On Second Thought, Bell and Cudahy Embrace Card Clubs

In the early 1980s, when a few City Council members in Bell and Cudahy first had the temerity to suggest that they could fatten the coffers of their poor, densely crowded cities by allowing card casinos, some residents and fellow council members had a fit.

“A lot of people, especially longtime residents, looked at it (a card casino) as an evil thing,” Bell Councilman George Bass said.

But in the last decade, Bell and Cudahy have become poorer, more crowded--and more desperate for a revenues. And the card casino industry, once looked upon as something that respectable towns should avoid, is being seen by some as an important tool to gain financial stability.

The Cudahy City Council is counting on the fortunes of the Silver Saddle Casino, which is expected to open later this year, to bring more than $600,000 to its vaults. In Bell, where a thriving casino operated for several years before falling on hard times and closing, city officials are hoping for better luck with the Regency Card Club and Casino, which opened this summer.

City leaders are counting on the casinos to produce hundreds of thousands of dollars for city coffers. Otherwise, both cities would be facing drastic cuts in city services or dangerously low reserves.

To a certain extent, Bell and Cudahy are not alone. The gaming revenues generated by the California Commerce Club, the Bell Gardens Bicycle Club and the Huntington Park Card Casino are vital to all three cities. If something were to happen to any one of those casinos, the effect on their cities would be “devastating,” said Bell Gardens City Manager Claude Booker and Commerce Finance Director John Mitsuuchi.

But Commerce and Bell Gardens have strong commercial and industrial sectors and have built up millions of dollars in reserves--enough to cushion both cities for a short while should the casinos fail.

Bell and Cudahy are primarily residential cities, with tiny commercial and industrial districts. Cudahy has less than $1 million in cash reserves; Bell has none.

A successful card casino could be just the shot in the arm both cities need to achieve financial stability, Bell and Cudahy city leaders say. Cities reap 8% to 13% of the gross revenues received by the casinos. With a consistent flow of gaming revenues, city leaders say, they could improve public safety, offer more services, begin building a viable economic base and pour money into public works and recreation.

For a good example of what a card casino can do for a poor city, all Bell and Cudahy city leaders need to do is look east, just beyond the Long Beach Freeway, to Bell Gardens.

Before the Bicycle Club opened in 1984, Bell Gardens operated on such a meager budget that it was ranked one of the poorest cities in the county in terms of how much money it spent per resident, City Manager Claude Booker said.

Now, Booker said, the city can provide each resident with a level of service comparable to the best bedroom cities in the county.

Since the Bicycle Club has opened, the city has increased its police force from 57 to 71 employees and its community services department from 20 to 26 employees, Booker said.

The club has also been a major source of scholarships for area youth and a consistent supporter of charities, city officials said.

“Most importantly, the club has given us the seed money we need to plan for a future in which we are not dependent on its revenues,” Booker said.

Not everything that comes with a card casino is good, Booker acknowledged. There is bad press.

Earlier this year, the Bicycle Club was seized by federal authorities after investigators found that the club had been built with the profits of a drug-smuggling operation. The general manager of the club and his firm have been cleared of wrongdoing, and their share of the club has been returned to them, but the other partners of the club are still awaiting a federal court ruling.

The card casino business is also one in which large amounts of cash exchange hands daily, which keeps law enforcement officials always on the lookout for possible wrongdoing.

“There is a lot of cash flowing through the business,” said Detective Doug Estna of the Los Angeles County Organized Crime Division, “and if the management is of the persuasion, it makes it really easy to launder. It’s hard to keep books on that much money.”

Residents of cities with card casinos have also complained that city leaders would turn cartwheels, if necessary, to make sure casino owners stay happy. In the April Bell Gardens election campaign, some candidates complained about the way the city, using its power of eminent domain, cleared out several blocks of homes and business to make room for the Bicycle Club and its parking lot.

Bell Gardens officials have long denied such favoritism, and Booker said there have been some knock-down-drag-out fights with management.

George Hardie, the general manager of the club, said the city recently refused to allow club owners to convert the city’s banquet room into card rooms.

It is both the good and the bad aspects of the card casino business that make Cudahy and Bell leaders wary of placing too much hope in an industry in which profits are as unpredictable as the luck of the draw.

Even the phrase dependent upon card casinos makes some city leaders cringe.

“I’d prefer to equate Bell’s reliance, at least in this year’s budget, as important but not critical,” Bell City Manager John Bramble said.

But Bell’s financial picture speaks for itself. As of the beginning of this fiscal year in July, the city had more expenses than it did money to pay them, and no money in reserves. Several employees had to be laid off, park programs cut.

