UPDATE: San Jose joins lobbying group to protect its casinos

San Jose has long had a love-hate relationship with its two casinos.

But with those businesses threatened by new state regulations, the City Council voted 10-1 this week to join a group of other California municipalities to try to stave off the new rules. The reason comes down to simple dollars and cents — San Jose’s two card rooms, Bay 101 and Casino M8trix generate millions of dollars annually for the city.

“The bottom line for us is that card rooms really do provide the city with some needed revenue that goes into our general fund and provides basic city services,” said Bena Chang, assistant to San Jose City Manager Dave Sykes.

Mayor Sam Liccardo was the lone dissenter. Liccardo has long-opposed gambling for its negative social effects and also opposed a recent vote to put a measure on the ballot to add more tables to card rooms.

“I haven’t changed my opposition to expanding gaming in San Jose, as evidenced by my August vote against putting the card club expansion measure on the ballot,” Liccardo said. “I will oppose this and other efforts to expand gaming in this city.”

The California Cities Gaming Authority, a so-called joint-powers authority that represents cities with medium-sized card rooms. To be a member, San Jose must pay $30,000 in annual dues. One councilmember must serve on the authority’s board and attend meetings. Another councilmember will serve as an alternate.

The authority has close relationships with major card room stakeholders and legislative leaders that could rally support for the casinos, said Lee Wilcox, the city manager’s chief of staff, in a memo. Among the authority’s members are the town of Colma and city of Gardenia.

Rob Lindo, vice president of Casino M8trix, said the cardroom is fully supportive of the city’s plans to join the California Cities Gaming Authority.

The city’s card room tax generated approximately $18.9 million from 2018 to 2019. The money went to the city’s general fund and supported public safety, libraries and parks, according to city documents.

But following COVID-19 closures, estimated revenue from the tax plummeted to $13.5 million.

The card rooms have fallen victim to fluctuating COVID-19 regulations. Bay 101 and Casino M8trix invested money in buying tents and heaters after getting the green light to reopen outdoors in September. But their investment was all for naught as state mandates following a rise in coronavirus cases forced the businesses to shutter once again.

Lindo said Casino M8trix was closed for eight months of 2020.

“Consequently we experienced devastating losses — approximately 65% of our revenue,” Lindo said. “We spent hundreds of thousands of dollars preparing COVID-19 prevention protocols, purchasing cleaning supplies, masks, gloves, face shields, tents and temperature screening technology so we could operate the card room and restaurant outdoors.”

The card room stayed open outdoors for part of September through November before county restrictions mandated another closure.

But COVID-19 is not the only threat to Bay 101 and Casino M8trix, Chang said. The state is considering tightening regulations on certain games in the near future.

The Bureau of Gaming Control, which regulates gambling in the state, has indicated that it may ban games that look “too similar” to 21 and Blackjack, Wilcox said. State law allows only tribal casinos to offer those games, he said.

California law also prohibits games where a card room has an interest in the outcome, according to a memo from Wilcox. Among such games are blackjack, three-card poker and pai gow poker. Tribal casinos, subject to different rules, are allowed to offer those games.

Many card rooms offer modified versions of these games, but the Bureau of Gaming Control may put restrictions on them that could hurt business.

If these games were to be stripped from Bay 101 and Casino M8trix’s lineup, they could lose an estimated $25.7 million in annual gaming revenue in addition to 150 jobs, according to Wilcox. The move could even force the casinos to close.

”We are absolutely concerned about any changes to the current and long-standing laws and regulations governing how games operate in California card rooms such as ours,” Lindo said. “The player-dealer style games offered in California card rooms have been deemed legal and attempts to change those rules pose a serious threat to our business and its continued viability.”

Contact Carly Wipf at [email protected] or follow @CarlyChristineW on Twitter.