BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1767| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1767 Author: Bigelow (R) Amended: 6/30/16 in Senate Vote: 27 - Urgency PRIOR VOTES NOT RELEVANT NOTE: On August 9, 2016, the Senate Governmental Organization Committee held an informational hearing on the amended tribal gaming compact entered into between the State of California and the Jackson Rancheria Band of Miwuk Indians. SUBJECT: Tribal gaming: compact ratification SOURCE: Author DIGEST: This bill ratifies the amended tribal-state gaming compact (Amended Compact) entered into between the State of California and the Jackson Rancheria Band of Miwuk Indians (hereafter "Tribe") executed on June 22, 2016. Additionally, this bill provides that, in deference to tribal sovereignty, certain actions are not deemed projects for purposes of the California Environmental Quality Act (CEQA); and, stipulates, except as expressly provided, that none of the provisions shall be construed to exempt a city, county, or city and county, or the Department of Transportation from CEQA requirements. ANALYSIS: AB 1767 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)Authorizes expressly a number of tribal-state gaming compacts between the State of California 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 AB 1767 Page 3 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, to negotiate and conclude compacts, subject to ratification by the Legislature. This bill ratifies the Amended Compact entered into between the State of California and the Jackson Rancheria Band of Miwuk Indians executed on June 22, 2016. The Amended Compact conforms the revenue sharing provisions of the Tribe's existing compact (ratified in 2015) to those of more recent compacts. All other provisions of the existing compact remain intact. In 2015, the Tribe entered into a new tribal-state compact that authorized it to operate a maximum of 1,800 gaming devices (slot machines) at no more than two gaming facilities, and only on those Indian lands held in trust for the Tribe as of the execution date of the compact, as described. Under terms of the 2015 compact, the Tribe agreed to contribute into the Special Distribution Fund (SDF) its pro rata share of the State's regulatory costs which include programs that provide education, counseling and treatment for Californians affected by problem gambling. Additionally, the Tribe agreed to contribute 8% of the casino's net win from its operation of gaming devices in excess of three hundred fifty (350) to the Revenue Sharing Trust Fund (RSTF) or the Tribal Nation Grant Fund (TNGF) to be shared with tribes that are not gaming or that otherwise are not substantially benefiting from gaming. Also, under terms of the 2015 compact, during any quarter in which the Tribe operates less than nine hundred (900) gaming devices the Tribe must pay to the State the sum paid in the most recent quarter in which it operated at least nine hundred (900) gaming devices to ensure the solvency AB 1767 Page 4 of the RSTF. Furthermore, the 2015 compact allowed the State to provide the Tribe with annual credits for up to forty percent (40%) of the payments otherwise due to be paid into the RSTF or TNGF for, among other things, the following: incentives for investments in renewable energy projects, non-gaming related economic development projects and health care facilities that provide a mutual benefit to the Tribe and the local community. The 2015 compact allows the Tribe or the State to request the reopening of negotiations regarding RSFT payments if, among other things, the balance of funds within the RSTF is not expected to fall short of the amount reasonably required to meet the long-term obligations of that fund. The 2015 compact also provides that its terms may be amended at any time by mutual agreement of the parties. The 2016 Amended Compact modifies the provisions regarding the Tribe's payments to the RSTF and TNGF. Specifically, the 2016 Amended Compact provides for a six percent (6%) of net win, or equivalent, payment instead of eight percent (8%), into the RSTF or the TNGF, and an annual credit for the Tribe of up to sixty percent (60%) instead of forty percent (40%), with no reference to a minimum payment for nine hundred (900) gaming devices. This Amended Compact also makes technical clarifications about the use of credits, as specified. Brief History of the Jackson Rancheria Band if Miwuk Indians The Jackson Rancheria has been a federally recognized band of Miwuk Indians since 1895 and occupies over 1,400 acres of land near the city of Jackson in Amador County. The Tribe has operated a bingo hall since 1985 and initially entered into a compact with the State of California for Class III gaming in 1999. That compact 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, AB 1767 Page 5 self-sufficiency, and to provide essential government services to its citizens. The Jackson Rancheria is a small tribe (18-voting