BILL ANALYSIS Ó AB 1020 Page 1 ASSEMBLY THIRD READING AB 1020 (Chesbro) As Amended May 5, 2011 2/3 vote. Urgency GOVERNMENTAL ORGANIZATION 17-0 APPROPRIATIONS 17-0 ----------------------------------------------------------------- |Ayes:|Hall, Nestande, Atkins, |Ayes:|Fuentes, Harkey, | | |Block, Blumenfield, | |Blumenfield, Bradford, | | |Chesbro, Cook, Galgiani, | |Charles Calderon, Campos, | | |Garrick, Gatto, Hill, | |Davis, Donnelly, Gatto, | | |Jeffries, Ma, Perea, V. | |Hall, Hill, Lara, | | |Manuel Pérez, Silva, | |Mitchell, Nielsen, Smyth, | | |Torres | |Solorio, Wagner | | | | | | ----------------------------------------------------------------- SUMMARY : Ratifies a new tribal-state gaming compact (compact) entered into between the State of California and the Habematolel Pomo of Upper Lake (Tribe or HPUL), executed on March 17, 2011. Specifically, this bill : 1)Repeals the ratification of the tribal-state gaming compact entered into between the State of California and the Habematolel Pomo of Upper Lake, executed on September 2, 2009, and ratifies a new tribal-state gaming compact entered into between the State of California and the Habematolel Pomo of Upper Lake, executed on March 17, 2011. 2)Requires 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)States upon all the necessary approvals, the compact will be valid until December 31, 2031. 4)Contains an urgency clause, allowing the bill to take effect immediately upon enactment. FISCAL EFFECT : According to the Assembly Appropriations Committee: 1)Unknown increase in revenue for both the SDF and the RSTF. AB 1020 Page 2 The compact allows HPUL up to 750 gaming devices. 2)HPUL is not required to make an RSTF payment for the first 350 devices. However, it will be required to pay $900 per year for each gaming device in excess of 350. If HPUL places 750 gaming devices in the casino, their annual RSTF contribution will be $360,000. 3)Similarly, the HPUL is not required to make any contributions to the SDF for the first 350 devices. However, they are required to contribute 7% of their net profits for each device between 351 and 600. For devices in excess of 600, they are required to contribute 15% of the net profits. COMMENTS : The Habematolel Pomo of Upper Lake is a federally recognized tribe of Pomo Indians in Lake County, California. The Tribe has 216 enrolled members. The HPUL is governed by an elected, seven-member tribal council. The Habematolel Pomo operate their own housing, environmental, and educational programs, including computer classes and general education diploma preparation. The Tribe's original Rancheria was 564 acres. The Tribe was congressionally terminated in 1956 with the passage of the California Rancheria Act then restored to federal recognition in 1983. Once restored, the Tribe was landless until 2008. The U.S. Department of Interior determined that the Tribe has met the conditions of the restored lands exception Indian Gaming Regulatory Act (IGRA), and on November 13, 2008, accepted 11.24 acres of land in Lake County in trust for the benefit of the Tribe, thus making this 11.24 acre parcel of land eligible for gaming. This compact will supersede a 2009 compact the Tribe signed with former Governor Arnold Schwarzenegger. The state and Tribe executed a tribal-state class III gaming compact on September 2, 2009, which was ratified by the California Legislature with the passage of SB 89 (Budget and Fiscal Review Committee), Chapter 1, Statutes of 2010, and subsequently submitted to the U.S. Department of the Interior for approval. On August 17, 2010, the U.S. Department of the Interior disapproved the 2009 Compact in light of the decision of the U.S. Court of Appeals for the Ninth Circuit in Rincon Band of AB 1020 Page 3 Luiseno Mission Indians of the Rincon Reservation v. Schwarzenegger (9th Cir. 2010) 602 F.3d 1019 (Rincon). The basis for the Department of Interior rejection was that the compact was unfair to the tribe and it violated IGRA by requiring revenue sharing payments to the state General Fund (GF) and to the extent to which revenue sharing and variations on tribal gaming exclusivity constituted "meaningful concessions" under IGRA. The rejection letter stated, "The Department is committed to upholding IGRA and cannot approve a compact where the State imposes a tax, fee, charge, or other assessment on a tribally-owned gaming facility in violation of lGRA, as set forth above. See § 25 D.S.C. 2710(d)(8)." The Governor's office reports that currently, "the State is seeking review of the Rincon decision by the United States Supreme Court and any review of the Rincon decision by the Supreme