Amicus Curiae Brief — Seminole Tribe of Fla. v. Florida

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In the Supreme ¢ oF THe CLERK

1995

OF THE

United States

OCTOBER TERM, 1994

SEMINOLE TRIBE OF FLORIDA,

Petitioner,

vs.

STATE OF FLORIDA, et al.,

Respondent.

On Writ of Certiorari

To the United States Court of Appeals

For the Eleventh Circuit

—————————

BRIEF OF AMICI CURIAE

NATIONAL INDIAN GAMING ASSOCIATION,

MINNESOTA INDIAN GAMING ASSOCIATION AND

CALIFORNIA-NEVADA INDIAN GAMING ASSOCIATION

IN SUPPORT OF PETITIONER; APPENDIX IN SUPPORT

eee

March 31, 1995

LEVINE & ASSOCIATES

JEROME L. LEVINE

FRANK R. LAWRENCE

2049 Century Park East, Suite 710

Los Angeles, California 90067

(310) 553-8400

Counsel of Record

BLUEDOoG, OLSON & SMALL

KurT V. BLUEDOG

5001 W. 80th Street, Suite 670

Minneapolis, MN 55437

(612) 893-1813

Bowne of Los Angeles, Inc., Law Printers (213) 627-2200

—— <2 —— — —_—s-

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Page

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Pee. Re CID oon 5 ons cccccvcvenecevess 3

Fees Se SURE tne Ed Snind aN io vas 05 0 64ue 0 oe 5

A. Congress Enacted the Indian Gaming Regulatory

Act, in Part, Pursuant to its Powers Under the

Interstate Commerce Clause................. 5

B. Congress Expressly Contemplated Interstate

Gaming Activity in IGRA................... 9

C. Congress’ Concern in IGRA with the States’ and

the Commercial Gaming Industry's Economic

Interests, as well as Tribes’ Interests, Implicates

ND Neon uaess cuehececeee. ll

D. IGRA_ Regulates Non-Indian Economic

ec ea keene odin ts 6s oder ee ix 13

E. Indian Gaming Has a Substantial Effect on

EE vec cdiwiesseenet de eee 14

F. Congress Enacted IGRA, in Part, to Combat

i ee eeu iveisesctscesics 23

i cece i ee ices eaensaséeateceseas 27

ele cee e aR eeueN bobs sbe00esieC nex la-120a

TABLE OF CONTENTS

TABLE OF AUTHORITIES

Cases

Atlantic Cleaners & Dryers, Inc. v. United States, 286

US. 427, $8 SAX. GF CAGED «vc dnscteeeeeee

Beckman v. Mall, 317 U.S. 597, 63 S.Ct. 199 (1942)

Bender v. Wickard, 319 U.S. 731, 63 S.Ct. 1326

(1968). 2... cccdcevcseecssépe ee

Bowen v. Kendrick, 487 U.S. 589, 108 S.Ct. 2562

(ISBB) 0. ccccccoscucessnanceen sean

California v. Cabazon Band of Mission Indians, 480

US. 22, 107 S.Ce, 1669 (IGF) «. se cdaceseees

Caminetti v. United States, 242 U.S. 470, 37 S.Ct.

192 (IDET)... 00s0ccencecce nes sue

Champion v. Ames, 188 U.S. 321, 23 S.Ct. 321

(i) re

Concrete Pipe and Products of California, Inc. v.

Construction Laborers Pension Trust for Southern

California, ___. U.S. —__., 113 S.Ct. 2264 (1993)

Department of Revenue of Oregon v. ACF Industries,

ee ee

Employees of the Dep't of Pub. Health and Welfare v.

Missouri Dep't of Pub. Health and Welfare, 411

US. 279, 93 GLA. 16060 (00 eae < icissnseeeee

Equal Employment Opportunity Commission v.

Wyoming, 460 U.S. 226, 103 S.Ct. 1054 (1983)

Federal Election Commission v. N.R.A. Political Vic-

tory Fund, U.S. __, 115 S.Ct. 537 (1994)

Fullilove v. Klutznick, 448 U.S. 448, 100 S.Ct. 2758

(30GB) .o. cccesewecwees eee

Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824)...

NE oe CS ree ne

ee o - -

TABLE OF AUTHORITIES

CASES

Page

Heart of Atlanta Motel v. United States, 379 U.S.

I ID cc ccc cccccccecccces 6,7

Helvering v. Stockholms Enskilda Bank, 293 U.S. 84,

IES ee 9

Hodel v. Virginia Surface Min. & Recl. Assn’n, 452

Sees ay OD Ms OO CEDUE) oc ccc cece cence. 6

Katzenbach v. McClung, 379 U.S. 294, 85 S.Ct. 377

Gs daWa ce ceddicscccccccss 7

Lac du Flambeau Band of Lake Superior Chippewa

Indians v. Wisconsin, 770 F. Supp. 480 (W.D. Wis.

esa atc cee cesccscccees 16, 20

Louisiana Public Service Commission v. Federal

Communications Commission, 476 U.S. 355, 106

ie 7 eer eS re 10

New Mexico v. Mescalero Apache Tribe, 462 U.S.

ee 15

Moskal v. United States, 498 U.S. 103, 111 S.Ct. 461

EEE Ee 25

Pennsylvania v. Union Gas Co., 491 U.S. 1, 109 S.Ct.

Nek cscs ccccscccees 8

Perez v. United States, 403 U.S. 146, 91 S.Ct. 1357

NES EE 5, 6, 7, 8, 25

Sault St. Marie Tribe of Chippewa Indians v. Michi-

gan, 800 F. Supp. 1484 (W.D. Mich. 1992)..... 16, 21

Seminole Tribe of Florida v. Florida, 11 F.3d 1016

eee cece ccesccccccces 5,19

Sorenson v. Secretary of Treasury, 475 U.S. 851, 106

eee s cece ccecccess 9

United States v. Cappetto, 502 F.2d 1351 (7th Cir.

EO TEE 25

TABLE OF AUTHORITIES

CASES

Page

United States v. Darby, 312 U.S. 100, 61 S.Ct. 451

CNN i 6 hi6 sae eeee ere eee 6, 7,8

United States v. Haley, 358 U.S. 644, 79 S.Ct. 537

SUN odsdaeneeud cans tnedieeee eee 6

United States v. Jarrett, 705 F.2d 198 (7th Cir. 1983) 25

United States v. Martino, 648 F.2d 367 (Sth Cir.

SE sshe kes oh0endudsis dae 25

United States v. Menasche, 348 U.S. 528, 75 S.Ct.

ee Pe re ee ee ee 25

United States v. Ohio, 385 U.S. 9, 87 S.Ct. 66 (1966) 6

U.S. Dept. of Labor v. Triplett, 494 U.S. 715, 110

Sia WS CR ss eines bccn bade cbeteecun, 7

Walters v. National Assn. of Radiation Survivors, 473

US. 305, 105 S.Ct. 3180 (1985) .. 0... ccc eeee 7

Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82 (1942) 6

Woods v. Miller, 333 U.S. 138, 68 S.Ct. 421 (1948) 6

STATUTES

Communications Act of 1934, 47 U.S.C. §§ 151,

SE wn ccaenntrasdbeueadecesaane seen 10

Indian Gaming Regulatory Act, 25 U.S.C.

EE Gadi cave sda ueuaseeaunioens passim

EE IE sc coc c x Gevceccevuececuteuean 14,19

ED vn 5 v0 bc ten dae sedhuseauauel 14

Es c's ob 6 cha deen we wee 19, 22, 23, 24, 25

EN. cn cen ie ehaseuednaaeeneeeue 2

on. es an 6 ane came erks 2

EN oe eee idea te ane acad 2

OL | a ere re ee 2

TABLE OF AUTHORITIES

STATUTES

Page

en I tens cree ese ds beeeis 2

I UPEIOIED soc nvcccccencceccsces 9

Section Z7IO(B)(Z)(A) ...ccccccccccccccccss 13

I 26

Section 2710(b) (2) (F) (ii) (II) ...........2... 26

ee 9

Fi GuCe iw ewer dice ccceccs 26

Section 2710(d) (7) (B) (iii) .................. 12

ert Cetdnag see é4cee be tsseens ened 13

RR ee 13

Oe ae ae 13

ES 65 hb 4b SAN 4d bd eN eee OA hoe 10

Interstate Horse Racing Act, 15 U.S.C. Section 3001

ass BA aNie wade eGd Keewes ee ees dann s 9

Johnson Act, 15 U.S.C. §§ 1171-1178 ............ 25

Ee ee 8, 25

Ge Se ED 6 Sk Sac edcedenencccceccers 10

OTHER AUTHORITIES

Hearings Before the Subcommittee on Communica-

tions of the Senate Committee on Commerce, 93rd

Ces BER Rg Fare CITED ccnan ss Hicdedseye 10

S. Rep. No. 446, 100th Cong., 2d Sess. 1, 33 (1988)

reprinted in 1988 U.S. Code Cong. & Admin.

Scat uvianshdecwinnesce eens 4, 10, 13, 14, 26

Webster’s New Twentieth Century Dictionary,

unabridged, at 362 (2d ed. 1983).............. 25

TABLE OF AUTHORITIES

OTHER AUTHORITIES

APPENDIX

Department of the Interior, Bureau of Indian Af-

fairs, Tribal State Compact List, (January 26,

SO 4455 605140 04d0 deeds cae ee eeeehaess

Oversight Hearing on the Need for Amendments to

the Indian Gaming Regulatory Act: Hearing

Before the Committee of Indian Affairs, 103rd

Cong., 2d Sess. 69 (May 17, 1994) (statement of

Ada E. Deer, Assistant Secretary, Indian Affairs,

Department of the Interior).................

Deloitte & Touche, A Historical Review of Gaming

in the United States (1994) .................

KPMG Peat Marwick, Minnesota Indian Gaming

Association, Economic Benefits of Tribal Gam-

ing in Minnesota 1992 (1993) ...............

Minnesota Planning, High Stakes: Gambling in

ED ha co tees ch aceenendecaees

Minnesota Planning, Minnesota Gambling 1993

ERR ay. ee ee Ser epee me pe ee

Oversight Hearing on the Need for Amendments to

the Indian Gaming Regulatory Act: Hearing

Before the Committee on Indian Affairs, 103rd

Cong., 2d Sess. 246 (May 17, 1994) (statement

of Dr. Michael K. Madden, Professor of Eco-

nomics, University of South Dakota) .........

Oversight Hearing on the Need for Amendments to

the Indian Gaming Regulatory Act: Hearing

Before the Committee on Indian Affairs, 103rd

Cong., 2d Sess. 246 (April 26, 1994) (testimony

of JoAnn Jones, Tribal Chair Wisconsin Winne-

SSE axavenneccvehepasbacsowadasaes

1-2a

3-6a

7-49a

50-75a

76-79a

80-84a

85-9la

Ne ee eR eek:

it ene

vii

TABLE OF AUTHORITIES

OTHER AUTHORITIES

Oversight Hearing on the Need for Amendments to

the Indian Gaming Regulatory Act: Hearing

Before the Committee on Indian Affairs, 103rd

Cong., 2d Sess. 118 (April 26, 1994) (testimony

of Bernard Bouschor, Chairman Sault Ste, Marie

Tribe of Chippewa Indians).................

Oversight Hearing on the Need for Amendments to

the Indian Gaming Regulatory Act: Hearing

Before the Committee on Indian Affairs, 103rd

Cong., 2d Sess. 202 (April 26, 1994) (Letter

from the Sault Area Chamber of Commerce to

Governor John Engler)... ......eccscccseees

Oversight Hearing on the Need for Amendments to

the Indian Gaming Regulatory Act: Hearing

Before the Committee on Indian Affairs, 103rd

Cong., 2d Sess. 203 (April 26, 1994) (Letter

from Bruce J. Dodson, Mayor of St. Ignace,

Michigan, to Tribal Chairman Bernard Bouschor

Sault Ste. Marie Tribe of Chippewa Indians) . .

Hearing Before the Committee on Indian Affairs on

S.2230, 103rd Cong., 2d Sess. 226 (July 19,

1994) (statement of Ray Halbritter, Nation

Representative Oneida Indian Nation of New

Ee ee. on eo een eiia heise ben's

99-105a

106-109a

110-113a

114-120a

ee ed

No. 94-12

In the Supreme Court

OF THE

United States

OCTOBER TERM, 1994

SEMINOLE TRIBE OF FLORIDA,

Petitioner,

vs.

STATE OF FLORIDA, et al.,

Respondent.

On Writ of Certiorari

To the United States Court of Appeals

For the Eleventh Circuit

BRIEF OF AMICI CURIAE

NATIONAL INDIAN GAMING ASSOCIATION,

MINNESOTA INDIAN GAMING ASSOCIATION AND

CALIFORNIA-NEVADA INDIAN GAMING ASSOCIATION

IN SUPPORT OF PETITIONER

I. Interest of Amici Curiae

This brief of amici curiae National Indian Gaming Asso-

ciation, Minnesota Indian Gaming Association and Califor-

nia-Nevada Indian Gaming Association (hereinafter the

“Associations”), is filed in support of petitioner Seminole

Tribe of Florida pursuant to the written consent of all

parties. The Associations are national and regional organiza-

tions representing the interests of federaliy recognized tribal

governments that depend on gaming under the Indian Gam-

ing Regulatory Act, 25 U.S.C. sections 2701-2721

(“IGRA” or the “Act’’) to fund education, care for the

elderly, housing, health care and other tribal governmental

programs. Congress anticipated that in order to achieve the

Act’s goals of tribal self-sufficiency and funding for impor-

tant governmental projects, tribal gaming activities would be

pursued in, and have an impact on, interstate commerce.

Congress recognized the effects Indian gaming would have

on interstate commerce and enacted IGRA, in part, to

address those effects. Amici will also demonstrate that, just

as Congress expected, Indian gaming in practice has had a

significant impact on interstate commerce.

The success of tribal governmental gaming depends in

large part on the tribes’ ability to engage in what the Act

classifies as “class III” gaming, which is clearly the most

economically competitive form of gaming available.’ Con-

gress provided, however, that in order to engage in class III

gaming a tribe must either reach a Tribal-State compact or

determine through court action that the state has chosen not

to avail itself of the opportunity to regulate class III gaming.

Amici share a concern that Congress’ carefully-crafted bal-

ance of tribal and state interests, which conditions class III

gaming on either achieving Tribal-State compacts — with

‘IGRA divides gaming into three classes. Class I gaming consists of

social or traditional games, and is solely regulated by Tribes. See 25

U.S.C. §§ 2703(6), 2710(a) (1). Class I] gaming consists of bingo and

similar games, as well as nonbanking card games, and is regulated by

Tribes and the National Indian Gaming Commission. /d. at §§ 2703(7),

2710(a) (2). Class III gaming consists of all other forms of gaming, id.

at § 2703(8), including those forms of gaming in which states and

private interests are most often involved, including horse racing, lotter-

ies, and games associated with casinos. Because of the competition from

those sources, and their importance in the marketplace, tribes which are

deprived of class III opportunities are likely not to derive the revenues

which generate the jobs and economic development demonstrated be-

low, at Section III(E) of this brief, which exemplify the kinds of results

which can be achieved where the class III process has worked.

court-supervised mediation to overcome negotiating im-

passes — or removing uninterested states from the process,

not be frustrated by the Eleventh Amendment barrier erro-

neously erected by the Eleventh Circuit’s opinion in this

case, reported at 11 F.3d. 1016 (11th Cir. 1994). The lower

court held that Congress lacks authority to abrogate the

states’ sovereign immunity to provide the judicial supervi-

sion necessary to carry out the class III process Congress so

carefully designed.

In erroneously determining that Florida could invoke its

sovereign immunity to upset the delicate balance wrought

by Congress in IGRA, the Eleventh Circuit incorrectly held

that IGRA was enacted exclusively under the Indian Com-

merce Clause, and that Congress lacked the power under

that clause to abrogate state immunity. While the Indian

Commerce Clause doubtlessly supports IGRA, and amici

agree with petitioner Seminole Tribe that the Indian Com-

merce Clause alone empowers Congress to abrogate state

sovereign immunity where necessary to carry out its consti-

tutional duties regarding Indian affairs, the Act makes clear

that Congress was also acting pursuant to its powers over

interstate commerce. An analysis of that power provides

further support to petitioner’s position, as well as supplying

an independent basis for upholding the Act’s class III

compacting process.

Il. Summary of Argument

Congress enacted IGRA, in part, pursuant to its powers

under the Interstate Commerce Clause, and Tribes are in

fact engaged in such commerce. Congress was explicitly

concerned in IGRA with the tribes’, states’ and commercial

gaming industries’ interstate economic interests and impact.

The Act anticipates that tribes will use the mails, tele-

phones, broadcasting and other technologies in furthering

the Act’s goals of promoting tribal self-sufficiency. Indeed,

congressional hearings and other forums that have examined

the impact of tribal governmental gaming under IGRA are

replete with examples of the Act’s effect on interstate

commerce. Those effects include: major purchases and sales

of food and other goods which typically move in interstate

commerce; dependency on transportation programs which

utilize common carriers and highways; extensive employ-

ment for persons who commute from far beyond reservation

boundaries with corresponding reductions in reliance on

state and federal welfare programs; and dramatic upswings

in tourism and visitors crossing state lines to enjoy tribal

facilities. IGRA also addresses the need and means for

combating organized crime,’ which subject this Court has

repeatedly held implicates interstate commerce. IGRA’s

references to the gaming industry generally and the reputa-

tion and integrity of those who participate in it, its focus on

controlling organized crime, as well as the substantial im-

pact on commerce which Indian gaming actually has, more

than amply evidence congressional intent to legislate over

matters affecting interstate commerce.

