The 78-member Sycuan tribe of San Diego County has decided to back off from a new gaming compact it negotiated with California Governor Arnold Schwarzenegger that would have allowed it to expand to 5,000 slot machines.

The reason for the change is the bad economic times.

Setting aside the compact will limit the tribe’s future expansion, although it still could build a second casino in the rural town of Dehesa. However, it will be limited to the 2,000 slot machines allowed under its original compact.

It is estimated that the tribe spent $6 million in legal fees promoting a state initiative that ratified the compact that it signed in 2006. Although the governor signed it, the tribe itself never formally ratified the compact.

The tribe’s chairman, Daniel Tucker, wrote to the governor last month, “It is with sincere regret that Sycuan is unable to take advantage of the August 2006 amended compact between our tribe and the state.” He added that it would be “financially imprudent” to proceed under the terms of the new compact.

The second casino proposed by the tribe has been controversial because it would have been built on land not part of the reservation that the tribe purchased. The Department of the Interior has yet to rule on that land, although regulations adopted earlier this year by the department make it much harder for tribes to build casinos off the reservation.

The development means a significant loss of payments to the state, which would have gotten an increased percentage of slot machine profits under the agreement, including a larger share of the existing slot machines.

That last provision may have been the deal killer, since giving a larger share of a smaller pie would further cut into the tribe’s revenues.

The tribe is attempting to restructure its operations to avoid laying off employees.

By GGB Staff

Staff writers for Global Gaming Business magazine. Las Vegas, Nevada.