members) that is deeply involved in the community and economic life of Amador County. The Tribe is a responsible steward of its tribal lands, which encompass a diverse ecosystem in the Sierra foothills. The Tribe references that its beautiful RV Park, which is tastefully situated in a secluded forest setting, is a regional attraction and nationally recognized as an elite facility. The Tribe emphasizes that it has demonstrated its dedication to economic development and public projects benefitting both the Tribe and the community - these include long-standing tribal contributions to law enforcement and other public safety programs in Amador County, such as fire protection, as well as significant contributions to the hospital, recreational facilities (including the Indian Grinding Rock State Park), and the County Fair. Additionally, the Tribe points out that in the past ten years, it has provided millions of dollars to support a host of community programs ranging from schools and the arts, drug and alcohol abuse prevention, care for the elderly, and employment of Native American youth. Furthermore, the Tribe notes that it has invested in programs which have enhanced its workforce (e.g., establishment of a local health clinic and adoption of a minimum wage that exceeds California's minimum wage). The Tribe's current casino operation, known as the Jackson Rancheria Casino Resort, has approximately 1,650 Class III gaming devices (slot machines), offers 36 table games, five restaurants, a hotel with 86 rooms, and both indoor and outdoor entertainment venues. The casino resort complex also employs approximately 1,200 people. Details Of The Amended Compact Payments to the RSTF or the TNGF. If the Tribe operates more than three hundred fifty (350) gaming devices at any AB 1767 Page 6 time in a given calendar year, it shall thereafter, including in that calendar year, pay to the State Gaming Agency, for deposit into the RSTF or the TNGF, six percent (6%) of its "net win" from its operation of gaming devices in excess of three hundred fifty (350). "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 suppliers 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. Credits Applied to the RSTF or the TNGF. The State agrees to provide the Tribe with an annual credit for up to sixty percent (60%) of the payments otherwise due to be paid into the RSTF or TNGF for the following: 1) Payments by the Tribe to the County of Amador and local jurisdictions operating facilities or providing services within the County for purposes of improved fire, law enforcement, public transit, education, tourism, and other services and infrastructure improvements intended to serve off-reservation needs of County residents - such payments shall be subject to approval by the County or local jurisdiction in the County and at least twenty percent (20%) of the annual credits must be utilized for the above stated purposes; 2) Payments by the Tribe to reimburse Amador County for any loss of sales tax revenues to the County that would otherwise be due for retail sales at the Tribe's gaming facility or transient occupancy tax at the Tribe's hotel if it was not located on Indian lands. Such reimbursements AB 1767 Page 7 shall be subject to approval by the County; 3) Payments to support operating expenses and capital improvements for non-tribal governmental agencies or facilities operating within Amador County; 4) Non-gaming related capital investments and economic development projects by the Tribe on tribal trust lands that the State or State designated agency agrees provides mutual benefits to the Tribe and the State because, for instance, they have particular cultural, social or environmental value, or diversify the sources of revenue for the Tribe's general fund; 5) Investments in, and any funds paid to the State in connection with, renewable energy projects that, in part, serve the gaming facility, to include facilities that incorporate charging stations for electric or other zero-emission vehicles that are available to patrons and employees of the gaming facility; and, 6) Payments (not including direct or indirect state or federal funding) to support capital improvements and operating expenses for facilities within California that provide health care services to tribal members, Indians, and non-Indians. All excess authorized credits that cannot be applied in any one year because they would exceed the sixty percent (60%) may be applied as an annual credit in all following years that this Compact is in effect, in the same percentages, until completely exhausted. AB 1767 Page 8 Additional Background Information Indian Gaming Regulatory Act (IGRA) In 1988, Congress enacted the Indian Gaming Regulatory Act (IGRA) to provide a statutory basis for the operation and regulation of gaming on Indian lands. IGRA provides that an Indian tribe may conduct gaming activity on Indian lands if the activity "is not specifically prohibited by federal law and is conducted