For all of these reasons, the Associations submit that

Congress enacted IGRA, in part, under the Interstate Com-

merce Clause. Amici suggest that the Eleventh Circuit’s

contrary holding was erroneous, and respectfully request

that the Court reverse the Eleventh Circuit’s opinion and

judgment.

? Albeit little if any evidence of such crime in Indian Country has ever

existed, largely due to tribes’ own vigorous implementation of regulatory

and control standards. See California v. Cabazon Band of Mission

Indians, 480 U.S. 202, 221, 107 S.Ct. 1083, 1094 (1987); S. Rep. No.

446, 100th Cong., 2d Sess. 1, 33 (1988) (Additional Views of Mr.

McCain), reprinted in 1988 U.S. Code Cong. & Admin. News 3071,

3103 (hereinafter “Senate Report’).

ee ers in aecee s

Il. Argument

A. Congress Enacted the Indian Gaming Regulatory Act,

in Part, Pursuant to its Powers Under the Interstate

Commerce Clause

The Eleventh Circuit erroneously concluded that Con-

gress did not enact IGRA pursuant to its plenary powers

over interstate commerce. Specifically, the court found that

“alleviating a supposed burden on interstate commerce”’ was

not among Congress’ purposes in enacting IGRA. Seminole

Tribe of Florida v. Florida, 11 F.3d 1016, 1025-26 (11th

Cir. 1994). In reaching this conclusion, the lower court

misapprehended the broad scope of congressional power

under the Interstate Commerce Clause. Congress’ power

over interstate commerce is not liinited to alleviating pre-

existing burdens thereon, as the Eleventh Circuit assumed.

The Interstate Commerce Clause gives Congress the

power to legislate with respect to all “commerce which

concerns more states than one.” Gibbons v. Ogden, 22 U.S.

(9 Wheat.) 1, 194 (1824). The power generally allows

Congress to reach at least three categories of problems:

First, the use of channels of interstate or foreign com-

merce which Congress deems are being misused, as, for

example, the shipment of stolen goods (18 U.S.C. secs.

2312-2315) or of persons who have been kidnaped (18

U.S.C. sec. 1201). Second, protection of the instru-

mentalities of interstate commerce, as for example, the

destruction of an aircraft (18 U.S.C. sec. 32), or

persons or things in commerce, as, for example, thefts

from interstate shipments (18 U.S.C. sec. 659). Third,

those activities affecting commerce.

Perez v. United States, 403 U.S. 146, 150, 91 S.Ct. 1357,

1359 (1971).

When Congress regulates under the Interstate Commerce

Clause, it only needs a rational basis for finding that the

regulated activity substantially affects interstate commerce,

and the means it employs need only be reasonably adapted

to the ends sought. Hodel v. Virginia Surface Min. & Recl.

Ass'n, 452 U.S. 264, 101 S.Ct. 235 (1981). The “substantial

economic effect” test is easily satisfied, even where the

regulated activity is seemingly only local in nature. See

Wickard v. Filburn, 317 U.S. 111, 63 S.Ct. 82 (1942)

(regulation of wheat grown by a farmer wholly for home

consumption was within Congress’ interstate commerce

power because it supplied the grower’s needs which other-

wise would have been satisfied by purchases in the open

market). See also United States v. Ohio, 385 U.S. 9, 87

S.Ct. 66 (1966); (per curiam) United States v. Haley, 358

U.S. 644, 79 S.Ct. 537 (1959); (per curiam) Bender v.

Wickard, 319 U.S. 731, 63 S.Ct. 1326 (1943) (per curiam);

Beckman v. Mall, 317 U.S. 597, 63 S.Ct. 199 (1942) (per

curiam).

Congress need not even have interstate commerce as its

primary motive when legislating under that power as is

evident from the cases upholding the Civil Rights Act of

1964.° In Heart of Atlanta Motel v. United States, 379 U.S.

>Nor must Congress recite by name the particular power under which

it legislates. “The constitutionality of action taken by Congress does not

depend on recitals of the power which it undertakes to exercise.” Woods

v. Miller, 333 U.S. 138, 144, 68 S.Ct. 421, 424 (1948). See also Equal

Employment Opportunity Commission v. Wyoming, 460 U.S. 226, 243

n.18, 103 S.Ct. 1054, 1064 n.18 (1983); Fullilove v. Klutznick, 448 U.S.

448, 476-78, 100 S.Ct. 2758, 2773-2774 (1980). In United States v.

Darby, 312 U.S. 100, 61 S.Ct. 451 (1941), “a class of activities was held

properly regulated by Congress without proof that the particular intra-

state activity against which a sanction was laid had an effect on

commerce.” Perez, 402 U.S. at 152, 91 S.Ct. at 1360. In Darby, the

Court recognized that “Congress has sometimes left it to the courts to

determine whether the intrastate activities have the prohibited effect on

241, 85 S.Ct. 348 (1964), the Court held that the Interstate

Commerce Clause empowered Congress to regulate a motel

located in downtown Atlanta that did not rent rooms to

blacks. The requisite nexus to commerce existed because

the motel was located near two interstate highways, derived

75 percent of its occupancy from out-of-state guests, and

solicited business outside the state. The Court explained

that Congress’ power “to promote interstate commerce also

includes the power to regulate the local incidents thereof.”

Id. at 258, 85 S.Ct. at 358. See also Katzenbach v. McClung,

379 U.S. 294, 85 S.Ct. 377 (1964) (despite restaurant’s

distance from interstate transportation facilities, and despite

lack of evidence that much of its business came from out-of-

state travelers, a sufficient connection to interstate com-

merce existed because — looking to the total incidence of

the regulated activities on commerce — the restaurant

bought 46 percent of its food from a supplier who in turn

had purchased it from out of state).

The Interstate Commerce Clause also gives Congress

power to use prohibitions on the interstate transportation of

the commerce, as in the Sherman Act... .” Darby, 312 U.S. at 120, 61

S.Ct. at 460. The fact that a statute does not contain congressional

findings about the regulated activity’s impact on interstate commerce is

not determinative of the statute’s constitutionality under the Interstate

Commerce Clause. Cf. See Katzenbach v. McClung, 379 U.S. 294, 304,

85 S.Ct. 377, 384 (1964). Nor does “Congress need [to] make

particularized findings in order to legislate.” Perez, 402 U.S. at 156, 91

S.Ct. at 1362.

In this regard amici “note[s] the heavy presumption of constitutional-

ity to which a ‘carefully considered decision of a coequal and representa-

tive branch of our Government’ is entitled.” U.S. Dept. of Labor v.

Triplett, 494 U.S. 715, 722, 110 S.Ct. 1428, 1432 (1990) (quoting

Walters v. National Assn. of Radiation Survivors, 473 U.S. 305, 319,

105 S.Ct. 3180, 3188 (1985)). See also Concrete Pipe and Products of

California, Inc. v. Construction Laborers Pension Trust for Southern

California, __. U.S. ——, 113 S.Ct. 2264, 2287 (1993); Bowen v.

Kendrick, 487 U.S. 589, 817, 108 S.Ct. 2562, 2579 (1988).

items or people in furtherance of “police power” or “general

welfare” regulations. See, e.g., United States v. Darby, 312

U.S. 100, 61 S.Ct. 451 (1941) (upholding Fair Labor

Standards Act’s wage and hour regulations for employees

engaged in production of goods for interstate commerce, the

statute’s prohibitions against interstate shipment of goods

produced in violation of those regulations, and its criminal

penalties for employing workers engaged in commerce in

violation of those regulations). In Perez, this Court upheld

the Consumer Credit Protection Act, 18 U.S.C. 891, et seq.,

which prohibited loansharking, even in entirely local activi-

ties, noting that Congress had recognized that loan sharks

“are in large part under the control of ‘organized crime,’ ”

Perez, 402 US. at 147, 91 S.Ct. at 1358, and that organized

crime, virtually by definition, operates on a national scale.

See id. at 147 n. 1, 150, 91 S.Ct. at 1358 n.1, 1359.

In short, the Interstate Commerce Clause “has grown to

vast proportions in its applications,” Employees of the Dep't

of Pub. Health and Welfare v. Missouri Dep't of Pub.

Health and Welfare, 411 U.S. 279, 285, 93 S.Ct. 1614, 1618

(1973), such that “[i]t would be difficult to overstate the

breadth or depth of the commerce power.” Pennsylvania v.

Union Gas Co., 491 U.S. 1, 20, 109 S.Ct. 2273, 2284 (1989)

(Brennan, J., plurality).

Numerous aspects of IGRA reveal a sufficient nexus to

commerce to bring the Act within Congress’ interstate

commerce powers. First, Congress expressly contemplated

interstate gaming activity in IGRA. Second, in enacting

IGRA, Congress balanced the competing economic inter-

ests of Indian Tribes, the states, and the commercial gaming

industry. Third, IGRA regulates both Indian and non-

Indian economic concerns. Fourth, Indian gaming has a

substantial effect on interstate commerce, a fact that was

well-known to Congress when it enacted IGRA. Finally,

Congress enacted IGRA, in part, to assure that the nation-

wide problem of organized crime does not infiltrate Indian

gaming.

B. Congress Expressly Contemplated Interstate Gaming

Activity in IGRA

IGRA’s Senate Report expressly contemplates interstate

gaming activity:

In this regard, the Committee recognizes that tribes

may wish to join with other tribes to coordinate their

class II* operations and thereby enhance the potential

of increasing revenues. For example, linking participant

players at various reservations whether in the same or

different states, by means of telephone, cable, television

or satellite may be a reasonable approach for tribes to

take. Simultaneous games participation between and

among reservations can be made practical by use of

computers and telecommunications technology as long

as the use of such technology does not change the

fundamental characteristics of the bingo or lotto games

“While this comment was in the context of class II gaming, the same

possibilities exist regarding class III gaming. Interstate simulcast wager-

ing on horse races is but one example of interstate gaming within

IGRA’s class III category. See, e.g., Interstate Horse Racing Act, 15

U.S.C. § 3001 ef seg. Moreover, IGRA’s provisions regarding the

permissible scope of both class II and class III gaming contain precisely

the same requirement —- namely, that the gaming activity be “located

within a state that permits such gaming for any purpose by any person,

organization or entivy.”” 25 U.S.C. § 2710(b)(1)(A)) (class II). Com-

pare 25 U.S.C. 9 2710(d)(1)(B) (identical language regarding

class III). As this Court has long held, identical words used in different

parts of the same act are intended to have the same meaning. See

Department of Revenue of Oregon v. ACF Industries, Inc., __. U.S.

——, 114S.Ct. 843, 849 (1994); Sorenson v. Secretary of Treasury, 475

U.S. 851, 860, 106 S.Ct. 1600, 1606 (1986); Helvering v. Stockholms

Enskilda Bank, 293 U.S. 84, 87, 55 S.Ct. 50, 51 (1934); Atlantic

Cleaners & Dryers, Inc. v. United States, 286 U.S. 427, 433, 52 S.Ct.

607, 609 (1932).

and as long as such games are otherwise operated in

accordance with applicable Federal communications

law.

Senate Report st 9 (emphasis added).

The Senate Report’s reference to Federal communica-

tions law also suggests Congress’ concern with interstate

commerce, for Congress’ power to regulate the communica-

tions industry flows from its interstate commerce power.

See, e.g., Louisiana Public Service Commission v. Federal

Communications Commission, 476 U.S. 355, 370-71, 106

S.Ct. 1890, 1899-1900 (1986) (purpose of Communications

Act of 1934, 47 U.S.C. §§ 151, 152(b), is to regulate

interstate commerce in communication). See also Federal

Election Commission v. N.R.A. Political Victory Fund,

U.S. —~, 115 S.Ct. 537, 542 (1994) (citing Hearings

Before the Subcommittee on Communications of the Senate

Committee on Commerce, 93rd Cong., Ist Sess., 70-71

(1973)); 42 U.S.C. § 2000e(g) (defining “commerce” as

including “communication among the several states”). Ad-

ditionally, the Act explicitly exempts tribal marketing efforts

from the criminal sanctions ordinarily imposed in connec-

tion with the transmission of gambling information by tele-

phone and through the mails. See 25 U.S.C. § 2720.

In sum, the regulation of interstate gaming activities such

as those Congress contemplated when enacting IGRA are

plainly within Congress’ interstate commerce power.

C. Congress’ Concern in IGRA with the States’ and the

Commercial Gaming Industry’s Economic Interests, as

well as Tribes’ Interests, Implicates Interstate

Commerce

In enacting IGRA, Congress was concerned with balanc-

ing the interests of the states and the commercial gaming

industry with those of Indian tribes:

S. 555 [IGRA] is the outgrowth of several years of

discussions and negotiations between gaming tribes,

states, the gaming industry, the administration, and the

Congress, in an attempt to formulate a system for

regulating gaming on Indian lands. In developing the

legislation, the issue has been how best to preserve the

right of tribes to self-government while, at the same

time, to protect both the tribes and the gaming public

from unscrupulous persons. An additional objective

inherent in any government regulatory scheme is to

achieve a fair balancing of competitive economic

interests.

Senate Report at 1-2 (emphasis added). The Senate Report

also noted that “[a]s the debate unfolded, it became clear

that the interests of the states and of the gaming industry

[included] ... protection of their own games from a new

source of economic competition.” Senate Report at 33

(Additional Views of Mr. McCain).°

Congress’ concern with balancing competing economic

interests is apparent on IGRA’s face, for the Act provides

that “[i]n determining... whether a state has negotiated

[with a Tribe] in good faith [for a class III] compact], the

court — (I) may take into account... adverse economic

*See also Senate Report at 36 (Additional Views of Mr. Evans)

(“Ironically, the strongest opponents of tribal authority over gaming on

Indian lands are from states whose liberal gaming policies would allow

them to compete on an equal basis with the tribes”’).

impacts on existing gaming activities...” 25 U.S.C.

§ 2710(d) (7) (B) (iii) (emphasis added). IGRA’s Senate

Report makes the same point:

The bill allows states to consider negative impacts on

existing gaming activities. That is not to say that the

bill would allow states to reject Indian gaming on the

mere showing that Indian gaming will compete with

non-Indian games. Rather, states must show that eco-

nomic consequences will be severe and that they will

clearly outweigh positive economic consequences.

Senate Report at 14 (emphasis added). See also Senate

Report at 18-19 (“[I]f the court finds for the tribe, it will

order a 60-day negotiation period and may take into account

public interest, public safety, criminality, financial integrity,

and adverse economic impacts on existing gaming

activities’’).

Congress’ explicit recognition that one “objective” of

IGRA is to balance competing economic interests, and its

direction that federal courts may consider such competition

in determining the states’ good faith, is strong evidence that

Congress adopted the Act in part under its interstate com-

merce power.°

*Congress also balanced related concerns:

After lengthy hearings, negotiations and discussions, the Commit-

tee concluded that the use of compacts between tribes and states is

the best mechanism to assure that the interests of both sovereign

entities are met with respect to the regulation of complex gaming

enterprises such as parimutuel horse and dog racing, casino gaming,

jai alai and so forth. The Committee notes the strong concerns of

states that state laws and regulations relating to sophisticated forms

of class III gaming be respected on Indian lands where, with few

exceptions, such laws and regulations do not now apply. The

Committee balanced these concerns against the strong tribal opposi-

tion to any imposition of state jurisdiction over activities on Indian

lands. The Committee concluded that the compact process is a

D. IGRA Regulates Non-Indian Economic Concerns

IGRA directly regulates state and commercial gaming

interests by barring them from owning gaming projects on

Indian lands. Specifically, the Act excludes all but Indian

tribes from having a “proprietary interest and responsibility

for the conduct of any gaming activity” on Indian land. 25

U.S.C. § 2710(b) (2) (A).

The Act also controls non-Indian economic concerns by

regulating contracts between tribes and other entities related

to the management of tribal gaming projects. See 25 U.S.C.

§ 2711. “As used in section 12 and throughout the bill, the

term ‘management contract’ refers to agreements governing

the overall management and operation of an Indian gaming

facility by an entity other than the tribe or its employees.”

Senate Report at 12-13 (emphasis added). IGRA generally

limits the terms of management contracts, see id. at

§ 2711(b) (5), and generally limits the manager’s fees. See

id. at § 25 U.S.C. § 2711(c) (1). See also Senate Report at

8. Congress intended that these limitations on non-Tribal

viable mechanism for setting various matters between two equal

sovereigns.... In the Committee’s view, both state and tribal

governments have significant governmental interests in the conduct

of class III] gaming.... A state’s governmental interests with

respect to class III gaming on Indian lands include the interplay of

such gaming with the state’s public policy, safety, law and other

interests, as well as impacts on the state’s regulatory system,

including its economic interest in raising revenue for its citizens. /f

is the Committee's intent that the compact requirement for class Ill

not be used as a justification by a state for excluding Indian tribes

from such gaming or for the protection of other state-licensed

gaming enterprises from free market competition with Indian tribes.

Senate Report at 13 (emphasis added).

. entities apply retroactively to contracts that preexisted the

Act:

In the area of gaming where many factors other than

ordinary business risk enter into the equation, the

Committee has no reluctance in requiring changes to

existing gambling enterprise contracts, whether or not

such contracts have been given a stamp of approval by

the Secretary.

Senate Report at 15.

IGRA’s direct regulation of non-Indian economic con-

cerns is further evidence that Congress adopted the Act, in

part, under its interstate commerce power.

E. Indian Gaming Has a Substantial Effect on Interstate

Commerce

In enacting IGRA, Congress found that “numerous In-

dian tribes have become engaged in or have licensed gaming

activities on Indian lands as a means of generating tribal

governmental revenue.” 25 U.S.C. § 2701(1). Congress also

found that “a principal goal of Federal Indian policy is to

promote tribal economic development, tribal self-suffi-

ciency, and strong tribal government.” Jd. at § 2701 (4).

