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Fond du Lac band stops casino payments to Duluth

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region Park Rapids, 56470
Park Rapids Minnesota PO Box 111 56470

Millions of dollars the city of Duluth plans to use toward an aggressive street repair program has been put at risk as the Fond du Lac Band of Lake Superior Chippewa has said it will stop sharing casino revenue with the city.

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The city says that's a breach of contract and has filed an injunction to force the band to continue an agreement it's had since Duluth allowed the downtown Fond-du-Luth Casino to become federal Indian land in 1986.

The tribe, in a letter dated Aug. 10 and sent to the city by Chairwoman Karen Diver, argues that the contract was entered into "under erroneous understandings that the city's consent was necessary to the creation of reservation land within the city."

The letter also states that the city has received more than $80 million over the last 25 years and in return "has provided no consideration or compensable services beyond those municipal services which are legally obligatory."

In the past, Diver has called the amount the tribe pays the city "a gift."

"We're reviewing all of our historical obligations, much like any administration," Diver said Monday, "and we find this arrangement to be exploitive to the band. We have to put [members'] needs first."

Duluth Mayor Don Ness and attorney Bob Maki counter that both sides get something out of the agreement. The city gets revenue, and the tribe got the land in addition to ongoing police, fire and public utility services.

"Everybody put up money for a project that everybody's benefitted from," Maki said. "The city has done its part and will continue to do its part."

The contract is in place until 2036, but is due to be renegotiated next year.

The band has given the city 19 percent of its gross revenue from slot machines, which the city puts into its Community Investment Trust Fund. The fund mostly is used to repair and rebuild city streets, although it also has been used to pay down retiree health care debt and build or rehabilitate low-income housing. This year the city was to receive about $6.6 million to be added to a pot that's grown to about $60 million.

Earlier this year Ness announced a plan where the city would use those reserves to pay down existing street debt while using new money that comes in from the casino to pay for what he said would be up to 100 miles of road repair in the next five years.

The pool of money is also continuously cited by bond rating agencies as one of the main reasons for giving the city a high credit rating, which provides low interest rates when the city borrows money.

Asked what would happen if a judge sided with the tribe, Ness wouldn't entertain the question, saying the city's street repair program would continue as planned in 2009 and 2010.

"We are confident that the courts will see this in our favor, and this will set the tone and direction for the remaining 25 years of this agreement," he said. "We have every expectation that the basis of the contract will remain and those revenues will continue to come to the city of Duluth to fund the street program."

City officials noted that, over the years, the agreement was reviewed and approved by the U.S. Secretary of the Interior, the Chairman of the National Indian Gaming Commission and U.S. District Court.

Diver said the Fond-du-Luth revenue that goes to Duluth could be used for economic development opportunities on the reservation, housing services and investment in the downtown casino.

But Diver said the tribe wants to review the legality of the whole agreement.

"We liken this very much to what the city [of Duluth] did with the retiree health-care obligation," Diver said. "At the time it might look one way, and down the road it looks different, and you see what you can do to revise or review the situation to make it more appropriate."

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