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City of Duluth wins appeal in Carter Hotel case (Duluth News Tribune)

By Peter Passi, Duluth News TribuneMcClatchy-Tribune Regional News

April 16--A decision issued by the Minnesota Court of Appeals Monday has steeled the Duluth city administration's resolve to block the growth of Indian lands in its downtown, at least temporarily

Back in April of last year, the city sued the Fond du Lac Band of Lake Superior Chippewa, claiming a breach of contract when the tribe took its first steps to expand the physical size of a downtown reservation that's also home to the Fond-du-Luth Casino.

But St. Louis County District Court Judge Mark Munger dismissed the city's lawsuit, ruling that a federal court was the only proper jurisdiction to consider the matter.

The city appealed, and on Monday a higher court remanded the case back to the district court, ordering it to reconsider the suit. Judge Munger has since recused himself from the case.

"It was a pretty strong opinion, saying that the city is entitled to bring a motion that asks the court for a temporary injunction," Duluth City Attorney Gunnar Johnson said.

At issue is the band's request that the Bureau of Indian Affairs place the former Carter Hotel property at 29 N. Second Ave. E. into federal trust, removing it from local property tax rolls.

If the approximately

1-acre parcel is designated as trust land, the band would be well positioned to have it declared "Indian country," possibly clearing the way for an expansion of the neighboring casino operation.

The band purchased the Carter building in 2010 and is seeking permission to tear down what it characterized as a blighted nuisance property.

Tribal Chairwoman Karen Diver has maintained that the band has no immediate plans for the property but does intend to invest and redevelop it in the near future. She told the News Tribune that the band's governing body, the Reservation Business Committee, would be going over its next steps with legal counsel in the coming week, deciding whether to appeal Monday's decision to the Minnesota Supreme Court.

"The decision wasn't really about the merits of the case; it's more about the process than the venue," she said.

The city of Duluth and the band have been battling each other in the courts since 2009, when the tribal council determined that the amount of money the city had been collecting from casino operations could no longer be justified. In turn, the Fond du Lac Band ceased making those payments -- a move that subsequently was supported by the National Indian Gaming Commission when it deemed the tribe's revenue-sharing arrangement with the city to be in violation of the Indian Gaming Rights Act.

An ensuing federal court decision further girded the band's contention that it should not be required to share future casino revenues with the city. Duluth had been collecting 19 percent of slot machine revenues from the casino -- a payout that exceeded $6 million per year for the city.

The casino was created in 1986 as a result of a joint partnership between the city of Duluth and the band, but that agreement later ran afoul the Indian Gaming Rights Act, forcing the agreement to be renegotiated in 1994.

The Court of Appeals ruled that portions of the original contract between the city and the band remained valid, despite the 1994 revisions, making it possible for a Minnesota district court to consider Duluth's lawsuit.

The original agreement said: "The city, in its sole discretion, shall have the right to disapprove the creation of additional Indian Country, as defined herein. The Fond du Lac Band shall not create any additional Indian Country, as defined herein, unless the city of Duluth approves."

"We feel the city has a right to be consulted on any plans for the Carter property and how it would be used before it can go into trust," said City Attorney Johnson. "We're not saying we can't be convinced to put the property into trust, but that can't happen without a cooperative agreement."

Johnson said the city first learned of the band's application to place the Carter Hotel in trust when it was contacted by the federal Department of the Interior.

The city has strenuously objected to plans to tear down the Carter, noting that the building is considered a contributing structure in federally recognized historic district.

Duluth Mayor Don Ness said he hopes the ruling by the Minnesota Court of Appeals sends a message.

"For me, the big take-away from this decision is that it highlights the spirit of cooperation that led to the establishment of the casino in the first place," he said.

"The original agreement does require the city and band to be on the same page. It demonstrates the importance of speaking with the same voice to encourage economic development in our downtown," Ness said. "I'm hopeful that spirit of cooperation can be re-established so issues like this can be resolved in a mutually beneficial way."

News Tribune staff writer Jana Hollingsworth contributed to this report.


(c)2013 the Duluth News Tribune (Duluth, Minn.)

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