
legality of tribal governments setting up gaming operations in states other
than where they are recognized is an "issue begging for resolution." That
remains true today, particularly in light of Gov. Pataki's brazen move to
award casinos to three non-New York tribes.

As revenue from gaming and other enterprises will continue to slowly
strengthen tribal governments and economies, it is only logical that some
tribes will seek to reacquire ancestral lands. Regardless of the purpose
for such land purchases - commercial or residential development, or simply
leaving the land wild - the legality of a tribe's exertion of sovereignty
in a state other than that of formal recognition must be addressed soon.

Pending courtroom decisions, particularly the pending hearing by the U.S.
Supreme Court of the City of Sherill v. Oneida Indian Nation tax case, will
likely guide bureaucrats and legislators in the near term. But, if action
is not taken, this issue will dominate civil court dockets, particularly in
the Eastern U.S., for years to come.