Cherokee Gambling Proposal Signed

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Cherokee Gambling Proposal Signed

Special Report - November 29, 2011
Governor Beverly Perdue has signed a new 30-year compact with the Eastern Band of Cherokee Indians that would allow Las Vegas style gambling at their casino and open the door for more casinos across North Carolina. Although the stated purposes of the compact are couched in terms of jobs and support for education, the new compact is the capstone of at least a 15-year effort by the Cherokee to secure more kinds of gambling for the tribe. Details of the plan were worked out in private between the Governor’s office and Cherokee leaders.

Under the new proposed compact:

The State would grant the Eastern Band of Cherokee Indians “exclusive live table gaming rights west of Interstate 26.”
In exchange for these exclusive rights, the Cherokee would pay the state between four and eight percent of gross gambling revenues over the next 30 years.
The compact specifies that the state’s revenue from the compact would be directed to school districts and be used for classroom instruction.
Should the Cherokee’s exclusive gaming rights west of Interstate Highway I-26 ever be altered or revoked, the compact states that “all revenue sharing . . . with the State shall cease immediately.”
The Cherokee would have the right to open new casinos after they notify the Governor. The two are provided 90 days to reach a revenue sharing agreement, which is not to exceed 8 percent of the gross revenue of the new facility.
See the end of this article for a more complete analysis of some of the key provisions in the 28-page compact.

Despite the Governor’s agreement, the General Assembly must pass a bill to allow the compact to take effect. The Senate adjourned early Tuesday morning without taking any action on the newly inked gambling compact. Similarly, the House of Representatives is expected to adjourn on Tuesday, November 29.

In her press release on the proposed compact, Governor Perdue urged “ the General Assembly to act so that we can quickly start receiving the benefits of this expansion.” Should lawmakers pass a bill that will allow the proposal to take effect, it will be sent to the U.S. Department of the Interior for approval.

Bill Brooks, president of the North Carolina Family Policy Council commented, “It is disappointing that the Governor has signed a proposal that would expand gambling in our state and cause harm to many more families who will be afflicted with problem gambling. In addition, by granting the Cherokee the right to transform their casino from video poker to full-blown Las Vegas style gambling, the Governor has opened the door for the spread of casinos to other parts of the state. The North Carolina Constitution has a provision forbidding exclusive emoluments or privileges, and that appears to be just what this compact allows. In fact, some at the legislature seem to understand that a court decision could result in more casinos elsewhere in the state, but if these casinos were not on tribal lands, they could be taxed directly, bringing in more revenue. Unfortunately, this may be what this whole exercise is about.”

Brooks then added, “In addition to these fundamental issues, there seem to be several other major constitutional questions, possibly at both the state and federal level. The House and Senate leadership were right in their decision not to consider the new compact that was presented to them during the second-day of a three-day legislative session. We hope legislators will take a close look at this proposal and reject the compact and gambling expansion in North Carolina.”

Preliminary Legal Analysis of the Compact:

The following describes some of the more significant provisions found in the Amended and Restated Compact (the “New Compact”):

Section 5(D) of the New Compact essentially says it all: “Subject to the provisions of Section 4.1(B)(2) of this Compact [relating to the revenue sharing agreements for new Cherokee gaming facilities], the Tribe may legally operate unlimited Class III gaming facilities on Eastern Cherokee Lands.”
The New Compact specifically permits “all Class II gaming activities as defined by the Act [IGRA] and that are customary in other gaming jurisdictions in the United States as of the Execution Date, including, without limitation, Live Table Gaming on Eastern Cherokee Lands.” [Section 4(A)(3).] “Live Table Gaming” is defined to mean games that utilize real (non-electronic) cards, dice, chips and equipment in the play of the game.
In Section 4.1(A), “the State grants the Tribe exclusivity for conducting its Live Table Gaming in a geographical zone encompassing all areas within the State of North Carolina west of Interstate Highway I-26.”
In consideration of the exclusivity granted by the State, the Tribe is required to make Monthly Payments to “all Local School Administrative Units and Charter schools within the State of North Carolina” which consist of a percentage of the Gross Revenue derived from Live Table Gaming. Interestingly, the Monthly Payments start out low and accelerate slowly—for the first five years of the New Compact, the Monthly payments are 4% of Gross Revenues, then 5% for the next five years, 6% for the next five years, 7% for the next five years and 8% for the final 10 years of the New Compact. [Section 4.1 (B)(1).]
The Monthly Payments are to be made by the Tribe to the Cherokee Preservation Foundation and then to an irrevocable trust fund at the Department of Public Instruction, “as directed by the Governor, to ultimately be distributed to Local School Administrative Units and Charter schools within the State of North Carolina for the sole purpose of educating children in the classroom.” [Section 4.1 (B) (4).]
The New Compact anticipates new Class III gaming facilities and specifically provides that the Tribe and the Governor “shall” agree to a revenue sharing agreement for each such new facility (not to exceed 8% of the Gross Revenue), and that the negotiations must be concluded within 90 days of the Governor receiving notice from the Tribe of its intention to open a new facility. [Section 4.1 (B) (2).]
The New Compact seems to anticipate the overturning of the exclusivity provisions, and specifically provides that if the law changes or a court or administrative agency permits a person or entity other than the Tribe to conduct Live Table Gaming within the exclusive area, “all revenue sharing . . . with the State shall cease immediately.” [Section 4.1 (B) (5).] [Obviously, the exclusivity provision is likely to be challenged quickly, and if successfully challenged, the 4% Monthly Payments would be very short lived.]
The New Compact amends the language in the prior Compact that prevented the Tribe from conducting Class III games outside of Eastern Cherokee Lands so that the limitation does not apply to the use of technology that permits the Tribe to conduct “Proprietary Progressives.” (“Proprietary Progressives” are defined to mean a group of machines that are owned and operated by the Tribe on Eastern Cherokee Lands linked together by a network.) In addition, if Congress passes a law permitting online gaming, the territorial limitation will also be deemed not to apply to online gaming, and the State will be required to enter into discussions regarding the Tribe’s ability to engage in such gaming. [Section 5(A)(10).]
The New Compact permits the Tribe to extend credit to gaming customers in amounts of $1000 and greater, and to provide and make available ATM machines. [Section 5(A)(11).]
25% of Video games may award prizes that are unlimited in value and 75% of video game machines may award prizes up to $100,000 in value. [Section 6(A)(9).]

* Please visit our gambling policy papers page for a comprehenive list of gambling resources.

Related resources:
Bringing Las Vegas to North Carolina - FNC - Fall 2011
Governor Considers Expanding Cherokee Casino Gambling Options - December 8, 2005
Cherokee Political Contributions Unreported - October 29, 2007
Cherokee Casino Sees Significant Growth - January 31, 2007
Senator Dole Introduces Lumbee Recognition Act - January 19, 2007
Lumbee Bill Introduced in Congress - January 10, 2007
Lumbee Bill to Get Senate Hearing - July 10, 2006
Cherokee Gambling Negotiations End - April 21, 2006