within a State which does not prohibit such gaming activity." IGRA distinguishes between three classes of gaming (Class I, Class II, and Class III) and provides for different forms of regulation for each class. Class I gaming includes "social games" for minor prizes or "traditional forms of Indian gaming." Class II gaming is defined to include bingo and card games that are explicitly authorized by the laws of the state, or that are not explicitly prohibited by the laws of the state and are played at any location in the State, so long as the card games are played in conformity with those laws and regulations. Class III gaming includes such things as slot machines, casino games and banked card games such as black jack and baccarat. Class III gaming may only be conducted under terms of a compact negotiated between an Indian tribe and a State. IGRA was enacted against a legal background in which Indian tribes and individuals generally are exempt from state taxation within their own territory. IGRA provides that with the exception of assessments permitted under the statute, to defray the State's costs of regulating gaming activity, IGRA shall not be interpreted as conferring upon a State authority to impose any tax, fee, charge, or other assessment upon an Indian tribe to engage in Class III activity. Nor may a State refuse to enter into negotiations based on the lack of authority to impose such a tax, fee, charge, or other assessment. When a tribe requests negotiations for a Class III compact, IGRA requires the State to negotiate with the Indian tribe in good AB 1767 Page 9 faith. IGRA provides a comprehensive process to prevent an impasse in compact negotiations, which is triggered when a tribe files suit alleging that the State has refused to negotiate or has failed to negotiate in good faith. Before 2000, the California Constitution prohibited Class III gaming. In 2000, California voters approved Proposition 1A which had been proposed by the Governor and passed by the Legislature. Proposition 1A amended the California Constitution to permit the State to negotiate compacts with federally recognized Indian tribes for certain Class III gaming activities. Because non-Indian parties were still forbidden from operating gaming facilities, Proposition 1A granted Indian tribes a "constitutionally protected monopoly on most types of Class III games in California." Rincon Decision The U.S. Supreme Court in July 2011 refused to consider the decision of the Ninth Circuit Court of Appeals rejecting a Class III Tribal-State Gaming Compact negotiated by then Governor Schwarzenegger with the Rincon Band of Luiseno Mission Indians. The issue of this case's impact on Indian gaming throughout the country has been a topic of great debate. As noted, IGRA authorizes states to receive compensation for costs related to tribal gaming such as regulation and gaming addiction, and to offset the effects of casinos on surrounding communities. However, states are prohibited from assessing taxes on tribal casino revenues, so unjustified payments to a state's General Fund are no longer permissible unless the tribes are getting something in return for the required payments, such as those authorized by IGRA. Any payments to the State, above those needed to mitigate impacts of gaming must be in exchange for a benefit deemed "exclusive" to the tribe. AB 1767 Page 10 The Rincon Band challenged the legality of California's "second generation" compacts pursuant to which the signatory tribes would be entitled to increase their slot machine count in return for paying percentages of the new slot machine revenue to the state's General Fund. The Ninth Circuit had affirmed a lower court decision that the new financial concessions were nothing more than a state tax on tribal casino revenues which is prohibited by IGRA. Rincon refused to sign the amended compact which had already been executed by several other tribes choosing instead to demand that it be given the expanded gaming opportunity without making the new financial concessions. The Ninth Circuit Court of Appeals concluded that a "non-negotiable, mandatory payment of 10% of net win into the State treasury for unrestricted use yields public revenue, and is [therefore] a tax, and that the court was therefore required to consider the State's demand as evidence of bad faith under IGRA's statutes." The court noted that "the State could rebut the presumption of bad faith by demonstrating that the revenue demanded was to be used for the public interest, public safety, criminality, financial integrity, and adverse economic impacts on existing activities, but the State's need for general tax revenue was insufficient to demonstrate good faith." Special Distribution Fund (SDF) Existing law creates the SDF in the State Treasury for the receipt of revenue contributions made by tribal governments pursuant to the terms of the 1999 model Tribal-State Gaming Compacts and authorizes the Legislature to appropriate money