BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 1356| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 1356 Author: De León (D), et al. Amended: 8/18/14 Vote: 27 - Urgency NOTE: On August 21, 2014, the Senate Governmental Organization Committee held an informational hearing on the amended tribal-state compact between the State of California and the Viejas Band of Kumeyaay Indians. PRIOR VOTES NOT RELEVANT ASSEMBLY FLOOR : 74-0, 8/22/14 - See last page for vote SUBJECT : Tribal gaming: compact ratification SOURCE : Viejas Band of Kumeyaay Indians DIGEST : This bill ratifies the amended and restated tribal-state gaming compact (Compact) between the State of California and the Viejas Band of Kumeyaay Indians, executed on August 12, 2014. Assembly Amendments delete the prior version of the bill relating to counterfeit goods, and insert the current language; change the author from Senator Lieu to Senator De Leon; add coauthors; and add an urgency clause. ANALYSIS : CONTINUED SB 1356 Page 2 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, self-sufficiency, and strong tribal governments. 2. Expressly authorizes a number of tribal-state gaming compacts between the State and specified Indian tribes. 3. 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. 4. 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. 5. 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 U.S. against alienation and over which an Indian tribe exercises governmental power. 6. 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. Provides the U.S. 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. 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. 7. Authorizes the Governor, under the California Constitution, CONTINUED SB 1356 Page 3 to negotiate and conclude compacts, subject to ratification by the Legislature. This bill ratifies the amended and restated Compact between the State and the Viejas Band of Kumeyaay Indians (Tribe), executed on August 12, 2014. Specifically, this bill: 1. Authorizes the Tribe to operate a maximum of 4,500 slot machines at not more than two gaming facilities, and only on those Indian lands held in trust for the Tribe as of the execution date of this Compact, as described. The Tribe may combine and operate in each gaming facility any forms and kinds of gaming permitted under law, except to the extent limited under IGRA and any applicable regulations adopted pursuant thereto, this Compact, or the Tribe's gaming ordinance. 2. Converts the Tribe's current fixed revenue share payment to the State (which required the Tribe to pay a flat fee of $17.4 million to the State's General Fund each year) into a percentage-based payment in order to account for the impact on revenue caused by changing economic conditions and to enhance the economic development, long-term stability and self-sufficiency of the Tribe. The percentage-based payment structure ensures that the Tribe remains the primary beneficiary of its gaming operation as required by federal law. The Department of Finance estimates that the State will receive reduced revenue of about $3 million to $5 million annually if this Compact is ratified and casino operations perform at the current level. 3. Supersedes a 2004 amended compact (AB 687, Nuñez, Chapter 91, Statutes of 2004) between the Tribe and the State. The 2004 amended compact replaced the Tribe's initial compact signed in 1999 with Governor Gray Davis, who negotiated gambling agreements with more than 60 tribes. The 2004 amended compact allowed the Tribe to operate an unlimited number of Class III slot machines in exchange for payments to the state General Fund for machines added after ratification of the compact. Under the 1999 compact, the Tribe could not operate more than 2,000 gaming devices. Unlike the 1999 compact, the 2004 amended compact required payments to the General Fund, as defined. The 2004 amended compact also required the Tribe to negotiate with local governments CONTINUED SB 1356 Page 4 concerning enforceable memoranda of understanding (MOU's) to address environmental, public safety, infrastructure, and other demands related to gaming operations. Additionally, under the 2004 amended compact the Tribe agreed to pay $2 million into the Revenue Sharing Trust Fund (RSTF). The negotiated MOU's, RSTF disbursement, and designated payments into the General Fund are still mandated in this Compact. 