Briefing Report: Making Tribal Land Gaming-Eligible Through the 'Two-Step Determination Process'

Wednesday, February 12, 2014

A House Divided

Nearly every year, the Legislature considers the ratification of at least one Tribal-State Gaming Compact authorizing a tribe to operate casino gambling on its land. The Governor, on behalf of the state, negotiates the compact and presents it to the Legislature which, under federal and state laws, ratifies the compact before it goes into effect. In most cases, the ratification process is fairly noncontroversial. However, in May of 2013, a compact was presented to the Legislature for ratification that, not only split party caucuses in both Houses but, also, divided the Native American communities throughout the state.

The North Fork Rancheria of Mono Indians of Madera County sought ratification of their Tribal-State Gaming Compact which, for all intents and purposes, was a fairly standard, straight forward proposal. It was consistent with every other compact ratified by the Legislature in recent years. The controversy lay in the fact that the gaming facility was to be located on land that was 30 miles distant from and not contiguous with the North Fork community. Also, the proposed casino was situated just off Highway 99 in Madera County, a location that some other tribes felt would put them at a competitive disadvantage.

But, North Fork had undergone a very complicated legal process called the “two-part determination process” as spelled out by the Indian Gaming Regulatory Act of 1988 (IGRA) to make its Highway 99 parcel part of its Rancheria. This process is rarely used because of the cost and difficulty involved. In fact, since 1988, 25 tribes nationwide have attempted to acquire land in trust for gaming purposes by utilizing it. Besides North Fork, only six tribes, nationwide, have been successful.1

California legislators will be facing more such compacts where the land on which the facilities are to be built have been brought into “trust” through the two-part determination. Just what is this process and how does it work? How does a tribe go about making newly acquired land, which may or may not be contiguous with its reservation or Rancheria, “gaming-eligible?” As more such compacts are considered, this Briefing Report attempts to address those questions and offer some insight on this rather complex legal process.

Trust Lands

Under the Indian Regulatory Act of 1934 (IRA), tribes are allowed to obtain additional land and convert it into trust status. Tribal land is held in trust by the federal government for the benefit of tribal members. Tribes have the ability to acquire additional land in trust by purchasing or acquiring land that is contiguous with its existing land or from federal surplus lands. The Secretary of the Department of Interior or Congress can then confer trust status to the newly acquired land. With congressional action or the Secretary's determination, the new land acquisition is placed in trust by the United States for the benefit of the Tribe. This land legally becomes part of the tribe’s reservation and could become gaming-eligible under state and federal law. If the land is not contiguous, a much more complicated process ensues.

Gaming on Newly Acquired Lands

Federal law, specifically IGRA, requires all tribes who want to engage in Class III gaming (e.g., lotteries, slot machines, video gaming devices) to enter into a compact or agreement with the state in which the tribe is located before that type of gambling can occur. On September 10, 1999, 56 tribes, led by the Pala Band of Mission Indians entered into Tribal-State Gaming Compacts permitting Class III video gaming devices on tribal lands. Implementation of the ’99 Compacts were subject to approval of Proposition 1A - the Indian Self-Reliance Initiative - which appeared on the March 2000 Ballot. With 64.5 percent of California voters casting a “yes” vote, the initiative amended the State Constitution’s ban on casinos and lotteries to allow gaming on tribal lands subject to the terms of the compacts. There are currently over 70 tribes that have entered into tribal-state compacts.

IGRA generally prohibits gaming on lands acquired for Indians in trust by the Secretary of the Interior (Secretary) after the date of enactment of IGRA, October 17, 1988. The exceptions, however, may be significant because they raise the possibility of Indian gaming proposals for locations presently not connected with an Indian tribe. Among the exceptions are land: (1) contiguous to or within reservation boundaries; (2) acquired after the Secretary determines acquisition to be in the best interest of the tribe and not detrimental to the local community and the governor of the state concurs (two-part determination); (3) acquired for tribes that had no reservation on the date of enactment of IGRA; (4) acquired as part of a land claim settlement; (5) acquired as part of an initial reservation for a newly recognized tribe; and (6) acquired as part of the restoration of lands for a tribe restored to federal recognition. In the North Fork case, the tribe sought the two-part process (Secretary's determination with governor’s concurrence) to take the property along Highway 99 into trust for gaming purposes.

