Major privately-owned California racetracks and card clubs have thrown down the gauntlet in their bid to potentially break Indian tribes' monopoly over operation of slot machines in the state.
In the first step toward what promises to be a significant battle over gaming in the state, sponsors of a ballot initiative that could bring slot machines to five racetracks and 11 card clubs in California filed the proposal with the state Attorney General's office Nov. 26. The measure, if it qualifies, would be on the November 2004 ballot. Proponents include a coalition of gambling interests and law enforcement officials, who view the act as a way of guaranteeing future funding.
If passed, "The Gaming Revenue Act of 2004" would amend the California Constitution to require the tribes to agree to pay a quarter of their net revenues to the cash-strapped state. There are currently 54 operating casinos with some 61,000 machines on Indian land. Failure to renegotiate their operating compacts within 90 days would open the way for as many as 30,000 slot machines to be split among the state's biggest tracks and card clubs.
"This is not intended to save racing in California," said Rick Baedeker, president of Hollywood Park, acting as spokesmen for the track sponsors. "This initiative only requires that the Indians' start paying their fair share."
Hollywood Park, Los Alamitos and three Magna Entertainment-owned tracks – Santa Anita, Golden Gate Fields and Bay Meadows – are potential beneficiaries. He projected that race purses could double in the state with the addition of slots.
But Baedeker was careful to point out that simple passage of the initiative would not bring slots to those California tracks.
"Far from it. What happens then would be up to the Indians," he said. "All this does is put us in a fallback position."
Tribes are currently exempt from paying taxes on their casino earnings. They could lose an estimated $1.25 billion of their $5 billion-a-year business to the state under the ballot measure. Several have indicated a willingness to negotiate new deals with Gov. Arnold Schwarzenegger, while 10 other tribes without casinos said in a recent letter to the governor that they would be willing to share profits in exchange for approval to operate.
Indian legal representatives said they believe the initiative is unconstitutional and they are likely to challenge it in federal court. Baedeker said the sponsors have investigated those claims and are prepared for a court fight should it arise.
The track executive said the election of Schwarzenegger – who campaigned against the Indians' special status in October's successful recall campaign, but is reportedly not in favor ending the tribe monopoly over gaming in the state – provided the impetus to push for a change in the Constitution.
"Schwarzenegger raised the awareness of the issue with the Indians," Baedeker said. "He made the California voters aware that the Indians are not paying their share. Certainly that made this possible."
The operating compacts were negotiated with previous Gov. Gray Davis, who was blamed for failing to bring any of the casino revenue into state coffers. Davis also didn't force tribes to submit to land-use agreements with local jurisdictions and comply with other state gaming and environmental protection measures.
However, under those compacts, tribes with casinos pay about $130 million a year into two funds, one of which benefits rural tribes without gambling and another that seeks to mitigate the impact of casino operations on nearby communities.
Under terms of the proposal, card clubs and tracks would pay 33% of their slot revenues to cities and counties, with the bulk of the money – expected to be about $1 billion a year – earmarked for police, firefighters and public schools. Half of the money would go to educational services for abused and neglected children, 35% to local government for additional police and sheriff's deputies, and 15% for more firefighters.
Baedeker said the non-profit Del Mar Thoroughbred Club and Capitol Racing at Cal Expo, which operates an 11-month harness meet in Sacramento, were not included in the measure's provisions because both operate on state-owned land.
"It was too cumbersome to work out the details," he said. As a compromise, the other tracks would create what he called an "impact fund" to ensure those tracks could also benefit.
The attorney general's office is expected to complete its review of the act by mid-January, when a 100-day signature gathering campaign can begin. Validation of signatures by the secretary of state would last from mid-April into June.
Baedeker estimated that one million signatures would be required to get enough valid ones to qualify the measure for the ballot, which requires 598,105 registered voters. A simple majority from voters would be required for passage, he said.