Court and any potential federal court review of the Department of the Interior's disapproval of the 2009 Compact could take a significant amount of time, with uncertain outcome." The Governor's office further states, "in light of the Tribe's significant needs and investment of resources in furtherance of its proposed gaming project and the limited economic opportunities for the Tribe in light of its geographic location, the State and the Tribe decided to enter into a new compact rather than await the outcome of the Rincon case and any potential federal court review of the August 17, 2010, decision of the Department of the Interior." On March 17, 2011, the Governor and the Habematolel Pomo of Upper Lake signed a new tribal-state gaming compact. According to the Governor's office, "the compact funds programs in local communities that mitigate the impact of gaming activities and address gambling addiction. It includes provisions to protect employees and patrons, and measures that the tribe must take to protect the environment during the construction and operation of gaming facilities. The compact allows the operation of a maximum of 750 slot machines, and up to 15 percent of the casino's net win from them will go to local communities, as well as gambling mitigation and regulation provisions. The compact requires regular audits of gaming operations, and supersedes the 2009 compact between the tribe and the State of California." The compact will run through December 31, 2031. AB 1020 Page 4 Under the terms of the compact, the Tribe may engage in class III gaming only on eligible Indian lands at a single gaming facility located within the boundaries of an 11.24 acre parcel, as the boundaries exist as of the execution date of the compact. This compact will afford the Tribe primary responsibility over the regulation of its gaming facility. The main difference between this compact and the 2009 compact is the amount for revenue sharing requirements between the state and the Tribe and no revenue payments will be paid into the GF. This compact is intended to assist the Habematolel Pomo of Upper Lake in improving the Tribe's socio-economic status, assist in economic self-sufficiency and to promote the stability and security of the Tribe and families. The casino is expected to create approximately 145 or more jobs in Lake County. Other provisions of the compact include : Authorized and permitted class III gaming . The Tribe is authorized to operate only the following gaming activities under the terms and conditions set forth in this compact: 1) gaming devices; 2) any banking or percentage card games; 3) Any devices or games that are authorized under state law to the California State Lottery, provided that the Tribe will not offer such games through use of the Internet unless others in the state are permitted to do so under state and federal law. Nothing shall be construed to preclude the Tribe from offering class II gaming or preclude the negotiation of a separate compact governing the conduct of off-track wagering at the Tribe's gaming facility. Patron protections . The Tribe agrees to binding arbitration before a retired judge for disputes over patron injuries and gambling. Environmental protections : The Tribe must prepare an Environmental Impact Report (EIR) and negotiate mitigation of any off-reservation impacts with Lake County. Employee protections . The Tribe has granted employees the right to collectively bargain. The Tribe has agreed to participate in AB 1020 Page 5 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 standards. The Tribe also has agreed to enhanced employment discrimination provisions. Revenue Contribution : The Tribe shall pay quarterly to the Special Distribution Fund (SDF) created by the Legislature, in accordance with the following schedule: Number of Gaming Devices inPercentage of Average Quarterly Device Base Gaming Device Net Win 1-350 0% 351-600 7% 601-750 15% The payment specified herein has been negotiated between the parties as a fair contribution, based upon the Tribe's market conditions, its circumstances, and the rights afforded under this compact. Revenue Sharing Trust Fund (RSTF) . The Tribe agrees that it will pay into the RSTF on January 30 of the following year for distribution on an equal basis to Non-Gaming and Limited Gaming Tribes the following amounts: Number of Gaming Devices Operated Annual Payment 1-350 $0 per Gaming Device 351-750 $900 per Gaming Device Enhanced audit and compliance review procedures . In addition to providing for an annual independent audit, the amended compact allows the state to conduct its own annual audit and