Calif. Track Slot Revenue Speculation On Rise

Speculation that a revenue sharing agreement could result in California between racetracks and tribal casinos over slot machines increased this week after a lawsuit on behalf of five tracks filed last year against Gov. Arnold Schwarzenegger was dropped May 25.

The suit was aimed at overturning five tribal gaming compacts the governor signed during the summer.

Hollywood Park president Rick Baedeker acknowledged there have been talks between the two sides, but said he could not comment on the nature or extent of the discussions. He noted that the lawsuit – filed in Alameda County Superior Court and later moved to Sacramento on behalf of Hollywood Park, Santa Anita Park, Bay Meadows, Golden Gate Fields, and Los Alamitos Race Course – was "dismissed without prejudice, meaning that we could re-file it at any time."

The tracks, with Baedeker as a leading spokesman, were part of an effort to get the state's voters to approve a backdoor initiative last November that could have resulted in the tracks and 11 card clubs getting slot machines. Voters trounced the expensive measure, estimated to have cost the two sides $50 million.

The lawsuit, which was filed during the election campaign, prevented the state from authorizing a $1 billion transportation bond to be backed by the tribes to the tune of $100 million for 18 years as part of their agreement with Schwarzenegger. The deal gave the tribes slot machine exclusivity in their areas for the life of the agreement and removed a 2,000-machine limit. It was approved as an "urgency" measure by the State Legislature, meaning it would take effect immediately. Such bills are protected from overturning by the voters through a referendum, essentially guaranteeing the tribes a slot monopoly for the life of the compact.

The tracks contended that the deal violated constitutional provisions against urgency bills conveying "any franchise or special privilege, or create any vested right or interest."

It didn't take long for one Southern California card club to react. Two days after the tracks' decision to drop the legal action, Commerce Casino took up the same legal fight over the gaming compacts, filing a suit against Schwarzenegger in Los Angeles Superior Court. The card club is asking the court to declare the legislation unconstitutional and issue an order restraining Schwarzenegger from further attempts to implement the bill's provisions.

San Francisco attorney Steven Mayer, representing the tracks, did not return a phone message. Earlier, he told the Oakland Tribune, "We're engaged in discussions with the tribes and the state to see if we can resolve some of these issues and thought it would be conducive to settlement negotiations if we dropped the lawsuit, subject to the idea that we can file it again if discussions go nowhere."

A spokesman for governor's office said it was good to see the lawsuit withdrawn so that the transportation bond can go forward.