Tuesday a federal judge ruled in favor of the Fond du lac Band of Lake Superior Chippewa. The decision means that the tribe will not have to pay upwards of $10 million in back payments to the city from its casino located downtown.

After six years of litigation and two ruling’s in favor of the city by U.S. District judge Susan Richard Nelson, the judge ruled on Tuesday that a revenue sharing agreement between the Fond-du-Luth Casino and the city, which was implemented for the first time in 1986 was in violation of the federal law requiring tribes to be the “primary beneficiary” of gambling profits.

In what has been a six-year legal battle that twice saw U.S. District Judge Susan Richard Nelson rule in the city’s favor, only to have the decisions overturned by an appeals court, Nelson held that the  revenue-sharing agreement between the parties, first implemented in 1986, violated the federal law that requires tribes to be the “primary beneficiary” of gambling profits.

While a victory for the Fond du Lac Band of Lake Superior Chippewa, the ruling was a major disappointment for the city of Duluth. The tribe stopped making payments to the city in 2009. Estimated at $6 million annually, roughly 19 percent of casino profits, were paid to the city which were a major portion of the city’s street repair fund.

According to city officials, including interest, the band owed the city in excess of $13.5 million for the portions of the contract that went unpaid. The city sued the Chippewa over the contract which was in effect through 2011.

In May, the 8th Circuit found that by “failing to consider congressional policy and its intent that tribes be the primary beneficiaries of Indian gaming,” the court had abused its discretion. Ruling that payments collected by the city from the Chippewa were unlawful under the Indian Gaming Regulatory Act (IGRA), the National Indian Gaming Commission (NIGC) issued a “notice of violation,” which was upheld by a judge in March.

Agreeing with the Chippewa that congressional policy in not is not in favor of repayment, Judge Nelson ruled that even consideration of the receipt of a higher percent of revenue from gaming and being the primary beneficiary, taking millions from the tribe goes against the IGRA’s intent of promoting a strong, self-sufficient tribal government. In addition, the 19 percent of the casino’s profits the city was getting from the band was “grossly disproportionate to the cost of any city services for the casino”and to property taxes.

City Attorney Gunnar Johnson contends that the NIGC ruling was a political decision and detrimental to Duluth taxpayers. According to Johnson, city services such as, law enforcement, fire protection and tourism promotion, are benefits the Chippewa enjoy, but at the same time do not pay property taxes. The band paid $75 million to Duluth from 1994 to 2009.

The casino is undergoing a $3 million upgrade this summer.

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