With San Jose's budget deeply in the red, the City Council voted Tuesday to put a measure on the June ballot that would allow a dramatic expansion of gambling at the city's card clubs, along with higher card-room taxes that could generate $5 million a year.
The 6-5 vote marked a reversal from two years ago, when the council rejected a similar ballot measure calling for a slightly higher card room tax.
This time around, council members cited concerns about closing a budget gap that has stretched to $116.2 million and may force hundreds of layoffs. Officials also fear that without an agreement to ease city regulations as part of the deal, San Jose's two card clubs may seek state intervention to lift those regulations — or leave town.
The vote sets up what may be a divisive spring campaign pitting opponents of gambling — which include the city's top law enforcement officers — against officials who are desperate for new tax revenue. Voters may have to decide which is worse: to allow more gambling or lay off city employees and lose the services they provide.
Mayor Chuck Reed said that while the expected increase in card club revenues is "not a huge amount," it is "significant in this budget cycle."
Even more troubling, he said, is the prospect the clubs — which complain the city's regulations are so costly and restrictive they cannot compete with other card rooms or tribal casinos — might goelsewhere, taking the taxes they now generate with them.
"I'm very interested in maintaining those revenues," Reed said, noting that the $13 million a year from the two card clubs is more revenue than is generated by all the city's car dealerships. "It's a lot of jobs if we were to lose those revenues."
Council members Sam Liccardo, Kansen Chu, Nora Campos, Ash Kalra and Madison Nguyen were opposed, citing concerns about compulsive gambling leading to crime and social problems.
"I do believe there is a social cost attributed to it," Chu said. "It's very difficult for me to support any additional gambling in this town."
The proposed measure would increase the city's 13-percent tax on card rooms to 15 percent, increasing annual city revenues by an estimated $3.6 million to $5.25 million.
To avoid drawing card room opposition to higher taxes, the proposal would allow the clubs each to expand nearly 25 percent, from 40 tables to 49. It also would eliminate the city's $200 cap on bets and limit of 21 approved card games.
City pollsters have found solid public support for raising the card club tax, with about 64 percent of those polled indicating they would vote for such a measure. The council also is considering for the November ballot a quarter-cent increase in the sales tax, which pollsters said a slight majority might favor.
Reed and City Manager Debra Figone stressed that rejecting the proposed measure would not necessarily ensure things stay as they are. The city's card clubs, Bay 101 and Garden City Casino, have asked state lawmakers to sponsor bills that would lift regulations that keep them from moving out of town or subject them to city regulations.
City officials last fall asked state lawmakers to hold off on bills while they work with the clubs. But Figone said that doesn't mean the bills won't be reintroduced if the clubs aren't satisfied with those efforts.
"It has become clear Sacramento legislators are watching," Figone said. "It has become very clear that other cities are very eager to welcome the city's card rooms and related revenue."
While it was not clear which cities those might be, Councilwoman Rose Herrera added: "We all need to ask ourselves, if they did move, where would we come up with that revenue? I don't think we should take the opportunity away from the voters to make this important decision."
The card room measure drew lengthy debate from the council, but few public speakers. George Beattie, president of the San Jose Police Officers' Association, cited concern that the proposal had the "potential to increase crime in our city at a time when our already understaffed police force may be reduced further."
But over at Bay 101, where hundreds of poker players are gathering this week for a tournament, people said they didn't understand what the fuss was about.
Ken Johnson, 70, of Fremont, said the city's current limit of 40 tables means he often has to wait hours to get into a game.
"People want to gamble," said Johnson, who came for a chance to see top players from around the world.
Matt Savage, Bay 101's longtime tournament director, said the city's $200 limit on wagers restricts the club to just a couple tournaments a year, something other card clubs aren't subjected to.
And Mark Phlegar, a 53-year-old San Jose airline baggage handler who came to watch Tuesday's tournament, said he'd gladly support the proposed measure.
"It's money for the city," Phlegar said. "If you had a couple more big tournaments, you'd have a lot more money."