Dissecting the ‘poison pill’: A new West Valley casino can’t trigger it, but tribes remain opposed

Josh Coddington//February 9, 2015

Dissecting the ‘poison pill’: A new West Valley casino can’t trigger it, but tribes remain opposed

Josh Coddington//February 9, 2015

OIn 2002, Arizona voters overwhelmingly rejected a proposal allowing slot machines and table games at race tracks. Voters also narrowly approved Proposition 202 that year, which set the stage for the current exclusive tribal gaming environment in Arizona.

Prop. 202 led to the Indian gaming compacts under which Arizona tribes operate casinos. In general, the compacts outline the number of slot machines, table games and casinos each tribe can have, where gaming can and cannot occur and the percentage of gaming revenue each tribe gives to the state annually.

The agreements, according an Arizona Department of Gaming January 2015 report, have provided more than $1 billion to the state and local municipalities for schools, hospitals and trauma centers, wildlife conservation, tourism since 2004. Contributions by all gaming tribes in Arizona total approximately $100 million per year.

In addition to dictating how gaming should operate in Arizona, the 2002 gaming compacts also outline what happens if a tribe believes things aren’t running as they have been agreed upon and understood in the compacts. The provision of the agreement dealing with breaking the compacts and the potential consequences is generally known as the “poison pill.”

Consideration of this poison pill provision from the 2002 compacts sprang up in 2009 with a legislative effort to allow slot machines at race tracks and the Tohono O’odham Nation’s announced plans for a West Valley casino.

In return for tribes’ agreement to limit the number and size of casinos and amount of games offered, the poison pill is designed to protect them against state lawmakers or courts granting non-tribal entities licenses to operate casinos in Arizona. If that did happen, the 2002 compacts dictate that all limits on casinos and slot machines would be lifted and money given to the state and to smaller tribes would be drastically reduced.

“Our biggest concern is that breaking the compacts creates chaos in the Arizona gaming market,” said Gov. Stephen Roe Lewis of the Gila River Indian Community.

However, based on the opinions of multiple sources interviewed for this story and an analysis of Section 3(h) of the Arizona Tribal-State Compact as written, the West Valley casino will not trigger the poison pill provision.

Despite this, the community, which operates three casinos in the Valley, and Salt River Pima-Maricopa Indian Community, which operates two casinos in the Valley, both strongly oppose the Tohono O’odham Nation’s casino plan. The Tohono O’odham, which operates three casinos in southern Arizona, is in the initial phase of construction on its West Valley casino on 54 acres of land taken into trust last year near 95th and Northern avenues adjacent to Glendale.

The project has caused a rift among tribes in Arizona.

Tohono O’odham asserts its right to build the casino on land it purchased and had converted into part of its reservation, based on the Gila Bend Indian Reservation Lands Replacement Act of 1986. The federal law allows the tribe to have up to 10,000 acres placed in trust to replace lands that were flooded as the result of a dam built by the federal government. The West Valley project would bring the tribe’s total casinos to four, which it is permitted to have under the compact. The tribe has also had several court victories affirming its plans.

The Gila River and Salt River tribes have said, among other reasons, they oppose the project because they believe that it goes against an oral promise of no additional casinos in the Phoenix area and against the compacts the tribes negotiated and signed with the state in 2002. The tribes argue that an invalidated compact could lead to the establishment of widespread Las Vegas-style gaming in the Valley.

Salt River Pima-Maricopa Indian Community President Delbert Ray, Sr., said, “It works only if all parties, including the Tohono O’odham Nation, abide by the promises made in 2002. That policy was adopted around the core principles that gaming would be limited to existing reservation lands, limited in the scope, size and number of casinos and there would be no additional tribal casinos permitted in the Phoenix metropolitan area.”

Lewis, the Gila River governor, said, “Voters chose limited gaming on traditional tribal lands. In return for agreeing to those limits, Arizona’s tribes benefited from a stable, balanced gaming environment. If the Tohono O’odham Nation is allowed to violate that agreement with voters by opening their Glendale casino, Las Vegas-style gaming will happen in our state, against voters’ wishes and to the detriment of tribes.”

Of course, for “Las Vegas-style gaming” to spring up in Arizona, the poison pill in the compact would have to be triggered. Although unlikely, if it was determined to have happened, it would largely deconstruct Arizona’s exclusive and mutually beneficial tribal gaming market.  It would occur only if a three-step process failed to yield a solution.

