‘Simply a Bad Deal’ : Cities With Poker Clubs Don’t Hold All the Aces

It seemed so easy: Build a splashy, Las Vegas-style card club, keep it open around the clock, serve drinks, fancy food and an honest game of draw poker and watch the players flock to the tables. Bingo! Everybody walks away a winner.

The clubs bank big bucks. The cities collect thousands of dollars. And players don’t have to drive hours across the desert for a chance to win a jackpot in Nevada.

So beginning in the late 1970s, a cluster of tax-poor, heavily Latino cities in southeast Los Angeles County went into the casino business. Passage of tax-cutting Proposition 13 in 1978 sent the cities into economic tailspins, and dealing cards for cash seemed like a winning way to balance their books.

First it was suburban Bell, where the 70-table California Bell Club opened to huge crowds. Then came casinos in City of Commerce and Huntington Park and finally Bell Gardens, where the Bicycle Club opened last November as the biggest and the glitziest of all, a $20-million neon fun house with valet parking, beauty parlor, pastry shop and seven giant TV screens showing continuous sports.

As each privately held club opened, however, the others suffered, losing players and dollars. Then came a string of charges of dirty deals between some club owners and government officials. And, finally, there were indictments in Bell and Commerce. Fourteen people, including three city councilmen and a former mayor, either were convicted of or pleaded guilty to charges that included bribery, illegal gambling and racketeering.

Today, nearly five years after the Bell Club opened, the great gambling experiment is in trouble.

“Card clubs are simply a bad deal . . . from start to finish for most cities,” said David J. Bellis, a Signal Hill city councilman who led a successful fight in 1982 to keep a casino from opening its doors in the tiny town next to Long Beach.

“It has left those cities with casinos hooked on the poker dollar. It has damaged their reputations and futures. It’s a classic case of the get-rich mentality.”

In Bell, the casino has generated more than $8 million for the city since opening in August, 1980--enough money to boost employee salaries, pay for residents’ trash pickups and expand the police force. The city’s monthly poker dividends started drying up a year ago, however, and the city has sued the club for $226,000 in back taxes and fees. As a result, Bell officials must shelve $500,000 in street repairs and cut $300,000 in operating expenses in coming months.

Filed for Bankruptcy

Next door in Huntington Park, a 70-table casino in an industrial park near Watts filed for bankruptcy six months after it opened in March, 1984, claiming debts of more than $4 million. Back taxes totaling more than $25,000 are still unpaid to the city.

In Gardena, the city that pioneered big-time card casinos in California nearly half a century ago, six clubs once flourished. Now the marquees of only three--Horseshoe, Normandie and Eldorado--burn nightly along Rosecrans and Vermont avenues.

“It used to be this town’s No. 1 industry. But no more,” said City Manager Kenneth Landau, who said Gardena has weaned itself from poker dollars, which at one time made up 25% of the annual budget. “Now it’s just another business; the clubs are no longer king in this town.”

Casinos in Commerce and Bell Gardens, the top-grossing card houses, also face uncertain futures.

In Commerce, four city officials, including three councilmen, and the casino’s principal financier, Orange County fireworks magnate W. Patrick Moriarty, have pleaded guilty in the last year to bribery and racketeering charges stemming from secret shares in the club given to city officials.

In Bell Gardens, the booming success of the 81,000-square-foot Bicycle Club is attributed largely to a popular Chinese betting game that law enforcement officials contend is illegal under state law. Pai gow (pronounced PIE-gow) is being tested in the courts, and if it is banned, fortunes could sour for the Bicycle Club and five of the other six casinos in the county that began last fall offering the complex game, which is played with domino-like tiles.

Hinges on Chinese Game

“To me, everybody’s future depends on that Chinese game,” said Dick Bisbines, who started in the poker business 44 years ago as a parking lot attendant and is now the general manager of the Huntington Park Casino. “If the courts uphold pai gow, everybody will survive. If it goes down, I feel that two out of the seven clubs will go down. That’s how precarious this whole industry really is.”

Five cities in Los Angeles County have casinos, and a sixth, Cudahy, is negotiating with a developer to open a card club.

To the south, residents of Imperial Beach in San Diego County will decide in November whether to build a 100-table card club and adjoining hotel to pump new money into the financially ailing coastal town.

Health, Not Riches

Since 1980, nearly a dozen other Southern California cities have considered casinos. In some towns, the issue went to the voters, sparking expensive campaigns and fiery debates over the merits of using poker dollars to pay City Hall bills.

