The cities of Stanton and Cypress have put proposals to establish card clubs on their June 8 ballots. Cities are interested in card clubs; even Anaheim officials--or at least some--are listening to a proposal. As they do with all revenue sources, local officials must ask whether the benefits of increased revenue outweigh the costs, in this case, the costs of an increase in crime.
Cities obtain revenue from card clubs in at least two ways. The largest portion of revenue comes from the percentage the city collects of seat-rental fees. Unlike casino gambling, patrons of card clubs do not bet against the house. Rather, card players pay an hourly seat rental to sit at tables and play poker or any of the other games which the clubs sponsor. Cities collect a portion of the seat rental receipts, usually on a sliding scale, which increases as the club takes in more revenue.
The second way in which cities raise revenue from the clubs is by charging hefty quarterly licensing fees, as much as $20,000 to $30,000 every three months. Revenue may also come from increased sales taxes from restaurants, bars and other retail sales in the clubs.
Our local officials do not have to figure their cost/benefit analysis in the dark. Five communities in Los Angeles County have used card club proceeds as a major part of their revenue for a long enough period to gain some insight into their utility. Gardena has licensed poker clubs for more than 40 years. Bell, Bell Gardens, the City of Commerce and Huntington Park opened their clubs in the early to mid-1980s. After 10 years of operation, these cities' experience is instructive.
First, revenue to the cities from the clubs as a whole has increased steadily during this 10-year period, have been little affected by inflation or the recession, and now account for a greater proportion of these cities' revenue. The size of the revenue varies widely for the five cities, but the average revenue from the card clubs was about $5 million in 1991-92, compared to a low of under $2 million in 1983-84. As a proportion of the city budget, card club revenue ranges from a high of 60% in Bell Gardens to a low of 3% in Huntington Park.
As long as clubs stay out of trouble--and the vast majority of them do--revenue to the cities remains stable. But if, as happened in Bell, clubs run into problems, then the revenue can fluctuate dramatically and become a very unpredictable source of city money. The club in Bell lost money when it opened, went into bankruptcy, was sold, reopened, shut down again, reopened and was sold again. All this change worked against the city's interest; the club has not been a reliable source of revenue for many years.
On the whole, however, the revenue produced by card clubs is the kind of revenue cities enjoy. It's a "voluntary" tax, so people don't object to paying it. Clubs attract non-residents who pay the costs of goods and services used by the host city. Cities have been able to improve their services. Those are real and substantial benefits.
The costs, say critics of card clubs, is that cities will have to spend more money on law enforcement because the clubs will cause increased crime in the community.
There is no evidence that this is true.
We looked at the FBI Crime Index for the past 10 years for the five Los Angeles cities with clubs and 15 cities in the same geographic area surrounding the card club cities. We looked at the crime rates in Bell Gardens and the City of Commerce before and after the clubs opened. Crime rates tend to fluctuate greatly, with or without card clubs, and we could find no distinctive pattern in any city which suggested that the clubs led to any increase in crime.
It is true that cities with card clubs have a slightly higher crime rate than their 15 neighbors, but that rate has always been higher. In residential communities such as Gardena, the crime rate is lower than the average. In non-residential communities, such as the City of Commerce, the crime rate is higher. That is equally true for cities without card clubs. Residential Bellflower has a low crime rate; industrial Santa Fe Springs has a high one.
Since crime rates demonstrated no pattern, we looked at the change in crime rates in communities. Was there a pattern of increase or decrease in crime which was different for communities with card clubs from communities without card clubs?
Again, we could find no significant difference among cities. If there is any pattern, crime rates go down the year after a club opens, and then resume their unpredictable change.
The crime rate goes down after card clubs open for good reasons. The clubs hire security guards, and lots of them. In a visit to one club, we saw seven guards circulating in one of the card rooms. At the management level, people who invest in clubs--the "point-holders"--must undergo a thorough background check by the California attorney general's office before any operating license is issued.
Cities may restrict the number of point-holders and add additional qualifications and conditions. In short, if city officials are diligent, there is no reason to believe that card clubs are a cause of crime in themselves. And, cities will have all that increased revenue to spend on law enforcement if that is what they choose to do.
When we asked finance and law enforcement officials in the five L.A. County cities which kind of revenue source they would prefer in their cities--an auto mall, a shopping center or a card club--every one agreed that a card club was a better deal for the city. (It is true that one of the finance officers in Bell disagreed. Given the history in Bell, so would we.)
To quote one, "They cause less crime, they give us fewer problems, and they serve a damn good lunch!"