BILL ANALYSIS                                                                                                                                                                                                    Ķ



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          CONCURRENCE IN SENATE AMENDMENTS
          AB 787 (Chesbro)
          As Amended  August 9, 2012
          2/3 vote.  Urgency
           
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          |ASSEMBLY:  |     |(May 19, 2011)  |SENATE: |     |(August 23,    |
          |           |     |                |        |37-0 |2012)          |
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                               (vote not relevant)
           
           Original Committee Reference:    G.O.  

           SUMMARY  :  Ratifies the amendment to the tribal-state gaming 
          compact entered into between the State of California and the 
          Coyote Valley Band of Pomo Indians (Tribe), executed on July 25, 
          2012.

           The Senate amendments  delete the Assembly version of this bill, 
          and instead:

          1)  Provide for the legislative ratification of an amended 
          tribal-state gaming compact between the State of California and 
          the Coyote Valley Band of Pomo Indians which was executed on 
          July 25, 2012.  Allows the operation of a maximum of 1,250 
          gaming devices, as defined.

          2)  Require contributions to the Indian Gaming Special 
          Distribution Fund (SDF) and the Revenue Sharing Trust Fund 
          (RSTF), as specified, instead of requiring revenue contributions 
          be made to the General Fund (GF).

          3)  State upon all the necessary approvals, the amended compact 
          will be valid until December 31, 2032, and supersedes a 2004 
          compact between the Tribe and the State of California.

          4)  Add an urgency clause.
           
          EXISTING LAW  :

          1)Provides, under the Indian Gaming Regulatory Act (IGRA), for 
            the negotiation and conclusion of compacts between federally 
            recognized Indian tribes and the state for the purpose of 
            conducting class III gaming activities on Indian lands within 
            a state as a means of promoting tribal economic development, 








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            self-sufficiency, and strong tribal governments.  

          2)Authorizes the conduct of Class III gaming activities to the 
            extent such activities are permitted by state law, a gaming 
            compact has been concluded by a federally recognized tribe and 
            the state, and the compact has been approved by the Secretary 
            of the Interior.  

          3)Limits the operation of Class III gaming activities to Indian 
            lands acquired on or before October 17, 1988.  Provides for 
            certain exceptions to conduct gaming activities on Indian 
            lands acquired after October 17, 1988.

          4)Defines Indian lands to mean all lands within the limits of 
            any Indian reservation, and any lands title to which is either 
            held in trust by the United States for the benefit of any 
            Indian tribe or individual or held by any Indian tribe or 
            individual subject to restriction by the United States against 
            alienation and over which an Indian tribe exercises 
            governmental power.

          5)Requires the state to negotiate to conclude a compact in good 
            faith with an Indian tribe having jurisdiction over the Indian 
            lands upon which the Class III gaming activity is to be 
            conducted.  

          6)Provides the United States district courts with jurisdiction 
            over any cause of action initiated by a tribal government 
            alleging that the state failed to negotiate in good faith to 
            conclude a compact.  

          7)Prescribes the remedy, mediation supervised by the courts, if 
            it is found that the state failed to negotiate in good faith 
            to conclude a compact.  

          8)Authorizes the Governor, under the California Constitution, to 
            negotiate and conclude compacts, subject to ratification by 
            the Legislature.  
           
          AS PASSED BY THE ASSEMBLY  , this bill required the Fish and Game 
          Commission to permit          California Native American tribe 
          members to continue fishing and gathering practices for 
          traditional religious, ceremonial and cultural purposes.

           FISCAL EFFECT  :  Unknown








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           COMMENTS  :  This bill was substantially amended in the Senate and 
          the Assembly-approved provisions of this bill were deleted.  

          On Tuesday, August 21, 2012, the Assembly Governmental 
          Organization Committee conducted an informational hearing on the 
          contents of this amended Compact. 

