BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1267| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1267 Author: Hall (D), et al. Amended: 4/29/13 in Assembly Vote: 27 - Urgency ASSEMBLY FLOOR : 69-0, 5/2/13 - See last page for vote SUBJECT : Tribal gaming: compact ratification SOURCE : Author DIGEST : This bill ratifies the amendment to a tribal-state gaming compact entered into between the State of California (State) and the Shingle Springs Band of Miwok Indians (Tribe), executed on November 15, 2012. ANALYSIS : Existing law: 1.Provides, under the federal 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, self-sufficiency, and strong tribal governments. Existing law expressly authorizes a number of tribal-state gaming compacts between the State and specified Indian tribes. CONTINUED AB 1267 Page 2 2.Requires, under IGRA, 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. Existing law also 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. Furthermore, existing law 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. 3.Authorizes the Governor, under the California Constitution, to negotiate and conclude compacts, subject to ratification by the Legislature. This bill ratifies the amendment to a tribal-state gaming compact entered into between the State and the Tribe, executed on November 15, 2012. Specifically, this bill: 1.Creates the Shingle Springs Band of Miwok Indians Trust Fund (Trust Fund) in the State Treasury as a special purpose trust fund, to be administered by the California Gambling Control Commission (CGCC), for the receipt and deposit of revenue payments received by the State from the Tribe pursuant to the amended tribal-state gaming compact ratified by this measure and any trust fund agreement executed by the State and the Tribe pursuant to this tribal-state gaming compact, as specified. 2.Appropriates, continuously, from the Trust Fund to the CGCC the amount necessary for specific purposes enumerated in the tribal-state gaming compact and trust fund agreement, including governmental operations of the Tribe and reduction of the Tribe's existing debt related to its gaming facility. Provides for the termination of the Trust Fund on January 1, 2016, or another date, as specified. 3.Provides for the transfer of the amount of revenue payments made by the Tribe to the State during the period between July 1, 2012, and the date the amended tribal-state gaming compact ratified by this measure becomes effective, from the General Fund to the Trust Fund as an initial deposit pursuant to the terms of that tribal-state gaming compact and any trust fund agreement. CONTINUED AB 1267 Page 3 4.Provides that, in deference to tribal sovereignty, certain actions may not be deemed projects for purposes of the California Environmental Quality Act (CEQA). Revenue Provisions of the Amended Compact Revenue contribution . The Tribe shall pay to the State 15% of Net Win generated from the operation of the Tribe's gaming devices. However, in recognition of significant predevelopment and development costs incurred by the Tribe in relation to its gaming facility and other fiscal challenges, the State and the Tribe have agreed to specified payment terms during the duration of the Compact. The amended Compact provides a three-phased procedure for the restructuring of the Tribe's debt and obligations: Phase 1 - Restructuring Period (July 1, 2012 - June 30, 2015); Phase 2 - Repositioning Period (July 1, 2015 - June 30, 2020); and Phase 3 (July 1, 2020 - June 30, 2032). Restructuring Period (Phase 1 ). From July 1, 2012, through June 30, 2015, the Tribe shall make no revenue contributions that are payable to the State's General Fund, instead during this phase the Tribe will transmit to the State the same amounts it would have paid under the 2008 Compact (20% - 25% of Net Win) and those payments will be directed to the Trust Fund, which is created as part of this amended Compact. The Tribe will make revenue payments under the 2008 Compact terms until it restructures or refinances financial obligations with the El Dorado County and management company, as defined. The Trust Fund exists for the duration of the restructuring period and can be terminated early or extended by written agreement between the Tribe and the State, as specified. Additionally, the Trust Fund is continuously appropriated to the CGCC which is charged with administering it. Distributions shall be made by the CGCC for the governmental operations of the Tribe, including, tribal administration, health care, education, and economic development. Furthermore, the Trust Fund is to assist the Tribe in reducing its existing debt including the payment of reasonable costs in connection with refinancing or restructuring its debt load, terminating its management