California Cardrooms’ Host Communities May Raise Sales Taxes to Mitigate Impact of New Rules
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To partially offset the financial impact of California’s ban on ‘twenty-one’ style games, two cities in the Los Angeles area will vote on tax increase measures this June.
Residents of Commerce and Bell Gardens, California, will vote in June on whether to raise the local sales tax by a quarter of a cent to recoup funds lost due to the state’s blackjack ban.
City officials criticized California Attorney General Rob Bonta’s decision to institute the ban at a March 26 news conference. The mayors of Commerce and Bell Gardens also declared fiscal emergencies.
During the presentation, city officials said the tax measures are necessary to protect municipal budgets.
Bell Gardens Mayor Miguel De La Rosa said the legal change has left his city on shaky ground.
“They gave cities like ours the ability to responsibly build our budgets,” he said. “Now, that foundation is being pulled out from underneath us.”
Michael B. O’Kelly, Bell Gardens city manager, said the new rules forced the city’s hand.
“If we don’t act now, we risk the ability to protect the community,” he said. “We are acting because we must, not because we want to.”
California Blackjack Ban Closes Cardroom Loophole
The new regulations, which take effect this month, close a loophole that allowed card clubs to offer blackjack and other house-banked table games. Under California law, these games are only legal at Indian casinos, but the clubs used designated outside dealers to skirt the regulations.
Cardrooms now have until May to communicate how they intend to comply with the changes.
The ban, Commerce City Manager Ernie Hernandez said, will impact the city’s basic daily services, causing slowdowns and reductions.
“The threat to our city is here,” he added.
Commerce Mayor Kevin Lainez told those in attendance that the proposed tax increase could recapture at least $4.5 million. But that’s just a fraction of a projected $8- to $19-million loss, he said.
Similarly, Bell Gardens has projected a 40% loss, O’Kelly said. The city will only recoup about a third of that revenue with the tax increase, he added.
According to officials, Bonta refused to meet with or address their concerns. Challenging that absence, they used the news conference to urge the state to stop the ban.
Bonta’s office didn’t immediately respond to Gaming America’s attempt to confirm this claim.
City Officials Claim Ban Targets ‘Vulnerable’ Communities of Color
The ban breaks new ground in a decades-long fight between tribal casinos and the cardroom industry.
Although the state’s constitution otherwise prohibits it, tribes retained the right to conduct Nevada-style gaming on reservations in 2000. However, cardrooms bypassed the ban through the use of Third-Party Proposition Player Services (TPPPS). These contracted “players” served as full-time dealers in practice, ostensibly complying with California law that forbids house-banked games.
Tribes have railed against this practice for almost two decades, saying it violates their exclusivity over house-banked games. Bonta appears intent on satisfying them, pushing through the new regulations this year after beginning machinations in that direction last summer.
Operators have called the ban an existential threat. The cardroom industry has more than 70 rooms and nearly 20,000 workers. The California Gambling Association has estimated that the ban could cut those jobs by about half.
According to County Supervisor Hilda Solis, in Los Angeles County alone, cardrooms generate more than $2 billion in economic activity and about 9,000 jobs annually.
Lainez and De La Rosa urged residents to vote to pass the tax increase in June.
Lainez said communities of color are uniquely affected:
“This is a terrible situation. We are a vulnerable community. We are a community of color, and if you look at the cardroom cities all across the state, they are also communities of color.”
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