San Jose cuts fees for its two card rooms

San Jose leaders are reducing card room fees and slashing police staff that monitor gambling, marking a turn in the city’s long — at times tense — relationship with casinos.

The City Council on Tuesday unanimously agreed to lower regulatory fees for the city’s two licensed card rooms — Bay 101 and Casino M8trix — from $1 million to $857,000 per card room annually, while cutting two civilian positions in the San Jose Police Department’s Division of Gaming Control. City leaders say the decision rectifies sections of their gambling policy described as “duplicative” with state laws.

While the fee reduction loses the city an annual $440,000 in revenue, officials say the staff cuts will rebalance that through cost savings.

“The Chief of Police and administration believe, as we do, that their recommendations to eliminate those two targeted positions will not negatively impact public safety,” reads a memo supporting the change from Mayor Matt Mahan, Vice Mayor Pam Foley and Councilmembers David Cohen, Michael Mulcahy and George Casey. “They also believe, as we do, that the City’s other oversight measures are reasonable, cost-effective and necessary.”

SJPD will remove its senior auditor position, responsible for performing advanced financial and compliance audits of card room operations. The city says other audit staff will continue that work. The city will also remove a staff specialist that helps process license renewals, maintain card room employee records, update internal databases and other duties.

San Jose police officers who license and inspect the city’s card rooms support the move, but asked councilmembers not to lax oversight any further — citing risks of loan sharking, embezzlement, follow-home robberies and gambling addictions that damage families.

“While cardrooms remain a legal business that provides tax revenue to the city, there are negative externalities that must be managed,” Steve Slack, president of the San Jose Police Officers’ Association, said in a letter to councilmembers. “With resources scarce as they are, a further reduction in fees and less oversight will reduce our ability to proactively manage risk to the community and may result in increased crime, negative social impacts and further burden our understaffed police department.”

The city has had a complicated relationship with its two licensed card rooms. In 2020, voters approved a ballot measure allowing for the expansion of card rooms at the behest of both casinos, which agreed to paying higher taxes in exchange for more tables. But the state later squashed that option — passing a bill in 2023 preventing card rooms from expanding through 2043 — while card rooms were still left on the hook for higher taxes. The city also opposed two state laws expanding sports betting, which failed to pass.

Meanwhile, Bay 101 was locked in a nearly decade-long lawsuit with the city over “unconstitutionally excessive” government fees. The legal battle came to an end with a 2020 settlement between the two parties, which made a wealth of regulatory concessions, such as allowing card room owners to play at poker tournaments in their casinos. Former Mayor Sam Liccardo, now a congressman, opposed the settlement over his philosophical opposition to gambling for its risk of addiction and familial harm.The city also plans to reduce services that impose an undue administrative burden for monitoring and enforcement, according to officials. Examples under review include observed patron monitoring, betting limitations and stimulation of play provisions. A city memo said these rules can be simplified without reducing oversight.

Representatives of Bay 101 and Casino M8trix, as well as the California Gaming Association, did not respond to requests for comment.

Contact Brandon Pho at [email protected] or @brandonphooo on X.