A largely approved election in San Jose to increase taxes on the city's two card rooms and increase the number of table games in each establishment may be invalid, according to a new lawsuit.
Casino M8trix – one of the two card rooms in San Jose – filed a lawsuit against the City of San Jose late last month seeking a court to invalidate the measure in its entirety and find it unenforceable.
Since voters passed the measure in November, the California Bureau of Gambling Control has reportedly completed the city's plan to increase the number of card tables across the city. This violates the state law, it says in the lawsuit.
Casino M8trix filed an application with the California Gambling Control Commission in December for approval to increase its table games from 49 to 64, as allowed under the city's newly passed measure. However, the application is still pending.
If the commission joins the bureau and finds the card room's request for additional tables to be illegal, Casino M8trix argues that the tax increase should also be voided.
"Casino M8trix believes that it is only fair to postpone the increased tax that was only part of Measure H until the additional gaming tables that allow us to pay this new tax are approved," he said Robert Lindo, Vice President and Director of Casino Matrix, wrote an email to the news organization on Thursday.
Measure H, approved by nearly 73% of San Jose voters in November, was presented as an increase in taxes on the San Jose Casino M8trix and Bay 101 card rooms from 15% to 16.5%, allowing casinos to do so, respectively Add 15 new card tables.
The language of choice for the measure told voters that it is expected to generate $ 15 million per year for city services such as: B. Fire Prevention, 911 Emergency Response, Street Repayment, and Homelessness Fight.
The increase in map tables should generate $ 9 million – or 60% – of the expected funding that should result from the measure, while the tax hike would add only $ 2 million, according to a city report. The remaining $ 4 million was supposed to come from expanding the city map room tax to companies that provide in-house player services to the map rooms.
In the lawsuit, Casino M8trix argued that there was "no evidence that voters would have agreed to such an outcome" had the additional revenue from the increased card tables not been part of the equation.
"The illegal provisions of Measure H are inseparable from the law," said the lawsuit filed in the Santa Clara District Supreme Court late last month. "… the evidence of voters' intent suggests it was approved as a full and sweeping amendment to the city's gambling regulation."
The lawsuit also alleges that the city was aware of the state's skepticism about the legality of the measure in front of voters more than a month before the measure began.
On September 24, 2020, the prosecutor sent a letter to the State Gambling Control Bureau explaining the city's legal theory that the city can increase the number of card tables in each card room.
About three weeks later, the Bureau responded with a letter informing the city that the city's proposal "appears to be inconsistent with the Gambling Control Act".
Under the State Gambling Control Act, a city is prohibited from increasing the number of card tables in a card room by 25% or more compared to January 1, 1996.
The disagreement between city and state depends on how many card tables were allowed in the San Jose card rooms in 1996.
San Jose argues that at the time the city had no limit on the number of tables each card room could serve, only a city-wide limit of 181 card tables.
However, in June 1992 the city passed an ordinance limiting the number of card tables per card room to 40, and the Bureau argues that no ordinance was passed or amended between June 1992 and January 1996 to change that limit.
In 2010, a voter-approved election initiative allowed the San Jose cardrooms to increase the number of card tables from 40 to 49 – an increase of around 23%.
The November move would have allowed Casino M8trix and Bay 101 to increase their table limits from 49 to 64 – a 60% increase over the 40 tables that were supposedly allowed in 1996.
San Jose city attorney Nora Frimann said Thursday that her office is working with Casino M8trix and the California Bureau of Gambling Control to resolve the matter.
“Casino M8trix would like the additional tables. We believe you can have it. The state has taken the opposite position. But let's work to make it work for everyone, ”said Frimann, declining to make further comments, citing pending legal disputes.
Lindo said he hoped the state would decide to postpone the city's interpretation of its own laws and honor the will of voters.
If the state fails to do so, however, the card room filed the lawsuit as a "protective measure" as the tax hike could cost Casino M8trix about $ 1 million annually, without the associated benefit of additional revenue from the expected increase in card tables.
"What Casino M8trix wants is the proposal that everyone has agreed to and that has been approved by voters – more business to fund higher taxes," wrote Lindo.