Duluth, Fond du Lac Band settle casino revenue fight

The Fond du Lac Band of Lake Superior Chippewa and the city of Duluth have a tentative deal to end seven years of litigation over disputed revenue from the band's downtown casino.

The 10-year settlement announced Wednesday at Duluth City Hall calls for the band to pay the city $150,000 a year, an amount designed to cover services the city provides to the band's Fond-du-Luth Casino.

In exchange, the city will drop all pending litigation and appeals related to its long-running dispute over whether it's entitled to a cut of the casino's revenues.

"In this new norm, the city gains a renewed business partner paying their fair share in line with other businesses to operate in our downtown," Duluth Mayor Emily Larson said. "Our communities gain by putting a contentious, painful litigation-based relationship to rest."

The casino employs 235 people in downtown Duluth. The deal provides stability for those employees, said Fond du Lac Interim Chair Wally Dupuis, and creates opportunities for job growth in the future.

"This agreement respects the sovereignty of the band while recognizing that we can be good neighbors and good partners within the city," added Dupuis, who's led the band since Karen Diver, the former chair, left last November for a position with the Obama administration.

The Fond-du-Luth Casino first opened in downtown Duluth in 1986. Under the terms of a 1994 deal, the band agreed to share 19 percent of its revenues with the city. That amounted to about $6 million annually, which the city plowed into street repair.

But in 2009, the band reduced its rent payments to the city. The city sued. Then the band stopped paying altogether. Two years later, the National Indian Gaming Commission ruled the agreement violated federal Indian gaming law, which requires tribes to be the sole beneficiaries of gaming.

Federal courts have ruled in favor of the band in several subsequent lawsuits, a fact Larson highlighted when announcing the settlement.

"The truth is that the court system has spoken very clearly on several occasions," she said. "And the reality is that our time and energy and financial resources are much better spent in ways that can move our community forward."

The $150,000 "fee for service" the band will pay the city was not "randomly assigned," said Larson. "It's equivalent to the property taxes, food and beverage sales and other municipal costs of business."

The casino is located on land held in trust for the band by the federal government. As a result, it's exempt from local property taxes.

But "the band has always said that we are willing to pay our fair share for services we receive from the city like any other business," Dupuis said.

The Fond du Lac Band has also agreed to adopt the city's zoning and planning framework for its trust land in downtown Duluth.

That includes a vacant former hotel next to the casino that the band purchased in 2009. Larson said if the band chooses to eventually build a hotel in downtown Duluth, the agreement stipulates the band will make an additional financial contribution to the city, equivalent to that of other hotels that operate in Duluth.

The band has still not decided what to do with the property, known as the Carter Hotel, Dupuis said, adding, "Now that this cloud has been lifted we can start making a plan."

The Fond du Lac Band's Reservation Business Committee has already approved the deal. The Duluth City Council is scheduled to vote on the settlement at a special meeting on Friday.

Council member Joel Sipress said in light of the court hearings he thinks it's a fair and equitable settlement and plans to vote for it.

"There may be some in the community that may be disappointed at the financial settlement," he said, but "we now can move on with our planning and budgeting with clarity about where we stand with this issue."