Report Highlights:

Tribal Casinos and Their Impacts on a California Community: A Focus on the Palm Springs Area in the Coachella Valley and the Casino Operations of the Agua Caliente Band of Cahuilla Indians

Size and Potential Growth of the California Tribal Gaming Industry

• California has become the largest tribal gaming market in the country, and is the second largest gaming market overall after Nevada. Industry experts expect California to surpass Nevada within 10 years.
  
  
• Tribal casinos in California are generating about $5 billion a year in revenues up from $2.5 billion in 2000 and $1.4 billion in 1998. Las Vegas casinos brought in $6 billion in 2002 when Nevada’s total casino revenues hit $9.5 billion. It took Las Vegas over 70 years to hit the $6 billion mark.
  
  
• Industry analysts predict “the Palm Springs area will ultimately possess at least one, and perhaps, two Foxwoods-style casinos,” referring to the tribal casino in Ledyard, Conn., which is billed as the world’s largest casino with over 6,500 slot machines, almost 13,000 employees, 1,400 hotel rooms and 41,000 average daily visitors. According to industry analysts, casino growth will occur in the Palm Springs area if the state-imposed limit of 2,000 slot machines per tribe is lifted. The slot cap is open to renegotiation
  in March 2003.
  
  
• The Agua Caliente Band of Cahuilla Indians is the only tribe in the state with two casinos. The tribe has proposed to build what may be the largest casino in the state, a $400 million casino resort complex in downtown Palm Springs. Palm Springs lies within the Coachella Valley in east Riverside County and is a two-hour drive from both Los Angeles and San Diego. It sits within 130 miles of almost 16 million people. The area is home to six tribal casinos, including the two Agua Caliente operations, and is considered one of the strongest Indian gaming markets in the state given its proximity to significant population density and easy access via Interstate 10.

Tribal Gaming Industry Revenue and Public Contribution

• According to industry sources, the statewide average per machine is about $180 per machine/per day. In the large, successful and heavily used casinos, we estimate each slot machine is generating about $254 per machine/per day, which means each machine is generating just under $93,000 a year and
  a casino with 2,000 slot machines may generate more than $185 million a year from their slot machines.
  
  
• While California’s casino industry reaps revenues second only to Nevada, it ranks 14th among gaming states in the amount of revenue it returns to the state. Thirteen states receive more revenue from gaming than does California. Nevada, Illinois, and Indiana each collect over $500 million from casino industries, while California collects less than $100 million.
  
  
• Connecticut’s tribal casinos pay 25% of their slot revenue to the state, which last year amounted to $400 million. In contrast, California is expected to receive between $96 million to $100 million over this fiscal year, which is roughly 2% of the industry’s revenue.
  
  
• The amount of revenue received by the state will remain around $100 million irrespective of the growth in the industry. This money is collected into a Special Distribution Fund (SDF) and is a relatively fixed amount of return to the state.
  
  
• After some $25 million is allocated for regulation and oversight from the SDF, $5 million for gambling addiction and $30 million to fill shortfalls for tribal revenue sharing, something in the range of $40 million would be available for local communities impacted by tribal casino development and operation. If every remaining dollar is allocated to local communities it will amount to about $770,000 for each jurisdiction that hosts a tribal casino. However, it may result in far less because casinos may impact multiple communities. Also, the tribal contributions do not grow as the industry grows, which means the number of impacted communities seeking to draw from the fund will expand, while the fund itself will not.

Local Impacts and Fair-Share Financial Transfers

• Any business that operates around the clock, generates significant foot and vehicle traffic, and employs large numbers of individuals creates impacts both positive and negative. Tribal casinos that create quality jobs with good wages and affordable benefits and have a positive approach to local communities create positive impacts that outweigh the negative.
  
  
• Positive impacts include tribal economic development and self-sufficiency, contributions to state and local tax receipts, reductions in welfare dependency for tribal members and previously unemployed workers, revenue for local businesses, job creation and tribal charitable contributions.
  
  
• Negative impacts in the Palm Springs area may include increased costs for law enforcement and fire protection, traffic mitigation and road maintenance, water and sewage extension and maintenance, augmented social services (including family health care and affordable housing), open space conservation, and other infrastructure and public service expansion.
  
  
• A number of tribes have negotiated and signed comprehensive fair-share financial transfer agreements with local governments that approximate the costs of local impacts. The average of these local impact transfer agreements is $2.69 million annually with an additional average one-time contribution of $1.81 million.
  
  
• Through these agreements, local governments are assured that anticipated detrimental impacts to the communities surrounding the tribal casino will be mitigated in accordance with a binding and enforceable agreement between the local government and the tribe. The rationale for such agreements is that it is in the interest of both parties to insure a regular and sufficient revenue stream from the tribe to the local government. In turn the local government guarantees the provision of high quality public services.
  
  
• Despite the fact that casinos are lauded as an economic development success, creating jobs and moving people off of public subsidies and welfare, the record of success in the Palm Springs area is unremarkable. In the region, the percentage of the population that qualifies for Medi-Cal assistance has followed the same patterns as Riverside County and the state of California. Poverty has increased and a smaller percentage of people can afford to own their own homes.