Raising the Ante
After years of scandals and dwindling revenues, card club owners in Los Angeles County are betting on better days ahead by building two casinos and expanding and renovating several existing clubs.
Hustler magazine publisher Larry Flynt is taking the biggest gamble: He is investing $30 million in a new casino in Gardena, where five casinos have closed since the early 1980s because of financial problems.
In Cudahy, the owners of an Orange County bail bond business are building what a representative calls the county’s first “Latino-themed” card club.
Meanwhile, club owners in Commerce, Hawaiian Gardens, Huntington Park and Bell Gardens are planning expensive expansion and renovation projects to revive flagging business.
The new clubs and expansions will add nearly 260 card tables, increase the number of tables in the county by more than a third, to 980.
In previous years, municipal officials--who depend on casino revenues for up to 50% of their city budgets--might have welcomed these developments effusively and counted on extra revenues. But history has taught them caution.
Because gambling revenues have become so unreliable, these officials say, they are trying to diversify their cities’ economies.
“With the money we get from the card club, we are looking to try to attract new businesses and retain the businesses we have in town,” said Hawaiian Gardens Mayor Pro Tem Leonard Chaidez.
The history of casinos in the county has been a sad, sordid tale. Half a dozen clubs have closed in the last decade because of mismanagement, corruption and what some experts say is over-saturation.
Tax revenues from the seven existing clubs have dropped by as much as a third since 1992, according to a survey of city records. The Commerce Club Casino, the largest card club in the county, with 220 tables, is the only casino whose contributions to city coffers have not flagged.
The closures and dwindling revenues have created huge headaches for city officials, who have relied on casino money to fatten meager budgets in working-class communities with diminished tax bases.
Nevertheless, encouraged by the strong economy, club owners insist that profitable days are ahead. They believe that the public is increasingly tolerant of gambling, as demonstrated by overwhelming voter support in November for Proposition 5, the measure to expand casino gambling on Indian reservations.
“The market will be sufficient for all of us,” said Ron Sarabi, general manager of the Hawaiian Gardens Casino, who is planning to expand from six card tables to 150 this summer.
The state has imposed a moratorium on new casino licenses until 2001, but the moratorium does not prohibit expansion of existing casinos. (The two new clubs will operate under the existing licenses of defunct casinos.)
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Although gambling experts say that the demand for casinos is limited, club owners insist that they can expand the market by reaching out to new gamblers through improved marketing and specialized services.
The Mehr family, which operates one of the largest bail bond companies in Orange County, is building the Club Caribe Casino in the square-mile city of Cudahy. The club is licensed for only eight tables, but the family believes it can compete with the larger casinos by targeting the region’s huge Latino population.
Club Caribe will have bilingual dealers and a kitchen that serves Latin American food. The club will be heavily advertised in Spanish-language newspapers, television and radio, said Jerry Nicholson, an attorney for the Mehr family.
“We are going for a market that is untapped,” he said.
Club Caribe will take over the gambling license of the Silver Saddle Casinos, which struggled for years to open before permanently closing in 1989 when its two partners began feuding.
Cudahy will get a percentage of the casino revenues plus a monthly $10,000 license fee. City officials say that they are counting on nothing more than the monthly fee. “If it does better than that, fine,” said City Manager Jack Joseph.
Flynt, meanwhile, is building a glitzy, 46,500-square-foot casino in Gardena on the site of the defunct El Dorado Club, which closed in 1996 after its owner filed for bankruptcy. The name of the new club has not been determined.
Flynt’s attorney, Alan Isaacman, said he has reached an agreement with the El Dorado owners to take over that club’s license. State and local approvals of the transfer are pending. The two-story casino, which will include a beauty salon, a gift shop, a sports bar and 55 card tables, is expected to open in October.
City officials have yet to complete a revenue projection study for the casino. Isaacman says that the club “will not be anything sexual in nature.”
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Gardena, too, has had a losing gambling record. Once home to six card clubs, which brought in $2.5 million a year in tax revenues, the city was known to some residents as “Gamblers Gulch.” All but one casino closed because of money problems.
