Tribal gambling has grown to a $1.2 billion-a-year business in Wisconsin, with revenue increasing 34% from 2000, a state audit report released Wednesday says.

The report by the Legislative Audit Bureau also shows the tribal casinos are very profitable, earning $516 million in 2004 after deducting expenditures a profit margin of 43%.

The $1.2 billion figure for all tribal gambling-related revenue includes $79 million in revenue from hotels, restaurants and other operations linked to the casinos.

A rough comparison: the $1.2 billion Indian gambling industry in Wisconsin is dwarfed by the state's $42.8 billion manufacturing sector, the $5.5 billion publishing and broadcasting industry, and the $14.9 billion health care sector, according to U.S. Commerce Department figures for 2002, the most recent available.

Tribal gambling takes in about the same as Wisconsin's computer systems design sector ($1.2 billion) and the state's wood products industry ($1.4 billion).

The audit lists only aggregate totals for the state's 11 tribes that operate 17 casinos and seven ancillary facilities generally convenience stores with a small number of slot machines. Figures for individual tribes' casino operations were withheld because of secrecy deals that were part of state-tribal compacts governing gambling.

Nonetheless, the revenue of the Forest County Potawatomi tribe's Milwaukee casino can be determined based on the local payments it makes to the city and county. For the fiscal year ending last August, Potawatomi Bingo Casino in the Menomonee Valley took in about $260 million, making it the most lucrative casino in Wisconsin. The city and county each get 1.5% of net revenue from the tribe, which came to about $3.9 million last year.

Payments by the tribes to the state totaled $69.6 million for the state's 2003-'04 fiscal year. That was $30 million less than anticipated because the Ho-Chunk Nation withheld that sum. The tribe based that action on a 2004 state Supreme Court decision that struck down new games and the perpetual duration of gambling compact amendments made in 2003.

Tribal casino payments to the state were far lower before the 2003 amendments $16.7 million was paid in 2003, according to the state Department of Administration.

Some lawmakers have argued that Gov. Jim Doyle should have negotiated much higher tribal payments, but Doyle has said Wisconsin enjoys one of the best casino payment deals in the country.

Wisconsin's casino "revenue sharing" payments for 2004 ranked fourth nationally of the 16 states with tribal gambling, behind Connecticut, California and Arizona, according to a national study released this month by Alan Meister, an economist with the Analysis Group, a Los Angeles-based financial consulting firm. Meister's review included tribal payments to both state and local government.

In addition, Wisconsin's gambling payments grew by the largest percentage of any state with tribal casinos, more than tripling from 2003 to 2004, the Meister study shows.

Connecticut tribal casinos rake in by far the largest sums of any state $2.2 billion last year based on their proximity to New York City.

Large payment

Officials from the Potawatomi tribe say the $40.5 million it paid to the state last year effectively made it the biggest business taxpayer in the state, a fact confirmed by state Department of Administration spokesman Scott Larrivee.

The payment amounted to about 16% of the tribe's revenue, minus payouts from its Milwaukee casino. The state's corporate income tax rate is 7.9% on net revenue, a smaller base in which business expenses are subtracted first.

The tribal gambling payments to states technically are not a tax, which is forbidden under federal law.

"The Potawatomi feel like they are paying their fair share," said tribal spokesman Ken Walsh. "They are paying multiple times what they would pay under the (state's) corporate tax rate."

Critics have said the tribes should pay something more like the 25% two Connecticut tribes pay on slot revenue. Most Wisconsin tribes in future years will pay about 6% to 8% of all gaming revenue; until then, the payments in most instances were negotiated flat sums.

Larrivee said state-to-state comparisons are difficult because of widely varying factors. For example, the high rate paid by the Connecticut tribes was for semi-monopoly rights to a massive market that draws from the New York City and Boston metropolitan areas.

Doyle's administration has been negotiating potential changes in the compacts to address the court ruling, which could lead to lower state payments.

The Ho-Chunk and the state will arbitrate the question of what that tribe should pay, and arbitration is possible with the Potawatomi tribe as well if a revised gambling deal can't be completed by the end of the month. The Potawatomi would pay the state $43.5 million this year, under terms of its 2003 compact amendment.

The Legislative Audit Bureau cited concerns about the accuracy and timeliness of some tribes' reporting of gaming revenue but did not disclose which tribes had problems. Two tribes' compacts, for instance, allow nine months from the end of a fiscal year for submitting payments to the state, the report says.

Gambling agreements with five tribes don't specify the time period for which their state payments should be calculated, creating room for argument, the report says.

"The auditors have concerns with the accuracy and timeliness of payments to the state" in the future, state Auditor Jan Mueller said.

The suggestions for tightening compact language on time periods for casino payments will likely be adopted in the current round of compact negotiations, Gina Frank-Reece, the acting state Gaming Division administrator, said in a written response to the audit.

Data on slot machine revenue is gathered by direct state access to tribal accounting systems and leaves little room for manipulation, the report says. But information on earnings from blackjack and other casino table games "is inherently less reliable" because tribes manually enter those numbers on reports turned in to the state, the report says.

State pari-mutuel taxes from dog tracks dropped nearly 16% to $1.1 million in 2003-'04 because of the closing of the Hudson track and continued decline in patrons at the two remaining tracks in Kenosha and Delavan. Total wagering at the tracks in fiscal 2003- '04 was $96.4 million.

State revenue from charitable bingo dropped a fraction of a percent last year to $362,000. Charitable organizations reported $80 million in revenue from bingo, raffles and other games.

The Meister report shows that tribal casinos have enjoyed rapid growth, compared with commercial casinos. Commercial casino revenue in the United States grew 6.7% last year to $28.3 billion, while Indian gambling revenue rose 11.7% to nearly $19 billion.

Tribal casino revenue now accounts for 38% of the overall casino market; a decade ago Indian gambling held about 20% of the overall market, according to Meister's report.

Copyright 2005, Journal Sentinel Inc. All rights reserved. (Note: This notice does not apply to those news items already copyrighted and received through wire services or other media.)

Copyright 2005 Journal Sentinel Inc. Note: This notice does not apply to those news items already copyrighted and received through wire services or other media
Provided by ProQuest Information and Learning Company. All rights Reserved.