March 27, 2002
By Dan Walters -- Bee Columnist
The meteoric rise of California's Indian tribes from obscurity to virtual omnipotence -- in scarcely a decade -- is one of the most fascinating political sagas of the era.
Indian emissaries couldn't get the time of day from Capitol politicians in the 1980s, reflecting centuries of poverty and powerlessness. They represented few votes, had no political money and couldn't afford well-connected lobbyists. But after winning a court decision granting them the right to conduct bingo games and spending upward of $150 million on political action to establish a monopoly on casino-style gambling in the nation's largest state, tribal leaders now receive the red-carpet treatment in the halls of government.
Politicians stumble over each other in their eagerness to carry Indian-sponsored bills, whether they relate to bolstering the tribes' gambling monopoly or other matters. The gambling tribes carry high-priced lobbyists, lawyers and political consultants on their payrolls, underwrite political party conventions and, during campaign seasons, they sprinkle big checks on officeholders and officeseekers of both parties.
This month's primary election provided new evidence of the tribes' political clout. As the emphasis shifted from direct contributions to "independent expenditures" in critical legislative primary races, tribes picked their favorites and spent heavily backing their campaigns. The largesse has pushed individual tribes into the front ranks of campaign money sources.
Their main political goal is reinforcement of their gambling monopoly. With their newly won authority to operate Las Vegas-style slot machines -- the cash cows of any casino -- the tribes are expanding existing casinos in rural areas and making ambitious plans to open new gambling palaces on the urban fringes, including three along Interstate 80, the main link between Northern California and Reno. By the end of this decade, California's Indian casinos are expected to outstrip Las Vegas in their gambling dollar volume.
One might think that a multibillion-dollar gambling monopoly, enforced by legions of compliant politicians, would be enough for the tribes. But now, it would seem, they want to establish themselves as retailing powerhouses as well by gaining an exemption from state and local taxes on sales on tribal property.
At the behest of Johan Klehs, an outgoing Board of Equalization member who has been a recipient of generous Indian political contributions, the board is on the verge of granting such an exemption, thereby setting the stage for development of new retail facilities adjacent to casinos that would have built-in price advantages over non-Indian retailers.
The Klehs-sponsored amendment to an existing partial sales tax exemption on tribal sales is vaguely worded, as a Board of Equalization staff report points out, so it's impossible to determine what items sold on tribal property might be exempt from taxes. But some non-Indian retailers are fearful that shopping centers could rise next to the new urban casinos, selling almost everything, and local governments are worried about a multi-million-dollar loss of revenue.
A board staff analysis cites a fairly low revenue loss of several million dollars initially -- based on assumptions of the current level of retail sales on Indian property -- but there's no way to determine what the loss would be in the future as Indian retailing expands.
Klehs received substantial Indian tribe contributions as he was running for state controller, but he lost the Democratic nomination this month to businessman Steve Westly. He insists the contributions played no role in his formulating an amendment to existing sales tax regulations, which was drawn up in private negotiations with tribal representatives but excluded retailers and local governments.
The tribes insist the exemption is a logical extension of the "sovereign immunity" granted to them by federal law, but the Board of Equalization staff says the proposal goes beyond existing statute law and court decisions on the issue. And the Indians' position once again raises this issue: If the tribes are independent governments, as they insist, how can they legitimately make campaign contributions, a privilege that other governments are denied?