Cities that opened casinos say they were not trying to get rich, but just healthy.

In an era of fiscal turbulence--Proposition 13 tax cuts, a prolonged recession and the continuing threat of losing millions in federal aid--casinos seemed like a good bet to some, money-making ventures that could spell the difference between a balanced budget and deep cuts in services.

Perceived as being economically depressed with burgeoning minority populations, the cities were unable to compete with more fashionable areas for big-ticket developments, such as auto squares and shopping malls. Poker promoters moved into those cities, promising hundreds of new jobs for bartenders, security guards, dealers and parking lot attendants.

“Poker was an act of last resort,” said Bell City Councilman Ray Johnson. “It seemed a viable way of generating income. As it has turned out, it’s been sort of a tawdry affair.”

Signal Hill’s Bellis, a USC political science professor, said it is no coincidence that poker promoters pick small cities with economic problems. If the poker issue goes to the ballot, proponents can more easily sway the small, fragmented electorate.

“Those cities are more cheaply manipulated,” Bellis said. “(Casino developers) picked on those towns because they were pushovers. In most cases, they believed residents were asleep at the switch. So it was easy to peddle their product.”

Las Vegas Contrasts

California casinos are different from those in Nevada and New Jersey.

In Las Vegas, bettors gamble against the house, which makes money when the players lose. In the California poker clubs there is no house; the clubs only act as a host, providing the tables and a dealer. They make their money by renting seats to players. The bigger the table stakes, the higher the rent for a seat.

Cities receive a percentage of the club’s monthly gross revenues. In Bell, for example, it ranges from 7% to 13%. The blue-collar community of 28,000 pocketed $1.8 million the first year the Bell Club opened.

Because the stakes were so high, the clubs kept getting bigger.

When the Bell Club opened in August, 1980, it had twice as many tables as any of the six Gardena clubs, some of which have been dealing cards since 1936, when the city became the first in Los Angeles County to legalize draw poker. At the time, the Bell Club was billed as the “world’s largest card casino,” a distinction later eclipsed by the Commerce and Bicycle clubs.

It was a spiral that led casino developers to build warehouse-sized structures and to carry huge payrolls. The Bicycle Club has 1,200 employees, with an annual payroll of $13 million, said George Hardie, the club’s general manager and co-owner.

Casinos are competing for players, offering Mexico cruises, microwave ovens, free buffets, liberal credit and poker lessons.

‘A Mad Scramble’

“About a quarter of every club’s players are regulars,” said Herbert Stern, president of the Commerce Club, which was built on an industrial strip along the Santa Ana Freeway. “After that, it’s a mad scramble to find players. It’s like the old gas wars. Anything goes.”

The casinos are a far cry from the small storefront card rooms that have operated in California since the Gold Rush days.

There are 325 card rooms across the state, mostly one- to three-table operations. They are tucked away in shopping centers and next to bus stations, and there is even one two blocks from the Capitol in Sacramento, where draw poker, lo-ball and pan, a form of pinochle and rummy, is played in smoke-filled rooms.

“Except for the games, the casinos and card rooms are light-years apart,” said attorney Wilbur Duberstein of the California Card Assn., a group of poker room and casino operators who promote and police the industry.

“Once developers went beyond 35 tables, investing millions of dollars in land and construction to build those huge casinos, they set a dangerous precedent. They escalated the stakes. And the cities went right along with them because they had visions of dollars filling their pockets. It didn’t take long for the cities to get hooked.”

In the mid-1970s, Gardena’s share of club revenues topped $4 million a year. The money was used to build parks, pools and a hefty budget reserve.

‘A Golden Era’

“Very little seemed to go wrong,” said Tom Parks, who spent 26 years in the business, managing three different Gardena clubs. “It was a golden era. No competition from other cities. The clubs were making money, and so was the city.”

Through the years, religious leaders complained that the clubs corrupted the citizenry, and some Gardena officials warned that the casinos wielded too much political power.

“In the 1950s and early ‘60s, they ran the whole damn town,” said former Mayor Edward Russ, who served on the City Council for a dozen years beginning in 1968. “They were electing whole damn councils.”

Their influence was not entirely political. Club operators pumped thousands of dollars into civic groups and causes, often spearheading fund-raising drives for organizations like the Gardena Valley YMCA.