           Background and purpose of the bill  :  The Coyote Valley Band of 
          Pomo Indians is a federally recognized Indian tribe comprised of 
          just over 400 tribal members on approximately 70 acres located 
          in Mendocino County.  The governing body of the Tribe is the 
          Coyote Valley Tribal Council which is comprised of seven tribal 
          members who are elected by the Tribe's General Council.  The 
          Coyote Valley General Council is comprised of all adult voting 
          members of the Tribe.
           
          On July 25, 2012, Governor Brown and the Tribe concluded good 
          faith negotiations and executed amendments to an existing 
          tribal-state compact for Class III gaming, ratified in 2004, to 
          occur on the reservation. The Governor's Office states, that 
          this amended compact is designed to address fiscal challenges 
          the Tribe has faced and to meet the requirements of federal law 
          that the Tribe be the primary beneficiary of its gaming 
          operation.

          Currently, the Tribe is operating its gaming facility in 
          temporary structures that are decaying and must be completely 
          replaced.  Changes in the economy and increased market 
          competition, both currently and anticipated in the near future, 
          have caused a substantial reduction in revenues generated at 
          casino.  The Tribe maintains that if it were to continue 
          operating under the terms of the 2004 compact, its casino 
          operations would cease to be economically viable.  

          According to the Governor's Office, the Tribe has met all of its 
          financial obligations to the State pursuant to the 2004 Compact. 
           In addition, the Tribe represents that it has no disputes with 
          the County of Mendocino and its primary creditor pursuant to the 
          Tribe's financial agreements with these entities.  The Tribe 
          states that its casino cannot currently generate enough revenue 
          for the Tribe to cover the Gaming Facility's operating expenses, 
          finance the required replacement and expansion of the existing 
          Gaming Facility, and make the payments that the Tribe is 
          obligated to make to the County of Mendocino and the Tribe's 








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          creditor.

          The amended compact requires the Tribe to reach new agreements 
          with the County of Mendocino and the Tribe's primary creditor 
          that will provide material financial concessions that will 
          enable the Tribe to benefit from its gaming activities in the 
          future.  The amended compact recognizes that the Tribe has 
          executed such an agreement with the County of Mendocino and 
          independent negotiations with the primary creditor are underway, 
          as specified.

          The amended compact reduces the number of Class III gaming 
          devices the Tribe is authorized to operate from 2,000 to 1,250 
          slot machines.  The Tribe's current gaming operation utilizes 
          250 of the allowed devices.  Up to 15% of the casino's net win 
          from these machines will go into the SDF to benefit local 
          communities as well as gambling mitigation and regulatory 
          activities.  In addition, the Tribe shall pay an amended fee 
          into the RSTF based on the number of gaming devices utilized for 
          distribution to non-gaming and limited-gaming Tribes in 
          California.  The amended compact also requires regular audits of 
          the Tribe's gaming operations.
           
          The Tribe has stated that they're committed to improving the 
          environment, education status, and the health, safety, and 
          general welfare of its members and the local residents.
           
          Revenue Provisions of the Amended Compact Include  :
           
          No General Fund Revenue in the Compact  :  The compact takes into 
          consideration a recent decision of the United States Ninth 
          Circuit Court of Appeals in Rincon Band of Luiseno Mission 
          Indians of the Rincon Reservation v. Schwarzenegger (9th Cir. 
          2010) 602 F. 3d 1019, which states in essence, that the state is 
          precluded from negotiating with tribal governments for payments 
          into the general fund.  The Rincon decision has changed the 
          dynamics of tribal-state compact negotiations in the State of 
          California.  This "post-Rincon" compact contains no revenue 
          sharing requirement between the state and the Tribe relating to 
          payments into the General Fund.
           
          Prelude to the New Revenue Sharing  :

          Before the new, more advantageous revenue sharing system that 
          has been negotiated as part of the compact amendments can be 








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          enacted, the Tribe is required to renegotiate its financial 
          commitments with Mendocino County and with its primary creditor 
          that will provide "material financial concessions" enabling the 
          Tribe to benefit from its gaming activities.  The amended 
          compact recognizes that the tribe has executed such an agreement 
          with the county and that negotiations with the primary creditor 
          are underway.  The amended compact provides the Tribe with 30 
          months to conclude the negotiations with the primary creditor.

