High Stakes

Handicapping the gambling propositions on the November ballot.

In the decade or so since Indian casinos opened for business in Arizona, gambling has paid off big for Native American tribes.Because the tribes like to play their cards close to the vest, there's no official figure for the amount they pocket through gambling operations. But press reports estimate the total take at the state's 22 casinos to be between $800 million and a billion dollars annually.

Even after expenses, which have been steep thanks to start-up costs, the revenues have provided much-needed dollars to poverty-stricken tribes, paying for everything from basic infrastructure to college scholarships.

Now, with the current compacts between the state and the tribes set to expire next year, the future of gambling in Arizona is in the hands of voters, who have three options on the November 5 ballot. Two of the props, 200 and 202, come from the tribes, while the third, Prop 201, has been sponsored by the dog and horse tracks, which hope to win the chance to install slots at tracks to boost their struggling industry.

If any of the props win, gambling will expand in Arizona to include more slot machines and table games such as poker and blackjack. If more than one passes, it's anyone's guess as to what will happen by the time the courts finish sorting it all out.

"It's a legal mosh pit," says Arizona Attorney General Janet Napolitano, the Democratic nominee for governor who is supporting Prop 202.

NAPOLITANO ISN'T THE only heavy hitter backing Prop 202. It's got endorsements from Gov. Jane Dee Hull, U.S. Sen. John McCain and Maricopa County Sheriff Joe Arpaio, among others. And polls show it to be the favorite among voters; the most recent one, conducted by Northern Arizona University in late September, found that 52 percent of voters supported it and just 31 were opposed.

Sponsored by a 17-tribe alliance working under the aegis of a political committee called Arizonans for Fair Gaming and Indian Self-Reliance, Prop 202 mirrors a deal negotiated over two years between the tribes and Gov. Jane Dee Hull's office. Hull tried to get approval of the plan during this year's legislative session, but it was killed by lawmakers.

After the legislative debacle, the tribes took the streets to gather signatures for an initiative drive. The campaign has proven expensive; as of August 21, the political committee reporting spending $6,376,243, mostly on political consulting. New campaign reports are due this week.

But then again, there's a lot at stake. Since signing compacts with the state in 1993, Arizona tribes have gone from tiny smoke-filled slot houses to sophisticated casinos. The Ak-Chin tribe, for example, recently opened a resort south of Phoenix that features a golf course and other amenities as well as gambling. Last year, the Tohono O'odham nation opened the new Desert Diamond casino off Interstate 10 just north of Green Valley, while the Pasqua Yaqui tribe opened a new Casino del Sol off West Valencia Road. Both feature concert facilities and restaurants as well as casinos.

The proceeds from the gaming operations have improved living conditions on the reservations, say tribal leaders.

"The real basic needs were not being met in these communities--things that most people take for granted, like the police department, fire department, running water, indoor plumbing, paved roads, telephone service," says David LaSarte, spokesman for Prop 202. "You have to have all those things in place before you can even begin to attract other businesses. You can't diversify your economy until you have electricity and that type of infrastructure."

On the Tohono O'odham reservation, gambling revenues have funded the creation of a fire department and pay two-thirds of the tribe's law-enforcement budget, says Tohono Chairman Edward Manuel. The nation has been able to launch a Head Start program for kids and build a community college near Sells, as well as providing funds to begin work on a $14 million nursing home and a $11.2 million clinic for the west end of the reservation.

"We've never had this kind of revenue to address our needs," says Manuel. Although he's tightlipped about the precise amount that gaming brings to the tribe, he says the Tohono O'odham netted about $50 million after expenses in the first year of operation and has seen an increase every year since.

Casinos have also provided much-needed jobs to many tribal members. Statewide, Indian gaming directly employs than 9,200 people, according to a 2001 study by the UA Udall Center for Studies in Public Policy, which puts the casinos on the same level as the mining sector.

Prop 202 would expand the industry even further. Arizona tribes would be able to open up to seven more casinos, bringing to the total statewide to 29. One more casino could be built in Pima County; no more would be allowed in the Maricopa County.

The number of machines allowed per casino would nearly double, rising from the current limit of 500 to 998. Rural tribes that don't have a viable customer base would be able to transfer their slot machine allocation to tribes operating profitable casinos, with tribes negotiating the details of those agreements.

In addition, tribes in urban areas would be licensed to operate 100 poker and blackjack tables per casino, while rural tribes would be limited to 75.

The agreement calls for tribes to share revenue with the state on a sliding scale. From each tribe, the state will get 1 percent of all gross gaming revenue under $25 million; 3 percent between $25 million and $75 million; 6 percent between $75 million and $100 million; and 8 percent in excess of $100 million. The payment, which is estimated to total $89 million in the first year, will be used primarily to cover casino regulation and support education, health care and tourism, as well contributing to cities and towns affected by the casinos.

On the regulatory end, the agreement calls for tribes to allow the state Department of Gaming to disclose the total aggregate gaming revenue, although the details of each tribe's take will remain confidential. The department would also be able to monitor slot machines via computer and would be allowed to regulate card games.

THE COLORADO RIVER Indian Tribes, which run the Blue Water Casino in Parker, are offering voters a different deal. Although they originally were working with the other 17 tribes in the state, they split away late last year to run their own initiative, which appears on the ballot as Prop 200.

Ray Bernal, chairman of Yes for Arizona, says the CRIT leadership became disenchanted by Hull's call for revenue sharing. Convinced that the state government couldn't be trusted, they crafted a plan that does more to benefit tribes, says Bernal.

"Our proposition is about people," says Bernal. "It's about the poverty areas, and the money should stay there. That was the spirit of the whole gaming issue. It wasn't about states glomming onto poverty areas. It's become that because it's the magic bullet that will take care of the deficit. Take it from the Indians. The people who need it the worst. That's not right."

