From Crain’s Detroit Business:
LANSING — State economic-development officials are cheering the settlement of a long-running legal dispute and renewal of a key revenue stream to the state.
Gov. Jennifer Granholm, the Little River Band of Ottawa Indians and the Little Traverse Bay Bands of Odawa Indians on Friday announced the resolution of a federal lawsuit that involved the tribes’ obligation to share casino revenue with the state.
The tribes had halted payments in 2004. But under the settlement, tribal revenue-sharing will resume and the state will also receive about $26 million in previous payments that the tribes had put into escrow.
It’s good news to the Michigan Economic Development Corp., where tribal casino money pays for a variety of MEDC activities and nearly a third of MEDC employees’ salaries and benefits.
The revenue has fortified state economic-development operations and provided money not subject to legislative appropriation. But the casino-revenue pot has dwindled after the tribes halted payments in response to the Michigan Bureau of State Lottery’s 2003 launch of its Club Keno game.
The tribes said the game, played in bars and restaurants statewide, violated 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 game is just an expansion of a lottery game that existed since 1990.
The MEDC sued the tribes in 2005 and won a 2007 ruling in the U.S. District Court for the Western District of Michigan, which the tribes appealed to the 6th U.S. Circuit Court of Appeals in Cincinnati.
In a news release, tribal officials said they were pleased to bring the matter to a close and said the settlement allows the tribes and state to work together.
Under the settlement:
– The percentage of slot machine revenues paid by the tribes will drop from 8 percent to 6 percent.
– Gaming exclusivity will no longer be measured statewide but will be based on a more limited, multi-county area for each tribe.
– Lottery and other similar state activities will not be considered to be new commercial gaming unless they involve large-scale use of electronic machines.
– If new commercial gaming does occur within one of the tribes’ market areas, it will no longer result in permanent termination of payments. Instead, payments are suspended and can be reinstated at a reduced rate if the tribe’s casino business continues to grow.
The changes to the revenue-sharing agreement were made by amending the tribes’ compacts. The settlement agreement also provides for the state to get about half of the $52 million that the tribes had put into escrow during the dispute.
Bridget Beckman, MEDC public information officer, said some of the escrowed amount will be put toward maintaining current MEDC operations. The use of the remainder will be discussed with the MEDC’s executive committee in the next couple of weeks.
The lawsuit settlement doesn’t automatically resolve a revenue-sharing issue with a separate, southwest Michigan tribe. The state is supposed to receive an 8 percent revenue share from the new Four Winds Casino Resort operated by the Pokagon Band of Potawatomi Indians. But instead of sending the state its first payment, due Dec. 1, the tribe put an estimated $3.9 million into escrow as it awaited the outcome of the federal lawsuit.
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