Sept. 17 (Bloomberg) -- As President Barack Obama began his first term in January 2009, an Arizona Indian tribe saw a long-awaited opportunity to jumpstart a plan to build a 225,000-square-foot casino not far from the Cardinals’ football stadium.
Five years earlier, through a special company, the Tohono O’odham Nation purchased land outside Phoenix, 160 miles north of the tribe’s Sells city headquarters on its Tucson-area reservation. Now, having waited out a freeze on casino construction on property distant from a tribe’s reservation by President George W. Bush’s administration, it submitted the project to Obama’s U.S. Department of the Interior -- eight days after Inauguration Day.
Tohono found this White House friendlier. The tribe won initial federal approval and then overcame lawsuits filed by state and local officials and competing tribes. There’s one last obstacle: Congressional legislation that would scuttle the project. The U.S. House today approved the legislation, and it now moves to the Senate.
“The Bush administration would not have gone in this direction,” said Representative Trent Franks, an Arizona Republican who sponsored the bill. “Obama is trying to gain favor with tribal entities. They seem to believe that all of the negatives associated with gambling are subordinate to the political advantage that they believe it brings them by approving these projects.”
The legislation will stop “the precedent of tribes all over the country being able to indiscriminately put casinos up in or near cities,” Franks said.
The Tohono O’odham said in a statement that their project is not precedent-setting because it was sanctioned by earlier federal legislation giving them the right to acquire new land in Maricopa County, where they want to build the casino.
Fights over expanding Indian gaming are breaking out across the country as the Obama administration rolls back Bush-era restrictions on Native Americans, easing their way into the growing $27 billion market.
They include loosening limits on Indian gaming beyond traditional reservation borders, redefining what counts as highly regulated, taxed slot machines, and finding a way around a U.S. Supreme Court ruling that questioned the sovereignty of at least 50 tribes, some of which want to open casinos.
The administration’s goal is to help Native Americans, whose nationwide unemployment rate of 12.3 percent last year compares with 6.6 percent for non-Hispanic whites, see greater opportunities to grow and earn enough to provide jobs and better services, including schools and hospitals, for their people.
The rule changes are sparking clashes with state and local officials from California to Arizona who have seen shrinking tax bases as tribes expand and resent their inability to enforce anti-gambling laws, especially in the evangelical South.
From the start of his presidency, Obama has met annually with Indian leaders. He appointed Charles Galbraith, a member of the Navajo Nation, as an associate director of intergovernmental affairs in the White House. Galbraith had overseen outreach to tribes for Obama’s campaign. The president also established the first-ever tribal advisory council on health-care issues.
“Over the last few years, I’ve had a chance to speak with Native American leaders across the country about the challenges you face, and those conversations have been deeply important to me,” Obama told tribal leaders at his first summit, in November 2009. “I get it. I’m on your side. I understand what it means to be an outsider.”
Tribal governments responded by donating more than $2.5 million to Obama and Democratic allies for his re-election, according to the Center for Responsive Politics, a Washington-based organization that tracks political money. They gave less than $500,000 to Republican presidential candidate Mitt Romney and his associated groups.
The community has also spent $85 million on federal lobbying since Obama took office, compared with $146 million during Bush’s two terms, the center’s data shows.
“Obama has been seen as a real friend to the tribes,” said Steven Light, a political science professor at the Grand Forks-based University of North Dakota who studies Indian gaming. “His administration has changed course on some key dimensions of Indian gaming, dimensions that had seemed set under the Bush administration.”
Kevin Washburn, assistant secretary of Interior for Indian Affairs, addressing a Sept. 11 meeting of the National Congress of American Indians in Washington, said the administration supports tribes’ rights to govern themselves.
“We all know that you can’t do it if you don’t have money,” he said. “We know that you need revenues.” And land into trust, one of the first steps for a gaming project outside a traditional reservation, is “an area where we’ve had the most success, but we’re also seeing so much pushback recently.”
Twenty-five years ago, Congress cleared the way for Indian tribes to tap into the gaming industry as a way to rise out of poverty, passing the Indian Gaming Regulatory Act of 1988.
“Beyond a doubt, gaming has been a net positive for tribes,” said economist Alan Meister, who has studied tribal gaming for more than a decade. “There are variables when it comes to how it has helped each tribe. The advantages haven’t shown up across the board because the underlying problems, such as poverty and health, are so entrenched.”
American Indians remain more economically disadvantaged than the general population, according to U.S. Census data. Almost 30 percent of American Indians surveyed in 2011 were living in poverty, compared with 15.9 percent of the general population. Median household income for American Indians that year was $35,192, about $15,000 lower than for all households.
The betting industry has since spread to 242 tribes, more than 40 percent of the 566 federal recognized nations, according to Casino City’s Indian Gaming Industry Report, written by Meister. The report also calculated the $27 billion market value in 2011, about the same size as non-Indian gaming, cash that tribes use to build houses and schools.
Although the Indian Gaming Regulatory Act provides ways for tribes to open Las Vegas-style casinos on property that isn’t within their original reservation boundaries, just seven have been approved. President George H.W. Bush approved the first. President Bill Clinton sanctioned two during his eight years in office. George W. Bush green-lighted a couple during his two terms, and Obama already has approved three.
To begin building a casino on newly acquired land, tribes need state and local agreement in the form of a “gaming compact” and must convince the Interior Department to take into trust the land where the casino will be built.
