California Cities Push Tax Hike Over Cardroom Rules

Two small cities in southwest California are bracing residents for a potential vote on a sales tax boost on the June ballot in light of new state gambling rules and their impact on the local budgets.

0.25% Tax Rise

Commerce and Bell Gardens have disclosed their plans to propose a quarter-cent sales tax increase in the coming months. The decision comes in the context of both cities being forced to declare fiscal emergencies as a result of the expected losses from their local cardrooms.

“The threat to our city is here,” Commerce city manager Ernie Hernandez commented. Bell Gardens city manager Michael B. O’Kelly shared his views: “If we don’t act now, we risk the ability to protect the community. We are acting because we must, not because we want to.”

Both cities heavily depend on revenue generated by the Commerce Casino, just a few minutes of downtown Los Angeles, and the Bicycle Casino, best known as “the Bike.” The popular gaming destinations help fund essential services such as police and fire departments, road maintenance, and community programs.

In Bell Gardens, city officials say cardroom taxes bring in more than $17 million each year, accounting for over 40% of the general fund. Accordingly, losing even part of that income could have a serious direct impact on everyday services.

The tax hike proposal could recover a minimum of $4.5 million in Commerce, a small fraction of the expected $8-$18 million loss resulting from the ban, believes city mayor Kevin Lainez.

No More California Games

The concern stems from new regulations set to take effect on April 1 under the direction of the California Attorney General’s office. The rules target so-called “California Games,” which are modified versions of traditional table games like blackjack and pai gow poker.

Cardrooms have long used these formats to operate within state law, since house-banked games are generally restricted to tribal casinos. Instead of the house acting as the bank, players take turns in that role, while the cardroom collects a fixed fee from each hand.

According to the fresh rules that will come into place next month, tighter controls will be in place. For starters, the position of the player-dealer will need to rotate more actively, or else the game will come to an end. Plus, the use of third-party providers that currently fill the role of dealers will also be limited.

Another big change refers to the fact that cardrooms will no longer be allowed to market games using terms like “blackjack” or “21”. Plus, some familiar features of those games will be removed.

Operators believe these changes will slow gameplay and cut revenue, while state estimates suggest tens of millions of dollars could be lost each year, along with hundreds of jobs.

For Commerce and Bell Gardens, the stakes are clear. If cardroom income drops, the burden may shift to residents through higher taxes. Voters will likely have the final say.