October 26th, 2010 5:33 pm | by NIGEL JAQUISS News | Posted In: CLEAN UP, Politics

AG's Opinion Casts Shadow Over Measure 75's Proposed Wood Village Casino

Wood Village casino

There's a new addition to the long and dizzying list of complications around the private casino proposed for Wood Village.

The travails over this proposal go back to the summer. That's when casino proponents failed to get on the Nov. 2 state ballot a proposed amendment to the Oregon Constitution allowing a private casino.

Proponents considered a legal appeal of the ruling by Secretary of State Kate Brown's office that they had failed to turn in enough signatures to get the proposed constitutional amendment on the ballot. But they ended up advancing a legal theory saying that such a amendment, which they had been promoting for nearly five years, was actually unnecessary.

Then they proceeded with a companion statutory initiative that had gotten enough signatures to make the ballot, Ballot Measure 75. That measure asks Oregon voters whether they want to allow a private casino, slated to include up to 3,500 slot machines, at the site of the former Multnomah Kennel Club.

Now, after ballots have been mailed and many Oregonians have voted, comes a new opinion from the Oregon Department of Justice. The opinion paints a confusing and bleak picture of what would happen if Measure 75 passes on Nov. 2.

The opinion [PDF] was requested by the Oregon Lottery, which could lose business to a private casino. The opinion says that even if Measure 75 passes, the only entity legally able to operate non-native American gambling facilities in Oregon is the state; that the number of machines proposed for Wood Village violates the constitutional ban on casinos; and, a facility whose dominant function is gambling cannot operate.

Here's the conclusion reached by Associate Attorney General David Leith:

Due to the limits on lotteries stated in subsection 4(1) of Article XV, the State Lottery must operate any electronic gaming devices (that operate wholly or predominantly upon chance) or Keno games at the Measure 75 'destination resort casino.' the number of such devices or games that the State Lottery may operate at that facility is constrained by Article XV, subsection 4(12)'s prohibition of casinos. The State Lottery may not operate lottery devices or games at the Measure 75 facility if that facility will be an establishment that has a dominant use or dominant purpose, or both, for gambling, either as a result of the placement of the lottery devices or games or otherwise.

OK, for non-lawyers, that conclusion may not be crystal clear. So WW asked Steven Ungar, a Portland lawyer who chairs the Lottery Commission, to explain why his agency asked for an opinion and what the ramifications of that opinion are. Ungar, who is precluded from expressing an opinion on Ballot Measure 75, gave the following written response:
Re: Oregon Attorney General Opinion Request OP-2010-6
Re: Ballot Measure 75 – Statutory Initiative allowing private casino

Questions and Answers to Questions Presented by communications received today:

1. What prompted the Lottery to request the legal advice?

To get legal clarity around what immediate Oregon Lottery Commission actions, if any, would be necessary if the statutory measure was approved by the voters in November. As worded, the statutory measure would require the Oregon Lottery to expeditiously dedicate considerable time and effort to hire necessary staff, then prepare and publicly adopt administrative rules just to be in a position to begin all necessary casino/operator licensing, employee and vendor investigations, and review and approve key casino facility/operational plans.

2. What is the conclusion of the AG opinion regarding Measure 75?

In a comprehensive legal analysis, the Attorney General has advised the Oregon Lottery that:

A. The 3500 electronic gaming devices and Keno proposed for this casino are plainly “Lotteries” as that term is defined under Oregon law. Thus, only the Oregon Lottery, the State agency which operates the Oregon Lottery under the Constitution and Oregon statutes, could legally operate them.

B. The voters do not have the power in a statutory initiative to authorize a casino. Even if the voters approve Measure 75, the Oregon Lottery must still comply with the Oregon Constitution. Accordingly:

• The Oregon Lottery cannot issue a license to the Wood Village facility, regardless of whether the voters pass Measure 75;
• Only the Oregon Lottery could legally operate any electronic gaming devices or Keno games at this facility;
• But, the number of gaming devices at that facility is limited by the constitutional prohibition against casinos being operated in Oregon; and
• The Oregon Lottery may not operate any lottery device or games at the facility if the dominant use or purpose, or both, of that facility is gambling, either as a result of the placement of the lottery devices or games, or otherwise.

3. What are the regulatory concerns of the Oregon Lottery with the ballot measure?

On the regulatory side, the funding provided in the statutory measure would not be adequate to cover biennial regulatory costs once the facility was fully operational. As such, the casino operator/owner would need to either (a) scale back operations to live with the number of machines and table games that could be regulated within the $2 million provided biennially; or (b) the statute would need to be amended by the
Legislature so as to require the casino operator/owner to cover all Oregon Lottery-incurred regulatory costs.

4. What is the significance of the Casino's 25% Revenue “Split” with the State of Oregon as compared with the allocations required of the Oregon Lottery by the Constitution and various statutes?

Since the gaming devices contemplated for the Wood Village Casino would have to be Oregon Lottery-operated, their revenues would constitute Oregon Lottery revenues. There exists a specific, legally-mandated distribution of the Oregon Lottery's net proceeds, set forth in the Oregon Constitution (and several associated statutes). This overrides or pre-empts the proposed statutory scheme for the “25% distribution of the
casino's adjusted gross revenues to the State.”

Greg Chaimov, the lawyer for Measure 75 proponents, declined to comment on the AG's opinion. Chaimov says his clients prefer to "keep the focus on the merits of the proposal."
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