In the small, Reno-like heart of La Center, cardrooms are the engine that keeps the city running.
But the closure of La Center’s smallest cardroom earlier this year was enough to wipe out nearly a tenth of the city’s operating budget for 2015. After Chips Casino shut down, city officials realized their $4.4 million budget is heading for a $400,000-plus shortfall resulting from a steep drop-off in cardroom tax revenue.
About three-quarters of the city’s operating budget comes from its 10 percent tax on gross receipts at cardrooms. And that could be a big problem in the coming years, industry officials say, as cardrooms are rapidly disappearing across the state and customers continue to flock to tribal casinos instead.
At the peak of the industry in 2005, Washington was home to 105 cardrooms, which altogether generated more than $302 million in net gambling receipts. Today, fewer than half of them remain and cardroom profits are nearly two-thirds of what they were nine years ago.
The industry entered a downward spiral in 2006 as the state’s new smoking ban went into effect, a change that doesn’t apply to tribal casinos.
La Center still has a few of the most profitable cardrooms in the state: The Palace, New Phoenix and Last Frontier. They’ve faced some tougher competition since 2012, when a new owner reopened Woodland’s Oak Tree Restaurant adjoined with its own small cardroom, Lucky 21.
Business has struggled since the reopening, said Wally Fitzwater, a Portland-based consultant representing Lucky 21. Now, plans are in the works for a possible hotel and second casino at the Oak Tree to help the business stay afloat.
Last week, the Woodland City Council granted Fitzwater’s request to lower the city’s cardroom tax rate from 5 to 4 percent — a move that will save the company tens of the thousands of dollars a year once the new rate takes effect in January. But there’s no promise that the savings will be enough to help the Oak Tree expand or even stay in business.
“Right now things are very difficult,” Fitzwater said. “We’re doing our best to be successful in the long term. Certainly, there’s no guarantee that the tax break will help.”
At 5 percent, Woodland’s cardroom tax rate was already well below average, as most cities tend to charge between 9 and 11 percent on gross receipts, said Dolores Chiechi, the executive director of the Recreational Gaming Association of Washington. The revenue isn’t so vital there, though, as it’s funneled into the city’s reserve fund and can only go toward public safety expenses, Woodland Mayor Grover Laseke said.
“We don’t want to count on that money to be something we would regularly be getting in because we’re not sure how reliable that revenue stream’s going to be,” Laseke said.
The problem for cardrooms isn’t that people are turning away from casinos, Chiechi said. The market for gambling continues to grow, said Chiechi, whose organization acts as the major legislative advocacy group for Washington’s cardrooms.
Statewide gaming revenue has increased each year since 1996 with the explosion of much larger tribal casinos, which can offer both a wide range of electronic games and dozens more tables for card games. In that time frame, net gambling receipts for tribal casinos have skyrocketed from $50 million to more than $2.2 billion last year.
Proposed tribal casino
Meanwhile, cardrooms are struggling to keep up with the growing competition. In Southwest Washington, cardroom owners are bracing for the introduction of the Cowlitz Tribe’s new casino, hotel and convention center just west of La Center’s Interstate 5 interchange.
The tribe plans to take a 152-acre site into trust to establish a new reservation where the 134,000-square-foot casino would be built. The casino could have as many as 3,000 tribal lottery player stations and 125 gaming tables.
The tribe says it would share some of its revenue to support the surrounding small cities. The project remains tied up in a legal challenge from Clark County, the city of Vancouver, the Confederated Tribes of Grand Ronde and others.
In the meantime, Chiechi continues to lobby the state to allow electronic gaming in cardrooms.
“We are absolutely in trouble,” Chiechi said. “A great percentage of people enjoy gambling as a form of recreation, and yet we just don’t have games that draw people to our facilities because we don’t have electronic gaming.”
Chiechi has been pleading that line with the Legislature and the state Gambling Commission for more than a dozen years. State lawmakers authorized cardrooms in 1997, limiting the mini-casinos to 15 tables apiece exclusively for games like blackjack, Texas Hold ’em, and pai gow.
“The public wants a faster game,” she said. “They want electronic devices. They want slot machines. They want electronic pull tabs, and we are not authorized to offer those games.”
Cardroom owners have also struggled to keep up with growing labor costs as minimum wage increases each year, said Jack Newton, the assistant general manager at Lucky 21. Each card table needs a dealer to wait around for customers, even early in the afternoon when business may be dead.
“See with the machines, they don’t get sick, they show up to work on time, you don’t have to pay insurance for them, and it’s very simple,” Newton said. “As long as you have a good preventative maintenance program, the machines will work and work well.”
John Bockmier, who represents Chips and La Center’s three remaining cardrooms, said Chips shut down under the pressures of increasing business costs and the lingering effects of the recession. Chips initially closed in January and then briefly reopened with limited hours before finally shuttering for good.
According to financial statements obtained from the Gambling Commission, Chips had been operating at a deepening loss since 2008. Figures from 2012, the most recent year available, show Chips running more than $993,000 in the red, making it the third least profitable cardroom in the state at the time.