SAN DIEGO - After more than four years of negotiations with the state, the Rincon Band of Mission Indians asked a federal judge Monday to help settle a dispute about slot machines at its large casino in Valley Center.

Rincon claims the state is illegally requiring tribes to pay fees to the state in exchange for adding or installing new slot machines. The tribe says federal law allows the state to collect fees to help regulate the industry or offset gambling-related problems, but not to help balance its budget.

Lawyers for the state say the fees are fair payment on the part of tribes in exchange for having the exclusive right to operate slot machines.

The tribe's attorneys argued in court Monday that the fees amount to a tax, and federal law does not allow states to tax tribal governments under the Indian Gaming Regulatory Act of 1988. The act sets the rule for gambling on Indian reservations.

"We're not saying that we won't pay any fees," Rincon attorney Scott Crowell told Judge William McCurine.

Crowell said the money the state is asking for amounts to more than a fee.

"This is a tax," Crowell said. "It's a tax. It's a tax."

Attorneys for the state say fees that emerge from negotiations are not a tax.

In negotiations, the state proposed an agreement that would require Rincon to pay 10 percent of its net win revenues from the slot machines it operates and 15 percent on additional slot machine revenues. The money would be paid to the state's general fund.

Peter Kaufman, an attorney for the state, said the payments are not taxes because tribes negotiate the fees with the state and choose to pay them in exchange for the exclusive right to have slot machines.

"These are negotiated agreements between sovereign (governments)," Kaufman said in court Monday.

In 2003, Rincon asked the state to renegotiate a state gambling agreement for its Harrah's Rincon Casino & Resort, where the tribe operates 1,600 slots. But nearby tribes with casinos, including the Pauma and Pala bands, signed amended agreements that allow them to operate as many machines as they want.

Rincon officials say those agreements put its casino at a competitive disadvantage, and they want to install up to 2,500 machines to keep up. The tribe's current agreement, negotiated under Gov. Gray Davis in 1999, allows it up to 2,000 slots.

Rincon filed a lawsuit against the governor in 2004 seeking to overturn five state agreements with tribes, including the Pala, Pauma, and Viejas tribes in San Diego County. Rincon has since withdrawn its request to kill those agreements.

The lawsuit focuses instead on what it says are bad-faith negotiations by the state. Crowell said Rincon wants the court to appoint a mediator to settle the negotiations.

In court documents, Rincon argues that the state closed the door on the tribe, saying there was only a limited number of slot-machine licenses statewide and that no more licenses were available.

But other tribes were excused from the statewide license cap and the 2,000-slot-machines per tribe limit by agreeing to pay additional fees to the state.

Rincon has been willing to negotiate with the state for a flat per-slot fee tied to added costs for regulation and problems caused to neighboring communities, attorneys for the tribe wrote in court documents.

"The state, on the other hand, has been attempting from the outset to obtain fees disproportionate to the grant of additional gaming devices," the tribe argued.

Kaufman said the state's offer is not unfair because other tribes have signed similar agreements. Moreover, he said Rincon is generating an enviable profit on the games it operates.

Rincon's casino is generating more than $242 million in revenue each year, according to court documents. That includes an average of about $381 per slot machine each day.

"They are making $369 to $381 a day on their machines," Kaufman said, adding that there are other tribes "that would love to be in the situation that Rincon is in."

However, Crowell cited a state study that concluded the state would take most of the added revenue generated by the machines.

Kaufman said there are other benefits Rincon would get out of operating more machines, including the ability to expand its facility.

Judge McCurine said the case is "fascinating," but did not issue a ruling Monday.

- Contact staff writer Edward Sifuentes at (760) 740-3511 or esifuentes@nctimes.com.