          While those negotiations are occurring, the existing revenue 
          sharing schedule, as specified under the 2004 compact, remains 
          in effect.  The difference being that, instead of depositing the 
          Tribe's contributions into the state's General Fund, revenue 
          will be held in trust by the California Gambling Control 
          Commission (CGCC) for the Tribe for the purpose of assisting the 
          Tribe to restructure and service its debt ("Debt-Service 
          Funds").  If the Governor determines that the Tribe has been 
          successful in its negotiations with the primary creditor, the 
          CGCC shall reimburse all Debt-Service Funds to the Tribe.  At 
          that point, the new revenue contribution calculations as set 
          forth in the amendments shall take effect.

           Interlude to the New Revenue Sharing  :

          For the first four years after commencing operations at the new 
          gaming facility, or if the Tribe operates more than 350 gaming 
          devices in its existing temporary structures, the Tribe shall 
          make payments into the Indian Gaming Special Distribution Fund 
          (SDF) in accordance with the following schedule:

           Number of Machines         Percentage of Average Net Win  
          1-350                    0%
          351-600                  7%
          601-750                  10%
          751-1000                 12%
          1001-1250                15%

          This payment schedule remains in effect for the first four years 
          of operations at a new facility or six years after commencing 
          operation of the 350th machine at the temporary facility, 
          whichever comes first.

           Postlude to the New Revenue Sharing  :

          Following the "interlude" period, the Tribe shall make payments 








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          into the SDF for the duration of the compact according to the 
          following schedule:

           Number of Machines         Percentage of Average Net Win  
          1-250                    0%
          251-350             7%
          351-600             10%
          601-750             12%
          751-1250                 15%

           Contributions to the RSTF and Tribal Nation Grant Fund  :

          Once the new revenue sharing provisions of the amended compact 
          take effect, Tribe will make payments for deposit into the RSTF 
          or the Tribal Nation Grant Fund (TNGF), for distribution to 
          Non-Gaming and Limited-Gaming Tribes pursuant to the following 
          schedule:

           Number of Gaming Devices   Annual Payment Per Gaming Device  
          0-350                    $0
          351-750             $900
          751-1250                 $1950

          If, in the 30 month period allotted for renegotiating with its 
          primary creditor, the Tribe operates more between 1,100 and 
          2,000 machines (as allowed under the 2004 compact) and earns 
          over $50 million in net win, the Tribe shall pay $900 per 
          machine into the RSTF.

          The compact amendments provide that payments made by the Tribe 
          to the RSTF and TNGF "in a proportion to be determined by the 
          Legislature."

          The RSTF funds the tribal governmental programs of non-gaming 
          and limited-gaming tribes by providing payments of $1.1 million 
          per year to non-gaming tribes (defined as those that operate 
          fewer than 350 gaming devices).

          The Tribal Nation Grant Fund was created as part of the Graton 
          Compact, ratified by the Legislature in May, 2012 for the 
          distribution of funds to non-gaming tribes, upon application of 
          such tribes for purposes related to effective self-governance, 
          self-determined community, and economic development.  This fund 
          was conceived to compliment the RSTF.  The designated purpose of 
          the RSTF is rigid and formulaic.  This new fund is designed to 








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          be "fluid" and payments are intended to be made to non-gaming 
          tribes on a "need" basis, upon application by non-gaming tribes.
           
          Other Key Provisions of the Amended Compact  :  

           Authorized Class III Gaming  :  In addition to any Class II games, 
          the Tribe is authorized to operate gaming devices (slot 
          machines), banking or percentage card games, and any devices or 
          games that are authorized under state law to the California 
          State Lottery.  The Tribe may not operate roulette games (table 
          or mechanical) or any game that incorporates the physical use of 
          a die or dice.

           Authorized Facilities and Number of Gaming Devices  :  The Tribe 
          may engage in Class III Gaming at no more than two facilities 
          located within the existing Indian lands of the Coyote Valley 
          Reservation.  The Tribe is entitled to operate up to a total 
          1,250 gaming devices (a reduction from 2,000 in the original 
          2004 compact) if the Tribe operates two facilities, the second 
          one shall have no more than 25 gaming devices.

