Turtle Talk

From Crain’s Detroit Business:

Fight over casino funds limits kitty for MEDC

LANSING — A southwest Michigan American Indian tribe is withholding casino revenue destined for state economic-development operations, posing the latest twist in funding uncertainty for the Michigan Economic Development Corp.

The state is supposed to receive an 8 percent revenue share from the new Four Winds Casino Resort in New Buffalo, which opened in August. The operation holds the promise of needed new revenue for the MEDC, whose existing casino-revenue money is expected to run out in October or November.

But instead of sending the state its first payment from the casino, due Dec. 1, the Pokagon Band of Potawatomi Indians has put the money into escrow as it awaits the outcome of a federal lawsuit involving a state revenue-sharing dispute with two other tribes.

“There’s nothing more they’d rather do than distribute these funds. But they have to do, from a tribal standpoint, the responsible thing,” said Tom Shields, a spokesman for the tribe and president of Lansing communications firm Marketing Resource Group Inc. “They’re escrowing it into a fund that’s building interest. They certainly understand the plight of the MEDC.”

Neither the tribe nor the MEDC would state the amount of the first payment that’s due from the casino’s first two months of operation. But the tribe had estimated that annual payments to the state could reach $20 million annually.

As Crain’s reported last year, tribal casino money pays for a variety of MEDC activities and the salaries and benefits of nearly a third of the MEDC’s employees — non-civil service executives including President and CEO Jim Epolito. The revenue has fortified state economic development operations and provided money not subject to legislative appropriation.

This year, for example, casino-revenue funds provide nearly half of the $11.35 million that the MEDC has to spend on business marketing, promoting Michigan as an attractive destination for investment and jobs.

The state casino-revenue pot has dwindled amid a long-running dispute with the Little River Band of Ottawa Indians and the Little Traverse Bay Bands of Odawa Indians, who in 2004 halted their casino-revenue payments to the state after the Michigan Bureau of State Lottery began its Keno game.

The tribes said the Club Keno game, launched in October 2003 and played in bars and restaurants statewide, violates their gambling exclusivity under 1998 compacts and thus ended the requirement that they share revenue with the state.

The state contended that Club Keno is neither an electronic game of chance as defined under the compacts nor a commercial casino game that, within the compacts’ meaning, could nullify revenue sharing. The state said the Club Keno game is just an expansion of a lottery game that existed since 1990.

The MEDC sued the tribes in 2005 and last April won a ruling in U.S. District Court for the Western District of Michigan. The court found the tribes in violation of their obligation to make 8 percent payments to the state and issued a judgment to award the state nearly $44.8 million in payments and interest.

However, the tribes appealed the case in July to the 6th U.S. Court of Appeals in Cincinnati, where there’s been no resolution yet.

The Four Winds Casino’s Pokagon Band is not part of the federal lawsuit. But the lawsuit affects the tribe because its compact with the state was signed at the same time as the other tribes’ and provides “the exact same exclusivity that the others have,” Shields said.

He said the Pokagons had previously told Gov. Jennifer Granholm’s office and the MEDC that the tribe planned to withhold payments.

In comments e-mailed to Crain’s, MEDC public information officer Bridget Beckman said the MEDC is in discussions with Pokagons. She said the MEDC is concerned about the casino-revenue funds running out and is “continuing to explore what options may be available to ensure that our economic development work isn’t interrupted.”