Horse track operators drop lawsuit to block tribal deals

Brian Melley

Thursday, May 26, 2005 | 9:34 a.m.

SACRAMENTO -- Horse track operators dropped a lawsuit Wednesday that sought to block Gov. Arnold Schwarzenegger's _$1 billion casino deal with Indian tribes, freeing the state to issue bonds to pay for transportation projects.

The suit filed in Alameda County Superior Court sought to nullify a deal Schwarzenegger reached with five Indian tribes that gave them an unlimited number of slot machines in return for paying the state additional revenue.

The deal was part of the governor's plan last year to bring in more revenue while the state faced a multibillion dollar fiscal crisis.

"We have always indicated the lawsuit is without merit," said Vince Sollitto, a spokesman for the governor. "It is denying a billion dollars in transportation funding to California, and it needs to be withdrawn. The governor is certainly pleased they have done so."

Race tracks, which have unsuccessfully fought to get slot machines to compete with wealthy Indian casinos, challenged the law passed by the Legislature last summer that approved the first of two compacts the governor negotiated with tribes.

Tracks said the legislation was unconstitutional because it granted special privileges to the tribes, it used bond money to pay off a deficit and it would have prevented voters from extending casino gambling beyond Indian tribes.

While no hearings were ever held on the merits of the case, the group dismissed the suit in favor of resolving the dispute with the governor's office, said Steven L. Mayer, an attorney representing five race tracks. The tracks withdrew the suit, but they could refile it later.

"We're not giving anything up," Mayer said.

The governor's office has met several times with representatives of the horse racing industry and their concerns about competition, Sollitto said. But he would not say what the race tracks are seeking from the governor.

Dismissal of the lawsuit allows the state to issue _$1 billion in bonds to pay for transportation projects that have languished, said H.D. Palmer, a Department of Finance spokesman. The bonds will be repaid with revenue from the tribal casinos.

"It was this suit that basically hit the pause button on us going forward," Palmer said. "Absent any other legal challenge, this gives us the green light to get going this summer."

The lawsuit had cast a cloud over the compacts but had no bearing on the casinos, said attorney Howard Dickstein, who represented the tribes in their deal with the governor.

Tribes were able to add slot machines, and the state has received over $50 million in gambling revenue over about seven months. The deal called for the state to get about $100 million a year from the tribes, Dickstein said.

With the dismissal of the suit, tribes and track owners may be able to work together to help both industries, Dickstein said. He said the groups have had preliminary discussions.

"Some tribes are interested in saving the racing industry in this state," Dickstein said.

The suit was brought by Glen Craig, the former Sacramento County sheriff, on behalf of race tracks at Golden Gate Fields, Bay Meadows, Hollywood Park, Santa Anita and Los Alamitos.