           Exclusivity :  Provides for the exclusive right to conduct Class 
          III gaming.  In the event the exclusive right to operate Class 
          III gaming is lost and other non-Indian entities legally are 
          able to engage in Class III gaming in Marin, Mendocino, or 
          Sonoma Counties, the Tribe shall have the right to terminate 
          this amended compact and cease gaming activities.  If the Tribe 
          chooses, it may continue under the amended compact except that 
          it may operate no more than 1,100 gaming devices and may 
          terminate its contributions to the SDF, RSTF, and Tribal Nation 
          Grant Fund.  The Tribe would still be expected to pay reasonable 
          costs of regulation.

           Local Agreements  :  Before the commencement of the gaming 
          activities under this amended compact, the Tribe is required to 
          enter into an enforceable written agreement with Mendocino 
          County to provide for the timely mitigation of any significant 
          effect on the off-reservation environment which is attributable 
          to the casino operation.  Furthermore, the Tribe and County must 
          agree on provisions relating to compensation for law 
          enforcement, fire protection, emergency medical services, and 
          any other public services to be provided by the County to the 
          Tribe as a result of the gaming activities.

          The parties must agree on the mitigation of any effect on public 








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          health and public safety attributable to the gaming operation, 
          including any compensation to the County.  Copies of these 
          written agreements shall be provided to the CGCC within 30 of 
          execution.

          On June 7, 2012, the County of Mendocino and the Tribe entered 
          into a Letter Agreement further modifying their original MOU 
          which was signed in January, 2009.  The new agreement accounts 
          for the fact that the Tribe is proposing to modify its original 
          project as a result of the amendments to its compact.  The 
          County and the Tribe have agreed to use the prior MOU and prior 
          "Tribal Environmental Impact Report" (TEIR) for the new project 
          as a basis for further discussions as the project moves forward. 
           Furthermore, the County states that it is prepared to move 
          forward with negotiating an updated Intergovernmental Agreement 
          between the County, Tribe, and Redwood Valley-Calpella Fire 
          Protection District concerning mitigation for off reservation 
          impacts from the casino project.

           Patron protections  :  The Tribe agrees to binding arbitration 
          before a single arbitrator, who shall be a retired judge, for 
          disputes over patron injuries and gambling, as specified. 

           Environmental protections  :  The Tribe is required to prepare a 
          TEIR prior to initiating a development project for a facility, 
          to measure off-reservation environmental impacts including an 
          evaluation of energy consumption.  A completed TEIR shall be 
          filed with the County, the Department of Justice, and the State 
          Clearinghouse.  In the event that no agreement on mitigation is 
          reached, either party may demand binding arbitration.  Failure 
          to prepare an adequate TEIR when required may warrant an 
          injunction or other appropriate equitable relief where 
          appropriate.

           Labor provisions  :  If the Tribe employs 250 or more persons in a 
          tribal casino facility, then the provisions of the Tribal Labor 
          Relations Ordinance (TLRO) become effective.  The TLRO provides 
          for a secret ballot election.  

           Employee protections  :  The Tribe has granted employees the right 
          to collectively bargain.  The Tribe has agreed to participate in 
          the state's worker's compensation system and unemployment 
          insurance program, to comply with federal and state occupational 
          health and safety standards, and to consent to the jurisdiction 
          of the state agencies and courts enforcing all of those 








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          standards.  The Tribe also has agreed to enhanced employment 
          discrimination provisions.

