Re-raising Arizona

[Please note: I am a consultant for the Arizona Department of Gaming. The opinions
expressed in this column are my own and do not represent those of the Department nor the
State of Arizona.]

With more than 100% of the precincts reporting, voters in Arizona have decided to
keep their Indian casinos just about the way they are.

The vote count is close and still subject to change. In fact, it has to change, because
the unofficial count has 19 precincts reporting in Graham County, which has only 18
precincts.

Still, the margin for the winning initiative, Prop. 202, at 51.7% to 48.3%, is large
enough to withstand any recount.

The losing gambling initiatives were not so fortunate. They were, in fact, wiped out.

Prop. 201, which would have given the state’s racetracks slot machines, lost 20.1% to
79.9%. Prop. 200, which would have allowed tribes to operate any form of gambling they
wanted, lost by a margin of more than five to one: only 15.3% voted in favor to 84.7%
against.

Arizona’s voters had been asked to solve a decades-old problem. They were faced
with three complex, conflicting initiatives involving tribal casinos and slot machines at race
tracks. The State Legislature had thrown up its hands, after spending years conducting
hearings, drafting and redrafting bills, researching and debating these exact same issues.

Legislators are elected to make laws. They abdicate their responsibility when they
force voters to decide among complicated measures with little more to go on than campaign
ads.

The stakes are always high when it comes to legal gambling. The Arizona
Legislature walked away from the gaming table. But the remaining players were willing to
bet big money, and during the campaign, raise and re-raise each other.

It costs a lot of money to gather signatures for an initiative, and millions more to win
at the polls. Legislators introduce bills to benefit their constituents. Special interests write
initiatives to benefit themselves. To understand the true intent of a measure you have to first
know who wanted it on the ballot.

The principal players in Arizona are:

1) Gov. Jane Hull, who negotiated casino compacts, thrown into question by a federal court,
with 17 of the state’s tribes;

2) Those 17 tribes, which will lose hundreds of millions of dollars if their casinos are shut
down;

3) The Colorado River Indian Tribes (“CRITs”), which do not like the restrictions
contained in the present compacts; and

4) The state’s racetracks, which, like racetracks everywhere, feel they need slot machines to
survive.

The Governor and 17 tribes proposed the winning initiative, Prop. 202, which will
now become the “Indian Gaming Preservation and Self-Reliance Act.” It is 40 pages long,
single-spaced. The CRITs’ initiative, Prop. 200, was the shortest, but had the longest title,
“Tribal-State Gaming Compact, College Scholarship and Elderly Care Act of 2002.” The
tracks’ proposal had the politically snappy name, “Fair Gaming Act.”

It is always dangerous to create laws through conflicting voter initiatives. What
would have happened if two or all three had won? Arizona avoided the problem this time,
because only one proposal got a majority of votes.

The three proposals offered widely different plans for gambling in Arizona. The
winning plan from the Governor and 17 tribes, not surprisingly, looked a lot like the current
compacts. It will allow tribes now involved in gaming to have up to 29 casinos. As the
product of political compromise, it offers few round numbers: a tribe can have no more than
998 slot machines, with a state cap of 15,675.

The CRITs proposal would have allowed the gaming tribes to have up to 45 casinos
with no limit on casino size and a state cap of 21,492 slot machines.

The most arresting part of the CRITs initiative was the little noticed clause that would
have allowed tribes to offer all forms of gambling permitted under the federal Indian Gaming
Regulatory Act. Which means all forms of gambling, period. If Prop. 200 had won,
Arizona tribes would have had the right to open Internet casinos, taking bets from inside the
state.

The tracks proposed allowing gaming tribes to have up to 27 casinos with 19,600
slots. But the initiative spent little space on tribal gaming, because its real goal was to bring
6,450 slot machines to ten racetracks. Since there are presently only eight existing track
permit holders, it is interesting to speculate who would have gotten those last two “racino”
licenses.

The voters did not vote their pocket-books. They rejected the tracks’ plan, which
would have raised the most money for the state. The tracks were willing to tax themselves at
a hefty 40%. But it was probably wise to reject this initiative. Prop. 201 would have
imposed an 8% tax on tribes. The federal Department of Interior never approves of
revenue-sharing like this, unless the tribes are given something like a monopoly. So the
tribes’ rights to have casinos would have been subject to challenge and tied up in courts for
years.

What will Arizona gaming look like under the new law? About the same as now,
only more of everything: more casinos, more slots, more table games (up to 100 blackjack
and poker tables per casino), more money to the state, more money to tribes operating
casinos, more money to non-casino tribes, which may now transfer their slot allotments, and
higher stakes, $25 slots, $500 blackjack, $75/$150 poker.

Arizona casinos will be missing only one major item found in casinos in Nevada:
markers. At least for the present, playing on credit is prohibited.