from the SDF for the following purposes: (a) grants for programs designed to address gambling addiction; (b) grants for the support of state and local government agencies impacted by tribal government gaming; (c) compensation for regulatory costs incurred by the California Gambling Control Commission (CGCC) and the Department of Justice (DOJ) in connection with the implementation and administration of compacts; (d) payment of shortfalls that may occur in the RSTF; (e) disbursements for the AB 1767 Page 11 purpose of implementing the terms of tribal labor relations ordinances promulgated in accordance with the terms of the 1999 compacts; and, (f) any other purpose specified by law. (Pursuant to compact renegotiations that took place with several of the larger gaming tribes during the Schwarzenegger administration, revenue from those tribes is directed into the state General Fund, instead of the SDF.) The law establishes a method of calculating the distribution of appropriations from the SDF for grants to local government agencies impacted by tribal gaming. This method includes a requirement that the State Controller, in consultation with the CGCC, deposit funds into County Tribal Casino Accounts and Individual Tribal Casino Accounts based upon a process that takes into consideration whether the county has tribes that pay, or do not pay, into the SDF. The distribution formula "sunsets" on January 1, 2021. Existing law also establishes an Indian Gaming Local Community Benefit Committee in each county in which gaming is conducted, specifies the composition and responsibilities of that committee, and requires that committee to make the selection of grants from the casino accounts. Among other things, the committee is responsible for establishing all application policies and procedures for grants from the casino accounts. Additionally, existing law requires the State Auditor to conduct an audit every three years and report its findings to the Legislature regarding the allocation and use of SDF grant monies. Revenue Sharing Trust Fund (RSTF) Existing law creates in the State Treasury the RSTF for the receipt and deposit of moneys derived from gaming device license fees that are paid into the RSTF pursuant to the terms of specified tribal-state gaming compacts for the purpose of making distributions to non-compacted California tribes (e.g., federally-recognized non-gaming tribes and tribes that operate casinos with fewer than 350 slot machines). Revenue in the RSTF is available to CGCC, upon appropriation by the Legislature, for AB 1767 Page 12 making distributions of $1.1 million annually to non-compact tribes. The RSTF was created as part of the 1999 compacts, which, in conjunction with the passage of Proposition 1A, created gaming compacts with approximately 60 California tribes. Non-compact tribes are considered third-party beneficiaries of the 1999 compacts. Tribal Nation Grant Fund (TNGF) This particular fund (referenced in recent compacts) was created to complement the RSTF and provides 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. Payments from this fund are intended to be made to non-gaming tribes on a "need" basis, upon application. Prior Legislation AB 795 (Atkins, Chapter 520, Statutes of 2015) ratified the tribal-state gaming compact entered into between the State of California and the Sycuan Band of Kumeyaay Nation, executed on September 2, 2015. AB 1540 (Gray, Chapter 531, Statutes of 2015) ratified the tribal-state gaming compact entered into between the State of California and the Santa Ynez Band of Chumash Indians, executed on August 26, 2015. AB 315 (Bigelow, Chapter 512, Statutes of 2015) ratified the amended and restated tribal-state gaming compact entered into between the State of California and the United Auburn Indian Community, executed on August 14, 2015. AB 475 (Bigelow, Chapter 8, Statutes of 2015) ratified the tribal-state gaming compact entered into between the State of California and Jackson Rancheria Band of Miwuk Indians, executed AB 1767 Page 13 on February 1, 2015. SB 1356 (De León, Chapter 314, Statutes of 2014) ratified the amendment to the tribal-state gaming compact entered into between the State of California and the Viejas Band of Kumeyaay Indians, executed on August 12, 2014. SB 1224 (Correa, Chapter 300, Statutes of 2014) ratified the tribal-state gaming compact entered into between the State of California and the Karuk Tribe, executed on December 4, 2013. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No SUPPORT: (Verified8/15/16) Agua Caliente Band of Cahuilla Indians Barona Band of Mission Indians California Labor Federation County of Amador Jackson Rancheria Band of Miwuk Indians Jamul Indian Village Pechanga Band of Luiseno Indians Teamsters UNITE HERE, AFL-CIO Viejas Band of Kumeyaay Indians Yocha Dehe Wintun Nation OPPOSITION: (Verified8/15/16) None received Prepared by:Arthur Terzakis / G.O. / (916) 651-1530 8/15/16 19:36:06 **** END **** AB 1767 Page 14