California Card Rooms, Echoed By Cities That Depend On Them, Express Concerns Over Financial Situation

Posted on April 15, 2020

California card rooms that closed their doors in response to the coronavirus pandemic are now putting their efforts into seeking financial assistance from the state. The communities that depend on them have joined the effort, as well.

With zero revenue coming in, card rooms report they might have to start laying employees off soon. Additionally, CA city governments are scrambling to replace the tax revenue they normally receive from the card rooms.

Why CA card rooms and cities are petitioning the state for financial assistance right now

Like any other business, CA card rooms need income to cover expenses. When they voluntarily shut their doors to help slow the spread of the coronavirus, they not only cut off their own source of revenue but did the same for the cities they inhabit as well.

For example, Hawaiian Gardens gets over 70% of revenue for its general fund from taxes on The Gardens Casino. The city has already said it has to find a way to replace $1.5 million in its budget because of the lack of gaming tax dollars.

The California Gaming Association has also weighed in on the situation. In a letter to California’s representatives in the US Congress, the association expressed fears that some card rooms would have to make layoffs permanent while others may never open again.

Unfortunately for the owners of these facilities, their businesses do not qualify for new small business loans and other financial assistance that is part of the federal CARES Act. Any business that gets at least a third of its income from gaming activities is exempt.

Because their options with the federal government are limited, CA card rooms are looking toward the state. They are pushing the size of their workforce and their contributions to cities in that effort.

Options for CA card rooms at the state level face the same obstacle that they do at the federal level

Card room operators are asking the California Small Business Administration for financial assistance. The problem with that agency isn’t necessarily in the language of legislation but more in procedural precedent.

The SBA has a long-standing rule against loans for gaming companies. The operators are hoping that because of the size of their workforce, most of whom are hourly employees who supplement their wages with tips, the SBA will make an exception.

From a certain perspective, the argument makes sense. CA card rooms pay state taxes like any other business in CA, so why should they be left out of programs designed to help keep small businesses afloat during challenging times?

Additionally, it will be difficult for their employees to find new jobs right now. Adding a few more thousand people to an already over-burdened job market will only make that situation worse as well.

At the same time, federal and state governments have strong traditions of shying away from funding gambling operations. Many residents see gambling as immoral. It’s a hard sell to put tax dollars behind an industry that is a danger to people with compulsive gambling issues.

Gov. Gavin Newsom and the rest of the state government have unenviable decisions to make right now. How they proceed in regard to the state’s card rooms will affect many people around the state.

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Derek Helling

Derek Helling is a freelance journalist who resides in Kansas City, Mo. He is a 2013 graduate of the University of Iowa and covers the intersections of sports with business and the law.

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