TRAVERSE CITY —
Area nonprofit agencies shared in more than $28.1 million worth of tribal gambling proceeds over the past two decades, but state officials contend such charitable groups may not be eligible for that windfall.
Auditors from the Michigan Gaming Control Board and the state Department of Treasury voiced concerns over Grand Traverse and Leelanau counties' roles as pass-through agencies for community charity groups that receive grants from the Grand Traverse Band of Ottawa and Chippewa Indians.
The tribe is required to send 2 percent of its electronic gambling revenue to local units of government under a 1993 federal consent deal between the state and tribe. The local tribe's last two awards amounted to $1.7 million, thousands of which went through Grand Traverse and Leelanau counties to local nonprofit groups that use tribal gambling money to assist recession-battered area residents.
Some state officials said tribal gambling proceeds must go to local governments and can't be parceled out to nonprofits.
"The state says the money is supposed to be provided to local units of government for government services, based on the impact on the community," said Dean Bott, Grand Traverse County's finance director.
Leelanau County board Chairman Tom Van Pelt said officials there also are aware of the state's questions. The board wants to meet with new tribal Chairman Alvin Pedwaydon and the newly elected Tribal Council to discuss the grant process.
"We realize there are some issues out there," Van Pelt said.
'Tribe is in compliance'
Bott discussed the matter with state officials over the past few months and points to the consent agreement that notes payments should be for the "impacts associated with the existence and location of the tribal casino."
The consent also states the payment to the local government should be no less than the amount owed in property taxes if the casino was subject to property taxes.
Bott said he believes designated gambling proceeds must go to local governments, based on his interpretation of the agreement, though he acknowledged others may see it differently.
Tribal attorney Bill Rastetter, who signed the 1993 agreement for the tribe, called the amount the casinos would owe in property taxes "miniscule" compared to their annual government and community allocations.
"Clearly, the tribe is in compliance," Rastetter said. "I can't imagine there is any valid criticism with respect to the tribe following its legal obligations."
Eleven nonprofits and four county agencies applied for over $325,000 through Grand Traverse County for the tribe's next biannual grant cycle. The board's normal process is to have a committee rank applications and send them to the tribe before a June 30 deadline. The tribe makes a final decision and cuts a check to the county, which in turn sends money on to selected nonprofit agencies.
But Bott said he will advise the Grand Traverse County board to cease the program after this cycle.
"The question is why are we involved." Bott said. "To me, it seems we are an unnecessary middle man in this process."
County board members Addison Wheelock Jr. and Jason Gillman want the county to end its involvement because the board doesn't have the final say over where the money lands.
"Grand Traverse County has received funds for agencies I don't think we should support," Gillman said.
In Leelanau, Van Pelt said it will be "business as usual" for now on tribal gambling fund proposals. The county used to review and make recommendations on applications, but now just passes on the proposals for the band to sort out.
"We just forwarded those requests to the tribe as we had in the past," Van Pelt said.
'Very dark cloud'
Local nonprofit officials who compete for tribal funds said they are critical to their operations.
Shrinking government budgets have pushed more people to nonprofits for help, and tribal money comes in handy, said Ken Homa, executive director of Third Level Crisis Center.
"There's been a nice mixture between the governmental appropriations and the nonprofits, and I haven't seen anything that I've objected to at all," Homa said. "They've done a very good job with it."
Many nonprofit programs funded by the tribe reduce demands on government, Homa said.
Third Level's grant application is for a prevention program for youth suicide.
Grand Traverse board Chairman Larry Inman called the state's concerns a "very dark cloud." The board asked assistant county Prosecutor Robert Cooney to review the issue with state and tribal officials, and commissioners will discuss the topic with Cooney at today's meeting of the board's Ways and Means Committee.
"If we're going to continue this process, what parameters do we use?" Inman said. "This might turn into a legislative matter or a court matter."
Rastetter said the state has not contacted the tribe and called its position "much ado about nothing.
"The state is not involved in any way with the 2 percent," Rastetter said. "If they want to dispute the process, the only forum is the federal court that issued the consent agreement."
Spokesmen for the Michigan Department of Treasury and Michigan Gaming Control Board did not have immediate knowledge of the issue and said they would have to investigate before responding.
The state Gaming Control Board routinely audits the 2 percent allocation of tribal casinos, but the agency cannot discuss ongoing audits or audit findings, said spokesman Eric Bush.
"We have to ensure 2 percent money is given to people who are eligible for it," Bush said. "For example you can't give 2 percent money to a 501c 3 (charitable) organization or an individual."
Business editor Bill O'Brien contributed to this report.