Fond du Lac band seeks to expand trust lands in Duluth

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The Fond du Lac Band of Lake Superior Chippewa has applied for federal permission to increase the size of its reservation property within Duluth — now home to the Fond-du-Luth Casino — by stretching its boundaries to include the neighboring Carter Hotel property.

The band already owns the Carter Hotel building. It’s asking the federal Bureau of Indian Affairs to designate it as trust land along with the casino property. Duluth Mayor Don Ness said the band did not notify the city of its intentions before filing paperwork with the federal government on Nov. 17.

“By taking this very aggressive action, using the federal government, the band showed a complete lack of consideration for the city and the residents of Duluth,” he said.

But Karen Diver, the band’s chairwoman, said placing the property in the band’s land trust could be a plus for the city, as it would open the way for the casino to potentially grow in the future.

“One of the things the band has been criticized for in the past is not investing enough in Fond-du-Luth Casino,” she said, suggesting potential job growth of 50 to 100 additional positions would more than offset any loss of property taxes.

The application to the Bureau of Indian Affairs does not detail the band’s future intentions for the property, except to raze the old hotel.

“When the building is removed, the band expects that it will improve the property, but, beyond that, it has not decided on the nature of the improvement,” the application says.

“The building is substandard, and it has been substandard for some time,” said Diver of the Carter Hotel building, which operated as a low-cost apartment building until the band purchased it in December of last year.

Nevertheless, Ness considers the tax implications of losing additional city land to the band troubling.

“An action like this would remove the building from our tax rolls and increase the burden for other taxpayers,” he said.

In 2011, Duluth collected about $1,150 in property taxes from the Carter Hotel property. The county share of the property tax bill totaled $5,318, according to the band. That equates to .0049 percent of the $108 million the county annually collects, according to the band.

Diver is quick to point out that the city has benefited handsomely from the Fond-du-Luth Casino, collecting $74 million through a profit-sharing agreement since it opened 25 years ago. That profit-sharing agreement was recently deemed improper by the chair of the National Indian Gaming Commission, and a court decision handed down in November would release the band from sharing future profits from the casino with the city.

The Duluth casino also employs 265 people.

Still, allowing the band’s downtown trust land holdings to grow without Duluth’s consent could set a dangerous precedent, according to City Attorney Gunnar Johnson.

“If this happens to one block, what happens if they buy the next block?” Johnson asked.

Diver said the band has no plans to buy up additional downtown properties.

The band’s application to essentially annex the Carter Hotel property states that in the 25 years since the casino opened in Duluth, “The city has provided precisely no redevelopment of any kind in the area surrounding the reservation,” referencing the Fond-du-Luth site.

The document goes on to say: “This is while the city has spent hundreds of millions of dollars improving businesses remote from the reservation. As a result, the area surrounding the reservation has continued to deteriorate and is a haven for vagrants, hustlers and inebriates.”

The band argues it should be allowed to absorb the Carter Hotel property or else it will be “unable to create a buffer development that can help to insulate its gaming enterprise from noxious adjacent uses. The land uses surrounding the reservation have a detrimental effect on the band’s on-reservation activities by reducing the level of enjoyment and sense of security for its guests and employees.”

Johnson said he was offended by the band’s characterization of the city’s role in redeveloping the downtown. He said the city has worked with private developers to invest hundreds of millions of dollars in the downtown since the casino opened.

As for the issue of unsavory activities occurring in the vicinity of the casino, Johnson said: “I think they minimize the criminal activity that comes out of their own property. Gambling has a social cost in the city.”

The city learned of the band’s application to increase its trust land holdings downtown only after the U.S. Department of the Interior requested tax information from the Duluth City Assessor’s Office about the Carter property, located at 17-27 N. Second Ave. E.

The inquiry prompted Johnson to start asking questions, and that’s when the city learned of the band’s plans.

“This came completely out of the blue,” Ness said.

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