Section 20(b)(1)(A) of IGRA contains a provision (commonly known as the “Two-Part Determination" allowing a tribe to operate a gaming establishment on lands that are acquired in trust for the benefit of a tribe after IGRA’s effective date if, after consultation with the tribe and appropriate state and local officials, including officials of other nearby tribes, the Secretary determines that a gaming establishment would be in the best interests of the tribe and its members and not detrimental to the surrounding community, and the governor of the state concurs in that determination.

The "Process Problem"

The most controversial aspect of the two-part determination process arises over the governor's role in the concurrence with Secretary of Interior determination. Once done, any land subject to the determination essentially is excised "out of California" and off the tax-rolls without legislative consultation. Legislative Counsel has opined that the governor may not actually have the authority to make that decision unilaterally. Federal law (IGRA) requires that the Secretary's determination for land to be taken into trust for gaming purposes must be agreed to by the state’s governor. But IGRA does not preempt state law on how that concurrence is to be achieved. The State Constitution provides, under the terms of Proposition 1A, that the governor has the exclusive authority to negotiate a compact with ratification by the Legislature but, according to Legislative Counsel, does not specifically grant the governor the authority to also concur in federal decisions to take additional gaming land into trust for tribes that already have gaming-eligible trust land. As such, there is no "specific authority" in state law for the governor to hand large parcels of land over to the federal government.

Legislative Counsel is certainly not the end-all of legal opinion and it is likely that this point will lead to litigation. Proposition 1A may not specifically authorize the governor to unilaterally concur in such decisions without the consent of the Legislature. The fact is, state law simply does not address it. Therefore, the governor derived this authority from interpretation of federal law and the lack of specificity in state law. This is an area of law that may require further clarity and refinement by the Legislature.

What If the Legislature Refuses to Ratify a Compact?

Should the Legislature fail to ratify a compact, whether or not it concerns gaming on land brought into trust via the two-part determination process, several options present themselves. A tribe could request re-negotiation with the governor on a compact that may be more favorable to the Legislature. Or, it could sue in Federal Court claiming that the State of California acted in "bad faith", at which point a compact could be imposed on the state by the federal government. This scenario could lead to a compact with far less favorable terms to the state than those negotiated between the governor and Tribe. However, the Tribe and governor did negotiate and execute a mutually beneficial compact which is subject to legislative ratification. Both state and federal law provide for such ratification. The fact that IGRA authorizes state legislatures to ratify compacts implies that they have the authority to refuse ratification. Therefore, it may be difficult to argue that the state acted in bad faith. Also, the court could send both parties to mediation.

The Tribe could open a Class II gaming facility without a compact on the land in question at any time. Class II gaming is defined as the game of chance commonly known as bingo (whether or not electronic, computer, or other technological aids are used in connection with playing the game) and, if played in the same location as the bingo, pull tabs, punch board, tip jars, instant bingo, and other games similar to bingo. It also includes non-banked card games which are games played exclusively against other players rather than against the house or a player acting as a bank (parimutuel). No compact with the state is necessary for a tribe to operate a Class II gaming facility. Class II machines are becoming almost indistinguishable from Class III gaming devices. In fact, in 2004, when the Legislature refused to ratify the compact between the State of California and the Lytton Band of Pomo Indians to operate Class III gaming at its facility on Highway 80 in San Pablo, the Lytton Tribe opened a Class II gaming facility at its Casino San Pablo using video bingo machines that resemble slot machines. Lytton, which has no tribal-state compact, makes no payment to any state-managed fund, and is not regulated or audited by the CGCC, has been very successful in this venture.

All This has Happened Before…

A referendum that seeks to stop the North Fork project has qualified for the ballot in California. Despite this, more such compacts to build casinos on land declared gaming-eligible through the two-part determination process will be coming before the Legislature in the near future. The Enterprise Band of Maidu Indians of Butte County was successful at bringing land into trust for gaming purposes through the two-part determination process. Its compact, which authorizes Enterprise to operate a casino in Yuba County, has yet to be submitted to the Legislature for ratification but likely will happen this legislative session. In San Diego, the Los Coyotes Band of Cahuilla and Cupeno Indians are going through the two-part determination process now to establish a casino in Barstow, 100 miles from the tribe’s San Diego County reservation. Others may follow. Undoubtedly, like the North Fork compact, these compacts will be equally divisive.

For more information on this report or other Governmental Organization issues, contact Richard Paul, Senate Republican Office of Policy at 916/651-1501.

1 The Enterprise Band of Maidu Indians of Butte County brought land into trust for gaming purposes that it purchased in Yuba County through the two-part determination process. However, its compact has yet to be considered by the Legislature for ratification.