As Indian Tribes engage in the economic activities IGRA

permits, they necessarily have a substantial impact on inter-

state commerce. Increased tribal self-sufficiency reduces

tribal dependence on federal and state funding, programs,

and support. This impacts interstate commerce by reducing

federal and state expenditures, with related implications for

federal taxation. Further, as an industry that had generated

more than $100 million on a national aggregate basis as of

1988’ — and which has continued to grow in the subsequent

seven years — the Indian gaming industry impacts com-

"See Senate Report at 20.

merce directly by: (1) purchasing, leasing, and renting

equipment and supplies from non-Indian businesses through

interstate commerce; (2) employing thousands of non-

Indians to help finance, design, construct, manage, and

operate Indian gaming facilities; and (3) inviting and serv-

ing out-of-state non-Indian customers.

In California v. Cabazon Band of Mission Indians, 480

U.S. 202, 107 S.Ct. 1083 (1987), this Court recognized the

potential scale of Tribal gaming projects and their impact

not only on the Tribes but on the commerce it attracted:

[Tribes engaged in gaming] have built modern facili-

ties which provide recreational opportunities and ancil-

lary services to their patrons, who do not simply drive

onto the reservations, make purchases and depart, but

spend extended periods of time there enjoying the

services the Tribes provide. The Tribes have a strong

incentive to provide comfortable, clean, and attractive

facilities and well-run games in order to increase at-

tendance at the games. The tribal bingo enterprises are

similar to the resort complex, featuring hunting and

fishing, that the Mescalero Apache Tribe operates on

its reservation through the “concerted and sustained”

management of reservation land and wildlife resources.

New Mexico v. Mescalero Apache Tribe, 462 US., at

341, 103 S.Ct., at 2390. The Mescalero project gener-

ates funds for essential tribal services and provides

employment for tribal members.

Id. at 219-20, 107 S.Ct. at 1093-94.

Where states have participated in the compact process,

tribes and surrounding communities have dramatically real-

ized the important economic benefits Congress intended

IGRA to afford.’ Class III operations, which are only

possible after a Tribal-State Compact has been reached,’

vividly demonstrate the inevitable impact such activities

have on commerce:

In the states where Indian tribes and states have

worked together on a government-to-government basis,

the objectives of the IGRA have begun to materialize

to the benefit of both governments. Tribes have used

gaming revenues to provide better governmental ser-

“Sometimes the most important gains for tribes and their states have

been in situations where compacts were reached reluctantly through

litigation, where the Eleventh Amendment was not an impediment. See,

e.g., Lac du Flambeau Band of Lake Superior Chippewa Indians v.

Wisconsin, 770 F. Supp. 480 (W.D. Wis. 1991); Sault St. Marie Tribe

of Chippewa Indians v. Michigan, 800 F. Supp. 1484 (W.D. Mich.

1992).

*The Bureau of Indian Affairs reports that as of January 26, 1995, 98

tribes in 22 states have entered into 114 Tribal-State compacts under

IGRA. See Department of Interior, Tribal-State Compact List, January

26, 1995, Appendix at 2a. Despite the apparent success for both tribes

and states once a compact is signed, most states which have signed

compacts first compelled litigation or threatenc.J sovereign immunity

defenses if tribes sought relief under IGRA. Some states, like Washing-

ton, relying on the Eleventh Amendment, demanded that Tribes either

accept a limited, generic “cookie cutter” compact dictated by the state

and not the result of negotiations as Congress intended, or face years of

litigation over the immunity issue. Meanwhile, tribal and congressional

goals for self-sufficiency remain frustrated. Assistant Secretary Deer

noted the difficulties caused by noncompacting states:

In several non-Indian communities tribal gaming has proven to be a

catalyst for their revitalization. In those states that have refused to

negotiate with tribes, the tribes’ efforts at achieving economic

stability and self-sufficiency have been effectively frustrated.

Testimony of Ada Deer, Senate Hearings, May 17, 1994, at 69,

Appendix at 4a.

vices for tribal members, better health care, higher

quality education and employment.

Oversight Hearings on ihe Need for Amendments to the

Indian Gaming Regulatory Act: Hearing Before the Com-

mittee of Indian Affairs, 103rd Cong., 2d Sess. 69 (1994)

(testimony of Ada E. Deer, Assistant Secretary, Indian

Affairs, Department of the Interior) hereafter (“Senate

Hearings”), Appendix at Sa. Better health care, education,

employment and other social benefits to Indian reservations

impact everyone, Tribes and states, Indians and non-Indians

alike. |

In Minnesota, for example, the number of welfare recipi-

ents — both Indian and non-Indian — under the federal Aid

to Families with Dependent Children program decreased by

14 percent between 1987 and 1992 in eight non-urban

counties with Indian gaming, whereas statewide the number

of welfare recipients increased 17 percent for the same

period. See Deloitte & Touche, A Historical Review of

Gaming in the United States, Appendix to Senate Hearings,

May 17, 1994, at 207, Appendix at 36a. Minnesota entered

into compacts with tribes soon after IGRA was passed. As a

study conducted for the amicus Minnesota Indian Gaming

Association (MIGA) by KPMG Peat Marwick has docu-

mented, Minnesota witnessed remarkable growth of tribal

self-sufficiency and freedom from federal welfare depen-

dency. Jd. Indian gaming has directly created nearly 10,000

jobs for Minnesotans, and has indirectly created an esti-

mated 20,000 additional jobs. Jd. Of particular significance

in terms of Indian gaming’s impact on commerce is the fact

that approximately 7,600 of those jobs are supported by

tourism expenditures. Jd. A number of these jobs are being

filled by persons who live more than 25 miles from the

reservation, particularly where tribal lands are remote. See

KPMG Peat Marwick, Minnesota Indian Gaming Associa-

tion, Economic Benefits of Tribal Gaming in Minnesota

1992, April, 1993, p. 14, Appendix at 68a. The impact on

highway travel is obvious.

Similarly, a study conducted for the State of Minnesota to

assist in its long-range planning determined that /5 percent

(approximately 900,000) of the customers visiting Minne-

sota Indian casinos were from outside the state. See Minne-

sota Planning, High Stakes: Gambling In Minnesota,

March, 1992, at 12, Appendix at 77a. A 1993 update to that

report observed:

Out-of-state visitors to [Tribal government] casinos are

having a significant economic effect on Minnesota.

According to the Department of Trade and Economic

Development these visitors were responsible for a $245

million dollar increase in the state’s gross product and

the creation of 7,600 jobs.

Minnesota Planning, Minnesota Gambling 1993, May,

1993, at 17, Appendix at 84a (emphasis added). The 1993

report noted that the number of out-of-state visitors had

increased from 15 to 20 percent. Jd. at 14, Appendix at 82a.

A survey of Tribal government gaming employees —

again, both Indian and non-Indian — in Wisconsin revealed

that 820 employees in 1992 had been welfare recipients prior

to going to work for a tribe’s gaming project, saving the state

approximately $1.6 million and the federal government

$1.4 million. See Deloitte & Touche, supra, at 209, Appen-

dix at 38a.

Tribal governments account for approximately five per-

cent of the American entertainment market related to gam-

ing. While small in relative terms compared to the 34

percent market share held by private casinos and the 38

percent share occupied by state lotteries — the latter being

by far the largest players in the gaming marketplace —

tribal governments’ gaming activities have a tremendous

impact in absolute terms on Indian and neighboring com-

munities. Jd. at 187, Appendix at 16a. The size and breadth

of Indian gaming projects where states have negotiated

tribal gaming compacts, and the impact of that activity on

commerce, must be considered in determining what Con-

gress was attempting to regulate under IGRA.'°

In South Dakota, the impact tribal gaming projects have

had on tourism is even more pronounced. In written testi-

mony submitted to the Senate Hearings, Dr. Michael K.

Madden, Professor of Economics, University of South Da-

kota, reported that prior to Indian gaming, aggregate travel

spending in the five counties which now host tribal gaming

projects totaled only about $8 million. By 1993, after the

tribes began their class III operations pursuant to Tribal-

State compacts,'' travel spending had increased in those

counties to about $31 million, an increase of 281 percent.

See Madden, Preliminary Estimates of Economic Impacts

Related to Tribal Gaming in South Dakota, Senate Hear-

ings, May 17, 1994, at 246, Appendix at 87a. Professor

Madden noted other benefits to Tribal and state economies:

'°As noted above, the Eleventh Circuit superficially dismissed the

impact of Indian gaming on interstate commerce as irrelevant to

Congress’ purpose in enacting IGRA, but its analysis focused only on

the control of organized crime:

Congress’ concern with organized crime was not that such activities

would burden interstate commerce, but rather that prohibition of

organized crime would “ensure that the Indian tribe is the primary

beneficiary of the gaming operation, and... assure that gaming is

conducted fairly and honestly by both the operator and the players.”

25 U.S.C. § 2702(2). In addition, Congress wanted to criminalize

the involvement of organized crime in order to “promote[ |] tribal

economic development, self-sufficiency, and strong tribal govern-

ment.” 25 U.S.C. § 2702(1). In analyzing Congress’ goals, it is

clear that alleviating a supposed burden on interstate commerce

was not among them.

Seminole, 11 F.3d at 1026. See discussion infra at Section III(F) of this

brief.

'' But not without substantial litigation delays. See fns. 8, 9, Supra.

New wages and salaries in the regions surrounding

the tribal casinos are estimated to be more than $25

million. Because most regions surrounding the tribal

casinos are of low population, these added earnings

have produced significant relative impacts on personal

income within communities. .. .

The use of [profits from tribally-owned casinos] vary

from tribe to tribe. Some of the resources have been

allocated to infrastructure improvements relating to the

casinos themselves. Examples include lodging and

camping facilities as well as additions to casino capac-

ity. Other economic development programs have also

been pursued. Training and educational programs for

tribal members have been instituted or expanded within

a number of the tribes.

Id. at 247, Appendix at 89a.

Perhaps the use of tribal gaming revenues in specific

instances best illustrates IGRA’s impact on commerce as

well as on the tribes themselves. The Wisconsin Winnebago

Nation has nearly 5,000 members, and was impoverished for

many years. The opportunity to use gaming under IGRA’s

compacting process, as the Wisconsin tribes were able to do

only after protracted litigation,'? not only benefitted the

Winnebago Nation in countless ways, but contributed signif-

icantly to the community around it. As Tribal Chair JoAnn

Jones so eloquently explained to Congress:

Indian gaming is not about gaming. It is about

survival and bringing my people out of the third world

conditions that they have lived in for generations. It is

about sovereignty and the right of one government to

operate free from the interference of another govern-

'? See Lac du Flambeau Band, 770 F. Supp. 480.

ment. Finally, it is about an agreement and compromise

worked out among sovereign governments.

When Congress established the National Indian

Gaming Regulatory Act it said the Act had three

purposes: Promote tribal economic development, self

sufficiency, and strong tribal government. Indian gam-

ing in Wisconsin is doing all of these things and more.

The Winnebago Nation employs more than 2000

people. Nearly 80% of these people are employed at our

gaming enterprises. Employment has quadrupled in the

last two years. More than 60% of these employees are

non-Indian. More than 300 of our gaming employees

came from the welfare rolls. Statewide, Indian gaming

jobs took 800 people off welfare and 1400 more from

the unemployment rolls. Casino income is the sole

support for the families of nearly 80% of the casino

employees. According to [state] Health & Social Ser-

vice Secretary Gerald Whitburn, state aid to Indian

families has dropped. He says that Indian gaming is a

major reason for this drop.

Testimony of JoAnn Jones, Tribal Chair, Wisconsin Winne-

bago Nation, Senate Hearings, April 26, 1994, at 68, Ap-

pendix at 96a-97a.

In Michigan, the Sault St. Marie Tribe of Chippewa

Indians, with a citizenship of approximately 20,000 mem-

bers, has experienced similar results, most of which came

after the State of Michigan, following extended periods of

negotiation and litigation (in this instance spanning five

years), entered into Tribal-state compacts.'* The Tribe is

the sole owner and operator of all its gaming operations. See

Testimony of Bernard Bousher, Tribal Chairman, Senate

Hearings, April 27, 1994, at 118, Appendix at 10la. Like the

'? See Sault St. Marie Tribe of Chippewa Indians, 800 F. Supp. 1484.

Wisconsin Winnebago Nation, which employs over 300

persons in connection with surveillance, security and inter-

nal accounting controls,'* the Sault St. Marie Tribe has

invested substantial resources in order to satisfy the congres-

sional mandate of providing gaming entertainment that is

conducted fairly and honestly, not only for the Tribe, but for

the customers as well. Bousher at 119-120, Appendix

at 103a-105a. See 25 U.S.C. § 2702(2). And as with tribes

in other states, many of Sault St. Marie’s patrons are

tourists, thus developing the economy of the reservation as

well as for the entire community. See, e.g., Letter from Sault

Area Chamber of Commerce to Governor John Engler,

dated May 13, 1993, Senate Hearings, April 26, 1994, at

202, Appendix at 108a-109a. Mayor Bruce J. Dodson of

nearby St. Ignace, Michigan, reports that in an area of 47

percent unemployment, “every able bodied person is now

working in a three county area... the Tribe has certainly

been one of the main contributors.” Senate Hearings, supra,

at 203, Appendix at 112a.

In New York State, the Oneida Nation, which had a 44

percent unemployment rate in 1990, is now the second

largest employer in Central New York. See testimony of

Gaiongwilode, Tribal Chairman, Senate Hearings, July 19,

1994, at 226, 243, Appendix at 117a-120a. The Oneida

Nation’s transformation has been typical of other tribes

which finally obtained the Tribal-State compact Congress

envisioned:

Thanks to revenue from the casino, the Nation is able

to house, feed, and educate its people, to nurture and

enhance the Oneida’s unique culture, to repossess

ancestral homeland, to significantly benefit the local

community, to research and develop other business

“Jones Testimony, supra, at 67, Appendix at 94a.

enterprises, and to otherwise provide for the seven

generations yet to come as our culture requires us to do.

Id. at 227, Appendix at 117a.

Indeed, while the effect of Indian gaming on surrounding

communities, the states, and commerce generally has been

significant, and clearly was within Congress’ sights when it

enacted IGRA, the uses of gaming revenues on the reserva-

tions themselves have reinforced the importance of tribal

participation for governmental purposes in this burgeoning

aspect of the entertainment and leisure industry. According

to the MIGA study, for example, in 1992 Minnesota Tribes

provided over $17 million for tribal housing, $39.5 million in

direct services, and $800,000 in charitable donations. An-

other $4 million was generated for human services and tribal

educational programs. See MIGA Study, at 10, Appendix at

64a.

Thus it is apparent that — just as Congress anticipated —

Indian gaming has had a substantial impact on interstate

commerce.

F. Congress Enacted IGRA, in Part, to Combat Organ-

ized Crime

Congress declared that IGRA’s purpose is, in part, “to

provide a statutory basis for the regulation of gaming by an

Indian tribe adequate to shield it from organized crime and

other corrupting influences, to ensure that the Indian tribe is

the primary beneficiary of the gaming operation, and to

assure that the gaming is conducted fairly and honestly by

both the operator and players... .” 25 U.S.C. § 2702(2).”°

'SCongress’ concern with crime and law enforcement is palpable in

the Senate Report. See Senate Report at 20 (“The need for Federal

and/or state regulation of gaming, in addition to, or instead of, tribal

regulation, has been expressed by various state and Federal law enforce-

ment officials out of fear that Indian bingo and other gambling enter-

See also Senate Report at 13 (“The purpose of the Act is to

provide a statutory basis for operating Indian gaming, to

promote economic development, to shield tribes from organ-

ized crime”). Reading these three distinct purposes as if

they were one, the Eleventh Circuit concluded that Con-

gress’ only concern with “organized crime” was that it might

prevent Indian tribes from being the primary beneficiary of

the gaming operation: “In analyzing Congress’ goals, it is

clear that alleviating a supposed burden on interstate com-

merce was not among them.” 11 F.3d at 1026. There are at

least three problems with the Eleventh Circuit’s reasoning.

First, section 2702(2) plainly sets forth three distinct,

though related, purposes. For example, it is conceivable that

an Indian tribe might not be the primary beneficiary of

gaming activity even in the absence of organized crime.

Similarly, fair and honest gaming does not insure that the

Indian tribe is the primary beneficiary of the gaming activ-

ity. Second, the Eleventh Circuit’s interpretation of sec-

tion 2702(2) suggests that the presence of organized crime

in Indian gaming is perfectly acceptable so long as the

Indian tribe remains the primary beneficiary of the gaming

activity. It is difficult to imagine Congress embracing such a

notion. Third, if the lower court’s interpretation were cor-

prises may become targets for infiltration by criminal elements”). See

also id. at 5 (“Representatives of states with experience in regulating

some forms of gaming activities, such as Nevada and California, have

expressed concern over the potential for the infiltration of organized

crime or criminal elements in Indian gaming activities. The criminal

division of the U.S. Department of Justice has expressed similar

concerns, although as stated in the additional views of Senator John

McCain, in 15 years of gaming activity on Indian reservations, there has

never been one clearly proven case of organized criminal activity”); id

at 6 (“the Committee has carefully considered the law enforcement

concerns of tribal and state governments, as well as those of the Federal

Government, and the need to fashion a means by which differing public

policies of these respective governmental entities can be accommodated

and reconciled”).

rect, Congress’ repeated use of commas'’® and the word “to”

before each of the three purposes stated in 25 U.S.C.

section 2702(2) would be surplusage. That result “violates

the established principle that a court should ‘give effect, if

possible, to every clause and word of a statute.’ Moskal

v. United States, 498 U.S. 103, 109-110, 111 S.Ct. 461, 466

(1990) (quoting United States v. Menasche, 348 U.S. 528,

538-39, 75 S.Ct. 513, 519-20 (1955) ). In sum, the Eleventh

Circuit read section 2702(2) too narrowly. Congress plainly

intended IGRA to, inter alia, combat organized crime.