Washburn said the department has placed into trust about 1,200 parcels of land under the Obama administration, just 10 of which are connected to gaming projects. Much of the rest of the land is being used for commercial development and Indian projects such as residences and health care, he said.
An empty field of sand and brush stands out like a missing tooth at the edge of the Phoenix suburb of Glendale’s bustling sports and entertainment district. It’s across the street from a high school, walking distance from freshly built condominium buildings and within sight of the University of Phoenix Stadium, where the Cardinals play.
This is where the Tohono O’odham Nation wants to build a resort with 400 hotel rooms, 1,100 slot machines and 68 table games and poker tables.
Arizona’s 23 casinos, by state law, are owned by Indian tribes. The Tohono Indians, who live on a reservation the size of Connecticut that touches the Mexican border, have three betting facilities outside of Tucson.
In 2002, the state’s Indian gaming agreements came up for voter review. The Tohono was among 17 tribes that, through a political committee, paid for advertisements and mailers assuring residents that voting to renew the agreements would limit new casinos.
One voter handout said “there will be no additional facilities authorized in Phoenix.” Tohono’s lawyers later said the voter handout was a mistake. The plan before voters didn’t explicitly prohibit the tribe from opening a casino in the Phoenix market.
Voters that November approved the gaming plan. Nine months later, in August 2003, the Tohono incorporated a company in Delaware, called Rainier Resources Inc., and bought 135 acres of land near Glendale. To make the purchase, the tribe used part of a $30 million federal settlement to replace their land damaged by a dam built in 1960 by the U.S. Army Corps of Engineers. That federal action, in 1986, identified unincorporated areas of Maricopa County as an acceptable place for the tribe to acquire replacement land.
The tribe didn’t make any moves for the next five years, nor did it share its plans with the city of Glendale, which during that time built a high school directly across the street from the would-be casino site.
While Tribe Chairman Ned Norris Jr. said the delay was just a matter of paperwork, timing was also important: Bush’s Interior Department didn’t encourage remotely located casinos.
“There was an informal moratorium,” said George Skibine, an Interior official from 1977 to 2011. Skibine was assistant secretary for management in Indian Affairs when he retired to become an Indian gaming lobbyist with Dentons, which represents the Tohono O’odham tribe.
Skibine said the Bush administration was in the thick of a lawsuit in which tribes sued the federal government for mismanaging reservation land and were reluctant to take more into trust -- a precursor to any reservation gaming project that isn’t located on the tribe’s traditional grounds.
The Bush White House was also operating in the midst of the Jack Abramoff lobbying scandal, in which Capitol Hill aides and Republican advocates secretly pitted tribes and Christian groups against one another while raking in millions.
The administration’s policy was presented in a Jan. 3, 2008, Indian Affairs memo that limited how far from a tribe’s existing reservation a casino project could be located.
“No application to take land into trust beyond a commutable distance from the reservation should be granted unless it carefully and comprehensively analyzes the potential negative impacts on reservation life and clearly demonstrates why these are outweighed by the financial benefits of tribal ownership in a distant gaming facility,” Carl Artman, Bush’s assistant secretary of Interior for Indian Affairs, wrote.
Artman, in an interview, said he and other Interior officials wanted a systemic approach to Indian gaming projects located outside the traditional reservation boundaries.
“We were looking at it from a logical perspective,” he said. “We wanted something to bring consistency to how we review applications.”
As of April 2008, the Interior Department was analyzing 15 remotely located reservation casino projects. As Bush’s term came to an end, two were approved. About 10 were rejected, using Artman’s commutability standard.
Eight days after Obama was sworn in, the Tohono O’odham Nation filed an application with the department to take the Glendale-area land into trust, which would pave the way for the casino construction and provide the new administration with an opportunity to overturn or ease the Bush policy.
“It made good business sense for us to do it the way we did,” said Norris, Tohono’s chairman. He said the tribe used a company with a different name to purchase the land to avoid unfair price markups, not to hide its ownership. And he said the Tohono waited until Obama took office because it took years for the tribe to internally approve the casino plans.
Taken by surprise, Glendale and Arizona elected officials protested. So, too, did the Gila River Indian Community and Salt River Pima-Maricopa Indian Community -- tribes with casino projects near Phoenix.
Tohono’s opponents have pursued state and federal lawsuits, and judges have ruled against them nine times, saying state and local opposition doesn’t preclude the tribe from adding the land to its reservation. Both sides have racked up millions of dollars in legal and lobbying fees, and spent millions more trying to elect friendlier politicians.
Tohono O’odham paid Dentons $1.3 million last year to lobby at the federal level and is seeking $4.2 million in legal fees from Arizona, a co-plaintiff on the lawsuits against the project. Gila River paid the lobby firm Akin Gump $2.5 million last year. The firm also represents the tribe in court.
As tribes jockey for position in the lucrative market, they’ve invested at least $235 million in state and federal campaigns and political committees since 2008, according to data from the Center for Responsive Politics, and the National Institute on Money in State Politics, a nonprofit in Helena, Montana.
“Keeping the Promise,” an opposition group led by the Gila River Indian Community, shares its name with the title of Franks’ House legislation.
The group’s website shows Arizona residents how to write or call federal lawmakers to urge them to pass the legislation blocking the casino.
Former Glendale Mayor Elaine Scruggs says in a video on the website that the Tohono O’odham Nation opening a casino in her city would “set a precedent that would then open up all gaming throughout Arizona.”
Franks legislation, if it passes, will have to be signed by Obama to become law. The Interior Department has already gone on record opposing the bill.
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