A popped poison pill would lift restrictions agreed to by tribes on the number of gaming facilities they operate; the number of gaming devices and table games they operate; and limits on maximum wagers. Tribes’ quarterly contributions would also be reduced from between 1 percent and 8 percent of net win to a flat .75 percent of net win. It would also release the urban tribes from an agreement to share revenues with rural tribes.

It would “demolish the structure of gaming as a whole,” Ray said.

“Swallowing the ‘poison pill’ will have enormous consequences for Arizona,”  said. “If the state opens up gaming to non-Indians, then tribes don’t have to abide by any limitations on the size of casinos, the number of machines or the number of casinos, nor will urban tribes have to share revenue with rural tribes. This will destroy the balance of Indian gaming in Arizona and destroy the economy of rural tribes all over the state.”

Debate, rhetoric and the Phoenix-will-turn-into-Las-Vegas scenario aside, a federal court has already ruled on the issues of whether the casino would actually trigger the poison pill and whether there was a “promise” of no more Phoenix casinos in 2002 have already been decided.

In May 2013, U.S. District Court Judge David G. Campbell ruled in favor of Tohono O’odham on the question of whether there was a promise during the signing of the compacts that would prohibit any new casinos from being built in the Phoenix area. He determined that “no reasonable reading of the Compact could lead a person to conclude that it prohibited new casinos in the Phoenix area.”

Further explaining his determination, he wrote: “The (2002 Tribal Gaming) Compact also declares that it is complete: ‘This compact contains the entire agreement of the parties . . . and no other statement, agreement, or promise made by any party, officer, or agent of any party shall be valid or binding.’ …Although Plaintiffs have presented some evidence to support their claim, the written Compact contains no such limitation. It does not prohibit the Nation from building a new casino in the Phoenix area…As a result, the Court concludes that the parties did not reach such an agreement and that the Nation’s construction of a casino on the Glendale-area land will not violate the Compact.”

In a statement provided to Arizona Capitol Times, the Tohono O’odham Nation said, “The West Valley Resort does not change Arizona law, nor does it allow a person or entity other than an Indian tribe to operate gaming devices or other forms of Class III Gaming. Therefore, the West Valley Resort cannot trigger the poison pill provisions of the 2003 Gaming Compacts.”

Even though initial construction of the West Valley Resort is underway, there is still another possibility that could keep the casino from being built. It could become illegal – under federal law.

U.S. Sens. John McCain and Jeff Flake and U.S. Reps. Trent Franks, Paul Gosar, Ann Kirkpatrick, Matt Salmon and David Schweikert all support legislation introduced Jan. 13 in both the U.S, House and Senate called the Keep the Promise Act of 2015, which is worded to specifically prohibit the building of the Tohono O’odham casino.

The legislation states: “Class II gaming and class III gaming are prohibited on land within the Phoenix metropolitan area acquired by the Secretary of the Interior in trust for the benefit of an Indian tribe after April 9, 2013.” The Senate version has been referred to the Senate Committee on Indian Affairs. The House version has been referred to the House Committee on Natural Resources.

The House bill by Franks is his second attempt at blocking the project. He introduced a Keep the Promise Act of 2013, which was passed by the U.S. House but ultimately died in the Senate Committee on Indian Affairs.

Even with several legal challenges decided in favor of Tohono O’odham, the current gaming compacts will be up for renegotiation and voter approval in 2027. Given the thin margin with which the 2002 compact passed, Gila River’s Lewis worries that there may be a negative public perception toward all tribes fostered by the new casino.

“…Tohono O’odham has undermined the trust between the Arizona tribes and with Arizona voters, so going forward any negotiations will be much more difficult. Tribes were successful in 2002 because all tribes stuck together, or so we thought. Tohono O’odham’s commitment to their ‘every tribe for itself’ approach will make assembling a tribal coalition much more difficult in the future. It will also be much more difficult to convince voters that casino gaming should be limited to tribes,” said Lewis.

Although the tribes are at odds over this project, they do actually agree that triggering the poison pill and a subsequent expansion of gaming by non-Indian enterprises would be bad for all.

“If gaming is allowed to expand exponentially, including non-Indian commercial gaming interests, that expansion will negatively impact all tribes, especially small market tribes and rural non-gaming tribes,” Lewis said.

“There is no dispute that the actions by the Nation would, or even could, cause the poison pill to be implemented,” the Tohono O’odham Nation said. “And the Nation, like other gaming tribes in Arizona, absolutely opposes implementation of the poison pill.”