“es

Congress has expressly found that “ ‘organized crime is

interstate in character,” Perez, 402 U.S. at 147 n.1, 91

S.Ct. at 1358 n.1 (quoting 18 U.S.C. § 891, Notes), and

that “[o]rganized crime operates on a national scale.” Jd. at

150, 91 S.Ct. at 1359. Consistent with this fact, Congress

has long enacted criminal statutes under its interstate com-

merce power. See, e.g., Caminetti v. United States, 242 U.S.

470, 37 S.Ct. 192 (1917) (White Slave Traffic Act);

Champion v. Ames, 188 U.S. 321, 23 S.Ct. 321 (1903)

(Federal Lottery Act); United States v. Jarrett, 705 F.2d

198, 202-03 (7th Cir. 1983) (Hobbs Act); United States

v. Martino, 648 F.2d 367, 381 (Sth Cir. 1981) (Racketeer

Influenced and Corrupt Organizations Act); United States

v. Cappetto, 502 F.2d 1351, 1356 (7th Cir. 1974) (1975)

(Organized Crime Control Act).

Congress has also criminalized the manufacture, recondi-

tion, repair, sale, transport, possession, or use of gambling

devices in interstate commerce. See Johnson Act, 15 U.S.C.

§§ 1171-1178. The Johnson Act expressly applies in Indian

country. See id. at § 1175. IGRA provides, however, that 15

U.S.C. section 1175 does not apply to any gaming con-

‘Congress’ use of commas between the three purposes set forth in

section 2702(2) indicates a “separation of sentence elements... [or]

items in a series...” Webster's New Twentieth Century Dictionary,

unabridged, at 362 (2d ed. 1983).

ducted under a Trihal-State compact that is in effect and is

entered into by a state in which gambling devices are legal.

See 25 U.S.C. § 2710(d) (6). See also Senate Report at 15.

Thus Congress, pursuant to its interstate commerce power,

was concerned with gaming devices, and chose to allow the

Johnson Act prohibitions to remain in effect absent a

class II] compact satisfying the requirements of 25 U.S.C.

section 2710(d) (6).

Related to its concerns regarding organized crime was

Congress’ determination that tribes adopt exclusionary stan-

dards of suitability for “primary management officials”

and “key employees.” See 25 U.S.C. § 2710(b)(2)(F)

(made applicable to class III gaming at 25 U.S.C.

§ 2710(d)(1)(ii)). Those employees must meet criteria

relating to the “public interest” and the effective regulation

of “gaming.” Jd. at § 2710(b) (2) (F) (ii) (II).

In sum, Congress’ concerns about organized crime and

gaming industry integrity standards further demonstrate the

interstate commerce nature of IGRA, and the error com-

mitted below in rejecting those factors.

IV. CONCLUSION

IGRA was enacted in part to address Congress’ concern

with issues that arise under its Interstate Commerce Clause

authority. The Eleventh Circuit Court of Appeal’s conclu-

sion that respondent State of Florida is entitled to a judg-

ment of dismissal because there was no exercise of that

authority was in error and should be reversed, and the case

remanded for further proceedings under IGRA.

Respectfully submitted,

LEVINE & ASSOCIATES

JEROME L. LEVINE

FRANK R. LAWRENCE

2049 Century Park East, Suite 710

Los Angeles, California 90067

(310) 553-8400

Counsel of Record

BLUEDOG, OLSON & SMALL

Kurt V. BLUEDOG

5001 W. 80th Street, Suite 670

Minneapolis, MN 55437

(612) 893-1813

March 31, 1995

Appendix 1

| Appendix 2

TRIBAL-STATE COMPACT LIST

TRIBAL INFORMATION FOR THOSE WITH

APPROVED TRIBAL-STATE COMPACTS

AS OF JANUARY 26, 1995

98 TRIBES — 22 STATES — 114 COMPACTS

24 AMENDMENTS/ADDENDUMS

THIS LIST IS UPDATED AS NEW COMPACTS/AMENDMENTS ARE

PUBLISHED IN THE FEDERAL REGISTER BY THE INDIAN GAMING

MANAGEMENT STAFF, OFFICE OF THE COMMISSIONER, BUREAU OF

INDIAN AFFAIRS, (202) 219-4068

* Tribe has compact(s) with more than one state.

** Tribe has more than one compact for different types of games.

INDIAN GAMING REGULATORY ACT

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED THIRD CONGRESS

SECOND SESSION

OVERSIGHT HEARING ON THE NEED FOR

AMENDMENTS TO THE

INDIAN GAMING REGULATORY ACT

MAY 17, 1994

WASHINGTON, DC

PART 3

APPENDIX

ADDITIONAL MATERIAL SUBMITTED

FOR THE RECORD

PREPARED STATEMENT OF ADA E. DEER,

ASSISTANT SECRETARY, INDIAN AFFAIRS,

DEPARTMENT OF THE INTERIOR,

Good Afternoon Mr. Chairman and members of the

Committee, I am pleased to be here with you today to share

with you the experiences of the Department of the Interior

in administering provisions of the Indian Gaming Regula-

tory Act (IGRA). I am accompanied by Mr. John Duffy,

Counselor to the Secretary, who will present the Depart-

ment’s testimony.

I do however, want to make some general comments on

Indian gaming before Mr. Duffy offers the Department's

testimony. The President’s remarks in his historical meeting

with the tribes, the follow-up Listening Conference and my

10 months as Assistant Secretary all make clear that tribe-

owned gaming is an important economic development activ-

ity for Indian tribes.

In the States where Indian tribes and the States have

worked together on a government-to-government basis, the

objectives of the IGRA have begun to materialize to the

benefit of both governments. Tribes have used gaming

revenues to provide better governmental services for tribal

members, better health care, higher quality education and

employment. In several non-Indian communities tribal

gaming has proven to be a catalyst for their revitalization. In

those States that have refused to negotiate with tribes, the

tribes’ efforts at achieving economic stability and self-

sufficiency have been effectively frustrated. Moreover, in

some highly publicized conflicts, protracted and costly liti-

gation has resulted creating a major disincentive for tribes

and States to work cooperatively.

Second, while at times tribes may feel overwhelmed and

frustrated, I believe they have shown great determination,

hope, and in most cases, willingness to work with the States

to reach amicable resolutions.

Although the implementation of the IGRA has some-

times been contentious and difficult, overall our experience

has been positive. To date we have approved 107 compacts,

12 amendments representing agreements between 90 tribes

and 19 states.

In closing I want to say that we will continue to support

Indian gaming as an important means of economic develop-

ment. And, as Assistant Secretary, I am prepared to work

with the tribes in their efforts to provide direction and

leadership on this critical issue.

Thank you.

Appendix 3

INDIAN GAMING REGULATORY ACT

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED THIRD CONGRESS

SECOND SESSION

OVERSIGHT HEARING ON THE NEED FOR

AMENDMENTS TO THE

INDIAN GAMING REGULATORY ACT

MAY 17, 1994

WASHINGTON, DC

PART 3

A Historical Review

of Gaming in the

United States

April 26, 1994

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HISTORY OF US GAMING

Origins of U.S. Gaming

The United States is in what has been referred to as the

“third wave” of legalized gaming, in that this is the third

time that gaming, in one form or another, is available

virtually everywhere in America. The first wave of gaming

began in the colonial era and lasted through the Civil War.

The second wave began after the Civil War and lasted

through the early twen#eth century when most forms of

gaming throughout the U. S. were banned. The third wave

began in 1964, with the passage of legislation legalizing a

lottery in New Hampshire.

Lotteries dominated the first wave and were used to help

finance the colonization of America. As such colonization

took place, the popularity of the lotteries increased and they

were used to finance projects too massive for traditional

government or private financing sources. Institutes of higher

learning such as Harvard and Princeton were financed in

part from tax proceeds generated by lotteries.

The nation’s first lotteries were considered respectable

and not a form of gaming, but rather, a voluntary form of tax

collection patronized by the most respectable citizens. By

1831, lotteries were sponsored by cight states and wagers

exceeded $66 million, five times the annual federal budget.

By the time the Civil War started, scandals and swindles

plagued the lotteries and a wave of morality swept the

nation. This soon led to the abolition of lotteries, and the

first wave of legalized gaming receded.

The second wave of legalized gaming followed the Civil

War. Lotteries made a comeback and other forms of gaming

proliferated. This comeback was the strongest in the Recon-

structed South as a means of dealing with the extreme

financial difficulties that resulted from the war. Gaming also

l3a

thrived in the frontier cities of the West and in most major

urban areas.

During the 1840s and 1850s, the gold and silver strikes in

California and Nevada caused an influx of miners and others

into those territories. Gaming became an integral part of the

boomtown atmosphere. Gaming also thrived in the cities of

San Francisco, Kansas City and Denver, all of which were

known as gaming capitals in the 1850s. During this period,

anti-gaming legislation was passed but was not effective and

only served to drive gaming underground where it was

tolerated if not supported by law enforcement officials.

However, the second wave did not persist, and by 1910,

the year Nevada.banned casinos, legal gaming was virtually

non-existent in the U.S. By the 1930’s casinos had returned

to Nevada and horse race wagering had returned to twenty-

one states. Lotteries were not legalized again until 1964

when such activity was legalized in New Hampshire, and,

according to some experts, this ushered in the third wave of

legalized gaming in America.

Despite a weak economy the gaming industry in the U.S.

has exhibited an impressive growth rate. The morality argu-

ment has lessened as governments and churches become big

players. The industry has become a huge economic and

social force. Players are demanding faster and easier games.

This fundamental value shift is currently changing the form

gaming takes across the country. Gaming is legal in one

form or another in every state (including the District of

Columbia) except Utah and Hawaii. Land based casino

gaming (including casinos on Indian Reservations) is of-

fered in 20 states. In addition, Indian tribes in Florida and

New Mexico operate electronic games such as video poker

without compacts because the states have refused to negoti-

ate with the tribes. Excursion boat (riverboat gaming) is

legal in Illinois, Indiana, Iowa, Louisiana, Missouri, and

Mississippi. Every other state with a major waterway, or

l4a

lake is considering riverboat gaming. 38 states (including

Washington D.C.) permit lotteries and remaining jurisdic-

tions where gaming is legal offer various forms of pari-

mutuel wagering.

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REVENUE ANALYSIS BY GAMING INDUSTRY

SEGMENT

1992 gaming revenues or win exceeded $29.9 billion a

volume that would rank 19th in the Forbes Sales 500, ahead

of American Express ($26.96 billion) and behind Boeing

($30.184 billion). Lotteries and casinos dominate the US

legal gaming industry accounting for approximately 38% and

34% respectively, of total 1992 gaming revenues. Pari-

mutuels are next in revenue market share at approximately

12%. Indian Reservation gaming accounts for 5% of revenue

market share. Charitable games, bingo, card rooms, and

legal bookmaking account for the remaining 11% of market

share (see exhibit B).

Consumer preference for higher priced lottery games,

continued interest in OTB and slot machines over lower

priced altermatives such as race tracks and table games

changed the composition of gross gaming revenue. This also

increased the average consumer price of gaming from 8.77%

of handle in 1991 to 9.07%.

Gross gaming revenue comprised .592% of US personal

income versus .552% in 1991. Consumer expenditures

(losses) on legal gaming were 6 times greater than the

$4.9 billion Americans spent on box office receipts.

Indian Reservation Gaming

Class III Indian Reservation gaming experienced signifi-

cant growth in revenues. Revenues totaled $1.07 billion,

with an estimated (256%) or $769 million increase since

1991. When combined with Class II revenues, mostly bingo,

the gross gaming revenue totaled $1.5 billion producing an

overall gain in revenues of 108%, or $779 million. Exhibit C

clearly illustrates the growth in Indian gaming since the

passage of the Indian Gaming Regulatory Act (IGRA) in

1988. Although Indian gaming revenues are increasing at a

tremendous pace, Indian gaming revenues are still a small

17a

percentage of total gaming revenues. Exhibits A & B illus-

trate market shares for 1991 and 1992. Exhibit D clearly

shows that the size of Indian gaming revenues is still small

as compared to total gaming revenues (comprising 5% of

total revenues).

There has been some confusion about the actual scale of

Indian Gaming. A widely talked about figure of $6 billion

was publicized. “Gaming and Wagering Business” magazine

attributes this projection to a possible misunderstanding

regarding gambling terminology. Indian casinos win 18% of

drop. Therefore, a $6 billion drop would equate to a

$1.08 billion win which is in line with the original estimate.

Casinos

Casinos won $11.2 billion an increase of $1.1 billion since

1991. Class III Indian Gaming the majority which is gener-

ated by casino games comprised $1.1 billion of the total

casino revenues. However, lotteries still comprised the larg-

est share (38.3%) of the pie but not by a significant amount.

Slot machines in Nevada and New Jersey, cruise ships,

riverboats and land based casinos were all strong performers.

The tend in the mix of casino gaming is moving away from

table games to higher margin slot machines. Slot machines

represented 47% of total Nevada and New Jersey casino

gaming revenues in 1982 versus 65% or $5.83 billion in

1992.

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18a

Lotteries

There have been many changes in the lottery market. It is

now comprised of three primary venues: traditional state

number games, instant games, and video lottery terminals.

Since its reintroduction into the US in 1964, the state lottery

has been the engine that has powered the resurgence of legal

gaming:

¢ 38 states including Washington DC permit state

lotteries.

¢ Lotteries are available to more than 80% of the US

population.

¢ Thus far, lotteries have been economically successful

and relatively free of scandal popularizing and sani-

tizing the game in general.

Aggregate gross revenues from lotteries reached $11.5 bil-

lion, a record 12% increase, a $1.2 billion increase from

1991.

Texas, Georgia, and Nebraska began lotteries in 1992-3.

The successful start of lottery operation in Texas generated

a first year handle which topped $1 billion.

The traditional lottery market is approaching maturity.

Lotteries are diversifying their product lines. The continued

success is highly dependent upon aggressively marketing

lottery games and stimulating the market by diversifying

their product lines.

Video poker and keno will play a key role in the future of

lotteries. Video lottery revenues were up 99% or $120.4 mil-

lion in 1992.

Non-Bingo charitable games

Non-bingo charitable games include pulltabs, punch-

boards, raffles, low-stakes blackjack and other card and dice

19a

games. Gross revenues increased by 4.5% or $55.6 million to

a total of $1.3 billion.

Bingo

Gross revenues from non-Indian bingo halls increased

2.2% to $1.09 billion. This revenue figure is an estimated

figure based on the reported revenues. Each state has

different laws regarding the reporting requirements and

therefore it is probable that there are instances where

revenues have not been reported.

Industry experts believe this market has matured. How-

ever, bingo players stay extremely loyal to their game.

Pari-Mutuels

Pari-mutuel wagering is generally considered to include

on-track, off-track, and inter-track betting on horse racing,

dog racing and Jai-alai. Currently, some form of pari-mutuel

wagering is authorized in all the U.S. states except Alaska,

Georgia, Hawaii, North Carolina, South Carolina, Utah,

and the District of Columbia. All of the states with pari-

mutuel wagering have some form of horse racing, approxi-

mately 17 states have greyhound racing, and Jai-alai wager-

ing is in operation in just three states, Florida, Rhode Island

and Connecticut. Pari-mutuel wagering accounted for 12%

of total US gaming revenues in 1992. Gross pari-mutuel

revenue rose slightly (.4%) by $16.1 million to $3.7 billion.

Major innovations in the industry have been off-track

betting, inter track betting and simulcasting races to other

venues, such as casinos. Off-track horse revenues increased

by 12.8% to $110.2 M. Off-track betting comprises 33% of

the industry’s revenues and the share continues to rise.

These innovations have made pari-mutuel wagering more

accessible to bettors, however several studies have shown

that the main effect has been to increase the amount

wagered by existing patrons versus attracting new attendees.

20a

The pari-mutuel industry has been losing its share to other

gaming industry segments and experienced low growth in

total revenues from 1982-1992 (exhibit E). The pari-mutuel

industry will require new and creative marketing approaches

to hold their share of the market.

Non-Nevada Cardrooms

Cardroom revenues increased slightly in 1992, by less

than $1.7 million, to $661 million. Most of these operations

are small but there are many. There are approximately 300

in California alone. However, revenues in those California

cardrooms have stabilized in 1992. Poker-like versions of

pai-gow and super pan-nine and similar games are the major

attractions.

Legal Bookmaking

This market share appears to have matured. Sports bets

net $9.98 million in 1992 to a three year low of $97.4

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HISTORICAL REVIEW OF INDIAN GAMING

Introduction

American Indian Nations embrace a distinct culture,

language and spirit. Casino gaming has been referred to

many as the “return of the buffalo”. The buffalo was used by

the American Indian people for total subsistence, food,

shelter, clothing, children’s games, and trading.

Gaming has replaced the buffalo as the mechanism used

by American Indian people for survival. Today, the proceeds

from gaming are used by Indian Nations for subsistence,

cultural preservation, and to replenish impoverished econo-

mies. Not surprisingly, the spread of Indian Gaming has

spurred controversy. As Indian casinos became more suc-

cessful, competitors have lodged charges of unfair advan-

tages and organized crime infiltration. During a 1992 Senate

hearing on Indian Gaming, Paul Maloney, senior counsel! at

the Department of Justice, testified that a special investiga-

tion uncovered no evidence of organized crime infiltrating

Indian gaming. In all cases of crime or robbery, Tribal

governments have brought the crime to justice. Opponents

accuse Indians of exploitation; that they are using gaming as

a means to provide short-term financial growth and enor-

mous benefits. Proponents refer to the intent of IGRA when

allegations of exploitation are raised.

The primary intent of IGRA is to “provide a statutory

basis for the operation of gaming by Indian tribes as a means

of promoting tribal economic development, self sufficiency,

and strong tribal governments”. Under IGRA, all revenues

from gaming operations are required to be used solely for

governmental or charitable purposes. Gaming revenues are

used to build infrastructure, schools, hospitals, roads, sewers,

and water systems and to fund health care and education.