“They were very, very good friends of the ‘Y’,” said that group’s executive director, Dave Cardenas, who works in spacious $150,000 headquarters built largely with card club contributions. “Without those clubs, a lot of things in this town would never have been built.”

Today, dependency on poker dollars varies among cities.

Gardena has successfully developed new revenue sources by aggressively attracting new industry and retail trade to offset the decline in poker dollars. Bell Gardens plans to use its poker revenues as seed money for future low-income housing projects. Commerce officials spend casino fees--an estimated $2 million in fiscal 1985-86--on police and fire protection.

Digging Into Reserves

Until recently, Bell officials also spent casino fees on essential services and salaries, a trap that caused the city to dig deep into its reserves as Bell Club revenues fell sharply in the last year.

Among the biggest beneficiaries of fat pay raises was former City Administrator John Pitts, who was sentenced to six months in federal prison for holding secret shares in the club. During the club’s first three years, the council raised Pitts’ monthly expense account from $400 to $1,700.

While city revenues from the club were soaring, Bell officials did little to expand the city’s tax base. Two major department stores left the city and the downtown commercial strip was decaying.

Commerce Finance Director John Mitsuuchi said he would discourage other cities from opening casinos.

“It’s like Las Vegas. As long as the economy stays healthy and people have money to spend on gambling, the clubs do well,” he said. “But the minute the economy sours, the clubs suffer. That’s not the kind of predictable revenue source that’s easy to build budgets around.”

Some cities, including Norwalk, located only minutes from poker casinos in Bell and Bell Gardens, decided against gambling for dollars.

In October, 1983, Norwalk residents approved an ordinance that would have licensed and regulated a card club. A 350-room luxury hotel was part of the project, and officials said it would generate 1,000 jobs and deliver up to $3 million a year to the city, or roughly 25% of Norwalk’s $12-million budget.

Indictments Change Plans

Several months later, however, Bell officials were indicted in connection with that city’s casino, and Norwalk councilmen began re-examining their plans. Although backers of the Norwalk proposal were not involved in the Bell operation, city officials grew wary of gaming interests, and three months ago the council rescinded the city’s poker ordinance.

“Once the Bell scandal became public, we began dragging our a heels a bit on the project,” said Norwalk Councilman Cecil Green. “Then we started hearing reports about problems at other clubs: bookmaking, cheating, prostitutes. . . . This is a town where honest folks live. In the end, the card club just didn’t fit here. We didn’t need to duplicate the mistakes of others.”

One California city still divided over the poker casino issue is Imperial Beach, the southwestern-most city in the nation.

The Mexican border town of 24,000, many of them dependents of U.S. Navy personnel, is typical of cities that have approved clubs in recent years. It is small and largely residential, with little commercial or industrial development.

Budget reserves had dwindled in three years from $800,000 to $7,000 in 1981, and there was talk of bankruptcy and unincorporation.

A year later, two Los Angeles businessmen proposed building a 100-table card casino and hotel that they claimed would deliver an annual jackpot of $1 million to the city. In November, city voters will decide whether to repeal the poker ordinance passed by residents two years ago.

‘This Was a Good Town’

“The longer I live here, the more I’m convinced that a card club will destroy the very things that attracted us all here in the first place--the family atmosphere, the beaches and the people,” said John Morton, a physician and a leader of the anti-casino movement.

Poker promoters contend that the casino is the only way the city can restore services lost because of the budget crisis. “This was a good town to raise a family in,” said Lorraine Faverty, a leading proponent of the club. “But now we don’t have lifeguards, recreation programs or even our own police force.

“And when you drive down almost any street, your kidneys rattle like Jell-O. This city needs money, and the card club offers us the best chance to get it.”

Despite recent troubles, some industry experts, including Rex Jones, believe that casinos are on the verge of a new period of growth in California.

Jones, a contributing editor to Poker Player newspaper, said the formation of the statewide Card Club Assn. is evidence of a new commitment among operators “to create a more favorable image toward card rooms.” Because it is the “true American sport,” Jones said, poker tournaments will become as commonplace as golf matches.

But others, like Bisbines, the Huntington Park casino manager, believe that the start of the California Lottery in October will siphon off more poker players. He said that whatever growth does occur in the casino business will be small. “For the next few years, I don’t look for (business) to get much better.”

Many officials believe that poker will never be the panacea for cities in need of cash. Said Huntington Park Finance Director Ed Chow: “I would advise a city considering a card club to think about it more than twice.”