The State of California is set to lose over $360M in the current year from Native American tribal casinos after the U.S. Supreme Court refused to hear an appeal to a California court decision that essentially voided the State’s profit-sharing arrangement with tribal casinos. This decision could cause the State to consider granting special licenses to private casino operators in California to help make up for the revenue shortfall. The Rincon Band of Luiseno Mission Indians petitioned the California court system a few years ago, charging that California’s mandated profit-sharing arrangement with the State’s tribes was simply a tax. States are prohibited from taxing Native American tribes and reservation inhabitants.

The U.S. Supreme Court’s refusal to hear the appeal is a major setback for the State of California, as Governor Jerry Brown and the California legislators balanced the 2011-2012 State budget by assuming that $8.3B of additional revenue will flow into the State coffers from the spoils of an improving economy. The decision of the U.S. Supreme Court now opens the door for tribes to reduce or eliminate their profit-sharing with the State of California and can cost the State upwards of $360M.

With the decision from the lower court upheld, tribes would continue to make payments to local communities for basic services such as road maintenance, law enforcement, and fire protection, but they can now stop making payments to the State. This loss of revenue would force Governor Brown either to sue the tribes or to consider more drastic actions such as issuing licenses to private operators to set up casinos in cities like Dublin, CA. By allowing the development of more resort-styled hotels and casinos similar to those in the State of Nevada, the State of California can directly profit from the gaming industry.

The State of California already allows for gambling on pari-mutuel games such as horse races and “games of skill” like poker; however, “games of chance” such as slot machines and keno are not yet allowed. The Tri-Valley can be an ideal spot for a casino operator, if the State of California ever decides to grant full casino gaming licenses. The demand is huge when one considers the card rooms that already exist, the year-round gambling on horse racing at the Alameda County Fairgrounds in Pleasanton, and the Tri-Valley’s central location.

If a casino operator ever decides to invest in the Tri-Valley, the land next to the East Dublin BART Station would make a perfect location. The developer that owns the parcel next to the station reportedly owes over $50M on the land that was meant for the Green on Park Place project. Now that The Green on Park Place may never become a reality, the developer would probably be more than willing to sell to a casino operator.

In addition, Dublin is more business-friendly than its neighbors in the Tri-Valley. The City of Dublin has had demonstrated success in recruiting big box stores and entertainment providers and benefited from the tax and fee revenues these businesses bring. The combination of flexible City leadership, an overabundance in available land, and easy access to two BART stations and the I-580/I-680 freeways make Dublin a very promising candidate for a full service casino, if the State of California decides to issue casino licenses in an attempt to bring in the much needed revenues.

The threat to legalize full-service casinos by the State of California alone may deter the tribal casinos from playing hardball. While the tribal casinos can reduce their payments to the State, they would likely not stop paying altogether. The State can also recover the lost revenue by cutting funding to local governments that receive direct payments from the tribal casinos, so these municipalities would be forced to raise the fees for the services they provide to the Native American tribes. In either event, more talks of and controversies over full-service casino legalization are expected, as the Golden State seeks to find money wherever it can. Desperate times call for desperate measures.