Many reservations do not have sufficient resources and

are located in undesirable regions that cannot support devel-

23a

opment. These tribes have become dependent on federal aid,

as attempts at economic development have failed prior to

the advent of Indian gaming.

Government aid provided to Indians often result in bene-

fiting local communities. This is due to the fact that there is

a scarcity of Indian businesses and high unemployment,

sometimes as high as 80%. A significant portion of the

federal dollars are therefore spent outside the reservation.

The lack of a vital economy on reservations makes it

nearly impossible to improve tribal conditions. This hopeless

environment and constant struggle help to explain the high

incidence of alcoholism and suicide, and the lack of ade-

quate health care.in many tribal communities. According to

the 1990 Census, the poorest counties in the United States

are located on Indian Reservations. There are also 3,200

counties in the United States. Of the Poorest 1% (32

counties), 7 are located on Sioux reservations in South and

North Dakota. In addition, several other Indian Reserva-

tions in various counties in the United States were also listed

amongst the 32 poorest counties.

More recently, gaming has enabled a few tribes to im-

prove their situations considerably. The profits are used to

build road and water systems and healthcare centers, pro-

vide job training scholarships and both home and business

loans to tribal members. More tribes will benefit from

gaming with the proliferation of Indian gaming operations.

Currently, there are 547 tribes of which only 79 (14.4%)

have Class III gaming.

Legislative and Regulatory Issues

Indian Tribes are sovereign governments. They have ex-

isted as sovereign governments long before Europeans set-

tled in North America. Treaties signed with settlers in

exchange for land guaranteed the tribes continued ability to

be recognized and treated as sovereign entities. However,

24a

historically state governments have been hostile in recogniz-

ing Indian Tribes as independent entities.

Under the constitution of the United States, the federal

government is obliged to protect tribes from states, who

have often coveted the Indian’s lands and assets, and sought

to impose power over Indian tribes and people.

Several landmark court cases have confirmed this recog-

nition of Indian sovereignty. These court cases include,

Cherokee vs. Georgia, 1831, and California v. Cabazon,

1987. The Indian Gaming Regulatory Act (IGRA), passed

by Congress in 1988, affirms that tribes have the power to

conduct gaming on Indian lands subject to tribal/state

jurisdiction.

Indian Gaming was conducted on many reservations

throughout the US prior to the passage of Indian Gaming

Regulatory Act (IGRA). This legislation was passed in

respo%¢ to a 1987 federal court decision “California versus

Cabazon” which stated that tribes could engage in forms of

gambling that were not expressly prohibited by the state in

which the tribe is located. The “California versus Cabazon”

case and US supreme court finalized the distinction in

which the court applied a criminal/prohibitory —

civil/regulatory distinction. In other words, if a state regu-

lates gaming, in any form, then gaming falls under civil law

for which Indian nations cannot be prosecuted and the state

is obligated under federal law to enter into compact negotia-

tions with the tribe. If a form of gambling sought by a tribe

is expressly prohibited by the state under criminal law, then

the state can refuse negotiations for particular games on that

basis. The Cabazon case solidified issues surrounding gam-

ing on tribal lands which had previously been questioned.

The purpose of IGRA was to create a balance between

the tribe’s right to conduct gaming on their reservations and

the public interests of the states in which the tribes are

25a

located. IGRA became effective on October 17, 1988. The

goals of the act include tribal economic development, self-

sufficiency and a strong tribal government. The act provides

a framework by which the games are conducted to protect

both the tribes and the state. The act created three classes of

gaming and allocated regulatory jurisdiction over each class

among tribal, federal, and state sovereigns.

¢ Class I — includes social games solely for prizes of

minimal value or traditional forms of Indian gaming

engaged in by individuals and is subject to exclusive

tribal regulatory jurisdiction.

¢ Class II — includes all forms of bingo and other games

similar to bingo, such as pull-tabs and punch-boards

(electronic or non-electronic), provided these are

played in the same location as bingo games. Class II

also refers to non-banking games that either expressly

allowed or not expressly prohibited by state law and

banking card games in existence in the specified states

of Michigan, North Dakota, South Dakota, Montana,

and Washington State on or before May 1, 1988.

Class II gaming is subject to tribal regulatory jurisdic-

tion, with extensive oversight by the National Indian

Gaming Commission (NIGC).

¢ Class II] — includes all forms of gaming that are not

Class I or II, including slots, casino games, banking

card games, tiorse and dog racing, pari-mutuel wager-

ing and jai-alai. Class III gaming is lawful on Indian

lands only if the gaming has been authorized by a tribal

ordinance approved by the chairperson of the NIGC

and such gaming is permitted by the state for any

purpose by any person, organization, or entity, and is

conducted in conformance with a tribal-state compact

entered into by the tribe and the state that is in effect.

The tribal-state compact entered into by the tribe was

proposed by the Nevada congressional delegation on

26a

behalf of the states. The jurisdiction over class III

gaming is left to the tribal-state compact negotiation.

The sovereignty of American Indian tribes was limited by

IGRA which required a tribe to negotiate a compact with

the state. Under IGRA, a tribe must request a state to enter

into compact negotiations. Once a request is made, the state

has an obligation to negotiate in “good faith” to enter into a

compact. The compact must also be approved by the Secre-

tary of the Interior. Jurisdiction is provided to the federal

district court concerning the following:

. Any cause of action by a tribe arising from a state’s

failure to conduct negotiations in good faith.

° An action by a state or a tribe to enjoin any class III

activity conducted in violation of the compact.

* Any cause of action initiated by the Secretary of the

Interior to enforce the Secretary’s authority under

IGRA to enforce mediation procedures.

Today, there have been law suits because some states

have failed to live up to IGRA and negotiate in “good faith”

with tribes. There have been a number of landmark cases

prompted by the proliferation of Indian Gaming. These

cases have clarified gaming issues that IGRA addressed.

Some of the major cases are summarized below:

Mashantucket Pequot Tribe versus

State of Connecticut, 199]

This decision involved the first interpretation of IGRA.

The tribe filed suit in accordance with IGRA requiring the

state of Connecticut to negotiate terms for operating games

of chance on its reservation. The state agreed that “its

limited authorization of the conduct of Las Vegas nights by

nonprofit organizations does not amount to a general allow-

ance of such (casino-style) gaming as the tribe would

institute, and further that such gaming activity is contrary to

27a

the State’s public policy.” The court determined that the

issue was whether the form of gaming sought by the tribe

violated the State’s public policy.

The court reiterated what was stated in the Cabazon case.

“If the intent of state law is generally to prohibit certain

conduct, it falls within the areas of criminal jurisdiction, but

if the state law generally permits the conduct at issue,

subject to regulation, it must be classified as

civil/ regulatory.”

The court reasoned that since the state permits certain

casino style games at charity events, the Mashantuckets use

was within the meaning of IGRA, and not against public

policy of the state. The court held that the state was

required to enter into a compact with the Pequot tribe and

that the games conducted in Las Vegas nights were subject

to negotiations as were the rules of conduct for these games.

Lac Du Flambeau Band of Lake Superior Chippewa

Indians Versus Wisconsin, 1991

In this case the tribe filed suit against the state under

IGRA because the state failed to negotiate in good faith for

a gaming compact. The court concluded that “the state is

required to negotiate with the plaintiffs over the inclusion in

a tribal state compact of any activity that includes the

clement of prize, chance, and consideration and that is not

prohibited expressly by the Wisconsin Constitution. The

State is required to negotiate casino games such as video,

slot machines, and blackjack with the tribes because the

activities are permitted under Wisconsin law within the

meaning of IGRA.”

The Cabazon case finalized the legal distinction between

criminal/prohibitory and civil/regulatory. In this case it was

determined that Wisconsin’s gaming structure was regula-

tory in nature. The central issue in this case was whether the

state “expressly permits” the type of gaming which the tribe

28a

was secking to conduct. The Federal court said that the

“inquiry” is whether Wisconsin prohibits those particular

gaming activities. It does not.”

Seminole Tribe of Florida vs. Lawton Chiles, Governor of

the State of Florida, 1994

This case was first filed in the Southern District of Florida

on September 19, 1991. The Seminole Tribe brought suit

against Lawton Chiles, Governor of Florida, to remediate

the alleged failure of the State of Florida to conduct good

faith negotiations for the tribe to establish gaming opera-

tions on their land. The State of Florida dismissed the

claims on two grounds, 1) Gaming activities proposed by

the Seminole Tribe are not conducted in the State of

Florida. 2) Pursuant to the Eleventh Amendment, Congress

does not have the constitutional power to enforce “good

faith” requirement of the compact process by explicitly

providing the Tribe a judicial remedy against the state.

On June 18, 1992, the final ruling sided with the Seminole

tribe. The Florida Federal Judge ruled that the Eleventh

Amendment was not a justifiable defense by the states. The

Tribe’s central argument against Florida’s rebuttal was that

IGRA abrogated the State’s immunity when it enacted

IGRA. This ruling was important in that it found that

Congress has the power to abrogate State immunity. Subse-

quently, interlocutory appeal ensued. The appeal resulted in

a finding that Congress did not have the power to abrogate

state immunity, but the tribes should have remedy in “bad

faith” cases. Therefore, the Secretary of the Interior was

directed to implement procedures for the tribes in lieu of a

compact with the states.

The State's Use of the 10th and 11th Amendments

Congress included a provision in IGRA that the states

and tribes negotiate a compact for those games being

29a

considered by the tribe. The states have responded to IGRA

by using the 10th and 11th amendments to block the

establishment of Indian Gaming Facilities. The state’s basic

Strategy is to refuse to negotiate all or certain kinds of

Class III games (such as slot machines, card games, pari-

mutuel racing etc.). If a tribe feels the state has failed to

negotiate in good faith, IGRA says that the tribe can sue the

state for failure to negotiate.

The states have been using the 10th amendment as a

defense because it reads the powers not delegated to the

federal government by the constitution are reserved for

individual state governments. The state therefore cannot be

compelled by the federal government to act on anything that

is not stated in the constitution. This is disputed by the

tribes.

States have been using the 11th amendment as a defense

when tribes file suit against them for allegedly negotiating in

bad faith. The 11th amendment says that a state cannot be

sued by individuals based on federal legislation, that a state

has immunity from such lawsuits unless congress makes it

clear that immunity does not apply. One response according

to Jerry Strauss, an attorney representative for several tribes

is “Congress has the power to abrogate state immunity and

nobody disputes that Congress intended to do that when

writing IGRA.”

When the tribe seeks an appeal by taking the state to

court the state dismisses the suit on the grounds of sovereign

immunity as defined in the 11th amendment. The amend-

ment bars suit by individuals against a state to enforce rights

conferred by federal legislation, in the absence of clear

congressional intent to authorize such suits.

30a

Recent Agreements

In 1993, the Mashantucket Pequots tribe agreed to pay

the state of Connecticut 25% of slot machine revenue in

return for a monopoly on slots.

On April 25, 1994 Governor Weicker Jr. settled the

Mohegan’s land claims in exchange for permission to oper-

ate a casino. In this new agreement, the Pequots and the

Mohegans will share the gaming business. The new compact

extends to all casino games in return for $160 million in

payments from the tribes. This agreement could be dis-

solved if the legislature legalizes not just slot machines, but

any gambling off the reservation. If the agreement is dis-

solved the state would be forfeiting the tribes’ millions. This

agreement raised the barrier to any gaming company other

than Indians to operate casinos in Connecticut.

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32a

REVIEW OF ECONOMIC IMPACT STUDIES

Introduction

There have been several studies which show the positive

effects of Indian Gaming on reservations and the economy.

The Indian Casinos stimulate economic growth due to direct

and indirect impacts. For example, direct impacts are the

wages paid to employees as well as the purchases from

suppliers. For purposes of illustration, let us review the

economic impact of the wages paid to employees of the

casino. The casino employees have the means to consume

and they will therefore spend a portion of their payroll on

goods and services both on and off the reservation. The

producers of these goods now have extra incomes and they

will in turn spend a portion of their income. This process will

continue. Thus an endless chain of secondary consumption

and respending is set in motion by the primary investment

(in this example the casino employees’ wages.) This is what

is referred to as the multiplier effect. Spending stimulates

additional or induced spending in addition to employment.

There are other positive economic effects such as decrease

in unemployment and public assistance expenditures.

Although different methodologies have been used there

are a number of common findings which are revealed in a

majority of the studies:

* Increases in tribal revenues to support Indian govern-

ment services, economic development, and self-

sufficiency

* Increases in employment (Indian and non-Indian)

* Reduction in public assistance expenditures

* Creation of induced spending and induced employment

¢ Increases in the number of out-of-state visitors which

stimulates visitor spending

¢ Increases in tax revenues

33a

¢ Decrease in crime rates.

These studies also prove that the Gaming operations not

only benefit the Indian community but the surrounding

regions as well. As will be explained in several of the studies,

more often than not the casinos employ a higher percentage

of Non-Indian employees. An estimated 78% of casino

gaming employees are non-Indians.

The following studies have been reviewed and the key

findings will be highlighted in this report:

¢ The Economic Impact of Sycuan Gaming Center on

East San Diego County — prepared by McGladrey &

Pullen CPA’s and Consultants

* Economic Benefits of Tribal Gaming in Minnesota —

prepared by KPMG Peat Marwick

* The Economic and Fiscal Impact of American Indian

Gaming on the Government of the State of Wiscon-

sin — prepared by James Murray, Ph.D.

* The Economic and Fiscal Impact of Indian Reserva-

tion Gaming in New Mexico — prepared by Center for

Applied Research

* The Economic and Social Effects of Indian-Owned

Gaming Enterprises in Michigan — prepared by Uni-

versity Associates

* The Economic Impacts of Foxwoods High Stakes

Bingo & Casino on New London County and surround-

ing areas — prepared by Arthur Wright and Associates

Key Findings

The Economic Impact of the Sycuan Gaming Center on

East San Diego County

Although there has been a recession in San Diego

County, the Sycuan Gaming Center has experienced tre-

34a

mendous growth. It has impacted the local economy by

creating more than 2,100 jobs in 1993 and generated total

spending of nearly $70 Million.

The population of the Sycuan is only 100 people. The

tribe has operated a gaming operation since 1983 starting

with bingo, then adding card games, OTB and video pull tab

machines. In 1990 a 67,000 square foot Las Vegas style

casino was built for $3.5 million and then expanded in 1992

for $500 thousand.

There have been positive benefits to the tribe such as no

reliance on public assistance for the last six years. The tribe

has improved the infrastructure and also invested in non-

gaming related ventures to gain long-term economic self-

sufficiency. Proceeds from the gaming center have funded

the following tribal operations:

* Medical and dental clinic for tribal members and all

employees including Non-Indians

¢ Pharmacy

* Day Care Center

¢ Chapel

* Ambulance Service

¢ Library

* Police department

¢ Fire Department

* Automotive Shop

* Human Resources department

Tribal administrative offices

Gaming revenues have continued to increase significantly.

Gaming revenues include revenues from bingo, pull tabs,

card games, off-track betting, and restaurant and conces-

sions. In 1990, the expansion of the facility allowed for the

inclusion of card games, which is the largest source of

35a

gaming revenues (53.3% of total revenues). Total gaming

revenues increased 28% from $34.0 million in 1992 to an

estimated $43.6 million in 1993.

The largest expenditures for the gaming operation are

operating expenses which totaled $22.1 million in 1993 and

the payroll and payroll taxes which totaled $9.7 million in

1993. Other capital expenditures related to the gaming

center totaled $2.2 million. Total expenditures in 1993 were

$34.0 million.

The revenues less the total expenditures totaled $5.4

million in 1992 and $9.6 million in 1993. These amounts are

referred to as “Proceeds” and IGRA requires that proceeds

be used for the general welfare of tribal members, promoting

economic development, funding tribal government and local

charitable donations.

The following table summarizes the tribes use of

proceeds:

Use of Proceeds 1992 1993

Tribal Government $ 651,000 $1,089,000

Education and Human Services 3,048,000 3,153,000

Per Capita and Direct Services 804,000 930,000

Capital expenses and investments 929,000 4,428,000

Total $5,432,000 $9,600,000

According to the San Diego Business Journal, the Sycuan

Band is the second largest employer in East San Diego

County with 851 employees in 1993. It is interesting to note

that 90% of those employed by the Gaming Center and

tribal operation are non-Indian.

The economic impact from the Sycuan Gaming Center

and Tribal Operations was $38.6 million for direct expendi-

tures and $31.3 million for induced expenditures resulting in

a total economic impact of $69.9 million.

36a

Economic Benefits of Tribal Gaming in Minnesota

The state of Minnesota entered into video games of

chance compacts with 11 tribes between October 20, 1989

and the spring of 1991. The state also entered into blackjack

compacts with 11 tribes between May and August of 1991.

Tribal gaming has resulted in an estimated total of 27,575

jobs from both direct and induced employment. Of this total

9,975 persons are employed directly by the tribal gaming

facility. Indians and non-Indians benefit from the gaming

facility. Indians hold 27% of the jobs and non-Indians hold

73% of the new jobs. The tribal gaming employment was

compared to other employers and it ranked as one of the

largest employers in Minnesota. According to a study con-

ducted by the Minnesota Planning Agency 20,000 indirect

employment jobs are being supported by tribal gaming and

7,600 could be supported by tourism expenditures.

The state has also reduced Public Assistance spending.

The number of Aid to Families with Dependent Children

(AFDC) recipients has decreased by 14% between 1987

and 1992 in 8 non-urban counties with tribal gaming

whereas the statewide number of recipients increased 17%

for the same period.

Gaming revenues increased 173% from 1991 to 1992

totaling $390 million. Video games comprised the largest

share (74.7%) of total revenues.

