City details objections to Fond du Lac Band's plans to expand downtown Duluth reservationCity Attorney Gunnar Johnson fired off a letter Friday detailing the city’s objections to a proposed expansion of the land the Fond du Lac Band of Lake Superior Chippewa governs in downtown Duluth.
By: Peter Passi, Duluth News Tribune
City Attorney Gunnar Johnson fired off a letter Friday detailing the city’s objections to a proposed expansion of the land the Fond du Lac Band of Lake Superior Chippewa governs in downtown Duluth.
The band is seeking federal authority to stretch the boundaries of its downtown reservation to include the Carter Hotel, which neighbors the Fond-du-Luth Casino on Second Avenue East. The now-vacant hotel already is under tribal ownership.
Johnson argues that the city originally worked to put city land in the band’s trust as part of a larger 1986 business agreement designed to launch a mutually beneficial casino. But that agreement, which involved profit-sharing, is on the rocks, and the band has halted all payments to the city.
A couple of recent rulings by a federal court and the National Indian Gaming Commission have proven favorable to the band’s position, leaving the city unable to collect about $6 million per year it used to receive from the casino. But appeals continue, and the legal battle appears far from over.
Tribal Chairwoman Karen Diver contends city staff members aren’t acting in the best interests of the community in attempting to block the potential growth of the casino.
“The band has an interest in upgrading the property and making it more of a draw,” she said. “We’d be investing in more jobs.”
But the city contends that allowing the band to make the Carter Hotel part of Indian country would erode the local tax base and set a dangerous precedent.
“One government is essentially trying to annex property inside the heart of another,” wrote Johnson in a Jan. 13 letter to Patricia Olbey, a Minnesota superintendent for the Bureau of Indian Affairs.
In 2011, Duluth collected about $1,150 in property taxes from the Carter Hotel.
“That seems a small price to pay to create jobs and upgrade the amenities we offer in order to get more people coming into Duluth,” Diver said. She earlier speculated an expansion of the casino could lead to the hiring of 50 to 100 more employees. The casino already employs between 265 and 300 people, depending on the season.
Without any revenue flowing to Duluth from casino operations, Johnson said it’s difficult to justify delivering the city services the band receives, including police and fire protection, water, steam, gas, storm water, streets, lighting, promotion, parking and more.
Diver contends the roughly $74 million the city already has received from the band since Fond-du-Luth opened should more than cover the ongoing tab for city services.
If the city cannot reach an alternative agreement with the band, Johnson said the city could charge sales and tourism taxes on the Carter Hotel property for all transactions by people who are not tribal members.
He pointed out that a new casino development could involve lodging and/or restaurant operations. What’s more, Johnson said that if the casino were exempted from sales and tourism taxes, as it has been in the past, “It puts them at a competitive advantage to other restaurants and
hotels/motels in Duluth.”
Diver dismissed the idea of the city charging the band taxes on its casino operations, saying that gaming could not occur on anything but Indian land, which is exempt from local taxation.
“It’s an impossibility to upgrade and invest in a new casino and have it stay city-fee land,” she said.
While Johnson said pursuing sales and tourism taxes from the casino wouldn’t be his first choice, the city is exploring all its options right now.
“The way it had been working, we had an arrangement that was beneficial to both the band and the city. But if other avenues are closed off to the city, this may be where we are pushed to go,” Johnson said.
Diver questioned Duluth Mayor Don Ness’ motives in opposing the band’s efforts to successfully grow its casino operations in the city.
“The mayor continues to publicly espouse his desire for the city to negotiate and partner with the Fond du Lac Band, but his opposition to the success of the property and his unwillingness to enable the band to upgrade and invest in its property belies all the rhetoric,” she said.
The Bureau of Indian Affairs typically takes 30 to 60 days to determine whether a reservation can or cannot expand, according to Johnson, but it may take longer given the complexities of the situation in Duluth.