Wisconsin Builder | An Elephant in the Room

Playing the Odds

Dairyland covers its bets with casino proposal

By Sean Ryan

Dairyland Greyhound Park Inc. is doing business with the same people it wants to put out of business.

The Kenosha dog track owner is living these days with one foot in the courtroom and the other in the boardroom as it tries to both shut down Wisconsin’s American Indian casinos, which represent its biggest competition, and strike a deal with them. It's a love-hate relationship that goes back four years, and its twists and turns can best be described as competition in its most confusing sense.

Here's how it happened.

In April 2001, Dairyland tried unsuccessfully to sell its track. The bid failed when the federal Bureau of Indian Affairs rejected the Menominee Indian Tribe of Wisconsin's application to build a casino on the Dairyland site. Six months later, Dairyland filed a lawsuit arguing a 1993 Wisconsin constitutional amendment prohibits casino gaming. So Dairyland, on the heels of losing its casino deal, set out to prove that no one in Wisconsin should have a casino.

About nine months ago, the state Supreme Court voted 3-3 on the suit and sent it back to appeals court. Around the same time, Dairyland signed a $40.5 million contract to sell its dog track to a development team — headed by the Menominee — that wants to build an $808 million entertainment complex centered on a casino.

The deal is only valid if state and federal regulators approve the project. Until that happens, Dairyland's priority will be the lawsuit.

It makes business sense to Dairyland. Until the land is sold, the company will be invested in an ailing dog track competing with American Indian casinos for gamblers.

Dairyland will continue to consider other offers for the property, but if the Menominee's casino plan succeeds, Dairyland can sell to the competition and turn its back on the business and the lawsuit protecting it.

Casino gambling is only one portion of the Menominee Tribe's proposal for the Dairyland Greyhound Park. The two-phase project includes a hotel, conference center, 5,000-seat auditorium, numerous retail and restaurant areas and a health spa.

Rendering courtesy of menominee indian tribe of wisconsin

"It's not in our best interest right now to drop the suit," said Roy Berger, Dairyland's executive vice president. "If we sell the racetrack and walk away, we certainly would have no interest in the lawsuit anymore as we're no longer an affected party in the state of Wisconsin."

That would be great news for the Menominee Indian Tribe, which is happy with the deal it has with Dairyland but wants the lawsuit to fail.

"It would have disastrous economic consequences for all tribes in the state," said Laurie Boivin, the Menominee's vice chairwoman. "[Berger]'s done what he feels he had to do to protect his business. We're doing something that will benefit our tribal membership."

Who will benefit and who will suffer is anyone's guess. There are still too many variables involving the Bureau of Indian Affairs and court system to tell if the case will be settled before the government review. Early predictions have the court's decision crossing the finish line before the Menominee's application.

In November, Wisconsin's 4th District Court of Appeals tossed the Dairyland case back to the state Supreme Court, which was expected to accept it by the end of the year, said Ron Ragatz, Dairyland's attorney with Madison-based DeWitt Ross & Stevens SC. If the Supreme Court accepts the case, Ragatz expected a decision before the justices go on summer break.

Meanwhile, federal BIA agents have told the city and county of Kenosha that their review of the developer's application would take until around December 2005. If approved, the state Department of Administration would then begin its review and negotiations with the Menominee over the state's take from the casino revenues.

The dynamics could change if the BIA exceeds all expectations and finishes early, or if the Supreme Court decision is appealed. Of course, all bets are off if the BIA rejects the Menominee's application like it did in April 2001.

Kenosha-area officials and the Menominee both say they learned a lot from the 99-point rejection letter the BIA sent in response to their 2000 application. This time around, they're doing everything they can to appease the BIA. The tribe is asking for the federal government to put the Dairyland site into trust, which would designate it as tribal land and allow it to build the casino there.

Despite the formidable and time-consuming regulatory barrier that the BIA presents, the agency's prime objective is to protect tribes from predatory partners and state and local governments.

"Tribes who have not had a great deal of experience with business dealings are finding they do, in fact, have a resource somebody else wants," said Kenosha City
Administrator Nick Arnold, who worked on the intergovernmental agreement with the Menominee. "The resource is casinos. They have something. They have very little experience in those types of transactions."

The requisite business savvy is part of the reason the Menominee recruited for the project local developer Dennis Troha and the Mohegan Tribe, which owns the country's third largest casino in Connecticut.

"We do have an on-reservation casino, but it's really small, and we just felt we didn't have the expertise for this project," said the Menominee's Boivin. "We have the Mohegan Tribe on board with us, and they are familiar with the land-into-trust process. Some of their key staff were with the Indian Gaming Commission."