Even worse, city leaders are expecting no significant increase in the sales tax revenues that provide the bulk of the city’s income for at least a year.

The Bell City Council last month adopted a $5.32-million budget, based on projections that the city would receive $500,000 in gaming revenue from the recently opened Regency Card Club and Casino.

It is a “scary” situation, said Bass and other council members--even scarier for a town that has already been burned by one card casino.

Bell was once the home of the first card casino in Southeast Los Angeles County. For a few years, during the early ‘80s, it provided the city with enough wealth to increase city services and operations. City leaders said a combination of bad management, increasing competition from other card casinos and the taint of a criminal investigation dealt several deadly blows to the casino.

When the casino’s owner filed for bankruptcy in 1988, city leaders found themselves looking at a dry well and no place else to get water.

Mayor George Cole said the city is just beginning to feel the impact of the club’s closure.

A combination of the reduction in revenue and poor decisions made by city officials has the city reeling, Cole said.

City services today are at the lowest quality in at least 10 years. Staff and management salaries are barely competitive. The business district, which Cole said should have been revitalized years ago, is near shambles.

The card casino, Cole said, brought the city “nothing but trouble.”

But when another offer came through to open a new casino called the Regency Card Club and Casino, the council decided they had to take the gamble, Cole said.

Still, the council fear--that a thriving casino just might be too good to be true--manifested itself at the budget table. At early budget hearings in August, the council asked staff members to reduce their initial projection of $750,000 in casino revenues to $500,000.

“We wanted to be more conservative,” Bell City Councilman Ray Johnson said. “First of all, the club got off to a late start, so that meant fewer months in which we would collect revenues; and second, we just don’t know how long it is going to take to reestablish itself as a viable organization.”

There has also been talk among council members of guidelines mandating that most of the money go into the reserve fund, rather than the general fund, so the city would not be severely affected if the Regency folded.

A similar policy exists in Bell Gardens, where only revenues from the old-style poker games, such as five-card draw, go into the general fund, Booker said. The money from the Asian games--the Bicycle Club’s biggest moneymakers--is loaned to the redevelopment agency.

Bicycle Club general manager Hardie said the club gets about 60% of its revenues from the Asian games.

In Bell, however, no decision has been made on how the money will be used, City Manager Bramble said.

Down the street, on the south side of Florence Avenue, Cudahy city officials kept a keen eye on Bell’s bad experience with its casino and are expressing much of the same hesitation.

“If I had a choice,” Cudahy City Manager Jack Joseph said, “I’d say let’s not balance the budget with the casino, then we don’t get into a situation where we need them and become partners with them and will do everything they want to help them succeed.”

The Cudahy City Council balanced its $3.5-million general-fund budget with $649,200 in projected revenues from the Silver Saddle Casino, a club that was originally to open in July but now, because of a financial dispute, may not open until December--halfway through the fiscal year.

The situation has some city leaders fuming. “I’m fed up,” Cudahy Mayor Joseph Graffio said. “We need the money, but we’re not getting any the way we are going.”

The city receives $10,000 a month now in license fees from the casino--a far cry from the $70,000 a month in gaming revenues that city leaders hope for during times when the casino is in full operation.

Joseph said city officials are not yet panicking because the city has $750,000 in cash reserves, enough to cover the city should the casino not open this year.

“If tomorrow the Silver Saddle collapsed,” Joseph said, “we would be in trouble, but we would get by. We’re not desperate. If there is no card club, we have to get creative, but we have time.”

If all goes as planned in Bell and Cudahy, the card casinos would become the third-largest producers of money for both cities, trailing only sales tax revenue and proceeds from motor vehicle registration fees.

City leaders in Bell and Cudahy plan to wean themselves from casino revenues by making a more aggressive effort at commercial redevelopment in both cities. With a solid commercial sector producing consistent sales taxes, the cities would not be left in the lurch should the casinos falter, city managers said.

Cudahy officials plan to concentrate on developing commercial projects along Atlantic Boulevard, which now has a mix of tired retail shops and stores, plus to develop some new businesses.

In Bell, city officials are negotiating with the federal government to buy for redevelopment at least 100 acres once used as an air base. It is the last piece of open land in the city.

Still, Bell Mayor Cole said, even if everything goes as planned, it could take four years or longer for the city to rebuild its financial base.

“We are doing everything we can,” he said. “It’s not going to be easy, and it might get tougher. . . . The casino is a gamble. If it doesn’t work out, what’s going to happen? I don’t know.”