4. Provides that, in deference to tribal sovereignty, certain actions may not be deemed projects for purposes of the California Environmental Quality Act. 5. Provides that once effective (legislative ratification and federal approval required), this Compact will be in full force and effect for state law purposes until December 31, 2030 - this date remains unchanged from the Tribe's 2004 amended compact. Background The Viejas Band of Kumeyaay Indians, one of the remaining 12 bands of the Kumeyaay Indian Nation (Barona, Campo, Ewiiaapaayp, Inaja-Cosmit, Jamul, LaPosta, Manzanita, Mesa Grande, San Pasqual, Santa Ysabel, Sycuan and Viejas) is a 252-member federally recognized tribe located on a 1,600-acre reservation in the Viejas Valley, east of the community of Alpine in San Diego County, California. The Viejas Band has a "trust" relationship with the federal government, enforces federal laws and participates in issues pertinent to its land and people on a government-to-government basis. The Tribe notes that "membership in the Viejas Band of Kumeyaay Indians is determined by direct descent from the families forced from their original Capitan Grande Reservation, who contributed their share from the sale of their lands for the El Capitan Reservoir to purchase the current reservation in the Viejas Valley." According to information provided by the Tribe, the Viejas Band has experienced tremendous economic prosperity that has successfully helped increase access to health care, education and general welfare to its people and their children, who will carry on the Kumeyaay culture for years to come. Under the umbrella of Viejas Enterprises, the Tribe's properties include Viejas Casino & Resort; Viejas Outlet Center, a 37-acre shopping center; Alpine Springs Recreational Vehicle Park; and Ma-Tar-Awa CONTINUED SB 1356 Page 5 Recreational Vehicle Park, the Tribe's first business venture that opened in 1976. Through revenues brought in by the Tribe's business enterprises, "the Tribe has been able to reinvest millions of dollars back into its community, with 90 percent of dollars generated at Viejas Casino & Resort returning to the local and state economy." The Tribe's casino has approximately 2,000 slot machines, up to 86 table games, four restaurants, a deli, a bingo operation, an off-track betting facility, lounge, concert venues and a poker room. The Tribe opened a five-story, $36 million hotel in March 2013 that is located on the east side of the casino with 99 rooms and 29 suites, a pool with a patio area and cabanas, a business center, fitness room, and other amenities. In 1999, the Tribe and the State entered into a tribal-state compact, which enabled the Tribe, through revenues generated by its gaming operation, to improve the governance, environment, education, health, safety, and general welfare of its citizens, and to promote a strong tribal government, self-sufficiency, and to provide essential government services to its citizens. In 2004, the Tribe and the State via Governor Schwarzenegger entered into an amendment to the 1999 compact, which, among other things, significantly increased the gaming operation's earning potential and revenue payments to the State. The Compact's preamble states that since the time that the State and the Tribe entered into the 2004 amended compact, circumstances in the overall economy and the casino gaming market have changed, which have caused and will continue to cause a substantial reduction in revenues generated by the gaming operation in comparison to those that were expected when the parties entered into the 2004 amended compact. The Compact's preamble contends that the fixed quarterly revenue share payments required of the Tribe under the 2004 amended compact have not adjusted to changed economic and casino gaming market conditions. Additionally, the Compact's preamble notes that after review of the Tribe's financial condition, the Tribe and the State agree that if the Tribe continues to make revenue sharing payments to the State at the fixed level required by the 2004 amended CONTINUED SB 1356 Page 6 compact, the Tribe would not be able to adequately fund its Tribal government, to the detriment of the Tribe's ability to provide for the governance, environment, education, health, safety, and general welfare of the Tribe's citizens, and would therefore be incompatible with the purposes and policies of IGRA, Proposition 1A, the 1999 compact, and the 2004 amended compact. The Tribe and the State agree that this Compact is designed to enhance the Tribe's economic development and self-sufficiency and to protect the health, safety and general welfare interests of the Tribe and its citizens, the surrounding community, and the California public, and to promote and secure long-term stability, mutual respect, and mutual benefits. The Compact's preamble indicates that the State and the Tribe recognize that the exclusive rights the Tribe enjoys under this Compact provide a unique opportunity for the Tribe to continue to engage in the gaming activities in an economic environment free of competition from the operation of slot machines and banked card games on non-Indian