The Michigan Economic Development Corporation recently said the state could expect budget deficits of – million if more tribes begin withholding revenue-sharing payments, as the Match-e-be-nash-she-wish Band of Pottawatomi Indians, known as the Gun Lake Tribe, did two months ago. Gun Lake officials said they are no longer obligated to share gaming proceeds from their Gun Lake Casino in Allegan County, as required by the state gaming compact. Tribal leaders said the state broke the non-compete provision of the compact when the Michigan Lottery started to sell online games last summer. The state disagrees that it violated the compact by offering the games on its website and new electronic ticket-dispensing machine. So far in 2015, net proceeds from online lottery sales total .9 million.
After the tribe withheld its $7 million payment, MEDC Chief Executive Officer Steve Arwood said layoffs were possible as the agency reorganizes based on the decreased revenue. MEDC officials haven’t spelled out what programs or services could be cut or changed, nor how many employees could lose their jobs. However, Arwood said the financial effects could be twice as impactful in the 2016 fiscal year starting October 1 if the tribal casino revenue sharing issue isn’t resolved. The Gun Lake tribe could decline to make its biannual payments this fall and next spring. “It goes without saying that the scale and scope of our program must be reduced,” Arwood said.
According to the Michigan Gaming Control Board, between October 1, 2013 and March 31, 2014, the Gun Lake Tribe paid $13.3 million to the state–nearly one-quarter of the MEDC’s total tribal revenues of $56.9 million for that year. Besides the Gun Lake Tribe, the Little River Band of Ottawa Indians, Little Traverse Bay Bands of Odawa Indians, Pokagon Band of Potawatomi Indians and the Keweenaw Bay Indian Community have funded MEDC community development, business attraction and tribal business programs.
Under Gun Lake’s compact, which features a graduated revenue-sharing system, the tribe pays 8 percent of net winnings up to $150 million, and12 percent of net winnings of at least $300 million.
The tribe issued a statement noting both parties were aware the relationship would change if online lottery sales came about. “At that time, it was clear that internet lottery sales would result in elimination of the tribe’s state revenue-sharing payments. Both parties agreed that if the state introduced internet lottery sales or expanded other forms of electronic gaming to social clubs within the tribe’s market area, that the tribe would not have to make state revenue-sharing payments,” the statement said.
Attorney and tribal liaison Dave Nyberg said despite their disagreement, state officials and Gun Lake tribal officials have an amicable relationship and both sides still believe a resolution can be reached. He noted the tribe made a payment to the state in December 2014 although tribal leaders felt that was not required.
An attorney for the Sault tribe said most if not all of the state’s 12 tribes that operate casinos are “deeply concerned” about internet lottery sales. Michigan Lottery spokesman Jeff Holyfield said there are 160,000 registered online players and that figure continually is growing. However, net proceeds from the games account for only 2.3 percent of the entire lottery’s net winnings. Still, the state projects online lottery sales will have netted an additional $480 million in revenue, Holyfield said, reaching customers via smartphones, tablets and laptops.
Across the U.S., tribal disputes over revenue sharing frequently cite expanding state lotteries, said tribal law attorney Eric Dahlstrom. He noted, “The fact that a lottery is run by the state versus a private entity isn’t really relevant. The technology is changing within the lottery world, so that as lotteries start to figure out how to use the internet it changes the competitive field. And I think we’re going to see more of that.”