           Public and Workplace Liability  :  The Tribe is required to obtain 
          and maintain a commercial general liability insurance policy 
          which provides coverage of no less than $5 million.  The Tribe 
          is not obligated to waive its sovereign immunity with respect to 
          punitive damages. However, the Tribe agrees to waive sovereign 
          immunity for claims up to the limit of the insurance policy.  
          The amended compact requires the Tribe to prepare a Tort 
          Liability Ordinance stipulating that California Tort Law shall 
          govern claims except for punitive damages.  The ordinance shall 
          provide that the Tribe consents to binding arbitration.  If the 
          tribe fails to prepare a Tort Liability Ordinance, all of 
          California Tort Law applies.  Furthermore, the Tribe agrees that 
          it will participate in the state's unemployment compensation 
          program for providing benefits and unemployment compensation 
          disability benefits to employees at the casino.  The Tribe shall 
          withhold all taxes due to the state, except for Tribal members 
          living on the Tribe's reservation, and forward such amounts to 
          the state.

           Building and safety standards  :  The casino must meet or exceed 
          the applicable Building and Public Safety Codes.

           Enhanced audit and compliance review procedures  :  In addition to 
          providing for an annual independent audit, the compact allows 
          the state to conduct its own annual audit and compact compliance 
          review.

           Inspection of slot machines  :  The amended compact requires that 
          the software used for the play on a gaming device to be tested, 
          approved and certified by an independent or state governmental 
          gaming test laboratory.  Slot machines are required to be tested 
          by a Gaming Test Laboratory and the Tribal Gaming Agency (TGA).  
          The CGCC shall inspect all gaming devices in operation at the 
          casino, including all the software, hardware, and associated 
          equipment and systems that support the operation of the gaming 
          devices, on a random basis four times annually to confirm that 
          they operate and play properly.  The CGCC shall review the 
          Tribe's technical standards, regulations and internal controls 
          applicable to slot machines.

           Minimum internal control standards (MICS)  :  The amended compact 
          requires the Tribe to conduct its Gaming Activities pursuant to 








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          an internal control system that implements MICS that are no less 
          stringent than specified MICS of the NIGC. It requires gaming to 
          operate pursuant to a written internal control system that 
          reasonably assures that assets are safeguarded and 
          accountability over assets is maintained, liabilities are 
          properly recorded and contingent liabilities are properly 
          disclosed, financial records are accurate and reliable, 
          transactions are performed in accordance with the Tribe's 
          authorization.  Furthermore, it requires the Tribe to contract 
          with an independent certified public accountant (CPA) at least 
          annually, at the Tribe's expense, to verify compliance with the 
          Tribe's written internal control standards.

           Problem gambling  :  The Tribe must train supervisors and floor 
          employees on identifying and managing problem gambling, include 
          a responsible gaming message in advertising, provide signage and 
          education materials at conspicuous locations aimed at preventing 
          problem gambling, and adopt a code of conduct derived from the 
          American Gaming Association's code. 

           Tobacco  :  Requires the Tribe to provide a non-smoking area in 
          the gaming facility and not to offer or sell tobacco to anyone 
          that is under 18 years of age, and requires the Tribe to utilize 
          a ventilation system throughout the gaming facility that 
          exhausts tobacco smoke.
           
          Alcohol sales  :  Makes it explicit that the purchase, sale, and 
          service of alcoholic beverages shall be subject to state law 
          (Alcoholic Beverage Control Act). 

           Effective date  :  The compact is not effective until it is 
          ratified in accordance with state law, and notice of approval by 
          the U.S. Secretary of the Interior is published in the Federal 
          Register.  Upon all the necessary approvals, the compact will be 
          valid until December 31, 2032.

           Prior legislation  :  AB 517 (Hall), Chapter 12, Statutes of 2012. 
           Ratified a tribal-state gaming compact between the State of 
                                                                        California and Federated Indians of Graton Rancheria, 
          authorizing the Tribe to commence Class III gaming with up to 
          3,000 gaming devices.  The compact will be valid until December 
          31, 2033.

          AB 1418 (Hall), Chapter 412, Statutes of 2011.  Ratified a 
          revised tribal-state gaming compact between the State of 








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          California and Pinoleville Pomo Nation, authorizing the Tribe to 
          commence Class III gaming with up to 900 gaming devices, 
          executed on August 8, 2011, and requires contributions to the 
          SDF and the RSTF, as specified, instead of requiring revenue 
          contributions to the General Fund.