agreement, as defined, and any related litigation or CONTINUED AB 1267 Page 4 administrative proceedings resulting from its current difficulties. Repositioning Period (Phase 2 ). From July 1, 2015, through June 30, 2020, the Tribe shall be obligated to pay to the State 15% of Net Win generated from the operation of the Tribe's gaming devices. However, during this period, the Tribe shall receive a credit in the following amounts: --------------------------------------------------------- | |Annual Amount of | Amount of | | Repositioning Year | Repositioning | Quarterly | | | Credit | Repositioning | | | | Credit | |--------------------+-----------------+------------------| |July 1, 2015 - June | $28,000,000 | $7,000,000 | | 30, 2016 | | | |--------------------+-----------------+------------------| |July 1, 2016 - June | $27,000,000 | $6,750,000 | | 30, 2017 | | | |--------------------+-----------------+------------------| |July 1, 2017 - June | $26,000,000 | $6,500,000 | | 30, 2018 | | | |--------------------+-----------------+------------------| |July 1, 2018 - June | $26,000,000 | $6,500,000 | | 30, 2019 | | | |--------------------+-----------------+------------------| |July 1, 2019 - June | $25,000,000 |$6,250,000 | | 30, 2020 | | | --------------------------------------------------------- Phase 3 . From July 1, 2020, through June 30, 2032, the Tribe will be obligated to pay to the State 15% of the Net Win generated from the operation of the Tribe's gaming devices for deposit into the General Fund, as specified in the amended compact. The Tribe shall receive a credit for payments made to the Indian Gaming Special Distribution Fund (SDF). SDF. The Tribe agrees to pay its pro-rata share of reasonable state regulatory costs and other obligations agreed to by the State under the amended Compact. (The Tribe receives a credit for payments made to the SDF.) Payments to the Revenue Sharing Trust Fund (RSTF) or the Tribal CONTINUED AB 1267 Page 5 Nation Grant Fund . The Tribe shall pay into the RSTF or the Tribal Nation Grant Fund, for distribution to Non-Gaming and Limited-Gaming Tribes an amount equal to 3% of the Net Win. The "RSTF" is a fund created by the Legislature for the benefit of Non-Gaming Tribes and Limited-Gaming Tribes. The "Tribal Nation Grant Fund" is a fund, that once created by the Legislature, may make discretionary distribution of funds to Non-Gaming Tribes and Limited-Gaming Tribes upon application of such tribes for purposes related to effective self-governance, self-determined community, and economic development. Meaningful concessions . The Tribe agrees that the State is giving a "meaningful concession" to it in that the Tribe's revenue sharing payments will be significantly reduced over the term of the amended Compact, and the State has agreed to assist the Tribe in achieving a significant reduction in the debt associated with the Tribe's casino. Renegotiation of terms with creditors. The amended Compact requires the Tribe to enter into the following written agreements with terms and conditions that will materially improve the Tribe's financial condition or otherwise provide such financial concessions as necessary to implement the intent of the amended Compact (1) with the County of El Dorado - for restructuring the amounts and application of the local government payments made by the Tribe to the County; (2) with Lakes Entertainment Inc., the Tribe's casino management company - for the restructuring of the debt the Tribe owes the company (due no later than December 31, 2015); and (3) within four years from the effective date of the amended Compact, the Tribe must enter into written agreements that effectuate a refinancing or a restructuring of the bond debt. The Tribe is required to present evidence to the Governor that the written agreements referenced above have been executed and the Governor must determine whether such agreements and other supporting materials satisfy the amended Compact terms and conditions. If the Tribe satisfactorily complies with the conditions of repositioning its financial commitments to major creditors, the Tribe may apply the amended revenue contributions, as detailed in the amended Compact. If not, the Tribe will be required to revert back to the 2008 Compact terms. Other key provisions of the amended Compact relate to (1) CONTINUED AB 1267 Page 6 authorized class III gaming; (2) authorized facilities and number of gaming devices; (3) the exclusive right to conduct Class III gaming; (4) local agreements; (5) patron protections; (6) environmental protections; (7) labor provisions; (8) employee protections; (9) public and workplace liability; (10) building and safety standards; (11) enhanced audit and compliance review procedures; (12) inspection of gaming devices; (13) Minimum Internal Control