California casino controversy
By dave
Officials with California card clubs fear they may gradually be forced out of business due to the explosion of Indian casinos, which offer slot machines and 'house-banked' card games, which are off-limits by law to card clubs. Meanwhile, tribes are using their large and growing political clout to block card clubs' attempts to modernize, reform outdated regulations and offer new games, owners said.

There are 104 card clubs in California with a total of 1,394 tables, down from 220 clubs and 1,955 tables in 1997, when the industry was at its peak, according to figures from the state attorney general's office. Except for the 20 or so largest, most of the clubs have fewer than 10 tables.

Though the clubs have existed since California achieved statehood and survived mainly through there being no legislation specifically prohibiting them, most of the larger clubs were built after 1979, when Proposition 13 limited cities' ability to tax and left them looking for new revenue sources. Industry experts said the clubs generated about $1 billion in annual revenue in the late 1990s and still bring in close to that today. But profit margins at the clubs have dropped from 20 percent or higher in the late 1980s and early 1990s to single-digits today, said Andrew Schneiderman, vice president and general counsel of the state's largest card club, the 230-table Commerce Casino.

'It's just a matter of time before the cost of operating exceeds the revenue being generated, and then the whole business makes no more sense,' said Schneiderman, who also is president of the Golden State Gaming Association.

Meanwhile tribal gambling has become a $5 billion-a-year industry, according to state officials, and ongoing negotiations between tribes and the state are expected to lead to even further growth.

Tribal officials dismissed the complaints, noting that the clubs fought ballot measures in 1998 and 2000 that legalized Indian gambling in the state. If tribes have had more legislative success than card clubs in the years since, tribal officials said, that's because lawmakers are following the will of voters who gave Indians a monopoly on Nevada-style gambling.

With the exclusive right to offer slot machines and house-banked card games, tribal casinos can make greater profits than card clubs and draw more gamblers. At card clubs, players bet against one another, not the house; the clubs make money essentially from renting seats to players rather than from collecting their losses, as occurs at tribal casinos.

Card clubs' one advantage is that many are near large cities, while tribal casinos are in outlying areas. But club operators and cities such as Bell Gardens and Commerce, which get up to 50 percent of their budget from taxes card clubs pay, fear that tribes will begin to encroach on their territory.

Tribes, which pay no state or local taxes, said that won't happen anytime soon because of the barriers to establishing casinos away from reservations.

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