37a

The largest expenditures were payroll totaling $116.9

million and operations-related totaling $106 million. The

revenue less the operating expenses yielded available pro-

ceeds of $167 million. In accordance with IGRA the tribe

utilized proceeds as summarized below.

Use of Proceeds 1992

Direct services $39.5 million

Human services and education 4 million

Charitable contributions 8 million

General Gov. and trusts 13.4 million

Management fees 8.3 million

Capital expenditure enterprise 32 million

Capital expenditure infrastructure 6.5 million

Housing 17.3 million

Investments and unallocated 45.2 million

Total $167 million

————_—

The Economic Impact of American Indian Gaming on the

Government of the State of Wisconsin

There are currently 15 Class III gaming facilities owned

by American Indian tribes in the State of Wisconsin. This

study released in 1993 showed the dramatic benefits that

Indian Gaming has had on the state of Wisconsin. The

benefits to the state of Wisconsin from welfare savings, gas

taxes, income taxes and sales taxes were estimated at

$51.7 million. These savings are summarized as follows:

Savings 1992

Welfare Savings $2.2 million

Gas Taxes $14.2 million

Sales Taxes $17.3 million

Income Taxes $18 million

Total $51.7 million

38a

These estimates were derived by reviewing current em-

ployment data and historical welfare and unemployment

statistics. An estimated 30,000 jobs are directly or indirectly

supported by Indian Gaming Facilities. Of this total, 4,500

persons were employed directly by the gaming facility.

Approximately, 5,500 jobs were created in construction,

supplier firms, and from non-gaming visitor spending. The

remaining 20,000 jobs were indirectly supported by the

gaming facilities. The estimated tax liability as highlighted

above is $18 million.

The study also reviewed the reduction in welfare benefit

costs resulting from the employment of former welfare

recipients by the gaming facilities. A survey of employees of

the American Indian gaming facilities revealed that 820 of

those employed in 1992 had been welfare recipients prior to

joining the operation. Using the average payments it was

estimated that a total of $1.6 million in payments was saved

by the state and approximately $1.4 million was saved by the

federal government.

There were also approximately 205 Indians receiving

Relief for Needy Indian Person (RNIP) benefits prior to

joining the gaming operation. The average RNIP benefit in

1992 was $2,676 resulting in a total savings of $548,580 in

this program because of direct gaming employment.

As stated in the table above, there was also significant tax

revenue generated from sales associated with the operation

of the gaming facility. Total sales tax and gas tax collections

from sales associated with facility exceeded $32 million in

1992.

This study also reviewed crime rates and found that crime

rates were actually lower in those communities with gaming

facilities. The total number of offenses in rural counties

increased by approximately 11 percent, the increase in

casino counties was less than 5% while the increase in non-

39a

casino rural counties was over 12%. These statistics do not

support the contention that costs are being incurred in

casino counties due to higher crime rates associated with

Indian gaming facilities. Moreover, this does not reflect the

thousands of enforcement hours provided at no federal or

state costs by the tribally funded officers and departments.

The Economic and Fiscal Impact of Indian Reservation

Gaming in New Mexico

This study reviewed the operations of 10 tribes which

comprise all Indian gaming enterprises in New Mexico.

The study focused on three dimensions to determine the

economic impact of gaming.

* The wage and salary income of employees at all reser-

vation gaming enterprises was identified. A portion

(60%) of the wage and salary income of gaming opera-

tion employee was assumed to be expended in the state

economy.

* The value of expenditures that are made by tribal

gaming operations for supplies, utilities, equipment,

etc. was identified.

¢ The tourism expenditures related to gaming were also

determined. The tourism expenditure patterns were

primarily based on the All Indian Pueblo Council

Report, “The Economic and Fiscal Impact of Ameri-

can Indian Reservations in New Mexico.” (October 10,

1993)

The principal source of data was a tribe by tribe survey

which described number of jobs, salary payments, etc.

Economic and taxation assumptions were taken from eco-

nomic models developed for the All Indian Pueblo Council

by the Center for Applied Research.

40a

Economic Impact attributed to Indian

Gaming Operation Employees

The Indian Reservation gaming operation directly sup-

ports 597 jobs and accounts for induced employment of 176

job holders state wide. This results in a total salary and wage

income impact of $6.9 million.

Economic Impacts attributed to Tribal

Government Expenditures

The expenditures for gaming operations supplies, goods

and services created 879 jobs state-wide and $20.1 million in

wage and salary income.

Economic Impacts of tourism attributed to

Indian Reservation Gaming

The tourist expenditures account of 3,332 jobs and $65.6

million salary and wage income statewide.

The following table summarizes the economic impacts

discussed above:

Basis of Impact Amount

Total Income - Gaming Operation Employees $ 6,935,509

Total Income - Expenditures for Operations $20,149,451

Total Income - Tourism Expenditures $38,530,608

Total 615,

$65,615,568

Fiscal Impacts of Indian Gaming

The key assumption forming the basis for tribal govern-

ment expenditures is that gaming enterprises obtain at least

90% of the goods, services and supplies for their operations

in state. The gaming operations are directly and indirectly

contributing $1.4 million in tax revenue.

4la

The Economic Impact of Michigan's

Indian Gaming Enterprises

This study compiled information from all seven Michigan

tribes. There are eight separate gaming enterprises which

include casino and bingo operations. Some of the tribes

operate businesses to serve customers including restaurants,

hotels, and gift shops.

In August 1993, a total of 2,681 people were employed by

Michigan gaming facilities. Of these 52% were Native

Americans and 48% were non-Indians. Of those employed

49% were welfare recipients and 44% were unemployed prior

to joining the gaming facility operations. All of the facilities

rank among the top eight employers in their respective

counties. Employment of tribal members has substantially

increased. On average, tribal unemployment rates decreased

77% as a result of the availability of on reservation

employment.

The economic benefits were quite significant. The eight

tribes paid a total of $5.7 million in state and federal taxes.

The seven tribes reported total revenues of $70.7 million.

Gaming payrolls totaled $19.7 million in 1992. The gaming

enterprises spent a total of $14.5 million on goods and

services.

These facilities continue to flourish as evidenced by the

growth from 1992 to 1993 in several key areas. The number

of employees has increased by 40%, taxes paid increased by

5%, total receipts increased by 70%, payroll increased by

46% and expenditures on goods and services increased by

84%.

The Economic Impacts of the Foxwoods High Stakes

Bingo and Casino on New London County and

Surrounding Areas

This study focused on 3 economic impacts of the

Foxwoods High Stakes Bingo and Casino, Employment and

earnings, AFDC impact, and Real value of housing.

42a

I. Employment and earnings summary

The Foxwoods High Stakes Bingo and Casino, owned by

the Mashantucket Pequot Tribe, opened in early 1992. This

opening created 6,000 new jobs and is expected to increase

to 9,500 in 1994. The average gross pay of casino employees

is approximately $25,000 a year plus $9,300 for fringe

benefits. The salaries for casino employees are on average,

$2,100 more than average New London County salaries

before February 1992. Due to increased economic activity,

new indirect (non-casino) jobs will also be created. Apply-

ing economic impact analysis, the study showed that each

new Foxwoods job, supported 1,107 additional non-casino

jobs in New London County. Therefore, the combined effect

of the 9,500 jobs is a total of 20.017 new jobs. The total

associated payroll is estimated to be $478.5 million per year.

This analysis also determined that each new Foxwoods job,

supported 0.74 additional non-casino jobs in the rest of

Connecticut. This translates into more than 7,000 new jobs,

with an annual payroll of more than $214 million. Overall.

employment created by the opening of the Foxwoods High

Stakes Bingo and Casino have a significant correlation to

creating jobs in all of Connecticut.

II. AFDC Impact

Using economic methods, this study determined that each

new job trims 0.154-0.26 recipients from AFDC (Aid for

Dependent Children) rolls. The correlation was also deter-

mined that when the economy is more robust, these figures

increase. When the economy is more depressed, these

figures tend to drop.

To estimate the total savings from the drop in recipients

who receive AFDC, it was assumed that a conservative

AFDC payment is $200 per month and 26,000 direct and

indirect jobs will be created. The total estimated Savings

would range from $9.61 million to $16.20 million, based on

43a

an estimated reduction in AFDC recipients of 4,004-6,700

people.

Ill. Real Value of Housing:

Also applying econometric analysis, estimated that over

the long run, every | percentage point reduction in unem-

ployment rate in the four eastern most Labor Market Areas

(LMA’s) in Connecticut will increase better than 7.7 per-

cent in real housing prices in the 4 LMA’s. Converting

casino-related employment projections into decline in un-

employment rates, it is estimated that real housing prices in

the 4 LMA’s will increase by $1.177 billion by late 1994. In

addition, including the effects of non-casino related employ-

ment, the total increase in real housing prices is estimated to

be $6.1 billions by the end of this decade.

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MAGA

Minnesota Lndian Gaming Association

Economic Benefits of

Tribal Gaming

in Minnesota

7992

MIGA

Minnesota Indian Gaming Association

April 30, 1993

Economic Benefits of

Tribal Gaming

in Minnesota

1992

The Minnesota Indian Gaming Association (MIGA) is picascd to present this second authorized

Study of the economic benefits of Tribal gaming in Minnesota. The federal Indian Gaming Regula-

tory Act of 1988 provided a statutory foundation for Tribal gaming “as a means of promoting

economic development, sclf-sufficiency and strong Tribal government.” This Study was undertaken

to assess the continuing economic impact of Tribal gaming in Minnesota. Authonzcd by MIGA, the

Study presents data gathered from nine of the eleven Minncsota Indian Tribes operating gaming

casinos. The data identify economic bencfits from Tribal gaming in the areas of :

* Increased Tribal revenucs to support Indian government services, economic development and

self-sufficiency;

* Increased jobs and employment;

* Reduced public assistance expenditures;

* Increased jobs from secondary Spending and construction; and

* Increased out-of-state visitor Spending in Minnesota.

The study concludes that Tribal gaming in Minncsota is well on its way to becoming one of the

Statc's largest employers. As this industry conunucs to develop, other benefits associated with eco-

nomic progress will be studied. Visible progress is already occurring on Minnesota's Indian

reservations in community development, education, health care, nutrition, housing and infrastruc-

ture improvements. This study confirms thai non-Indian sectors of Minnesota's cconomy are enjoying

sufficient benefits as well.

Tribal gaming occupies a unique niche in the fabric of our society. Unlike other industries. it is

operaicd by sovercign governments to finance Programs and services for its citizens, to build eco-

nomic self-sufficiency on Indian reservations, and to create economic opportunity for Indians and

non-Indians alike. In this context, it is clear that Tribal gaming in Minncsola 1s achieving the objec-

Contacts tives set forth by the U.S. Congress.

Sincerely,

Report issucd by : Technical assistance by: Wounan Ellis.

Minnesota Indian KPMG Peat Marwick Chairman. MIGA

Gaming Association Minncapolis, Minnesota

Myron Ellis, Chairman Steven W. Laible, Partner

218-335-8200 612-337-9494

54a

Table of Contents

EXECUTIVE SUMMARY

STUDY BACKGROUND AND APPROACH

GAMING OPERATIONS: FISCAL DATA

EMPLOYMENT TRENDS

PUBLIC ASSISTANCE TRENDS

INDIRECT EMPLOYMENT

OUT-OF-STATE VISITORS

55a

EXECUTIVE SUMMARY

Study Participants

The Minnesota Indian Gaming Association (MIGA) has

authorized a study of the economic benefits of Tribal gam-

ing in Minnesota. A professional service firm, KPMG Peat

Marwick, provided the technical support and analysis to

conduct the study. The following nine MIGA members

participated in the study:

* Bois Forte Chippewa ¢ Mille Lacs Chippewa

¢ Fond du Lac Chippewa ¢ Prairie Island Sioux

¢ Grand Portage Chippewa ~» Shakopee Sioux

* Leech Lake Chippewa ¢ Upper Sioux

* Lower Sioux

Fiscal years are not the same for each Tribe. Some use

June 30 and others use September 30 or December 31 as the

end of the fiscal reporting period.

Results from the study identified several significant eco-

nomic benefits.

Gaming Proceeds

During fiscal years 1991 and 1992, the gaming operations

of the nine study participants produced the following finan-

cial results:

1992 1991

Revenues after payouts $390 million 143 million

Less expenditures 223 million 89 million

Available proceeds $167 million 54 million

The gaming expenditures are benefiting employees and a

variety of suppliers and service providers. The proceeds from

gaming are being used for purposes consistent with the

56a

National Indian Gaming Regulatory Act of 1988 to:

¢ Fund tribal government;

¢ Provide for the general welfare of the Tribe;

* Promote economic development;

¢ Contribute to charity; and

* Help fund local agency operations.

Proceeds are being used for direct human services, educa-

tion, housing and infrastructure improvements as well as for

investment in the Tribal business enterprises.

Job Creation and Employment

Tribal gaming has resulted in 9,975 new jobs in Minne-

sota for persons working directly for the Tribal gaming

enterprises. Indians hold approximately 27% of the new jobs

and non-Indians have benefited from 73% of the new jobs. A

majority of the jobs have been created in the non-urban

areas of the state where steady jobs on an annual basis are in

short supply.

If these jobs were attributed to a single employer, Tribal

gaming would be one of the 10 largest employers in

Minnesota.

Public Assistance Savings

An analysis of gaming operations in non-urban counties

shows a strong correlation between an increase in jobs in the

non-urban counties with Tribal gaming facilities and a

decrease in AFDC recipients. The number of AFDC recipi-

ents decreased by 14% between 1987 and 1992 in the eight

non-urban counties with Tribal gaming facilities while the

state-wide number of recipients increased 17% for the same

period. This produces a benefit to the state in the form of

reduced spending for public assistance.

57a

Indirect Employment

A study prepared by the Minnesota Planning Agency

estimates an additional 20,000 indirect employment jobs are

being supported by Tribal gaming.

Out-of-State Visitor Spending

It is estimated by the Minnesota Planning Agency that

out-of-state visitors spent $245 million on various travel

related goods and services in fiscal year 1992. This level of

spending could support an estimated 7,600 jobs.

Job Summary

The following is a summary of the total number of jobs

that could be supported by Tribal gaming based on the

methodology used in the study.

Source of jobs 1992 1991

Direct 9,975 4,730

Indirect estimate 20,000 5,300

Visitor spending estimate 7,600 600

Total 37,575 10,630

Other Benefits

There are likely additional benefits from Tribal gaming

that have not been quantified due to a lack of data including:

Increased payroll tax revenues;

Increased unemployment insurance revenues;

increased sales tax revenue from visitor spending;

Increased sales tax revenue from induced spending;

Improved housing;

Improved health care;

Increased job skills; and

Improved self-esteem from being employed.

58a

STUDY BACKGROUND AND APPROACH

Background

The Minnesota Indian Gaming Association (MIGA) is

an organization that includes members from each of the

eleven Tribes in Minnesota. These communities are feder-

ally recognized Tribes and each has an independent tribal

government.

MIGA has authorized a second study of the economic

benefits of Tribal gaming in Minnesota. The professional

service firm of KPMG Peat Marwick was engaged by the

members to provide technical assistance and analysis with

respect to the study elements. Exhibit | is a listing of the

Indian Tribes and gaming facilities that participated in the

study. Since some Tribes and gaming facilities did not

participate, the aggregate data included in the study is less

than the total Tribal gaming picture in Minnesota.

Exhibit 1

PARTICIPATING MEMBERS

Tribe Gaming Facility

Bois Forte Fortune Bay

Fond du Lac Fond du Luth and Big Bucks

Grand Portage Grand Portage Casino

Leech Lake Northern Lights and Palace Bingo

Lower Sioux Jackpot Junction

Mille Lacs Chippewa § Grand Casino Mille Lacs and Hinckley

Prairie Island Sioux Treasure Island

Shakopee Sioux Little Six and Mystic Lake

Upper Sioux Firefly Creek

59a

Approach

Data was based on the 1992 fiscal year. Data collection

forms were developed and included the following elements:

* Revenue — Revenue data for each gaming facility was

obtained directly from the facility. The term revenue in

casino operations is generally defined as the win from

gaming activities, that is, the difference between gam-

ing wins and losses, not the total amount wagered. All

reference to revenue in this study is after payouts and

does not include the total amount wagered.

* Source of Revenue — Revenue data has been classified

by major source. The major classifications of Tribal

gaming revenue in this study include:

— Video games,

— Blackjack,

— Bingo and pull tabs, and

— Concessions and other.

* Operating Expenditures — Expenditure data was ob-

tained from each gaming facility and classified into the

following categories:

— Salaries and wages,

— Payroll taxes and benefits,

— Advertising/ promotion,

— Utilities, and

— All other operating expenditures.

* Use of Proceeds — Information was obtained on the

use of proceeds made available from gaming activities.

The major classifications for use of proceeds include:

— Direct services and per capita payments to

members,

— Human services and education,

— Charitable contributions,

— Investments,

60a

— Management fees,

— Other tribal government trusts,

— Enterprise facilities,

— Public infrastructure, and

— Housing.

Other areas of economic analysis included the following:

* Employment Trends — Data was obtained on the num-

ber of jobs created by Tribal gaming including the

direct jobs at the gaming facilities and the indirect jobs

resulting from gaming expenditures.

* Public Assistance Trends — Data was obtained on the

numbers of persons receiving public assistance in Min-

nesota to analyze any changes that might be related to

the growth in gaming employment.

Sources of Data

Tribal gaming is a relatively new business activity in

Minnesota and data sources are in a developmental stage.

Fiscal data related to gaming operations was obtained from

internal reports prepared by the accounting and administra-

tive staffs of the participating MIGA members. The staff

personnel have attempted to answer all inquiries essential to

conducting the study and have made reasonable efforts to

present accurate data. The fiscal data was not independently

verified to other documents. It is possible that the data

presented includes inconsistencies in classification or other

discrepancies because each facility has developed its own

methods of reporting. Other sources of data are referenced

where appropriate.

6la

GAMING OPERATIONS: FISCAL DATA

Status of Tribal Gaming in Minnesota

The status of Tribal gaming in Minnesota has been

documented in a report to the legislature submitted by the

offices of the Governor and Attorney General and the Tribal

State Compact Negotiating Committee, dated September 5,

1991. The following is a summary of items related to Tribal

gaming operations in Minnesota:

* Indian Gaming Regulatory Act (IGRA) — Signed

into law on October 17, 1988. The Act provides the

regulatory framework for various forms of gambling on

Tribal lands. A primary purpose of the Act is to provide

a statutory foundation for Tribal gambling operations as

a means of promoting economic development, self

sufficiency and strong Tribal government.

¢ Video Games of Chance Compacts — between Octo-

ber 20, 1989 and the spring of 1991, the State of

Minnesota entered into video compacts with the eleven

Tribal governments in the state.

* Blackjack Compacts — between May and August of

1991, the State of Minnesota entered into blackjack

= with the eleven Tribal governments in the

tate.

The actions of Congress and the State of Minnesota have

established the regulatory framework for Tribal gaming. The

Tribal governments have established gaming ordinances,

built facilities and initiated operations pursuant to the evolv-

ing regulatory framework.

62a 63a

Gaming Operations- Fiscal data was obtained from repons furnished by the study paruc:-

Expenditures pants. Expenditures were classificd by mayor expendiure typc. The

following 1s a summary of cxpenditurcs by type in millions of dollars.

Gaming Operations- Fiscal data was obtained from reports furnished by the study partici-

Revenues pants. Revenues reported are net of payouts. The following is a summary

of revenues by major source in millions of dollars .

Revenue source 1992 1991 Expenditure type 1992 1991

Video $ 291.5 99.3 Payroli-related total $ 116.9 31.8

Blackjack 77.9 28.5 Operstions-related total 106.1 $7.2

Bingo and pull-tabs 12.8 11.0

Concessions & other 78 4.2 Total $ 223.0 89.0

TT TT AS TT LTT AT RR

Total $ 390.0 143.0

Exhibit 2 illustratcs revenuc information by percent. Exhibit 3 illustrates expenditure information by percent.

Exhibu 3

Exhibut 2

Expenditures by Type

Revenues After Payouts by Source FY 91

FY ‘91

Operstions

| Releted 47.6%

Source: Fiscal repors of sudy parucrpants

Source Fiscal reports of study parucipants

The catcgory of operating expenditures includes various expenditures

associaicd with the gaming opcratuons such as adverusing. uulucs, wain-

ing. sccunty (if contracted), uniforms, supplics. maintenancc, insiallauon

of equipment, business services and costs related to the use of faciliues

64a

Gaming Operations — Use of Proceeds

The Indian Gaming Regulatory Act requires Tribal gov-

ernments to adopt an ordinance governing the conduct of

any gaming activity. The ordinance must prohibit the use of

net revenues from any gaming for purposes other than to:

Fund Tribal government;

Provide for the general welfare of the Tribe and its

members;

Promote Tribal economic development;

Donate to charity; and

Help fund local government agency operations.

The following is a recap of the aggregate operations of the

nine gaming operations for fiscal years 1991 and 1992 in

millions of dollars:

Available proceeds 1992 1991

Revenue after payouts $390.0 $143.0

Less expenditures 223.0 89.0

Available proceeds $167.0 $ 540

For purposes of this study the use of gaming proceeds

have been summarized as follows in millions of dollars.

Use of proceeds 1992 191.

Direct services $ 39.5 $17.5

Human services and education 4.0 3.1

Charitable contributions 8 _

General government and trusts 13.4 2.5

Management fees 8.3 3.6

Capital expenditure enterprise 32.0 27.3

Capital expenditure infrastructure 6.5 _

Housing 17.3 —

Investments and unallocated 45.2 _=

Total $167.0 $54.0

65a

The following explanatory notes are provided to assist in

understanding how gaming proceeds are being used by the

Indian Tribes:

* Self Determination — The Indian Gaming Regulatory

Act intended that Tribal governments be the primary

beneficiary of gaming programs. Under broad guide-

lines established by the Act, Tribal governments have

decision-making authority regarding this use of gaming

proceeds.

* Aggregate Data — Data in the study has been aggre-

gated. There are significant differences in the use of

proceeds among the participating members.

* Capital Expenditures Enterprise — Approximately

$27 million of fiscal year 1991 and $32.0 million of

fiscal year 1992 proceeds have been expended for the

construction, renovation or improvement of gaming

facilities or is being held in short term investment

accounts pending disbursement for construction

projects recently completed or in progress.

* Per Capita Payments — The use of gaming proceeds is

in large part driven by demographic factors. There are

eleven Indian Tribes in the state of Minnesota: four

Sioux and seven Chippewa. The Sioux communities

have a much smaller population than the Chippewa

communities (approximately 1,500 Sioux and 45,000

Chippewa by one 1991 estimate). The Sioux Tribes are

much closer to population centers in the southern half

of the state. The Sioux Tribes also have three of the

larger gaming operations and are, therefore, in a better

position to make per capita payments. The Chippewa

Tribes have larger populations to provide for and

smaller commercial markets. Therefore, the use of

gaming proceeds in Chippewa Tribes is more likely to

66a

be used to support general government and human

services rather than per capita payments.

EMPLOYMENT TRENDS

Objective of Indian Gaming Regulatory Act (IGRA)

A primary objective of IGRA as stated in United States

Public Law 100-497 is:

“to provide a statutory basis for the operation of

gaming by Indian Tribes as a means of promoting

tribal economic development, self-sufficiency and

strong tribal governments.”

The trend in employment can be used to measure the

accomplishments of economic development objectives.

Tribal gaming (primarily bingo and pull tabs) has been

around for many years. High stakes bingo gained considera-

ble publicity in 1982 when the Shakopee Mdewakanton

Sioux opened the Little 6 Bingo Palace at Prior Lake

(within the Twin City metropolitan area). Other Indian

Tribes subsequently opened or expanded bingo operations in

other parts of the state. During 1990, video slot machines

were introduced in various operations and blackjack fol-

lowed in 1991.

Tribal gaming operations and activities grew rapidly dur-

ing 1991 and 1992 as newer facilities were opened.

67a

Employment Trends

As the charactenstics of gaming changed, the nature of the employment

paticrns changed. Bingo games were typically played in the evenings

for a few hours. Some of the smalicr operations did not have daily games.

With the introduction of video slots and blackjack, the gaming audience

changed, the gaming hours changed and the number of employees needed

to staff the operations incrcascd.

The number of persons employed by gaming opcrations was obtained

from the study parucipants. Exhibit 4 illustrates the growth in cmploy-

ment from 1982 to 1992. As evident from the exhibit, the number of

Tribal gaming jobs grew by over 4,000 during fiscal year 1991 and

another 4,000 during fiscal year 1992.

Gaming Employees

Tribal Gaming Employment Growth

‘B2 ‘83 ‘84 ‘8S ‘86 ‘87 ‘BB ‘B89 ‘90 ‘91 ‘92

The pay range for a majority of the jobs created is $5 to $10 per hour.

While these wage rates are not impressively high, there arc a number of

bencficial atinbutes to the gaming jobs, including:

* Location of jobs in non-urban arcas where more jobs are necded

to balance the siatc economy,

* Location of jobs on or near Indian lands where uncmployment

has histoncally been excessive,

* Flexible hours allowing households to add incremental income

without incurmng substanual incremental cost for day care. trans-

portation or clothing, and

* Opportuniues to Icarn and develop basic job skills.

—eean{quneannuqunuuquqrlrlrlrreEllElEEEEE)E)) —___————

68a

Indian and An analysis of employment trends shows an intcresting distnbuuon be-

Non-indian tween Indian and non-Indian employecs. As shown in Exhibit 5, 20% of

Job Distribution the gaming jobs were held by Indians in 1991 and 80% werc held by

non-Indians.

Exhibut 5

Overall Employment Ratio

Fy ‘91

indian Total

20.0%

The distribution of jobs between Indians and non-Indians is primarily

attributabic to demographics and location of the gaming faciliues. There

arc more Indian job seckers in the northern part of the state where the

gaming facilities are smaller.

The Burcau of Indian Affairs prepares periodic reports on the Indian

population receiving services and the labor force esumates. The Janu-

ary, 1989, report estimates that 4,300 Indians living on or adjacent to

reservations in Minnesota were not employed and were sccking work.

Stated another way, 38% of the Indians between the ages of 16 and 64

were uncmploycd and seeking work.

During 1991 and 1992, the total number of jobs created by Tribal gam-

ing could accommodate every unemployed Indian job seeker living on

or adjacent to a reservation in Minnesota. Unfortunatcly, the jobs cre-

atcd were not all within a reasonable commute (25 miles) of thc

prospective Indian job seekers.

69a

The gaming operations in the southern part of Minnesota

are near the smaller populations of Indians. Of the study

participants, five operations have the potential to virtually

eliminate unemployment on the reservation. Tribal gaming

is not the complete answer to Indian unemployment

because:

¢ There will likely be demographic or geographic barriers

to full employment; and

¢ There will likely be individuals who are unable to work

in gaming facilities for a variety of reasons

The study participants are all aware of the need to use

gaming proceeds to develop other areas of Tribal economies

and create a variety of job opportunities.

70a

Relative Size of

Tribal Gaming

Employment

The rclative size of Tribal gaming employment was compared to the

largest employers in Minnesota. Exhibit 6 lists the largest 25

employcrs. If Tnbal gaming werc a single corporation, the combined

employment would rank 1n the top 10.

Exhibit 6

Employment Comparison to

Minnesota’s 25 Largest Employers

Menncce ts

Pare Compomy Mame A mts venom’

1 3M 23,000

2 Dayton Hudson Corporation 21,650

3. Northwest Airlines inc 17,500

4 Mayo Foundation 16,500

S Health One Corp 11,000

6 Honeywell inc. 11,000

7 18M Corporaton 9,300

8 Lifespan inc. 8,800

9 Norwest Corporsuon 8,151

10 = Unusys Corporation 8,000

1) US. West 7,316

12 Ferwew Mospital & Health Services 7,000

13. Northern States Power Company 7,000

14s erst Bank System inc. 6,426

1S Fingerhut Corporation 5,800

16 «6K men Corporston 5,700

17 Heath East Corp. 5,050

18 = Cormtro! Dets Corporation 4,864

19 J.C. Penney Company inc. 4,800

20 = Burlington Northern Railroed inc. 4,500

2) Unned Parcel Service 4,200

22 The Prudentia! 4,100

23. Sears Roebuck and Company 4,033

24 Gatewey/Rainbow Foods inc. 4,000

2 Andersen Corporation 3,960

Source: Minnesow Deparument of Trade and Economic Development

Report of Minnesouw's Largest Corporaic Employcrs.

September 10, 1991

———

——

Tla

PUBLIC ASSISTANCE TRENDS|

Job Creation and Public Assistance Relationships

A common economic development strategy is to develop

industries and jobs in areas considered depressed. The

rationale for this strategy is that creating a job in a depressed

area will have a relatively greater benefit than creating a job

in an economically progressed area. Depressed areas of a

state or county will traditionally rely on and absorb compar-

atively more public assistance than a metropolitan area

relative to their individual contribution te the state’s

economy.

The significance of the Tribal gaming industry in Minne-

sota is that a majority of the facilities, by virtue of being

located on Indian reservations, are located in rural counties

and distributed throughout the state. Consequently, the

introduction of Tribal gaming has not only led to the

creation of many jobs, but jobs which have a substantially

greater economic benefit than would be the case in the

urban areas.

Thus, when analyzing the benefits of the Tribal gaming

industry, changes in demand for public assistance were

considered.

Analysis Approach

Data pertaining to public assistance spending within the

state was obtained from the State Department of Human

Services. After considering the major public assistance pro-

grams, the Aid to Families with Dependent Children

(AFDC) program was selected due to its significance in the

overall public assistance environment. In the state of Min-

nesota, the AFDC program currently serves 63% of the

Indians receiving public assistance, and 45% of all recipients

receiving public assistance (making AFDC the largest sin-

72a

gle human service program in the state in terms of recipient

counts).

AFDC recipient counts is selected counties covering the

period from 1987 to 1992 were analyzed. Because of the

relative newness of Tribal gaming, identifiable trends would

most likely be evident in that time period.

Only those non-urban counties with Tribal gaming facili-

ties were considered. These parameters were used because,

in such counties, the gaming facilities have emerged as one

of the major employers. Any fluctuations in AFDC demands

would more strongly correlate to the presence of Tribal

gaming than it would in an urban area. A wider range and

number of economic factors would influence a change in

public assistance patterns in an urban area. Given the

criteria, Cass County containing the Northern Lights and

Palace Bingo facilities, Cook County containing Grand

Portage Casino, Goodhue County containing the Treasure

Island facility, Mahnomen County containing the Shooting

Star Casino, Mille Lacs County containing the Grand Ca-

sino, Pine County containing the Grand Casino Hinckley,

Redwood County containing the Jackpot Junction facility,

and Roseau County containing the Lake of the Woods

Casino were studied.

Recipient count trends in each selected county were then

compared to the trends in the state as a whole and to the

largest urban counties, Hennepin and Ramsey.

Recipient Trends

The results of this analysis suggest that the employment

generated by the Tribal gaming industry is reducing the

demand for AFDC services and expenditures, and is there-

fore fulfilling one of the main goals of the State/Tribal

compact — economic development.

73a

Exhibit 7 displays the number of AFDC recipients for

Hennepin and Ramsey counties, the state of Minnesota, and

the four non-urban counties containing major Tribal gaming

operations.

Exhibit 7

AFDC RECIPIENT COUNTS

% Increase % Increase

(Decrease (Decrease)

1987 1991 from 1 1992 from 1987

Hennepin 42,349 53,524 26% 54,665 29%

Ramsey 24,298 33,169 36% 35,280 45%

State of MN 156,932 181,021 15% 183,676 17%

8 non-urban

counties with

gaming* 6,002 5,255 (12%) 5,137 (14%)

* Cass, Cook, Goodhue, Mahnomen, Mille Lacs, Pine, Redwood and

Roseau

Source: Minnesota Department of Human Services.

74a

From 1987 to 1992. the number of AFDC recipients increased by 45%

in Ramscy County, 29% in Hennepin County, and 17% in the state as a

whole Dunng the same five-year penod. the combined number of AFDC

recipients in the eight non-urban counucs with gaming declined by 14%

Exhibit & graphically displays the percentage change from 1987.

Exhibit 8

| Human Services—Changes in AFDC Recipient Counts

Percentage Change from 1987

*Cass. Cook. Goodhuc. Mahnomen. Mille Lacs. Punc. Redwood and Roscau

75a

INDIRECT EMPLOYMENT

A study prepared by the Minnesota Planning Agency

used the Regional Economic Model, Inc. (REMI) to esti-

mate the gross direct, indirect and induced annual statewide

impact of Tribal gaming in Minnesota as follows:

Total jobs 32,700

Direct jobs at January 1993 10,353

Indirect jobs 22,347

Source Recipient coun: data from Minncsou Deparunent of Human Sermees

The declines in AFDC recipients in the non-urban counucs may conse-

quently free up federal and state resources which could be uscd to help

offsct the cost of increased recipient numbers in other counues.

The presence of Tnbal gaming in Minnesota has led to many jobs. These

jobs arc proporuonaicly employing a large number of peopic (Indian

and non-Indian) who might typically have difficulty finding a job and

depend upon state and federal assistance for their livclihood. This in

tum rclaacs some constraints on public budgcts and allows for further

economic devclopment growth

See Minnesota Planning Agency publication, Minnesota Gambling

1993, page 11.

OUT-OF-STATE VISITORS

A study by the Minnesota Planning Agency estimated

that 20% of all visitor days to casinos are by non-Min-

nesotans. The REMI model used in the study estimated the

total impact of visitors as follows:

Jobs 7,600

Gross product (value of goods and services) $245 million

See Minnesota Planning Agency publication, Minnesota Gambling

1993, page 11.

76a

Appendix 5

77a

78a

ESTIMATED GROSS ANNUAL

ECONOMIC IMPACT OF TRIBAL GAMING

* Actual casino employment

(Jan 1992): 5,747 people

* Estimated annual visitor days: 5.9 million

¢ Estimated amount wagered (1991): $900 million

* Estimated gross revenues to casinos: $180 million

(after prizes, 1991)

Using these figures, the Regional Economic Model, Inc.

(REMI) estimates the gross direct, indirect and induced

annual statewide impact of Tribal gaming as follows:

* Jobs 13,700 jobs

¢ Gross product

(value of goods and services) $550 million

Major categories of jobs generated are eating and drinking

establishments, retail, lodging, cleaning, construction,

wholesale and professional services.

IMPACT FROM OUT-OF-STATE VISITORS

An estimated 15 percent (900,000) of all visitor days to

casinos are by non-Minnesotans. Many come specifically for

gambling. Others are tourists already in the state. The

REMI model estimates the total irapact of these visitors to

be:

* Jobs 2,300

¢ Gross product

(value of goods and services) $90 million

The estimates reflect total activity derived from tribal

gaming, not all of which is new activity. Some represents a

shift of Minnesota and tourist consumer expenditures from

other activities. Some is new economic activity generated by

79a

new tourist spending or increased resident spending. These

estimates are approximations based on annualization of

limited available monthly data. Available economic models

are not easily calibrated for the gaming industry.

Source: REMI model, MN Office of Tourism, MN Planning estimates.

80a

Appendix 6

8la

MINNESOTA GAMBLING

1993

82a

PERCENT OF TRIBAL GAMING CUSTOMERS

FROM OUTSIDE MINNESOTA

Grand Portage Casino, Grand Portage

Lake of the Woods Casino, Warroad

Jackpot Junction Casino, Morton

Shooting Star Casino, Mahnomen

Treasure Island Casino, Red Wing

Big Bucks Casino, Cloquet

Fond du Luth Casino, Duluth

Northern Lights Casino, Walker

Fortune Bay Casino, Lake Vermilion

Mystic Lake Casino, Prior Lake

Grand Casino Hinckley, Hinckley

Grand Casino Mille Lacs, Garrison

Firefly Creek Casino, Granite Falls

Palace Casino, Cass Lake

¢ The percentage of non-Minnesotans visiting tribal casi-

nos increased from 15 percent in 1991 to 20 percent in

1992.

¢ Total visitor days increased from 6 million in 1991 to

12.9 million in 1992.

Source: Tribal officers and casino managers.

15%

12%

10%

83a

... time of this report, information was not available on

the effect of recent developments on bars and restaurants in

casino and adjacent counties.

Census data for 1990 shows that 44 percent or 20,730

Minnesota Indians were living in poverty, compared to 10

percent of the general population. The unemployment rate

for Indians in 1990 was 20 percent, compared to 7 percent

for the general population. Recent figures show Indian

employment at casinos increasing by more than 87 percent

in the past year, to just over 3,000 in January 1993.

The Mille Lacs Band of Ojibwe, owners of Grand Casino

Mille Lacs and Grand Casino Hinckley, report they have

provided jobs for any band member wanting to work. The

Shakopee Mdewakanton Dakota Community, owners of

Mystic Lake Casino, initiated a program for urban Indians

from Minneapolis and St. Paul, offering job training and

transportation from inner-city areas to the casino. One

hundred twenty Indians participate in this program, which

has plans to expand to non-Indians.

Job creation for non-Indians has exceeded that of Indians.

Indeed, one might see Indian gaming as the largest federal

employment scheme in many years. This is noteworthy

because the gambling industry employs large numbers of

people in jobs that require only short-term training — the

type of jobs that increasingly have been shifted to less-

developed countries in other industries. Indian casinos also

employ growing numbers of professionals in marketing,

accounting, management and security. Tribal officials report

that Indian casinos employ 10,350 workers, of whom 8,400

work full time.

84a

The number of visitor days to casinos by non-Min-

nesotans nearly tripled between 1991 and 1992. If a person

spends all or part of a day at a tourist-related facility, it is

counted as a visitor day. Out-of-state visitors to casinos are

having a significant economic effect on Minnesota. Accord-

ing to the Department of Trade and Economic Development

these visitors were responsible for a $245 million dollar

increase in the state’s gross product and the creation of

7,600 jobs. Estimates were developed using the Regional

Economic Model and represent total economic activity

derived from tribal gaming, not all of which is new activity.

In part, these estimates represent a shift of Minnesota and

out-of-state tourist consumer expenditures from other activ-

ities. The numbers also include new economic activity

generated by new tourist spending or increased resident

spending.

Jobs created directly or indirectly by casino gambling

have brought many people from welfare to the work force.

In the 10 casino counties, the average number of people

receiving Aid to Families with Dependent Children each

month declined by 3.1 percent from 1990 to 1992; this

decline represents 574 people moving off welfare. At the

same time, the economic recession was increasing the num-

ber of recipients in the rest of the state by 14.6 percent. If

there had been no casinos, and the welfare rate in the 10

counties had climbed as fast as the rest of the state, the costs

of AFDC would now be $7 million per year higher, not

including additional medical benefits or food stamps.

The new jobs have gone mainly to the American Indian

community and the white population; both groups show a

reduction in statewide AFDC benefits. All other racial

groups had an increase in AFDC recipients. From 1991 to

1992, the number of adults statewide on AFDC decreased

6.4 percent for American Indians, from 4,451 to 4,168, and

decreased 1.4 percent for whites, from ...

85a

Appendix 7

86a

INDIAN GAMING REGULATORY ACT

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED THIRD CONGRESS

SECOND SESSION

OVERSIGHT HEARING ON THE NEED FOR

AMENDMENTS TO THE

INDIAN GAMING REGULATORY ACT

MAY 17, 1994

WASHINGTON, DC

PART 3

87a

PRELIMINARY ESTIMATES OF ECONOMIC

IMPACTS RELATED TO TRIBAL GAMING

IN SOUTH DAKOTA

Submitted by: Dr. Michael K. Madden

Professor of Economics, University of South Dakota

Tribal gaming commenced in South Dakota in October

of 1990 with the opening of the Royal River Casino in

Flandreau. Since then four additional casinos have begun

operations with the latest occurring in the spring of 1993.

(Refer to the accompanying state map for their respective

geographical locations. )

The Travel Industry

During the last nine years, I have been responsible for

measuring the economic impacts of the vacation travel

industry throughout the state and have accordingly tracked

the economic impacts of tribal casinos as they have devel-

oped since 1990. The added travel spending in each of the

counties in which tribal casinos are located has been sub-

stantial. Prior to tribal gaming, aggregate travel spending in

these five counties totaled about $8 million with Codington

County (Watertown) accounting for the bulk of this

amount. In 1993, travel spending in these five counties

amounted to about $31 million, an increase of 281%. To-

gether, these counties now account for nearly 8% of tourism

spending in the entire state compared to about 2% prior to

tribal gaming.

Economic Impacts

Visitor spending translates into economic impacts such as

jobs and earnings. Although no formal economic impact

study has been undertaken to date, preliminary discussions

have begun concerning the completion of such a study in the

near future. Upon the completion of this research, more

precise economic estimates will be possible. The following

economic impact highlights are based on an informal survey

of the five operating tribal casinos.

Direct employment in these casinos today amounts to

more than 1,700. Assuming indirect employment im-

pacts are similar to the South Dakota travel industry in

general, an additional 570 jobs have been generated in

the state through the multiplier effect. The total impact

on employment is therefore estimated to be 2,270.

It is estimated that 70 to 75 percent of the direct

employment positions are held by Native Americans.

This translates into an increase of between 1,200 and

1,300 new jobs held by Native Americans in South

Dakota. The remaining 25 to 30 percent of the jobs

represent new employment opportunities for South

Dakotans living in communities near the casino

operations.

New wages and salaries in the regions surrounding

the tribal casinos are estimated to be more than

$25 million. Because most regions surrounding the

tribal casinos are of low population, these added earn-

ings have produced significant relative impacts on per-

sonal income within communities.

Non labor operating expenditures amounts to at least

$22 million for the five operating casinos. These ex-

penditures are related to the required business

purchases of goods and services from local and non

local vendors. Examples include food and beverages,

utilities and various other miscellaneous purchases.

In addition, an undetermined amount of business activ-

ity occurs through spending by casino employees.

It is estimated that tribal profits derived from gaming

operations amounted to nearly $9 million in 1993.

89a

+ The use of these profits vary from tribe to tribe. Some

of the resources have been allocated to infrastructure

improvements relating to the casinos themselves. Ex-

amples include lodging and camping facilities as well as

additions to casino capacity. Other economic develop-

ment programs have also been pursued. Training and

educational programs for tribal members have been

instituted or expanded within a number of the tribes.

¢ At least $750,000 in contributions have collectively

been made to tribal and other social programs. Exam-

ples include day care facilities, senior citizen programs,

law enforcement and treatment centers.

The Future

There are at least three additional tribal casinos at some

stage of planning in South Dakota. (See attached map.) If

economic growth occurs in proportion to what has been

demonstrated since 1990, a number of inferences can be

drawn. Vacation travel spending related to tribal casinos will

grow from $31 million today to $52 million. Total employ-

ment will increase from 2,270 to 3,770 and earnings are

expected to grow from $22 million to $37 million.

Conclusion

From an economic standpoint tribal gaming has proven to

be an effective rural economic development tool. The added

economic activity has been distributed in the communities

surrounding the casinos producing economic vitality which

obviously would not have occurred in the absence of tribal

gaming enterprises.

90a

SUPPLEMENTAL SHEET

NAME:

Michael K. Madden

ADDRESS:

4955 Enchanted Pines Drive

Rapid City, South Dakota 57701-9252

TELEPHONE

Office: (605) 923-1434

Res. (605) 348-2498

TOPICAL OUTLINE

Preliminary Estimates of Economic Impacts Related to

Tribal Gaming in South Dakota

A. The Travel Industry

B. Economic Impacts

C. The Future

D. Conclusion

92a

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93a

INDIAN GAMING REGULATORY ACT

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED THIRD CONGRESS

SECOND SESSION

OVERSIGHT HEARING ON THE NEED FOR

AMENDMENTS TO THE

INDIAN GAMING REGULATORY ACT

APRIL 26, 1994

WASHINGTON, DC

PART 2

94a

Testimony

JoAnn Jones, Tribal Chair,

Alvin Cloud, Gaming Liaison

Wisconsin Winnebago Nation

before the

Senate Committee on Indian Affairs

U.S. Senator Daniel Inouye, Chair

U.S. Senate Hearing Room

216 Hart Senate Office Building

Washington D.C. 20510

April 26, 1994

95a

The Wisconsin Winnebago Nation has two nationally

recognized firms that assist in management and oversight.

The Accounting firm Arthur Anderson conducts all gaming

audits and financial reports required under tribal, state and

federal law.

Attorneys Process & Investigation Services Inc. (API), a

nationally respected private investigative consulting agency,

conducts the background investigations and regulatory en-

forcement required by tribal ordinance, tribal/state compact

and IGRA. With API, we have a top notch private investi-

gation firm of 35 people with an estimated 500 years of law

enforcement experience at our disposal.

API assisted us by providing information that was not

available from state or federal sources. As a result, serious

suitability issues were identified and the Winnebago Nation

took appropriate regulatory actions. This information helped

our operations keep their integrity and protect our Nation.

Again this information was not available to us from state or

federal sources.

All prosecutions of state criminal law are provided by the

State of Wisconsin under the tribal/state compact entered

into by the Nation and the State in July of 1992.

Many people believe that Indian country cannot possibly

have the level of security and control that Nevada and New

Jersey have over their gaming operations. That is not true.

The Wisconsin Winnebago have state-of-the-art security,

surveillance, on-line accounting, and audit controls. The

Winnebago employ nearly 1700 people at 3 casinos. More

than 300 of these employees are working in the security,

surveillance and accounting areas to insure the integrity of

the games, to protect our customers and to protect the

Winnebago Nation.

We have these controls because it our people’s money

that is at stake. We know what can happen. We want to do

96a

everything that we can to protect these enterprises because

it is our children’s future that is at stake. We challenge

anyone to come to the lands of the Winnebago Nation to

review our personnel, procedures and equipment. If any

governmental body, local, state or federal is doing more to

protect the integrity of its games, its customers, and its

citizens we want to know about it.

The Winnebago Nation’s gaming operations are very

successful in large part because the Nation has a strong and

effective gaming ordinance; experienced legal, accounting

and investigative personnel; and a dedicated Gaming Com-

mission with all the regulatory and enforcement authority

necessary for the maintenance of successful gaming.

Benefits of Indian Gaming

Indian gaming is not about gambling. It is about survival

and bringing my people out of the third world conditions

that they have lived in for generations. It is about sover-

eignty and the right of one government to operate free from

the interference of another government. Finally, it is about

an agreement and compromise worked out among sovereign

governments.

When Congress established the National Indian Gaming

Regulatory Act it said the act had three purposes: Promote

tribal economic development, self sufficiency, and strong

tribal government. Indian gaming in Wisconsin is doing all

of these things and more.

I have heard the testimony given at the recent hearing

regarding the positive impact that Indian gaming has had on

not only tribal, but on local economies at well. The situation

is not any different in Wisconsin, but the facts bear

repeating.

The Winnebago Nation employs more than 2000 people.

Nearly 80% of these people are employed at our gaming

97a

enterprises. Employment has quadrupled in the last two

years. More than 60% of these employees are non-Indian.

More than 300 of our gaming employees came from the

welfare rolls. Statewide, Indian gaming jobs took 800 people

off welfare and 1400 more from the unemployment rolls.

Casino income is the sole support for the families of nearly

80% of the casino employees. According to Health & Social

Service Secretary Gerald Whitburn, state aid to Indian

families has dropped. He says that Indian gaming is a major

reason for this drop.

Indian gaming has also been a great benefit to the larger

community. For example, in Sauk County where one of our

casinos is located, unemployment in 1991 was 30% above

the state average, now it is only 3% above the state average.

In Wisconsin alone, Indian gaming has created 7000 jobs.

Is there someone that has 7000 jobs that will employ these

Wisconsin people? According to a Dept. Of Commerce

study, when government creates jobs it costs $20,000 per

job. Does someone have the $140 million replace the 7000

jobs threatened by attacks on Indian gaming?

The Winnebago Nation has no natural resources and we

do not have a significant land base, yet we are expected to

provide the same governmental services that the Navajo or

the Yakima tribes provide their members. We cannot de-

pend on the federal government to give us the money to

provide these services. We cannot depend on the state

government to give us the money to provide these services.

And we don’t want to. We want to provide for our own.

To do this, we need a stable tribal economy. This econ-

omy must provide jobs for our people, both skilled and

unskilled; this economy must return money back into our

community and the pockets of our people; and finally, this

economy must allow us to diversify so we can sustain our

economy into the future. We know that diversification is the

98a -

key to economic survival and that is what we are doing.

Gaming has provided the Winnebago with this kind of

economy.

For too long our people have existed in poverty. They

have been denied jobs. They have...

Appendix 9

100a

INDIAN GAMING REGULATORY ACT

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED THIRD CONGRESS

SECOND SESSION

OVERSIGHT HEARING ON THE NEED FOR

AMENDMENTS TO THE

INDIAN GAMING REGULATORY ACT

APRIL 26, 1994

WASHINGTON, DC

PART 2

10la

TESTIMONY

BERNARD BOUSCHOR, CHAIRMAN

SAULT STE. MARIE TRIBE OF CHIPPEWA INDIANS

BEFORE THE SENATE SELECT COMMITTEE

ON INDIAN AFFAIRS

APRIL 27, 1994

Dear Chairman Inouye and Members of the Committee:

I. Introduction

On behalf of the Sault Ste. Marie Tribe of Chippewa

Indians, I wish to express our appreciation for extending to

us this opportunity to discuss the implementation of the

Indian Gaming Regulatory Act as it relates to Indian

gaming operations in the State of Michigan. | am pleased

and honored to address you with representatives of the

National Indian Gaming Association and Tribal govern-

ments from across the Country.

The Sault Ste. Marie Tribe of Chippewa Indians wishes

to express to the Committee our concern over recent calls to

amend the Indian Gaming Regulatory Act to increase

Federal or State regulation of Indian gaming. We believe

the success of Tribal gaming operations in Michigan is proof

of the fact that Tribal governments are capable of and are

more successful when they have the primary role in regulat-

ing their own gaming operations.

Il. Background

The Sault Ste. Marie Tribe of Chippewa Indians is the

largest federally recognized Tribe in Michigan, with over

20,000 members. Located in Michigan’s Upper Peninsula,

the Tribe provides direct services to members in seven

counties (Chippewa, Mackinac, Luce, Alger, Schoolcraft,

102a

Delta and Marquette). Gaming revenues are essential to the

provision of services to this population.

Although the Tribe has been conducting a Bingo opera-

tion for several years, a small casino was opened in 1985. In

1985 the Tribe began with a 10,000 square foot facility

offering blackje: X and poker and employing about 89 em-

ployees. Today the Tribe operates a 95,000 square foot

gaming facility in Sault Ste. Marie, Michigan and another in

St. Ignace, Michigan. These casinos offer a wide variety of

games including slot machines. The gaming operations in-

cludes hotels, a restaurant and gift shops.

The Tribe’s gaming operations now employ over 1600

people and produced over 100 million dollars in gross

revenue last year. The Tribe is the sole owner and operator

of all its’ gaming operations.

After over five years of negotiation and litigation, a

compact between each of the Michigan Tribes and the State

of Michigan was finally signed in August, 1993.

III. Gaming Regulation

The compact between the Tribes and the State stands as a

recognition of the Tribes’ right to regulate their own gaming

operations as sovereign governments, as well as their success

at self regulation for over eight years. Under the compact

with the State of Michigan, the Tribes maintain the primary

responsibility for regulating their own gaming activities. The

State’s role is limited to monitoring Tribal regulation. The

compact does, however, require that certain minimum stan-

dards be followed. For instance, the compact specifies that

certain Michigan laws pertaining to employment be fol-

lowed, the Tribes comply with the Bank Secrecy Act and

that minimum standards be followed with regard to back-

ground checks. (See attachment #1, Compact between the

Sault Ste. Marie Tribe and the State of Michigan).

103a

Indian gaming operations in Michigan are operated free

of any infiltration by organized crime. These casinos have

not generated an increase in criminal activity. Indeed the

Sault Ste. Marie tribe of Chippewa Indians works closely

with the Federal Bureau of Investigation, criminal investiga-

tors with the Bureau of Indian Affairs, Michigan State

Police and local police agencies. We have received the

support of the Chief of Police of the City of Sault Ste.

Marie, officials of the Michigan State Police and other law

enforcement officials. (See the attached correspondence

from Sault Ste. Marie City Police Chief Fitzgerald and the

Chippewa County Prosector Pat Shannon). We consistently

work with Canadian police authorities as we are located very

near the U.S.-Canadian border. The Tribe has its’ own

public safety department comprised of thirteen officers.

(See attachments; #2, Letter from the Detroit Police Of-

ficers Association, #3 Letter to Ted Gatzaros from the

Wayne County Sheriff's Department, #4 Letter to Ted

Gatzaros from the Wayne County Sherifi's Local 502, #5

Letter from Chief of Police of the City of Sault Ste. Marie

to Governor John Engler, #6 Letter from Chippewa County

Prosecutor Patrick Shannon to Governor En

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