Guest Series on Tribal Gaming (Part 5)

Today’s entry in our continuing series on Tribal Gaming in California by Jim Marino looks at the false economy of Indian casinos.  For the state, that is.  And any other residents who aren’t fortunate enough to have a profit stake in said casinos.  You know, this has always been one of my particular stumbling blocks.  After all, when one is dazzled by the glitter of Vegas or the sheer amount of cash changing hands in a casino, it’s hard to imagine that they can actually have a negative economic impact on the community.  But, as Marino explains (in this piece originally published in the Santa Ynez Valley Journal), there’s a lot more to the economy of tribal gaming than meets the eye . . .


Santa Ynez Valley Journal
By Jim Marino, Guest Columnist
May 13, 2010

(Part 5)

Last week I wrote about the many negative impacts Indian casinos imposed on the host communities. I wrote about the underhanded way the 59 tribal compacts were negotiated secretly and executed and then the clandestine ratification of them by the passage of the “Legislative Initiative” called Proposition 1A, months after former Gov. Grey Davis signed them and the Legislature approved them illegally with no Constitutional authority to do so.

I also wrote about the worthless content of these “sweetheart” compacts and how they provided no benefit to the state or local communities, except the massive political contributions these casino tribes now make regularly to the many politicians in the hip pocket of their gambling casino benefactors.

These casinos were thrust into communities under the claim the federal Indian Gambling Act [I.G.R.A.] and the state compacts made them a “done deal” and the local communities had nothing to say about it.

But if they didn’t oppose them, these local communities might get some of the gambling dollars in lieu of the many taxes local and state government could not collect. If the local government did not cooperate, on the other hand, they would get no money and often would be accused of being anti-Indian racists and insensitive to the plight of “Indians” in America. After wielding this political stick, these gambling investors and tribes would then wave the carrot, telling local government they would create “jobs” and thus be a great benefit to the community.

This week I’ll discuss the false nature of these claims and the negative economic impacts on every community that are easily identifiable and those that are more difficult to measure. Lastly, I will discuss the manner in which a literal handful of casino Indians and their gambling cartel have totally corrupted the State of California and its 38 million citizens.

One does not have to be an economist to understand the false economy of gambling casinos in general. The vast sums of money lost there in the name of entertainment are often monies lost by people who cannot afford to lose that money. Slot machines are the favorite vehicle to lose money, accounting for about 85 percent of the profits raked in by all casinos.

The difference between a casino in Nevada and an Indian casino is stark: The gambling casinos in Nevada pay taxes; Indian casinos do not. The Nevada casinos are strictly regulated and policed. Indian casinos are not. Nevada casinos require minimum fair rates of return for slot machines. Indian casinos do not and are free to change out the random operating chips in these slot machines whenever they want.

The tremendous costs of providing public services like police, fire, schools, jails, hospitals, public works, social services, etc., used regularly by Indian casinos and related businesses, and the demands placed on infrastructure like roads, bridges, public buildings, and other facilities, are all paid for by the non-Indian taxpayers because these tribal businesses are exempt from property taxes, bed taxes, sales taxes, personal property taxes, corporate taxes and state income taxes among others.

As an example, the Chumash casino grossing between $250 and $300 million a year in gambling losses, is able to evade approximately $20 million in combined taxes annually. The Chumash put sales tax as an item on bills and receipts and in an amount identical to what the state requires for all others, in order to make customers think the tribe pays the state tax monies. But that money does not go to state and local governments; it is kept by the tribe who recently allocated some $3 million from that fund to buy property in Solvang.

Similarly, the per capita profit distributions to each of the 152 tribal members amounts to about a half-million dollars a year to each tribal member. The state income taxes on that amount of money would be almost $9 million a year that the state does not get.

The amount of money that trickles down into the local economy from the salaries of employees and the costs of goods and services is nowhere near enough to make up for lost tax revenues or to pay the tribe’s fair share of the costs to the community for increased demands on public services and infrastructure. Neither are the occasional gifts tribes like the Chumash make usually to the police or fire agencies which gifts are often less than the $2 million the tribe still receives in federal welfare and grant monies every year.

The 59 Grey Davis compacts had a provision requiring the signatory tribes make a good-faith effort to comply with the California Environmental Quality Act [CEQA]. That provision provided that if tribal compliance was unsatisfactory then the Governor could demand a renegotiation of that provision. Tribal compliance was woefully inadequate, so in March 2003 Gov. Davis sent all the tribes a timely notice of required renegotiation. Not long after that, Gov. Davis was recalled for his inept leadership and Gov. Schwarzenegger was elected to replace him. During that campaign, Gov. Schwarzenegger assured the public he would make the casino tribes pay their fair share of the costs of providing public services and infrastructure to them at public expense, describing these casinos as “ripping the State off.” He also stood on the steps of the Capital, waving a broom and assuring the public he was going to sweep the corruption out of Sacramento. Once elected, he did neither.

In fact, he championed five expanded amendments a year or so later, creating compacts allowing those affected tribes to double and triple the number of slot machines and in doing so, making exaggerated claims as to how much money that would bring the state, it hasn’t come close to the amount claimed. In fact a recent court case in the 9th Circuit has held these tribes don’t have to pay any more money, going back to original giveaway compacts Gray Davis negotiated to pay back the tribes for his election and these five tribes can keep the extra slot machines and the revenue from them.

Shortly after Davis was recalled and just before his term was to end prematurely, he withdrew the notice to tribes demanding a renegotiation of the environmental protection clause in the compacts apparently out of pure spite because the public had ousted him from office and leaving environmental protection for all of the casino communities up to the “good-faith efforts” of the casino tribes in their neighborhood.

So despite the initial bluster and pontificating, Schwarzenegger did nothing to improve the false economics of Indian casinos. Most impartial studies, that is those that are not bought and paid for by Indian casinos, indicate that once the construction phase of a casino is finished, that it costs the host community $3.50 for every dollar the casino brings in.

Another economic myth is that by calling the casino a “resort” it will somehow become a destination location for tourists. This myth is debunked by several studies showing the vast majority of gamblers come from a one- to two-hour drive or fewer than 50 miles and come to gamble only.

Therefore, an Indian casino essentially siphons dollars from the immediate surroundings. Those are dollars and local monies not spent in other non-Indian businesses and entertainment venues where such discretionary income would otherwise be spent. Non-Indian businesses nearby often cannot compete with an Indian business that pays no taxes, is exempt from state and local laws, rules and regulations workers compensation and public liability insurance and cannot be sued for any of its misdeeds, no matter how outrageous they may be.

There are also the intangible and subtle negative impacts which are hard to place a monetary value upon. For example gambling addiction, substance abuse, family neglect, financial problems, bankruptcy and foreclosures, increased crimes of theft and embezzlement even increased suicides. Generally, chronic gamblers and addicts are not willing to stand up and admit they have gambled away food and rent money on the foolish belief they might win something in an unregulated, unpoliced and uninspected Indian casino, making monetary assessment of these negative impacts difficult to calculate.

Lastly, how can one measure the negative impacts of the corruption gambling dollars has brought to government and the impossibility of measuring in dollars the loss of integrity and honesty in state and local governments.

So widespread is this corruption I have written a concluding piece for next week’s Valley Journal.

It is more than clear at this point that Indian casinos are a false economy that creates far more detrimental and negative impacts on every community, and those costs and negative impacts are not offset by the creation of a few largely low-paying, unprotected and transient jobs in Indian casinos and businesses, nor by the purchases of goods and services. Nor do they come close to offsetting the millions in lost tax revenues needed to pay for all the public services and infrastructure used regularly by these casino tribes and their businesses.


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