As of August 23, the CRIT had spent more than the 17-tribe alliance, dropping $6,831,683 on the campaign. That's a lot of money riding on what appears a risky gamble. The measure has consistently trailed in the polls; the NAU survey showed that only 30 percent of the voters supported the prop, while 51 percent were opposed.

Prop 200 would open the door to a bigger increase in gambling than Prop 202. Each tribe would be allocated three casinos, for a maximum of 63. The proposal would allow 1,000 slot machines per casino, up to 21,492 statewide. That 1,000-machine ceiling could be exceeded without limit if the tribes transferred slot rights from other tribes.

The proposal would also allow 20 gaming tables per casino, including blackjack, craps, roulette and baccarat. In addition, games like poker that aren't banked by the house would be unregulated.

"If you're a casino, you're a casino," says Bernal. "But we limit the tables to 20 per facility. Now the other tribes are not going to expand to craps and baccarat, because that's real bad, bad, bad. Well, if you want to go that route, it's all bad. It's gaming."

A total of 3 percent of tribes' net income--the money remaining after paying winners and covering the expense of running the casino--goes to fund programs for non-tribal and tribal community college and university scholarships and elderly health care services. The state estimates the first year's take to be $26 million in the first year; Bernal guesses it would be $50 million. "Whose numbers are you going to use?" he asks.

State officials complain the CRIT initiative would roll back casino regulation. The Department of Gaming would no longer have access to security logs and financial records, says spokeswoman Christa Severns.

The tribes would have sole authority to investigate breaches of the compact and would no longer be prohibited from hiring felons, Severns adds. In addition, although the state would receive more money for regulation thanks to the increase in the number of slot machines, officials would be barred from using those funds to file suit against tribes they believed to be violating the compacts. "We would have to go to the Legislature and ask them to appropriate money for that purpose," says Severns.

LaSarte says the regulation issue is a key reason voters should support the 17-tribe prop rather than the CRIT proposal. "With the rolling back of regulation, what they want is their casino to be self-regulating," says LaSarte. "And self-regulating casinos just don't work. Unlimited, unregulated gaming is what you have under Prop 200. And other tribes look at that and say, that's not responsible, and it's not good for us. That's why the other tribes stayed united and moved forward with what they considered a win-win for them and the state."

Bernal dismisses the regulatory issue as "a cheap little political talking point."

"There are a couple of people in that department who are motivated to destroy the CRIT initiative and it's politics, it's from the governor's office," says Bernal, who insists that there are no significant changes in regulation. "What they're saying is that it's not properly regulated now. We say it is."

But Severns says the state has repeatedly clashed with the CRIT over regulatory issues. "We've been in litigation with the CRIT tribe almost since they opened on a number of the issues that are in their compact," Severns says. "They refuse to allow us in the back part of the casino. We had a federal court order that they comply with the compact at this point."

When the CRIT filed suit over ballot language that said Prop 200 did away with state oversight, the judges ruled that through negotiation, the tribes and state could agree to more regulation under the proposed law. But the decision also concluded that "Proposition 200 significantly reduces the authority of the department to insect records and conduct independent investigations...."

ANY EXPANSION OF tribal gaming doesn't sit well with representatives of the state's racetrack industry, who fear it would kill their operations.

"We just can't stay in business competing with those kinds of numbers," say Amy Rezzonico, spokesperson for the Arizona Racetrack Alliance.

Tucson Greyhound Park has felt the impact of casino competition, although the industry was in decline even before the casinos opened. Park officials say the "handle," or the total amount bet at racetrack windows, had been declining even before the casinos opened. After hitting a high of nearly $43.4 million in 1989, it had dwindled to about $34.8 million in 1993, when the tribal compacts were signed. By 1995, the handle had fallen off another $10 million, to about $24.5 million, as the slots lured away casual gamblers.

The track has improved its numbers in recent years, bringing the handle up to more than $38.1 million last year. The increase was the result of adopting simulcasting technology to broadcast races to tracks across the globe and to allow gamblers to bet on races from other tracks. That has meant a significant investment in technology and longer hours of operation; the track used to open for five or six hours at 6 p.m., but now the action begins at 10:30 a.m., six days a week. While the handle may have climbed back up, the expenses have increased considerably and the track takes a smaller percentage on the off-track bets.

It's a familiar pattern that has repeated itself whenever new casinos open near racetracks in the United States. Racetracks have only continued to thrive in the face of such competition in states such as Iowa, Rhode Island and West Virginia, where they're allowed to run slot machines.

To win over the voters, the racetracks have come up an offer they hope voters can't refuse: Let us have slot machines and we'll cut you in for the piece of the action.

Under Prop 201, up to 10 racetracks in the state (two per county) could have 550 to 950 slot machines. The tracks would pay the state 40 percent of the daily take, which the state estimates would provide between $166 million and $174 million in the first year.

The tracks have included expansion for the Native American casinos in their initiative. Each tribe could have up to three casinos and 600 to 2,400 slot machines, as well as 50 to 75 card tables for blackjack and poker.

Unlike Prop 202's sliding scale, Prop 201 would force tribes would pay 8 percent of the daily take to the state--a requirement that could be difficult to enforce under federal law.

The proceeds from Prop 201 would fund a laundry list of programs, including grade-school reading programs, prescription medication for seniors, rural health care, police, fire and emergency services, college scholarships and tourism.

The spokesman for the group is Joe Arizona, an actor who encourages voters to "do the math" and recognize the tracks are offering the best deal.

But Joe has even more ground to make up than the CRIT proposal. Polls have shown voters are reluctant to see slot machines move off reservations; in the recent NAU poll, two-thirds of the voters were opposed to Prop 201.

"We've got a steep hill to climb," concedes Rezzonico.