dissenting:
The district court concluded that the balance of tribal, federal, and state interests in this case tips in favor of the Tribe and granted the Tribe’s summary judgment motion. In doing so, the district court considered the Tribe’s strong interest in economic development-a particularly weighty concern for a small and destitute 143-member Tribe.
The district court also properly considered the long-standing federal interest of promoting tribal sovereignty. Further, the district ■ court noted the special relationship that exists between the Tribe and the federal government. That relationship included federal regulation of Indian gaming under the Indian Gaming Regulatory Act, 25 U.S.C. §§ 2701-2721. Finally, the district court also noted that the Tribe received a $1.12 million Development Grant from the Department of Housing and Urban Development (“HUD”). This grant was used for economic development on the Reservation.
Because the district court correctly found that the balance of interests tips in favor of the Tribe, I submit that the majority is wrong in concluding that federal law does not preempt Arizona’s privilege tax.
I.
“The standard preemption analysis is inapplicable to cases involving Indian law.” Gila River Indian Community v. Waddell (“Gila River II”), 91 F.3d 1232, 1236 (9th Cir.1996). In the Indian law context, state law is preempted if the balance of tribal, federal, and state interests tips in favor of preemption. Id. Traditional notions of Indian sovereignty and the federal goal of promoting *1114tribal self-government provide a crucial “backdrop” for the preemption analysis. Id. This “backdrop” requirement requires that treaties and federal statutes be interpreted generously to comport with traditional notions of sovereignty and with the federal policy of encouraging tribal independence. Id. at 1236.
II.
A tribe that plays an active role in generating activities of value on its reservation has a strong interest in maintaining those activities free from state interference. Cabazon Band of Mission Indians v. Wilson (“Cabazon v. Wilson”), 37 F.3d 430, 434-35 (9th Cir.1994) (citing Gila River Indian Community v. Waddell (“Gila River I”), 967 F.2d 1404, 1410 (9th Cir.1992)). In this case, the Tribe has provided substantial evidence that it plays an active role in generating activities of value on its Reservation.
The Tribe generates value by operating a casino within the Hotel. This case is substantially similar to California v. Cabazon Band of Mission Indians (“California v. Cabazon”), 480 U.S. 202, 107 S.Ct. 1083, 94 L.Ed.2d 244 (1987), and Cabazon v. Wilson, 37 F.3d 430 (9th Cir.1994)-two cases finding state regulation of on-reservation gaming activities preempted by federal law.
In California v. Cabazon, two tribes conducted on-reservation bingo games. 480 U.S. at 204-05, 107 S.Ct. at 1085-86. The Supreme Court found that an important tribal interest existed because the tribes “built modern facilities which provide recreational opportunities and ancillary services to their patrons-” Id. at 219, 107 S.Ct. at 1093. The two tribes were “generating value on the reservations through activities in which they have a substantial interest.” Id. at 220, 107 S.Ct. at 1093.
Similarly, in Cabazon v. Wilson, we found that a state tax on simulcast wagering-offtrack betting-at a facility located on the reservation was preempted by federal law. 37 F.3d at 435. We noted that the tribes “have inyested significant funds and effort to construct and to operate wagering facilities and to attract patrons.” Id. We stated: “It is sufficient that the [tribes] have made a substantial investment in the gaming operations and are not merely serving as a conduit for the products of others.” Id.
As was true in California v. Cabazon, and Cabazon v. Wilson, the Tribe in this case has a substantial interest in the Hotel and the casino. The Tribe made a $1.1 million dollar investment in the Hotel.1 In return, the Tribe is entitled to receive twenty percent of net operating revenues (excluding taxes paid to the State) and thirty percent of the proceeds of any transfer of the leasehold interest of Prescott Convention Center (“PCC”). The Tribe. also owns the Hotel’s physical structure and improvements and leases the property to PCC. PCC, in turn, leased portions of the Hotel to the Tribe for the purpose of operating the casino.
The Tribe’s interest in the Hotel and casino are one and the same because the Hotel and the casino are closely interrelated. The Hotel advertises the casino to attract customers both for lodging and for meals. The Hotel’s promotional materials identify the Hotel as the “Prescott Resort Conference Center and Casino.” Furthermore, many of the Hotel’s patrons spend extended periods of time on the Reservation and participate in the Tribe’s casino.2
Given the Tribe’s small size-the Tribe, currently has 143 members, of whom approximately sixty-five live on the Reservation-the Tribe’s interest in the Hotel’s operations is even more compelling. Without the coordinated efforts of outside developers it would be difficult, if not impossible, for the Tribe to *1115engage in any meaningful economic development.
