Business & Real Estate

Elk Grove casino is far from a done deal, legal experts say

Mary Tarango, the first official Wilton Rancheria chairwoman is surrounded by sage smoke – to bless the area, people and ground around them – before a news conference announcing that the tribe has obtained nearly 36 acres to be held in federal trust on Tuesday, February 14, 2017 in Elk Grove, Calif. The Wilton Rancheria Tribe plans to build a casino, hotel and shops on the site.
Mary Tarango, the first official Wilton Rancheria chairwoman is surrounded by sage smoke – to bless the area, people and ground around them – before a news conference announcing that the tribe has obtained nearly 36 acres to be held in federal trust on Tuesday, February 14, 2017 in Elk Grove, Calif. The Wilton Rancheria Tribe plans to build a casino, hotel and shops on the site. rpench@sacbee.com

The proposed Indian casino in Elk Grove still has several legal hurdles to clear, despite assurances from the Wilton Rancheria tribe that the $400 million project can move forward smoothly.

Tribal chairman Raymond Hitchcock announced last week that the federal government has confirmed it will take the tribe’s newly purchased 36-acre property into trust, a process that had been delayed by the presidential transition. But whether the tribe can be free to build a casino on its sovereign tribal ground remains an open question.

At the heart of the issue is a development agreement that covers the 36 acres the tribe purchased from Dallas-based Howard Hughes Corp. The agreement between Elk Grove and Hughes calls for an outlet mall to be built on the 100-acre parcel at the city’s southern end, off Highway 99.

City officials, along with the tribe, insist that once the federal government takes the land, local and state laws no longer apply. They argue that federal jurisdiction means the development agreement is also moot.

“A tribal reservation or tribal trust land is not impacted by city ordinance,” said Wilton attorney Rose Weckenmann.

One prominent tribal-law expert, however, contends the issue is far from settled because the development agreement is considered a recorded encumbrance on the deed.

“This is not a slam dunk,” said Howard Dickstein, a Sacramento attorney who has represented Indian tribes including the owner of Thunder Valley Casino Resort. “It’s unclear what the situation is.”

The U.S. Interior Department typically takes land into trust for a tribe, only after encumbrances – such as a development agreement, claim or easement – are removed. To facilitate the tribe’s trust application, the Elk Grove City Council sought to clean up the property’s title in October by amending the development agreement to remove the 36 acres.

That action was hotly contested by local residents and Indian gaming opponents. A company with ties to local card rooms gathered 14,000 signatures to trigger a referendum to overturn the decision. In response, the City Council this month repealed the October amendment to avert a costly election.

“The purpose of the City Council amending the agreement was to clean up the legal mess that would otherwise result,” Dickstein said. “The repeal of that amendment has created a confusing situation. It will probably end up in court.”

Nedra Darling, spokeswoman for the Bureau of Indian Affairs, confirmed that the land was taken into trust as of Feb. 10. However, she did not know whether the development agreement would affect the tribe’s ability to build a casino.

Under the U.S. Constitution, the federal government cannot interfere with a contract, said I. Nelson Rose, a gambling-law expert and professor at Whittier College. He suggested that Elk Grove would need to remove the agreement from the tribe’s land.

“That contract is going to stand until the parties to the contract renegotiate or change it,” he said.

Legal experts say the city or an outside party could sue to block the casino, based on the existence of the development agreement. The contract does not allow for a casino to be built in the area, which is zoned for retail.

The tribe will face its next test when it begins negotiations with Gov. Jerry Brown on a gaming compact. The contract must also be ratified by the state Legislature.

Katherine Florey, a UC Davis law professor who specializes in federal Indian law, said the development agreement may cloud the talks, putting the tribe in a weaker negotiating position.

“California has pushed the envelope in terms of what can be discussed in compact negotiations,” Florey said.

Howard Hughes Corp. has supported the casino, hotel and convention center project, arguing that it is necessary to drive traffic to the long-awaited outlet mall.

Richard Chang: 916-321-1018, @RichardYChang

  Comments