lands in California and that this unique economic environment is of great value to the Tribe. Furthermore, the Compact's preamble states the Tribe and the State share an interest in mitigating the off-reservation impacts of the gaming facility, affording meaningful consumer and employee protections in connection with the operations of the gaming facility, fairly regulating the gaming activities conducted at the gaming facility, and fostering a good-neighbor relationship. Key Provisions of the Compact Scope of Class III Gaming Authorized . The Tribe is authorized to operate up to 4,500 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. The Tribe shall not engage in Class III Gaming that is not expressly authorized in the Compact. Exclusivity . Provides that in the event the exclusive right of Indian tribes to operate Class III gaming in California pursuant CONTINUED SB 1356 Page 7 to the California Constitution is nullified by the enactment, amendment, or repeal of a state statute or constitutional provision or the conclusive and dispositive judicial construction of a statute or the state Constitution by a California appellate court after the effective date of this Compact, that gaming devices may lawfully be operated by non-Indian entities, the Tribe shall have the right to: (1) terminate this Compact, in which case the Tribe will lose the right to operate Class III gaming authorized by this Compact or (2) continue under this Compact with entitlement to a reduction of the rates specified in the chart below following conclusion of negotiations, to provide for (a) compensation to the State for the reasonable costs of regulation, as defined; (b) reasonable payments to local governments impacted by tribal government gaming; (c) grants for programs designed to address gambling addiction; and (d) such assessments as may be permissible at such time under federal law. Amendment by Agreement . The terms and conditions of this Compact may be amended at any time by the mutual and written agreement of both parties, provided that each party voluntarily consents to such negotiations in writing. Any amendments to this Compact shall be deemed to supersede, supplant and extinguish all previous understandings and agreements on the subject. Revenue Contributions to the State and the Indian Gaming Special Distribution Fund (SDF) . The Tribe shall pay to the State quarterly a revenue contribution, which shall be based upon the average number of gaming devices in operation during such quarter, equal to a percentage of the "net win" from such gaming devices according to the following schedule: ----------------------------------------------------------------- | Average Number of Gaming Devices in Operation During Quarter | | Percentage of | | Gaming Devices' Net Win | | | | 1 to 2,000 | | 8% | | | | 2,001 to 2,500 | | 10% | | | CONTINUED SB 1356 Page 8 | 2,501 to 3,000 | | 12% | | | | 3,001 to 3,500 | | 14% | | | | 3,501 to 4,000 | | 16% | | | | 4,001 to 4,500 | | 18% | | | | | | | ----------------------------------------------------------------- During the first five years in which this Compact is in effect, a portion of the Tribe's quarterly revenue contribution to the State will be deposited in the SDF in the amounts specified below: (1)During years one and two, $5 million will be allocated to the SDF; (2)During year three, $4 million will be allocated to the SDF; (3)During year four, $3 million will be allocated to the SDF; and (4)During year five, $2 million will be allocated to the SDF. This requirement does not alter the total amount of the contribution that the Tribe pays to the State, but specifies the principal fund to which the Tribe's payments are deposited. During each year in which the Compact is in effect, the Tribe's pro rata share of the state's regulatory costs will be deducted from the Tribe's quarterly revenue contribution to the State. The Tribe's pro rata share payment will be paid into the SDF, as specified. In each year of this Compact, any amount of the Tribe's quarterly revenue contributions due to be paid to the SDF that is remaining after the Tribe's payments are made and deposited CONTINUED SB 1356 Page 9 into the SDF will go to the General Fund. "Net Win" is defined as the drop from gaming devices, plus the redemption value of expired tickets, less fills, less payouts, less participation fees (e.g., payments made to gaming resource supplies on a periodic basis by the gaming operation for the right to lease or otherwise offer for play gaming devices), less that portion of the gaming operation's payments to a third-party wide-area progressive jackpot system provider that is contributed only to the progressive jackpot amount. Revenue Sharing Trust Fund (RSTF) or Tribal Nation Grant Fund (TNGF) Contribution . The Tribe shall continue to maintain its existing licenses to operate gaming devices by paying to the State Gaming Agency for deposit into the RSTF or the TNGF, within 30 days of the end of each calendar quarter, $500,000.00. If any portion of the fee payment is overdue after the State Gaming Agency has provided written notice to the Tribe of the overdue amount with an opportunity to cure of at least 15 business days, and if more than 60 calendar days have passed from the due date, then the Tribe shall cease operating all of its gaming devices until full payment is made. This particular revenue contribution mirrors a provision in the 2004 amended compact which required the Tribe to make annual payments in the amount of $2 million to the RSTF. Quarterly Revenue Contribution Report . At the time each quarterly payment is due, the Tribe shall submit to the State a report, prepared and certified by an authorized representative of the gaming operation, as defined. Gaming Facility Mitigation and Local Intergovernmental Agreements . Before the commencement of a project, and no later than the issuance of the final Tribal Environmental Impact Report (TEIR) to the County, the Tribe shall offer to commence negotiations with the County, and upon the County's acceptance of the Tribe's offer, shall negotiate with the County and shall enter into an enforceable written agreement with the County with respect to the following matters: (1) Provisions providing for the timely mitigation of any significant effect on the off-reservation environment, as defined; (2) Provisions relating to compensation for law enforcement, fire protection, emergency medical services and any other public services to be provided by CONTINUED SB 1356 Page 10 the County to the Tribe for the purposes of the Tribe's gaming operation as a consequence of the project; (3) Provisions providing for reasonable compensation for programs designed to address gambling addiction; and, (4) Provisions providing for mitigation of any effect on public safety attributable to the project, including any compensation to the County as a consequence thereof. Additional Provisions of the Compact Gaming Ordinance and Regulations . All gaming activities conducted under this Compact shall, at a minimum, comply with (1) a gaming ordinance duly adopted by the Tribe and approved in accordance with IGRA, (2) all rules, regulations, procedures, specifications, and standards duly adopted by the National Indian Gaming Commission (NIGC), the Tribal Gaming Agency, and the State Gaming Agency, and (3) the provisions of this Compact, as specified. Environmental Protections . The Tribe must prepare a TEIR and negotiate mitigation of any off-reservation impacts. The Tribe's failure to prepare an adequate TEIR when required shall be deemed a breach of this Compact and furthermore shall be grounds for issuance of an injunction or other appropriate equitable relief. A completed TEIR must be filed with the County, the City, the Department of Justice, the State Clearinghouse and the State Gaming Agency. Also, provides for binding arbitration if an intergovernmental agreement with the County is not entered into within 55 days of the submission of the final TEIR, or such further time as the Tribe or the County may mutually agree in writing. Any party may demand binding arbitration before a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association as set forth in the Compact. Employee Protections . The Tribe may create and maintain a system that provides redress for employee work-related injuries through requiring insurance or self-insurance, which system must include a scope of coverage, availability of an independent medical examination, right to notice, hearings before an independent tribunal, a means of enforcement against the employer, and benefits comparable to those mandated for comparable employees under state law. Not later than the effective date of this Compact, the Tribe will advise the CONTINUED SB 1356 Page 11 State of its election to participate in the statutory workers' compensation system or, alternatively, will forward to the State all relevant ordinances that have been adopted and all other documents establishing the system and demonstrating that the system is fully operational and compliant with the comparability standard, as described. Independent contractors doing business with the Tribe must comply with all state workers' compensation laws and obligations. The Tribe agrees that its gaming operation will participate in the State's program for providing unemployment compensation benefits and unemployment compensation disability benefits with respect to employees employed at the gaming facility, as described. The Tribe has also agreed to adopt and comply with standards no less stringent than federal and state employment discrimination laws. 