The remaining casino in Gardena is the 80-table Normandie Club, which generates $4.7 million a year in tax revenue. But that amount is down 11% since 1992--a disappointment considering the economic boom that Southern California has enjoyed in recent years.
Gardena, which relies on the Normandie Club for 13% of its budget revenue, signaled that it was trying to wean itself of casino dependence in February when it hired its first economic development specialist to create retail development projects.
“We are trying to develop additional economic growth, but when you only have a limited amount of commercial space you have to work slowly,” said Gardena City Manager Mitch Lansdell.
Officials in Bell Gardens, home of the Bicycle Club, say that they are doing the same.
For years, the Bicycle Club generated more than half of the city’s revenues. But after federal marshals seized the club in 1990 because of money laundering at the casino, tax revenues began dropping. They have fallen 35% since 1992.
To make up for the loss, Bell Gardens officials began last year to develop a $20-million entertainment and retail project across the street from the casino. It will include a 1,500-seat performing arts center and nearly 70,000 square feet of retail space. Groundbreaking is expected in the fall.
The partnership that last month bought the controlling interest of the Bicycle Club from federal officials is about to invest $4.5 million in renovations in hopes of reviving business at the club. The renovations will include a patio area to allow gamblers to smoke while they play cards.
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The owners of the Hawaiian Gardens Casino, located less than a mile from the border with Orange County, say they believe they can fill their expanded club by drawing gamblers from Orange County, which has no legal casinos.
The Commerce Club plans to capitalize on its success by building a 200-room hotel and adding about 50 tables. Construction will begin within three months.
The club generates nearly $14 million a year in city taxes, accounting for nearly half of Commerce’s budget. City officials predict that the expansion will add $2 million more each year--but also promise that they will rely less on casino revenues in the future.
Commerce officials are considering plans to expand the Citadel shopping center and develop an entertainment and retail district similar to the Third Street Promenade in Santa Monica. The district would stretch from the Citadel to the casino.
“It’s really just a straightforward business strategy,” said Justin McCarthy, the city’s community development director. “Don’t put all your eggs in one basket.”
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Unsteady Revenues
Despite a booming economy, casinos in Los Angeles County have experienced inconsistent revenues.
*Not in 1997-98, the Crystal Park Casino in Compton had revenue of $996.443 and the Hawaiian Gardens Casino had revenue Of $44,406.
Municipal Dependency
Cities with casinos are, in some cases, highly dependent on revenue generated by the casinos.
Chart shows the percentage of city budget funded by revenues paid to individual cities by casinos and the total budget for each city for the 1997-98 fiscal year.
Casino Controversies
The history of casinos in Los Angeles County has been a sad tale. Half a dozen clubs have closed over the past decade because of mismanagement, corruption or what some experts say is over-saturation. A thumbnail look:
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Bicycle Club in Bell Gardens
Built partly with $12 million in laundered drug money from Florida. Taken over by federal government but continued to have major corruption and crime. The club’s former political consultant was convicted of tax evasion last year. Revenues to the city are down 35% from 1992.
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Commerce Club in Commerce
In 1984, four city officials admitted they gave a gambling license to a Las Vegas executive who bribed them. The casino agreed this year to pay a fine for secretly contributing money to oppose gambling in nearby cities.
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Crystal Park Hotel and Casino in Compton
Closed in October, 1997, after auditors found the operator did not have enough cash to cover his outstanding chips. Reopened with new operator.
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El Dorado Club in Gardena
Closed in 1996 because of financial problems. Hustler magazine publisher Larry Flynt is investing $30 million to build a new casino on the site.
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Hawaiian Gardens Casino in Hawaiian Gardens
Opened in 1997. A group of rabbis and Middle East peace activists charge that money from the casino and a bingo parlor is used to by its owner, Dr. Irving Moskowitz, to build new Jewish settlements in Arab neighborhoods of East Jerusalem.
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L.A. Casino in Huntington Park
State agents unsuccessfully sought to revoke alcohol license in 1992 because of reports of drug sales, fighting and public drunkenness.
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California Bell Club in Bell
Closed in 1990 after corruption and mismanagement scandals, including the conviction of two former city administrators for a racketeering scheme in 1984. Reopened as Jackpot Casino in 1995 but closed seven months later because of financial problems.
