Budget & Tax

Tribes concede casino fees subject to renegotiation

December 18, 2019

Ray Carter

In a pair of dueling press conferences yesterday, Gov. Kevin Stitt offered Oklahoma tribes the opportunity to sign a short-term extension that will prevent potential closure of casinos upon the expiration of state-tribal gaming compacts on Jan. 1, 2020. The chairman of the Oklahoma Indian Gaming Association appeared cool to the offer but also conceded a major point made by Stitt—that the exclusivity fees tribes pay the state for monopoly casino rights are subject to renegotiation.

Stitt said a compact extension will allow both sides to preserve their legal positions while negotiations continue.

“The state cannot reach an agreement that addresses the needs of every single tribe in the state in the next 18 days. That’s obvious to me,” Stitt said. “But if we do not take action, all Class III gaming activity will be illegal on January 1, 2020. This creates tremendous uncertainty for the Oklahoma tribes, for those conducting business with the casinos, for casino patrons. I cannot put Oklahoma in this position. To protect all the hardworking Oklahomans and the tribal members who are employed at more than 100 casinos across our great state, I am announcing today that the state of Oklahoma will be requesting tribal leaders to join me in signing an extension to the gaming compact.”

He said the extension would provide “certainty and assurance” to vendors and casino employees as negotiations continue, while also preserving existing state revenue that Oklahoma receives from the current “exclusivity fees” paid by tribal governments, which run from 4 percent to 6 percent on slot machines, and up to 10 percent on other games.

Stitt has said those fees should be increased, noting other major gaming states receive up to 25 percent from tribal casinos in return for monopoly rights.

Matthew Morgan, chairman of the Oklahoma Indian Gaming Association, said tribal leaders have not seen a written offer outlining the proposed extension agreement, and that tribal leaders would not agree to support it until details are provided.

“I think tribal leadership would be open to all conversations but we haven’t seen it, and apparently the document hasn’t been written yet, so it’s hard to comment on something we haven’t seen,” Morgan said.

A major sticking point in negotiations has been the contention of Oklahoma tribes that their gaming compacts auto-renew every 15 years. The compacts include the statement that the agreements “shall have a term which will expire on January 1, 2020.” They also include additional language saying compacts “automatically renew” for another 15-year term under certain conditions, but also allow either the governor or the tribes to “request to renegotiate the terms” of two subsections.

Morgan conceded the compacts allow renegotiation of exclusivity fees, which has been the crux of the state-tribal dispute.

“It does give the governor a chance to renegotiate, but it renegotiates parts 11a and e of the compact, so it’s limited on the subjects we can talk about, which are exclusivity and rates,” Morgan said.

In a separate press release, the leaders of the Muscogee (Creek) Nation, Choctaw Nation, Cherokee Nation, Seminole Nation, and Chickasaw Nation again insisted the compacts auto-renew but also indicated exclusivity rates could be revised as Stitt has suggested.

“Tribal leaders remain open to negotiations about exclusivity fee rates,” Choctaw Chief Gary Batton said.

Cherokee Nation Chief Chuck Hoskin, Jr. said tribal leaders “will be working on a framework for a reasonable conversation on rates that will deliver value-for-value benefit for both the Tribes and the State.”

While tribal officials continue to publicly oppose entering negotiations unless Stitt agrees the compacts automatically renew, the governor dismissed that argument during his press conference, saying, “No contract goes on forever.”

Referencing the January 1, 2020 date in the compact agreements, Stitt added, “The big question is why is this sentence in here if these things auto-renew forever?”

Behind the scenes, Stitt indicated some tribal leaders have been open to crafting new agreements.

“I’ve been meeting with tribal leaders from around the state who want to negotiate a new compact,” Stitt said. “They’ve expressed their concerns about the current one and the fact that it expires.”

He noted some tribes expressly referred to the expiration of the gaming compacts and the need for renegotiation in letters sent to former Gov. Mary Fallin.

“Contrary to what the TV commercials and some of the newspapers are reporting, the tribes are not united on this issue,” Stitt said.

Morgan acknowledged the tribes do have reason to seek changes to the gaming compacts.

“Gaming is a technology industry. It’s always expanding and growing and there may be some new opportunities out there that tribes may want to take advantage of,” Morgan said. “Oklahoma has limited Class III gaming, so there is something to offer, but that offer is worth a specific value. We’ve said it before: Markets matter and markets are going to dictate what the costs of those benefits are to each individual tribe.”

Moving ahead, Stitt said he will be “resuming direct negotiations with tribal leaders,” replacing Attorney General Mike Hunter as the state’s lead negotiator.

“I’ve been talking to certain tribes, he’s been talking to different sets of tribes, and I just felt like it was best to have one unified voice,” Stitt said.

The governor said “all legal options are on the table” if tribes continue to operate casinos after Jan. 1 without new compacts in place or approval of a compact extension. Stitt said the state is “in the process of hiring additional legal counsel in preparation if we have to fight this out in court.” He said the firm, which he did not identify, has handled similar disputes in other states, including New Mexico.

Morgan said tribal leaders are “prepared” for the dispute to go to court.

Stitt said the renegotiation process has been difficult, but that it is important to have a good deal in place for the next 15 years.

“It’d be much easier for me just to say, ‘Yeah, let’s just let these things auto-renew,’” Stitt said. “Oklahomans elected the wrong person if they wanted me just to not look at every single agreement and always advocate for what’s right for Oklahoma for 15 years from now, and that’s what I’m going to continue to do.”