BILL ANALYSIS Ķ AB 787 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 787 (Chesbro) As Amended August 9, 2012 2/3 vote. Urgency ----------------------------------------------------------------- |ASSEMBLY: | |(May 19, 2011) |SENATE: | |(August 23, | | | | | |37-0 |2012) | ----------------------------------------------------------------- (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, AB 787 Page 2 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 AB 787 Page 3 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 AB 787 Page 4 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 AB 787 Page 5 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 AB 787 Page 6 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 AB 787 Page 7 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 AB 787 Page 8 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 AB 787 Page 9 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 AB 787 Page 10 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 AB 787 Page 11 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 AB 787 Page 12 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. 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