Standards; (14) problem gambling; (15) tobacco; (16) prohibitions regarding minors; (17) alcohol sales; and (18) tribal ownership, management, and control of gaming operations. The amended 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 June 30, 2032. Background The Shingle Springs Band of Miwok Indians is an approximately 500-member federally recognized tribe located on 160-acres in El Dorado County. The Tribe operates the Red Hawk Casino, which officially opened in December 2008. Currently, the Tribe offers over 2,250 gaming devices, table games, a poker room and a Bingo area, including several restaurants and bars within the casino facility. The Tribe's original Compact with the State was executed in 1999, but the Tribe was never able to construct a casino pursuant to the terms of that Compact due to the length of time required to obtain pre-development entitlements and subsequent litigation related to the pre-development entitlements. On June 30, 2008, former Governor Schwarzenegger and the Tribe concluded the first set of amendments to the original Compact that was initially executed in 1999. The 2008 Compact amendments, among other things, significantly increased the gaming facility's earning potential and revenue payments to the State. Prior to 2008, the Tribe spent several years and significant resources in developing a gaming facility that would provide a revenue stream to improve the environment, educational status, and the health, safety and general welfare of the Tribe's members. Since the time that the State and the CONTINUED AB 1267 Page 7 Tribe entered into the 2008 amended Compact, circumstances in the economy and market competition changed, which caused and continue to cause, a substantial reduction in revenues generated at the casino in comparison to those that were anticipated. The Compact's preamble indicates that the Tribe should be the primary beneficiary of the casino, but since the opening of the gaming facility, the State and other government entities have received payments from the Tribe that far exceed the amount that the Tribe has received for tribal governmental operations or to otherwise meet the basic needs of its tribal citizens. The Governor's Office affirms that after review of the Tribes financial situation, the Tribe and the State agree that if the Tribe continues to pay revenue to the State pursuant to the terms of the 2008 amended Compact then the positive impact of the Tribe's investment would not be fully realized and the Tribe would not materially benefit from the casino. Additionally, the gaming facility itself would not be economically viable. The Compact's preamble contends that while the Tribe has met all of its financial obligations to the State pursuant to the 2008 amended compact, the Tribe maintains that its casino cannot currently or in the coming years generate enough revenue for the Tribe to cover its financial obligations related to the gaming facility, including its operating expenses, payments to State and local government entities, notes that come due in the year 2015, and amounts owed to its management company, and other financial obligations. In order for the Tribe to be successful in improving its fiscal condition and meeting its short and long-term financial obligations, the State and the Tribe agree that the Tribe must not only change the structure of the Tribe's payment obligations to the State, but must also seek, and obtain, restructuring of its respective financial arrangements with local governments and the Tribe's primary creditors. In November 2012, the Tribe signed a revised Memorandum of Understanding and Intergovernmental Agreement with El Dorado County. The Tribe and the State agree that this amended Compact is designed to (a) enhance the Tribe's economic development and self-sufficiency; (b) protect the interests of the Tribe and its members, the surrounding community, and the California public; CONTINUED AB 1267 Page 8 and (c) promote and secure long-term stability, mutual respect, and mutual benefits. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: No SUPPORT : (Verified 5/8/13) El Dorado County Board of Supervisors Shingle Springs Band of Miwok Indians UNITE-HERE Yocha Dehe Wintun Nation ASSEMBLY FLOOR : 69-0, 5/2/13 AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom, Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley, Daly, Dickinson, Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray, Grove, Hall, Harkey, Holden, Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein, Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk, Yamada, John A. Pérez NO VOTE RECORDED: Atkins, Dahle, Donnelly, Hagman, Roger Hernández, Jones, Pan, Skinner, Torres, Williams, Vacancy MW:nl 5/9/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED