How Big 4 Can Manipulate Revenue
The Blue Sky Consulting Group Analysis
Ambiguity in the language of the 2006 compacts could result in significantly lower payments to the state General Fund than the tribes have claimed. The payments to the state under the compacts are calculated as a percentage of the total “net win” from the new slot machines. The compacts require the tribes to calculate the average net win per slot machine and multiply the result by the average number of new slot machines “in operation” during that quarter to determine the total net win from the new machines. Under the terms of the compacts, the tribes agreed to pay the state an amount equal to 15 to 25% of the net win, depending on the number of machines added.
OP: SO, if the tribes don't add the upper number of machines, they won't be paying 25% and we wont get $9 Billion. We can't force the tribes to put the machines in and we can't force 4 times the normal customers to come in either.
The language of the 2006 compacts, however, states that the tribes are to multiply the average number of slot machines “in operation” (rather than the average number of machines “present” on the casino floor) times the average win per machine (calculated using the present on the floor metric). Slot machines that are roped off during the weekdays, for example, might not be considered to be “in operation.” OP: Would the machines in the hallway between the two casino floors be considered "on the floor"?
The result is a much smaller calculated net win number used for purposes of determining the payment to the state. OP: So why do they say "UP TO $9 Billion" That's like saying, "UP to $100 Billion" in terms of realism isn't it?
By taking advantage of this loophole in the compact language, the tribes could significantly reduce the amount of revenue paid to the state General Fund. OP: Uh, the Pechanga tribe tried to get around the cap on machines before. That's cheating. That means they cheated the state, the people of CA once before. But they won't THIS time? They already cheated 25% of their tribe, but THIS time, they will be honest. THIS time, they really mean it.
As shown in the table below, the tribes could reduce their overall payments to the state by as much as 60 percent.
Impact of Machines “in Operation” Versus “on the Floor” on State Revenues(dollars in millions)
Periods When Devices are "in operation"
See this link for the table