Thursday, Jan. 17, 2008

Turlock to card room: Ante Up

Owners agog at call by city for 12.5% of revenue, slowing plans to move to bigger site

TURLOCK -- A dispute over how much money an expanded Turlock Poker Room should pay City Hall raises interesting questions of taxing morality and the financial disability of local government.

The poker room's owners announced plans last spring for a 10-table, two-story, 14,000-square-foot entertainment complex at West Main Street and Broadway. City officials trumpeted the benefits the proposed 24-hour first-floor restaurant and bar could have in a downtown grappling with relevance in a big-box world.

Poker room owners trumpeted the marriage, too -- literally, with a bugle player hired to play Taps on the corner every night at sundown. But as negotiations stalled, the bugle player retreated to the cramped seven-table, 2,350-square-foot card room near Lander Avenue.

City Hall wants 12.5 percent of the card room's revenue as "financial consideration" to offset Turlock's costs for police, fire and other services to the business. Poker room owner Joe Fernandez and General Manager Phil Rheinschild think that's absurd and amounts to a vice tax.

"I feel the city has sent Luca Brasi over to my house to ask for protection money," Fernandez said, alluding to the hit man in "The Godfather" who collected bundles of money for Don Corleone and ended up sleeping with the fishes.

City officials denied that the points on the business are anything like a vice tax, but said the development agreement does offer protection. The terms of the agreement, which could range from 10 to 30 years, according to City Manager Tim Kerr, include a provision that future City Councils cannot tamper with or try to shut down the business. The deal would grant the poker room owners a franchise, guaranteeing them all future gaming tables within the city limit. (Turlock maxes out at 10 tables, and any increase would require a change in state law.)

"Given the nature of the gambling industry, political winds can change," Kerr said. "They're getting something for their money."

When the chips are down

Alcohol, cigarettes and prostitution in places such as Nevada (where brothels are legal in some counties) are taxed and taxed heavily. The idea is if a consumer can afford the product or service, which isn't "necessities to life," they can afford to pay taxes on them, said Phil Wile, an emeritus professor at the McGeorge School of Law and a tax specialist.

Taxes on tobacco, alcohol and, to a lesser extent, firearms, are a major source of revenue to the federal government, and "Turlock appears to have found that thread," he said.

Turlock is not alone. Wine Country Casino and Restaurant in Lodi agreed to an ordinance change last year, which sent 9 percent of its revenue -- about $7,500 a month -- to the city's general fund. Bigger cities such as San Jose and Los Angeles have larger card rooms that pay more than 15 percent. Stockton takes 2.5 percent of its three card rooms' revenue. Manteca and Merced don't take anything other than a standard business license fee. Some cities don't allow card rooms.

But why card rooms and not restaurants or department stores?

"Because they can," said Ryan Lewis, president of the Wine Country Casino.

Lodi imposed its 9 percent when the casino asked for No Limit Texas Hold 'em, the poker game made famous on ESPN, to be added to the list of approved games. In the same push, the business moved to an expanded location with more tables -- much as the Turlock Poker Room aims to do.

"There's an unknown factor (for cities)," Lewis said. "There were a lot of stereotypes. In the '70s, violence and prostitution were associated with card rooms, but the state killed that; the state shut down all the bad operators. Now it's a highly regulated, a highly watched business."