As stated above, HUD awarded the Tribe a $1.12 million Development Grant. In doing so, HUD specifically found that constructing and operating the Hotel would encourage the Tribe’s economic development. The Development Grant required that the Tribe and a non-Indian developer obtain additional financing. By joining with a non-Indian developer to construct the Hotel, the Tribe has promoted its economic development beyond what it could achieve through its own efforts.3
The Tribe has demonstrated a strong interest in the Hotel’s operations through its concerted and sustained efforts to develop and manage its resourees-the commercial value of its land.4
III.
This case implicates two federal interests: (1) tribal economic development and (2) comprehensive federal regulatory schemes that include (a) leasing trust lands, (b) the Indian Gaming Regulatory Act (“IGRA”), and (c) the $1.12 million HUD Development Grant.
A. Tribal Economic Development
“The promotion of tribal economic development has long been recognized as an important federal interest.” Gila River II, 91 F.3d at 1237; see also California v. Cabazon, 480 U.S. at 217 n. 20, 107 S.Ct. at 1093 n. 20 (“It is important to the concept of self-government that tribes reduce their dependence on Federal funds by providing a greater percentage of the cost of their self-government.”) (quoting 19 Weekly Comp. Pres. Doe. 96, 99 (Jan. 24, 1983)); 30 Weekly Comp. Pres. Doc. 941, 943 (Apr. 29, 1994) (discussing the need for “special incentives to invest in reservations” and to “develop capital for new businesses on reservations”). The Supreme Court, however, has rejected the federal interest in tribal economic development as an overriding force preempting an otherwise valid state tax on non-Indian activity. Gila River II, 91 F.3d at 1237 (citing Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134, 100 S.Ct. 2069, 65 L.Ed.2d 10 (1980)). Thus, a federal interest “in assisting tribes in their efforts to achieve economic self-sufficiency ... does not, without more, defeat a state tax on non-Indians.” Salt River Pima-Maricopa Indian Community v. Arizona, 50 F.3d 734, 739 (9th Cir.), cert. denied, — U.S. -, 116 S.Ct. 186, 133 L.Ed.2d 123 (1995) (emphasis added). In this ease, however, something “more” exists-the Tribe’s casino.
B. Comprehensive Federal Regulatory Schemes
Three federal regulatory schemes also support the conclusion that a strong federal interest exists in this case.
The federal statutes authorizing the lease of trust lands and the regulations governing such leasing constitute one comprehensive federal scheme. See, e.g., 25 U.S.C. § 415; 25 C.F.R. § 162 (requiring the approval of the Secretary of the Interior for leases). In Gila River II, however, we found that the regulatory scheme governing leases was “insufficient to preempt a state tax imposed on non-Indians for transactions with other non-Indians.” Id. at 1237. But this case, unlike Gila River II, implicates two additional federal regulatory schemes-IGRA and the $1.12 million HUD Development Grant.
Federal law regulating Indian gaming constitutes a comprehensive federal regulatory scheme. The Tribe exercises exclusive con*1116trol over the casino. The federal government regulates the operation of Indian gaming under IGRA, 25 U.S.C. §§ 2701-2721. IGRA clearly addresses the federal interest in regulating Indian gaming: “Intended to ‘promot[e] tribal economic development, self-sufficiency, and strong tribal governments,’ IGRA seeks to ‘ensure that the Indian tribe is the primary beneficiary of the gaming operation.’ ” Cabazon v. Wilson, 37 F.3d at 433 (alterations in original) (citing 25 U.S.C. § 2701(1), (2)).
Moreover, to foster economic development, the Tribe applied for and received a $1.12 million HUD Development Grant. A comprehensive federal scheme regulates HUD’s Development Grants. See 24 C.F.R. § 570.450. Such grants are designed to stimulate economic development necessary for economic recovery.
The federal policy supporting tribal economic development, the Tribe’s involvement in the casino, the federal regulatory scheme governing leases of trust lands, IGRA, and the $1.12 million HUD Development Grant, all compel the conclusion that strong federal interests exist.
IV.
State interests are strongest “when the tax is directed at off-reservation value and when the taxpayer is the recipient of state services.” Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134, 157, 100 S.Ct. 2069, 2083, 65 L.Ed.2d 10 (1980).