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 and Testing of Slot Machines . Slot machines will have to be tested, approved and certified by an independent gaming test laboratory or state governmental gaming test laboratory to ensure they are being operated according to specified technical standards. Also, requires the Tribal Gaming Agency to maintain adequate records that demonstrate compliance with software and hardware specifications. The State Gaming Agency 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. Compliance Enforcement . It is the responsibility of the Tribal Gaming Agency to conduct on-site gaming regulation and control in order to enforce the terms of this Compact, IGRA, any applicable NIGC and State Gaming Agency regulations, and the tribal gaming ordinance with respect to gaming operation and facility compliance, and to protect the integrity of the gaming activities, the reputation of the Tribe and the gaming operation for honesty and fairness, and the confidence of patrons that tribal government gaming in California meets the highest standards of regulation and internal controls. To CONTINUED SB 1356 Page 12 meet those responsibilities, the tribal gaming agency shall adopt and enforce regulations, procedures, and practices. Labor Provisions . The Tribe entered into a collective bargaining agreement with a labor organization (Communications Workers of America, CWA Local 9400) before the enactment of its Tribal Labor Relations Ordinance (TLRO), which governs the organizational and representational rights of the employees at the tribal casino and gaming facility. The Tribe has renewed that collective bargaining agreement and the parties agree that no change in the TRLO is necessary to address employee rights. Prohibitions regarding Minors . The Tribe shall prohibit persons under the age of 21 years from being present in any room or area in which gaming activities are being conducted unless the person is en route to a non-gaming area of the gaming facility, or is employed at the Gaming Facility in a capacity other than as a gaming employee. Alcohol Provisions . Makes it explicit that the purchase, sale, and service of alcoholic beverages shall be subject to state law - the Alcoholic Beverage Control Act. Protection of Public . The Tribe will not conduct Class III Gaming in a manner that endangers the public health, safety, or welfare; provided that nothing herein shall be construed to make applicable to the Tribe any state laws or regulations governing the use of tobacco. Health and Safety Standards . The Tribe has agreed to adopt and comply with state public health standards for food and beverage handling and federal water quality and safe drinking standards applicable to California. Building Codes and Fire Safety . In order to assure the protection of the health and safety of all gaming facility patrons, guests, and employees, the Tribe shall adopt or has already adopted, and shall maintain throughout the term of this Compact, an ordinance that requires any covered gaming facility construction to meet or exceed the California Building Code and the Public Safety Code applicable to the county in which the gaming facility is located. CONTINUED SB 1356 Page 13 Emergency Services Accessibility . The Tribe must make reasonable provisions for adequate emergency fire, medical, and related relief and disaster services for patrons and employees. Effective Date . The Compact shall not be effective unless and until all of the following have occurred: (1) The Compact is ratified by statute in accordance with state law and (2) Notice of approval or constructive approval is published in the Federal Register. Once effective, this Compact shall be in full force and effect for state law purposes until December 31, 2030. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 8/22/14) Viejas Band of Kumeyaay Indians (source) Barona Band of Mission Indians Pala Band of Mission Indians Pechanga Band of Luiseño Indians Rincon Band of Luiseño Indians Santa Ynez Band of Chumah Indians Sycuan Band of the Kumeyaay Nation United Auburn Indian Community ASSEMBLY FLOOR : 74-0, 8/22/14 AYES: Achadjian, Alejo, Allen, Ammiano, Bloom, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dababneh, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray, Grove, Hagman, Harkey, Roger Hernández, Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein, Mansoor, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea, John A. Pérez, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams, Atkins NO VOTE RECORDED: Bigelow, Dahle, Hall, Ridley-Thomas, Yamada CONTINUED SB 1356 Page 14 MW:k 8/22/14 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED