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Transcripts

September 23, 2002

Host: Michael Grant
Topics:
A discussion about the impact of a court ruling that overturned a previous ruling declaring Indian gaming illegal;
Election 2002: Proposition 201
Prop 201 is the gaming initiative offered by the state's racetracks;
In-Studio Guests:
Scott Bales, the former solicitor general of our state, representing the state and currently an attorney at Lewis and Roca.
Vince Francia, Director of Marketing for Turf Paradise;
Doug Cole, Campaign Consultant for Proposition 201

>> Michael: Tonight on "Horizon," the 9th Circuit Court of Appeals rules in favor of the state and Indian tribes in a legal battle with racetracks over Indian gaming. We'll tell you how the decision affects the future of gambling in our state.

>>> Plus, we'll profile one of three gaming initiatives on November's ballot. Proposition 201 allows racetracks to have slot machines in exchange for paying 40% of the profits to the state. It would also allow Indian tribes to transfer slot machines and add blackjack games.

>>> Good evening, I'm Michael Grant. Welcome to "Horizon."

>>> Flagstaff state senator in trouble with the law again. John Verkamp was arrested over the weekend by Scottsdale police, charged with failing to obey a police officer and resisting arrest. Police say Verkamp became hostile after a car he was a passenger in was pulled over by police. The driver was arrested on suspicion of drunk driving, Verkamp for interfering with officers. Verkamp's attorney says his client interfered out of concern for his female companion's safety. Verkamp was convicted 2-1/2 years ago for extreme DUI. He served in the legislature since 1993 and is not running for reelection.

>>> 9th Circuit Court of Appeals dealt a blow to Arizona racetracks in their efforts to eliminate competition in the form of Indian gaming. Last year a federal district judge ruled in the track's favor by finding the Governor didn't have the authority to negotiate Indian gaming compacts, and that the type of games approved were prohibited by state law. Governor appealed that decision and Thursday, the 9th Circuit Court of Appeals vacated the lower court ruling in a two-to-one decision. The 9th Circuit decision said that they were indispensable parties with sovereign immunity from suit. The appeals court did not rule on the other merits of the appeal.

>>> Joining me now to make sense of this decision, if that is possible, and what happens from here, Scott Bales, the former solicitor general of our state, representing the state. Mr. Bales is now an attorney at Lewis and Roca. Scott, it's good to see you again.

>> Scott Bales: Thank you, Michael.

>> Michael: Can you make sense of it or no?

>> Scott Bales: The easy way to explain what happened is the court recognized that the racetracks in the lawsuit were arguing that the existing compacts are illegal and they were seeking an order compelling the Governor to terminate those compacts as their terms expire. What the Court of Appeals held was that if you're going to litigate the legality of the compact, the tribes have to be present and because they were not, the lawsuit must be dismissed.

>> Michael: Because that is decided on that procedural ground, I don't mean to minimize the point, but it doesn't go to the merits of the case, which was basically the 14th Amendment; well, how come, you know, the Indian tribes can have it and we can't, and then also the Governor's authority, whether or not the Governor can sign and negotiate compacts without legislative involvement. So the merits of the case were not reached.

>> Scott Bales: That's correct. The effect of the decision is to erase the district court ruling as if it had never occurred. So even though the district court, for example, ruled that it is permissible for states to agree that tribes can conduct gaming on the reservations that are not allowed off the reservation, that part of the ruling is also going to be vacated.

>> Michael: Now, given the tribes' sovereign immunity, if this ruling were to hold up, Scott, could you have a lawsuit on this issue, assuming that the tribes would not consent to the court's jurisdiction? Or could you? I mean, could you at some time in the future get to the merits of the issues?

>> Scott Bales: It's hard to imagine every possible circumstance that may arise, but the thrust of the Court of Appeals ruling is that a lawsuit that attacks the legality of an agreement to which the tribe is a party cannot proceed in their absence. So, I think what it did was deal a blow to the efforts by the racetracks to attack tribal gaming through the courts, and it may mean as a practical matter that those issues must be resolved in a political arena rather than a judicial arena.

>> Michael: Rather than the court system. All right. Let's deal with the time frames. The tracks' attorney has indicated he's going to apply for en banc review to ask the Court of Appeals to review this decision. What are the time frames, Scott? Where do we get to where this might actually be a final ruling?

>> Scott Bales: Well, the racetracks are entitled under the rules to file a petition within 14 days for either rehearing or rehearing by the entire 9th Circuit en banc. That would place their petition being due no later than October 3rd. The 9th Circuit then varies in how quickly it rules on those types of petitions. So it's hard to predict how quickly that'll happen. You also referenced the actual effect of the ruling, and that depends on something called the mandate. Although the Court of Appeals has decided the case, it has not yet issued an order to the district court to implement its ruling. That's what the mandate is. And typically that does not issue until a petition for rehearing has been denied.

>> Michael: And so basically, you are out to about the November general election at least before all of this would occur?

>> Scott Bales: Sure, on the normal timetable, that would be about the time period you would be addressing.

>> Michael: Now, you could drive yourself nuts with various election scenarios and those kinds of things, but hypothetically, if all three ballot propositions were to be defeated, the Governor, if this ruling stands, would be free to sign, negotiate, gaming compacts after the general election?

>> Scott Bales: Correct. What that would mean is that we would be in the situation we were in in 2000, because that's when the legislature renewed the Governor's statutory authority to either enter into new compacts or to extend existing compacts. So she would again have that authority that's been given to her by law, and I --

>> Michael: And obviously you're not going to forecast what she would do. Let me give you one other scenario, though. Let's say one of them does pass. Would the Governor still be compelled to act -- and by this, I mean legally, not necessarily political ramifications -- to act consistent with the voter-passed proposition, this ruling notwithstanding, that says the Governor has the authority to basically transact this business as Governor without any sort of legislative input?

>> Scott Bales: Well, it would depend, I believe, on which of the propositions passed. Proposition 200 and proposition 202 are written in a way that they sort of set a floor for a basic compact, but they allow some room for negotiation between the Governor and the tribes that would somewhat vary the terms. Proposition 201 is more specific in terms of what it tries to dictate must be in a compact.

>> Michael: Okay. Scott Bales, thank you for joining us.

>>Scott Bales: Thank you, Mike.

>> Michael: Arizona will see three gaming initiatives on the ballot. Tonight we turn our attention to the initiative from the racetracks, proposition 201. As Paul Atkinson shows us, proposition 201 would allow tracks to have slot machines in exchange for 40% of profits going to the state.

>> Reporter: Tom Bartol raises thoroughbreds and quarter horses in Avondale.

>> Tom Bartol: I'm a third generation boy right here in the state. My grandparents were interested in racing. I guess that's where it all started.

>> Reporter: Bartol is one of an estimated 6,000 Arizonans who make a living directly or indirectly from racing at Arizona tracks. Financially the horse racing industry is doing okay, but could get a major boost if proposition 201 passes.

>> Tom Bartol: The biggest part of it is, there is something in there for everybody. It's not just one little select slot of people that are out there. It's going to help everybody across the board.

>> Reporter: It's also going to help the state, which Bartol points out comes at a time when lawmakers face a pending billion dollar deficit.

>> Tom Bartol: It makes me sick to think that our state has gotten in such a financial bind right now, and this could be such a boon and really help pull us out of it.

>> Reporter: Proposition 201 is sponsored by Turf Paradise and American Greyhound Racing, owner of Phoenix Greyhound Park. Here's what the gaming initiative calls for and how it's different from current Indian gaming compacts. Prop 201 creates a 10-year gaming compact, the same as current compacts. Proposition 201 would allow up to 10 dog and horse racetracks to offer slot machines. Smaller tracks would get 550 slots, larger tracks, 950. Currently racetracks cannot legally operate slot machines. Proposition 201 would pace the number of Indian casinos and slot machines allowed on tribal population. Meanwhile, 13 tribes could have one casino, one tribe could have two casinos, and seven tribes could have three casinos. Under current gaming compacts, tribes can have two to four casinos. Proposition 201 would allow 13 tribes up to 600 slot machines each. One tribe would get 1,000 slots. Six tribes, 1400 slots. And the largest, the Navajo Nation, could get up to 2400 slot machines. Current gaming compacts allow as few as 475 slot machines and as many as 1400 slots per tribe. With proposition 201, the number of slot machines at tracks and casinos can increase every five years, based on the percentage of increase in state population. That doesn't happen under current gaming compacts. Prop 201 allows Indian tribes to transfer unused slot machines to casinos in exchange for a minimum 50% of profits per machine. But Indian casinos cannot have more than 1,000 slot machines total, including transferred machines. Tribes cannot transfer slots to racetracks. Right now no tribe can transfer slot machines and casinos are limited to 500 slot machines.

>>Amy Rezzonico: In proposition 201, it's the exact agreement that the tribes made with the Governor. We put it in ours. We feel we also made it better. We guaranteed that any transfers that go for the nongaming tribes, they have to give 50% of their proceeds to that. The racetracks portion of it is a small amount of slot machines in live racetracks. You have to have live racing at an Arizona racetrack in order to qualify for the slot machines.

>> Reporter: Prop 201 would give Indian tribes the exclusive right to offer table games. Rural casinos could have 50 tables of house banked blackjack and poker. Casinos near Phoenix and Tucson can have 75. Right now they cannot offer house banked blackjack. In exchange for games, tribes must pay 8% of gross profits from all forms of gambling. Currently they are not required to share revenues with the state. Racetracks would have 20% of gross profits required to go into race purses. Racetracks would also pay a 40% state tax on slot machine revenue. Prop 201 allocates that money for the following purposes. 25% would go for kindergarten to third grade reading purposes. 21% to the state general fund. 20% for rural healthcare and prescriptions for Medicare parties. 12% to cities for police, fire and emergency services. 10% for scholarships. 3% for tourism. And 2% for compulsive gambling. A minimum of $12 million would go to 10 different funds helping the racing industry, county fairs and state fairs. All total, they could raise up to $195 million a year from racetracks and up to $137 million a year from Indian casinos, according to estimates from legislative counsel.

>> Amy Rezzonico: We're talking about a billion dollar budget deficit. Proposition 201 is the only proposition that designates money to go to the state's general fund. How can people be against this? How can anybody be against this?

>> Reporter: Under prop 201, the Department of Racing would regulate slot machines at racetracks and the Department of Gaming regulates Indian casinos. Both tracks and casinos would be required to report daily winnings to the state and make public the amount of money earned. Right now the Department of Racing only oversees dog and horse racing. Racetrack profits are reported to the state and are public record. The Department of Gaming regulates casinos who reports profits to the state but those numbers are secret.

>>Amy Rezzonico: It's status quo with who regulates who. What we're saying is open up your books, make your records public, daily reporting, monthly audits.

>> Reporter: Arguments raised against proposition 201, neighborhoods groups worry that 24 hour gambling within a city would increase noise and traffic and the potential for crime in surrounding neighborhoods. Gambling opponents argue prop 201 could triple the number of slot machines in Arizona, Thus increasing compulsive gambling. Animal rights activists argue that prop 201 would lead to more dog racing, causing dogs to be abused, unwanted greyhounds killed and add more dogs to adoption lists that are already full. Indian tribes claim prop 201 will divert customers to racetracks and siphon revenues to rich out-of-state racetrack owners and some gaming experts argue Indian tribes may not have to pay 8% of profits to the state because prop 201 could violate the Indian Gaming Regulatory Act.

>> Michael: Joining me now is Vince Francia, Director of Marketing for Turf Paradise, and Doug Cole, Campaign Consultant for Proposition 201. Doug, let me clarify something, it is not 24 hours, it is liquor hours?

>> Doug Cole: It's liquor hours on the racetracks, that's correct.

>> Michael: Vince, give me your best shot on why people should vote for Proposition 201.

>>vince Francia: I'd be happy to. All of the propositions help the Native American casino interests and that's important. The one thing 201 does is expands that notion and helps to benefit everyone in the state. Importantly, I think 201 respects and honors what the Native American casino interests have, how it has helped their people, how they wish to expand because of their success, but there are two other components to 201 that certainly deserve the voter consideration. That is the proceeds that would be generated from 201 as we just saw illustrated on the TV monitor, quite a bit of money, nearly $300 million would be generated going to many needed things, which Doug can go over, from education to help bringing the deficit down. We all know what problems deficits can cause. And I think the third component is the racing industry itself, and here I'm not talking about the owners of the racetrack, I'm talking about the men and women who are supported day in and day out. That is going to help them because it's going to generate purse monies. They have families. They have dreams. They wish to be able to ensure that. And that is another component of 201, which should not be overlooked.

>> Michael: But it's going to help an awful lot of out-of-state racetrack owners, too, right?

>> Vince Francia: It should, if you are the owner of a business, I would hope it would help you financially in some way, uh-huh.

>> Michael: Doug, prop 201 supporters say this helps Indian gaming. It continues Indian gaming. The tribes respond, huh-uh. This introduces competition into an industry that we've had a monopoly on for the past 10 years, there is nothing beneficial about that. How does it help Indian gaming?

>> Doug Cole: First of all, prop 201 is based on prop 200. We took all of the provisions relating to Indian gaming and incorporated them into our proposition, number one. Number two, the -- when it comes to looking at the breadth and the market of what -- of this enterprise, we feel very confident that there is enough market for everyone, and you know, this is survival for our industry. We have 6,000, as Vince said earlier, we have 6,000 people that work in the paramutual industries.

>> Michael: But you understand how right now this obviously disturbs very much the status quo for the Indian tribes, maybe there's enough market there, maybe there's not. But it's a guess.

>> Doug Cole: We feel there is. For instance, as your set-up piece accurately stated, we have -- 201 only offers slot machines and the casinos. The Indian nation casinos will still have -- will have a monopoly on table games. They will be able to transfer, benefitting rural tribes, machines from say the Navajo Nation here into the Valley with a minimum of 50%. So, that transfer provision with the 50% floor is only in prop 201. We feel that's very beneficial to the native Americans.

>> Michael: Vince, one of the major concerns expressed about proposition 201 is you're bringing gaming off the reservation into the urban areas, sometimes residential-type neighborhoods in the case of Turf Paradise at 19th Avenue and Bell Road.

>> Vince Francia: Yes, I understand.

>> Michael: And people say once it moves off the reservation, where does it stop? Why is that not a concern?

>> Vince Francia: It's a valid question that I think the voters should be asking. First of all, Turf Paradise came to 19th Avenue and Bell Road in 1956. They were the neighborhood. Bell Road, hard to believe, because of what we're accustomed to now, and 19th Avenue were both dirt roads. So although we call it gambling and not gaming, Turf Paradise has been the neighborhood and part of the neighborhood as it grew around the racetrack.

>> Michael: This is a significant different change in the use, is it not, though, including but not limited to the number of hours the track would be in use, and also the amount of traffic that I think people could reasonably anticipate? I mean, it's a pretty significant step up, isn't it?

>>vince Francia: It is a step up, yeah. I certainly would not pretend otherwise, but Turf Paradise being the facility that it is, and that's the only one for which I can speak, has the accommodations, the parking lot, the facilities, all of that is built in. The fact that the gaming activity of proposition 201 if passed would end or run in conjunction with liquor hours, that is respectful.

>> Doug Cole: If I may step in, 150,000 Arizonans live in the same zip code. 700,000 Arizonans live within 5 miles of an Indian casino. I leave in Ahwatukee off of Pecos Road and 40th Street. When I open my window shade I see the Wild Horse Pass Casino. It's in my neighborhood. It's already there. You live along the Scottsdale corridor along Pima Road, all that's between you is Pima Road.

>> Michael: Second part of the question, though, and it seems to me that the tracks' lawsuit sort of harbinges this. I mean, you've said it's unfair for the tribes to be able to conduct gaming and not us. Once it comes off the reservation, why don't hotels, resorts, restaurants, bars, file exactly the same suit and say why do those guys get that and we don't?

>> Doug Cole: That's what's great about prop 201. It's the only proposition that has this safety valve in it. When prop 201 passes, it will take a vote of the people to expand gaming anywhere else besides where gaming has been for the last 60 years and that is at the racetracks and that is at the existing Indian casinos.

>> Michael: Absent court intervention. What if some court says hold it, the resorts ought to be entitled to this if you're going to allow gaming at racetracks.

>> Vince Francia: We do have previous experience and some I have personally. When I was at Delaware working for Delaware park, we initiated the legislation for slot machines that passed in 1994. It's just at the racetrack. It's at Dover Downs, Delaware Park, and I believe one of the native American Indian tribes in Delaware has it. Some other states followed suit. West Virginia, Iowa, Louisiana, and it remains -- there's always a live race program, but it remains at the racetrack. There has been no outcry from resorts or bar owners in these states that they would like to have it, too.

>> Michael: Have there been any suits, though, to challenge that proposition that I ought to be entitled to if you were entitled to it?

>> Vince Francia: Not to my knowledge.

>> Michael: Okay. Let me talk about the money aspect of this. An awful lot of people say, hey, that $100 million or $135 million that is part of the $400 million, don't count on that because the Interior Department has never approved a compact that has revenue sharing over the objection of an Indian tribe.

>> coug Cole: Well, let's talk about how this works. The -- obviously, as we all know, the racetracks will be paying 40% of their gross revenue. That's the tax.

>> Michael: That's the $300 --

>> Doug Cole:That's roughly $200 million.

>> Michael: I thought it was $300 million.

>> Doug Cole: The total is $300 million.

>>> Doug Cole: the $100 will come from the 8% of gross gaming revenue on the Native American tribes. Now, IGRA says you may not demand revenue sharing or a tax on Indian gaming proceeds. The way prop 201 is written, if Indian nations want to expand, i.e., grow their casinos with more slot machines, add table games, poker and blackjack, then they would then in order to be granted that additional franchise, then they agree to pay the 8% on the gross gaming revenues. So if a tribe is not -- does not want to revenue share with the state under prop 201, they can remain at status quo where they are today and not pay the 8%.

>> Michael: But that's not really status quo, is it? They will have new competition, and normally, revenue sharing is offered as a quid pro quo for -- and tribes, you will have a monopoly on gaming, that's the reason why the Interior Department will allow it.

>>Vine Francia: Well, to address your question on competition, I believe competition already exists among the Native American tribes. In a sense, they are competing with each other, trying to attract customers into this casino or that casino, so I think competition is already in play. The fact -- with the passage of 201, the racetracks would have slot machines, too, and I don't think we're adding the dynamic of competition to what is already in play.

>> Michael: How much sense does it make to have the Department of Racing regulating tracks' casino operations if Proposition 201 passes?

>> Vince Francia: It's a logical agency to do that. Racing is heavily regulated. The Department of Racing in this state, that is their mandate, and that is what they do. So anything the racetracks might do, like slot machines at the racetrack, probably logically should fall under the Department of Racing.

>> Michael: Doug, almost out of time. I understand, it seems to me that the Department of Racing would be very good, for example, on testing horses for substances, running paramutual odds and a variety of other things. Does that make them experts about computer chips and things that are different about gaming?

>>Doug Cole: Ten years ago when the first compact was signed, we had no Department of Gaming. It did not exist. That has been established and has ramped up. Prop 201, we're the only proposition, Michael, that opens the books per facility, every day, each casino, both at the racetracks and at the Indian casinos, have to open their books on a daily basis so the public knows what's going on. We're the only one that does that. The Department of Racing is at our facilities every day, and it works very well and they can adapt.

>> Michael: All right, Doug Cole, thank you for being here.

>> Goug Cole:Thank you.

>> Vince, thanks to you as well. Gentlemen, good luck on the campaign trail.

>>>Michael Grant: If you would like to learn more, please visit our Web site at www.kaet.asu.edu., you can click on "Horizon" or "Election 2002". Either way, you'll find links to all ballot propositions, plus web sites for and against. You can read transcripts of "Horizon" election coverage.

>>> Tomorrow the KAET poll sizes up candidates running for statewide office, plus a look at Proposition 101, which allows the state to exchange trust land with other governments.

>>> Then on Wednesday, we begin our ad watches by examining the accuracy of ads for gaming initiatives.

>>> And Thursday we'll examine Propositions 203 and 302. Thanks for being here on a Monday evening. I'm Michael Grant. Have a great one. Good night.