          AB 1020 (Chesbro), Chapter 27, Statutes of 2011.  Ratified a 
          revised compact between the State of California and the 
          Habematolel Pomo of Upper Lake executed by Governor Brown on 
          March 17, 2011.  This revised compact authorized the Tribe to 
          operate up to 750 slot machines with up to 15% of the net-win 
          from those gaming devices be paid to the SDF and the RSTF, 
          instead of requiring revenue contributions to the GF.

          AB 122 (Coto), Chapter 3, Statutes of 2010.  Ratified a 
          tribal-state gaming compact between the State of California and 
          the Pinoleville Pomo Nation, executed on March 10, 2009.  

          SB 89 (Budget and Fiscal Review Committee), Chapter 1, Statutes 
          of 2010.  Ratified the tribal-state gaming compact between the 
          State of California and the Habematolel Pomo of Upper Lake, 
          executed on September 2, 2009.

          AB 3072 (Price), Chapter 334, Statutes of 2008.  Ratified the 
          first amendment to a tribal-state gaming compact entered into 
          between the State of California and the Shingle Springs Band of 
          Miwok Indians, executed on June 30, 2008.   

          SB 106 (Wiggins), Chapter 37, Statutes of 2007.  Ratified a new 
          compact between the state and the Yurok Tribe of the Yurok 
          Reservation (Yurok).  

          SB 174 (Ducheny), Chapter 39, Statutes of 2007.  Ratified the 
          first compact amendment to the compact between the state and 
          Sycuan.  

          SB 175 (Ducheny), Chapter 38, Statutes of 2007.  Ratified the 
          first compact amendment to the compact between the state and 
          Morongo.  

          SB 903 (Padilla), Chapter 40, Statutes of 2007.  Ratified the 
          first compact amendment to the compact between the state and 
          Pechanga.  

          SB 941 (Padilla), Chapter 226, Statutes of 2007.  Ratified the 








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          first compact amendment to the compact between the state and San 
          Manuel.  

          SB 957 (Torlakson), Chapter 41, Statutes of 2007.  Ratified the 
          first compact amendment to the compact between the state and 
          Agua Caliente.  

          SB 470 (Ducheny), Chapter 527, Statutes of 2006.  Ratified the 
          first amendment to the compact between the state and the Quechan 
          Tribe of the Fort Yuma Reservation (Quechan).

          SB 1117 (Burton), Chapter 856, Statutes of 2004.  Ratified two 
          new and two amended compacts entered into between the state and 
          the following tribes:  Coyote Valley Band of Pomo Indians (new 
          compact); Fort Mojave Indian Tribe (new compact); Buena Vista 
          Rancheria of Me-Wuk Indians (amended compact); and, Ewiiaapaayp 
          Band of Kumeyaay Indians (amended compact).

          AB 687 (Nuņez), Chapter 91, Statutes of 2004.  Ratified 
          amendments to five compacts entered into between the state and 
          the following tribes:  Pala Band of Mission Indians; Pauma Band 
          of Luiseno Mission Indians of the Pauma and Yuima Reservation; 
          Rumsey Band of Wintun Indians; United Auburn Indian Communities; 
          and, Viejas Group of Kumeyaay Indians.  Provides for the 
          issuance of bonds in an amount not to exceed $1.5 billion by the 
          California Infrastructure and Economic Development Bank and 
          requires the net proceeds of the sale of the compact assets to 
          be deposited in the Traffic Congestion Relief Fund and the 
          Transportation Deferred Investment Fund.

          SB 930 (Burton) Chapter 802, Statutes of 2003.  Ratified a 
          compact between the state and the Torres-Martinez Desert 
          Cahuilla Indians.
           
          SB 411 (Ducheny), Chapter 790, Statutes of 2003.  Ratified 
          compacts between the state and the La Posta Band of Diegueno 
          Mission Indians and the Santa Ysabel Band of Diegueno Mission 
          Indians in San Diego County.


           Analysis Prepared by  :    Eric Johnson / G. O. / (916) 319-2531


                                                               FN: 0005516 
          








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