In Gila River II, we found that the state involvement on the reservation constituted a sufficient state interest to justify a state tax on entertainment events. 91 F.3d at 1239. In that case, the Tribe developed a motor and aquatic raceway for sporting events, and an amphitheater for the performing arts on its reservation. Id. at 1235. The court noted that the state provided “a number of governmental functions critical to the success” of the entertainment events. Id. at 1238.
In Salt River, we upheld a state tax on non-Indian businesses selling products and services to other non-Indians at a shopping mall located on the tribe’s reservation. Salt River concluded that “Arizona and its agents provide the majority of the governmental services.... ” Id. at 737 (emphasis added).
Unlike Gila River II and Salt River, in this case the state does not provide the overwhelming “majority” of services and does not provide services “critical” to the Hotel’s success. In fact, the State is reimbursed for most of the services that it provides to the Reservation. When a tribe reimburses the State for the services provided by the State, the State’s interest is weak. Cabazon v. Wilson, 37 F.3d at 435.
The Tribe pays the Yavapai County Sheriff for law enforcement services. The Tribe also pays the Central Yavapai Fire District for fire protection and emergency medical services to the Reservation. Although the Arizona Department of Transportation installed and maintains two traffic lights near the Hotel, the Bureau of Indian Affairs reimbursed the State for one-half the construction cost of the traffic lights and the Tribe pays for the electricity. The only services that Arizona provides at its own expense are educational services for the Tribe’s children, health services to Tribe members, and liquor licensing to the Hotel.5
V.
There is no requirement that a “tax imposed on non-Indians for reservation activities be proportional to the services provided by the State-” Gila River II, 91 F.3d at 1239 (emphasis added) (citing Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 185 n. 15, 109 S.Ct. 1698, 1713 n. 15, 104 L.Ed.2d 209 (1989)). Nevertheless, “this court has required that the State demonstrate a close relationship between the tax imposed on the on-reservation activity and the state interest asserted to justify such tax.” Cabazon v. Wilson, 37 F.3d at 435 (emphasis added).
*1117Defendants Scott and West admit that no portion of the privilege tax is segregated for tribal purposes. Because the privilege tax does not fund services related to the Hotel’s operations or the Reservation, there can be no “close relationship” between the privilege tax and the services provided by the State. See Cabazon v. Wilson, 37 F.3d at 435 (concluding that tax was not narrowly tailored because one hundred percent of it went to the state’s general fund).
In sum, the Tribe has provided compelling evidence that it has a strong interest in the Hotel’s operations because it is involved in “generating activities of value” by operating a casino within the Hotel. Strong federal interests exist through the federal regulation of Indian gaming, the lease of trust lands, the $1.12 million HUD Development Grant, and the federal policy of promoting tribal economic development. These strong tribal and federal interests outweigh the State’s weak interest because the State is reimbursed for most of the services that it provides to the Tribe.
For the reasons set forth above, I would affirm the district court’s decision
. The $1.12 million HUD Development Grant required the Tribe to loan $1.1 million to the Hotel's developer. The remaining $20,000 was used to pay the Hotel’s administration costs.
. The majority faults the Tribe for failing to provide a specific "determination as to how much of the value arises from the Tribe's contribution.” Majority Op. at 1112. This standard creates a nearly insurmountable burden on the Tribe. The Tribe has demonstrated that the casino and the Hotel are interrelated. This is sufficient to demonstrate that the'Tribe’s activities "generate value” regardless of the determination of an exact dollar amount.
. The majority notes that the record does not reflect that the Hotel employs any members of the Tribe. That fact, however, does not render the Tribe’s interest in the Hotel insignificant. The Tribe is not limited to economic development solely through increased employment opportunities.
. The Tribe’s most significant interests in this case relate to generating value in the Hotel’s operations and economic development. Nonetheless, the majority acknowledges several other tribal interests including: (1) the Hotel’s location on the reservation; (2) the Tribe's ownership of the Hotel, its facilities, and all improvements; (3) the Tribe’s residual interest in the assignment of the lease; and (4) the Tribe's contribution of approximately 11% of the Hotel’s construction cost. In combination, these factors also compel the finding that the Tribe has a strong interest in the Hotel’s operations.
. The majority indicates that the State provides the Hotel with the following services: criminal law governing the Hotel's operation; the law governing liens; and the law governing worker's compensation. Majority Op. at 1111-12. Each of these state interests, however, are merely incidental and not "critical to the success” of the Hotel.