Officials in the city of Kenosha and Kenosha County, hoping to land an $808 million tourist haven inside their borders, have also done their homework with the BIA to ensure their agreement with the Menominee favors the trust-land application. In October, six city and county representatives, along with three Menominee members, visited the BIA in Washington, D.C., to see what they did wrong in the last application and how they could do better this time. Just having an agreement at all is a step in the right direction, since city and county officials turned up only one comparable application. It is between the Forest County Potawatomi Community and the city of Milwaukee.

"We want to be sure that we are heading down a path that is a sound path as far as approval at all levels," said Dave Geertsen, Kenosha County finance director. "[The BIA] said, 'Yes.' Can I say now that they'll approve it in advance? No."

The draft application would give local governments a 3 percent take in the casino profits during the first eight years of operation and 4 percent after that. The estimated contribution would be $521 million over a 22-year period.

The application, which the city and county were planning to approve in December or January, is only one factor in the BIA's review. Another key consideration is who will get the money.

It's a question that concerns the Potawatomi, which is opposing the Menominee proposal partially because Potawatomi operates a casino on trust land less than an hour north in Milwaukee. But spokesman Ken Walsh said Potawatomi really entered the fray to change the BIA review process for off-reservation casino proposals.

The Potawatomi thinks the BIA should ensure that off-reservation casinos don't benefit non-Indian promoters and that it should be on the tribe's native land. The argument points to Menominee's partners. Troha isn't an American Indian, and the Mohegan Tribe comes from Connecticut.

"Really, the questions center around you having an out-of-state tribe coming into Wisconsin that is going to make millions off this casino," Walsh said. "Indian gaming was set up for Indian tribal economies, not exactly to have non-Native Americans make millions."

Boivin, who pointed out that the Menominee would be the primary beneficiary of the Dairyland casino, said the Menominee first approached the Potawatomi to partner in the project. But the Potawatomi declined, and Mohegan filled the slot. Walsh said Potawatomi wasn't interested because of Troha's involvement.

Who pockets the most money is a question left to the BIA, which won't approve the application unless it decides the Menominee is the primary beneficiary. Part of that decision relies on what the tribe needs the money for. The Menominee's application included a list of more than 17 unmet needs that the casino would pay for, including more police, college scholarships, health insurance for all members and construction of a new jail, new reservation wastewater system, recreation center, houses, K-8 school, a health clinic and expansion of the on-reservation casino and the College of the Menominee Nation.

The Potawatomi failed in its first attempt to derail Dairyland when Kenosha voters approved a county-sponsored referendum on the casino in November. But it'll get another chance in the BIA and state review processes in which it has a voice.

The BIA's review allows tribes in the area of the proposed project to submit their views on the proposal, and Walsh said the Potawatomi would be sharing its concerns with the agency.

While the BIA will consider all of the interests, the state has made it a priority to ensure the Menominee proposal doesn't substantially damage the Potawatomi's business.

"We would try to make this a win-win, or at least a win to the Menominee and not a loss to the Potawatomi," said Administration Secretary Marc Marotta, whose department is trying to include just such language in a proposed compact between the Potawatomi and the state.

Marotta said he doesn't know how to strike that balance, but he's hoping that the tribes can work out a revenue-sharing agreement, or maybe the Potawatomi can invest in the project.

Menominee's Boivin said she hadn't heard of the state's concern with striking a balance between the tribes, but the Menominee is doing what it can to accommodate the Potawatomi.

"Even after we worked our agreement with the Mohegan Tribe, we still went back to the Potawatomi and said maybe we could do some cross-marketing," Boivin said. "We can show the efforts our tribe made to offset anything that would happen to the Potawatomi."

Walsh said the Potawatomi wouldn't comment on ongoing negotiations with the state.

"It is a point of conversation within the compact discussion," he said. "Since we are negotiating with the state on the compact and trying to seek a resolution to the Supreme Court's decision, I'm not going to discuss the compact discussion."

The Supreme Court's May decision to strike down the American Indian gaming compacts with the state sent the Potawatomi's compact back to the drawing board and delivered Dairyland's suit back to the high court. The Dairyland case hangs over the heads of state government and the Potawatomi just as it threatens the Menominee.

The Potawatomi have construction plans of its own, and in May said it wants to spend $240 million on a new casino in Milwaukee. But that plan won't go anywhere until the Dairyland suit is resolved, Walsh said. The tribe hasn't said whether it would build the casino on the trust land it already owns in Milwaukee's Menomonee Valley or undergo the lengthy BIA review to build it on another downtown property, as some Milwaukee-area business leaders are suggesting it could.

The Dairyland case, which Berger said presents a peculiar situation for the track, creates an even thornier situation for the Potawatomi. The tribe is disputing the lawsuit that could end its entire business while opposing the rival project that could make the suit disappear.

"From our perspective, they're not intertwined," Walsh said. "We're going to fight to protect Indian gaming in Wisconsin in the courts. … We're going to continue to raise the questions and concerns on the proposed off-reservation casino in Kenosha."

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