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Analysts: California Casino Plan Not Sure Bet

5 February 2003

CALIFORNIA – As reported by the Sacramento Bee: "Despite the Davis administration's rosy projections of a $1.5 billion budget bailout from California's Indian casinos, tribal representatives and industry analysts say the odds of getting anything close to that amount are slim and none -- and don't bet on slim.

"Strapped for cash to close a yawning state budget deficit, Gov. Gray Davis has proposed raising $1.5 billion from the gambling tribes, presumably in return for an increase in the number of slot machines each tribe can operate.

"A quid pro quo deal is necessary because under federal law, the state cannot tax Indian tribes without the tribes' consent.

"But those close to the negotiations set to begin next month say it's likely final deals will fall short of the governor's goal.

"…It didn't help, several tribal leaders said, that Davis made his proposal without consulting them first.

"…And analysts say there are problems other than diplomacy. These are linked to the administration's underlying assumptions as it looks to casino tribes to help solve a state budget gap Davis estimates at $34.6 billion through June 2004. Those assumptions include:

" Estimating that the annual net operating revenues of California's 50 tribes with casinos is between $5 billion and $6 billion.

"Figuring that the tribes will turn over at least 25 percent of their net take in return for an increase in the maximum number of slot machines they can operate.

"Assuming the U.S. Department of the Interior, which must approve gambling compacts between states and tribes, will go along with a levy as high as 25 percent.

"…Tribal representatives, while refusing to disclose exact figures, say the average is closer to $175 a day per machine, which would make it a $3 billion annual market.

"The administration also appears to be assuming tribes, most of which currently pay no fees to the state, would give up as much as 25 percent of the revenues from machines they already operate.

"…But tribal leaders say there is absolutely no incentive to pay the state a share of money from machines they already have…"

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