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State’s take may doom casino deal

The state’s lucrative casino compact with the Mashpee Wampanoag, ratified last week by the Legislature, will now undergo a critical 45-day federal review amid signs that the state’s large take of tribal gambling profits could lead to the deal’s rejection, according to a Globe review of past compacts.

“I would say there’s a fair chance it would not be approved because the terms are way too onerous,” said Oklahoma lawyer Gary S. Pitchlynn, a specialist in tribal gambling law and a member of the Oklahoma Choctaw, speaking of the compact.

State governments cannot tax Indian casinos or impose fees on them, but tribes may trade revenue for something of “substantial value.” Normally, states offer tribes exclusivity to host gambling without commercial competition in return for a cut of the tribe’s revenue.


But the federal government will reject a compact if, in the judgment of the US Department of Interior, a tribe does not get “proportional” value for the money it agrees to pay.

In comparisons with other compacts, the Mashpee would pay a very high rate, and would not receive the benefit of an ironclad exclusivity guarantee. Experts also said a tight state-imposed deadline for completing the agreement could raise questions about whether the negotiations took place in good faith.

A rejection would not be fatal to the tribe’s plans, but it would add another layer of complexity to an already complicated process, and could cause a delay.

Under the terms of the deal, the Mashpee would pay the state 21.5 percent of all gambling revenue from their planned Taunton casino, in exchange for the exclusive right to run a gambling resort in Southeastern Massachusetts, and other considerations.

That is a steep percentage among recent tribal-state compacts, which by itself could raise a red flag with the Secretary of Interior as tantamount to a prohibited state tax, experts say.


“It is a high number,” said Matthew Fletcher, director of the Indigenous Law & Policy Center at Michigan State University College of Law. “At Interior, they’re going to look at it very closely.”

But the compact also requires the tribe to pay a lesser rate of 15 percent if the state infringed on the tribe’s exclusivity and permitted a commercial gambling resort in the southeast region — an “absurd” provision, according to Pitchlynn, who represents tribes and teaches tribal gambling law at the University of Oklahoma School of Law.

“I can’t for the life of me imagine why anyone would think 21 percent would be an appropriate number to pay in this day and age, particularly in that market with the competition that is squeezing them up there,” said Pitchlynn.

“Secondly, it’s absurd to think they would continue to pay 15 percent if the state created competition for them,” he said, since exclusivity is the primary price the state pays to justify getting revenue in the first place.

The Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians, agreed in 2007 to pay the state of Michigan 8 percent of its first $150 million and up to 12 percent on higher profits, in exchange for the exclusive right to run a casino in a zone covering nine counties.

The zone encompasses 8,000 square miles and about 1.9 million residents, a more substantial territory than the Mashpee’s semiexclusive zone, which cover about 1,800 square miles and about 1.3 million residents.


If Michigan permits commercial competition in the zone, the tribe’s state payment falls to zero, according to the compact.

“When the monopoly goes away, the legal and factual basis for revenue sharing goes away,” said Fletcher, from Michigan State.

The Mashpee’s compact further erodes the value of the tribe’s exclusivity by permitting a slot parlor with up to 1,250 machines to be licensed in the southeast with no effect on the tribe’s 21.5 percent contribution, another aspect of the deal Pitchlynn finds “surprising.”

“It may well be what we have here is the state overplaying its hand,” he said. “If you’re going to pay the state for something less than total exclusivity, it ought to be a fairly nominal sum.”

Negotiators for the Mashpee and for Governor Deval Patrick finalized the agreement July 11 under tremendous deadline pressure. Under the 2011 Massachusetts casino law, if the tribal compact was not finished and approved by the Legislature by the end of this month, the state gambling commission would be required to solicit bids for a commercial casino in the southeast.

The tribe, which could be years away from final federal approval of its gambling plans, was eager to reach a deal with Patrick to prevent a commercial competitor from getting a jump on the market.

The compact will keep a commercial resort casino out of the region at least in the near term, one of the deal’s benefits to the tribe.

But the fact that the Mashpee negotiated under severe deadline pressure may also play a role in the federal review.


“It was a fairly immediate, looming deadline and there was enormous pressure to get this done or the Mashpee would lose out,” said Steven Light, co-director of the Institute for the Study of Tribal Gaming Law and Policy at the University of North Dakota. The deadline could be “an important consideration,” among many others in the federal review, he said.

The Mashpee Wampanoag Tribal Council approved the compact 7 to 1, with one abstention, according to a tribal spokesperson. The member who opposed it, Carlton Hendricks, said he thought the payment was too high. “It’s a lucrative deal for the state,” he said. “It’s one of the most lucrative deals for any state.”

As casino gambling has expanded during the past two decades, tribes have generally negotiated more modest rates of revenue sharing, if they pay any at all, Pitchlynn said.

The Department of Interior in 2010 rejected a compact between the Habematolel Pomo of Upper Lake and the State of California.

That compact had proposed the tribe pay 15 percent plus some annual fees, in return for a package of concessions that included exclusivity for a 100-mile radius.

The department acknowledged the state had offered some valuable concessions, but concluded that the package was not worth 15 percent of the tribe’s gambling profits every day for the 20-year life of the compact.

The tribe negotiated a new compact with California, under which — at least initially — it shares no revenue with the state.


In the Mashpee agreement, in addition to a degree of exclusivity, the tribe also received a promise from the Patrick administration to hold separate negotiations to clarify aboriginal hunting and fishing rights and some land issues, as well as Patrick’s active support for the tribe’s efforts to persuade the federal government to accept the Taunton site for a casino. Getting the land accepted into federal trust on behalf of the tribe is a major obstacle between the Mashpee and their casino dreams.

“We think this compact is a fair agreement for the Commonwealth and the Mashpee Wampanoag Tribe,” said Patrick spokesman Brendan Ryan, in a statement.

“In exchange for several significant concessions from the state, the tribe has agreed to a revenue allotment in order to mitigate the impacts of a resort casino.”

Mashpee Wampanoag Chairman Cedric Cromwell could not be reached for comment, though he has defended the 21.5 percent revenue payment as a trade for “meaningful concessions.”

Katherine Spilde, chairwoman of the Sycuan Institute on Tribal Gaming at San Diego State University, said the state and the Mashpee could make the case that the tribe received concessions that justify the payment.

“The state has agreed to be supportive of the tribe’s land-in-trust application,” she said. “That is something we don’t normally see in a compact, and something that is a substantial benefit.” Political support for the Mashpee, including the endorsement of the residents of Taunton in a nonbinding referendum, also speaks well for the deal, said Light.

Mark Arsenault can be reached at Follow him on Twitter @bostonglobemark