compact compliance review. Inspection of slot machines . Slot machines will have to be tested, approved and certified by an independent gaming test laboratory and the tribal gaming agency to ensure that they are being operated according to specified technical standards. The California Gambling Control Commission (CGCC) would be authorized to annually conduct up to four random inspections of slot machines in operation to confirm that the slot machines are operating in conformance with these standards. AB 1020 Page 6 Minimum internal control standards (MICS) . The Tribe must adopt and comply with standards that meet or exceed the federal National Indian Gaming Commission standards. The MICS are incorporated into the compact as an appendix, which shall be updated periodically by the CGCC and the Tribal Gaming Agency, to ensure the MICS keep up with changing technology and industry standards. Building and safety standards . The casino must meet or exceed the California Building Code and Public Safety Code as applicable to Lake County. 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. Labor provisions . If the Tribe employs 250 or more persons in a tribal casino facility, the provisions of the Tribal Labor Relations Ordinance (TLRO) become effective. TLRO provides for a secret ballot election. When will compact become effective ? 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, 2031 Intergovernmental Agreement and Memorandum of Understanding (MOU) . In June 2006, the Tribe entered into an enforceable written mitigation agreement (Intergovernmental Agreement and MOU) with Lake County that includes provisions for the mitigation of any significant effect on the off-reservation environment, as specified, as well as compensation for public services, including law enforcement, fire protection, emergency medical services, wastewater services, and transportation enhancements. UNITE HERE Memorandum of Agreement . On September 15, 2009, the Habematolel Pomo of Upper Lake negotiated a MOU with the Hotel Employee and Restaurant Employee Union (UNITE HERE), recognizing AB 1020 Page 7 HERE's ability to organize eligible employees of the casino. Otherwise, the compact has the same Tribal Labor Relations Ordinance from the 1999 compacts. Revenue Sharing Trust Fund : The Tribe will continue to receive the $1.1 annual payment from the RSTF established in the 1999 compacts, if the tribe operates less than 350 gaming devices. A tribe operating under 350 gaming devices is considered a "non-compact" tribe and is eligible for revenue payments from gaming tribes under the 1999 compacts. In support . Lake County writes, "The County has established an exemplary government-to-government relationship with the Tribe as a result of the Upper Lake area gaming project. The cooperative working relationship we have enjoyed with this tribe, from day one, has set a new standard in Lake County and is truly a model for others to emulate. The Tribe has gone well beyond the County's expectations in its extraordinary efforts to include County officials and the community at-large in the preparation and planning of its gaming project, over a period of several years. The County, through its agencies and officers, continues to meet regularly with the Tribe to ensure the local community interests are adequately accounted for within the project." Lake County further states, foremost in these planning efforts is the existing MOU between the County and the Tribe that ensures the County's interests are taken into consideration throughout the Tribe's project. The MOU sufficiently provides for many mitigation measures including: 1) payment by the Tribe to the County of a payment in lieu of property tax; 2) wastewater mitigation measures; 3) water mitigation measures; 4) health and safety mitigation measures; 5) fire and safety mitigation measures; and, 6) security and law enforcement mitigation measures. UNITE HERE states, "The Tribe has executed an enforceable organizing agreement that will ensure the organizing rights of the permanent work force. With unemployment hovering around a staggering 20%, many urgently needed new jobs in Lake County are dependent upon this Compact and we are very hopeful that the Tribe will be able to move forward at the earliest possible date." AB 1020 Page 8 Prior legislation . AB 122 (Coto), Chapter 3, Statutes of 2010, ratifies 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, ratifies the tribal-state gaming compact between the State of California and the Habematolel Pomo of Upper Lake, executed on September 2, 2009. Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531 FN: 0000738