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Menominee tribal officials hailed a new gaming agreement signed with the state Tuesday saying it provides Gov. Scott Walker with a "clear path" to approve their proposed Kenosha casino. But a key state official warned that approval of the casino could put taxpayers on the hook for hundreds of millions of dollars.

In a memo to Gov. Scott Walker released simultaneously with a copy of the agreement, Administration Secretary Mike Huebsch listed several red flags that remain despite the new pact.

"The amendment to the Menominee compact that the State and Menominee submitted (Tuesday to federal regulators) does not fully remove these risks," Huebsch wrote.

He said most of the risks stemmed from opposition to the Kenosha casino raised by the Potawatomi tribe. The Potawatomi operate the nation's first off-reservation casino; the Menominee hope to open the tenth.

The compact lays out the rules for the proposed $800 million Menominee casino complex in Kenosha, including how much money the tribe would pay to the state.

The proposed amendment calls for the Menominee to pay the state 7.5% of its net win — the amount lost by gamblers.

The Menominee said the amended compact will generate $1 billion to the state over the 25 year life of the compact.

The tribe said the payments will more than cover any reduction in funds received from the Potawatomi and the Ho-Chunk tribes.

The Potawatomi and the Ho-Chunk operate the state's largest Indian casinos and oppose the Kenosha facility, fearing new competition will cost them customers.

If the combined annual payments from the Potawatomi and Ho-Chunk fall below $37.5 million, the Menominee would cover the shortfall, the agreement states.

"Gov. Walker now has a clear path to approve the Kenosha project and reap the benefits of $1 billion in revenue share for the state budget," Laurie Boivin, Menominee chairwoman, said in a statement.

Walker has unilateral authority to approve or veto the casino project, which would be developed and managed by Hard Rock International, which is owned by Florida's Seminole tribe. Walker must act by Feb. 19.

Huebsch's memo warns that the Menominee's promised payments may still leave taxpayers on the hook if the compact amendment is rejected by the federal Bureau of Indian Affairs or in court.

"A court could declare the Menominee obligation to compensate the state for any losses to Potawatomi ...unenforceable," Huebsch told the governor.

In addition, Huebsch warned that the Potawatomi could seek a refund of fees they've paid in past years.

Huebsch noted that the compact amendment would require the Menominee to reimburse the state for any funds it must pay the Potawatomi in future years.

"It does not compensate the state if the state has to refund past payments made by the Potawatomi," Huebsch wrote.

"If the Potawatomi are successful in their litigation against the state, the state may be required to pay Potawatomi hundreds of millions of dollars that will not be offset by payments to the state by the Menominee."

The Potawatomi last year refused to pay the state its annual gambling fee of about $25 million out of fear that a Kenosha casino would be approved by Walker.

Gary Besaw, chairman of the Menominee's gaming authority overseeing the Kenosha project, said it was absurd to think the state would actually be on the hook for huge payments to the Potawatomi.

"I could say it's going to be 100 degrees in Milwaukee tomorrow," Besaw said. "Most definitely, that probably will not happen."

The amendment to the Menominee compact agreement comes less than two weeks after the BIA rejected a state compact agreement with the Potawatomi. That compact held the state ultimately liable to cover any losses incurred at the tribe's Milwaukee casino that result from the opening of a Menominee casino in Kenosha.

Despite the rejection, the Potawatomi said the state could be held responsible for its losses and said it would sue in the hopes of forcing the BIA to approve the compact.

Huebsch said the state would defend any suits brought by the Potawatomi.

Still, he warned, "these potential legal challenges may decrease Menominee's ability to cover any financial obligation the state owes to the other tribes, regardless of what legal obligations Menominee has to the state under its compact.