TRAVERSE CITY -- A settlement in a three-year-old lawsuit between the state and two northern Michigan Indian tribes will reduce Michigan's cut of tribal gambling money, but will shake loose millions in escrowed state revenue.
The Little Traverse Bay Bands of Odawa Indians in Petoskey and the Little River Band of Ottawa Indians in Manistee approved a settlement with the state to end a long-running dispute over the Michigan Lottery's Club Keno game.
The deal will shave 2 percent off the tribe's annual payments of electronic gambling revenues paid to the state, to 6 percent from 8 percent, and make other changes to 10-year-old state gambling compacts with the two tribes.
"We reached a middle ground that was acceptable to all three parties," said Frank Ettawageshik, chairman for the Little Traverse Bay tribe.
The agreement splits approximately $52 million in electronic gambling revenue from the tribes that had been held in escrow since the dispute began almost five years ago. That included more than $33 million paid in by the Little River Band and $19 million-plus from the Little Traverse Bay Bands.
Megan Brown, a spokeswoman for Gov. Jennifer Granholm, said the state will get half the escrowed money, around $26 million, to be used for economic development efforts through the Michigan Strategic Fund. Ettawageshik said the Petoskey tribe will get more than $9 million. The rest will be returned to the Little River Band.
The dispute began when tribal officials alleged the state violated its 1998 compacts with the two tribes when the Michigan Lottery Bureau launched Club Keno in October 2003. The tribes said it was a commercial casino game that violated a provision in their compacts that only permitted Indian tribes and non-Indian casinos in Detroit to operate such games.
The tribes withheld payment of the 8 percent of their electronic gambling revenue spelled out in the compacts, prompting the state to file suit in federal court in 2005. State attorneys argued Club Keno was an extension of the lottery's Keno game that existed when the gaming compacts were established.
The settlement amends the compacts in terms of gambling "exclusivity" for the tribes, which won't be determined on a statewide basis, but will be limited to a nine- to 10-county area near each tribe's casino.
If new commercial gambling is established within one of the tribe's designated markets, revenue sharing payments to the state will be suspended, but can be reinstated later at a reduced rate.
The compacts also were clarified to state that lottery and similar state gambling activities won't be considered new gambling unless they involve large-scale use of electronic machines.
"I think this is clearly in the best interest of the tribes, and I believe it's also in the best interest of the state," Ettawageshik said. "The success of our casinos is related to the success of the state's economy."
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