BELL — Despite a warning that the California Bell Club will not survive without financial aid, the Bell City Council this week refused to grant the casino a tax break.
The club had requested a permanent tax rate of 8% of gross revenues, a plan that the council has instituted twice for six-month periods. But the council voted to stick with the original agreement with the club, which set a sliding fee schedule that ranges from 7% to 13%.
Council members said they had reduced the rate in the past to help the club pay old debts but believe the club no longer needs that tax relief. A city staff report estimated that the city lost $519,901 in income from the club for revenues paid from July, 1985, to July, 1986, because it reduced the rate to 8%.
"The City of Bell has demonstrated it is concerned with the longevity of the club," said Mayor George Cole.
The city will gamble that club revenues will continue to increase, council members said. If they do not, the council will once again evaluate the request for a tax reduction.
Samuel Torosian, one of California Bell Club's limited partners, challenged the city to audit its books--to prove that the club would go under if it had to pay a 13% tax rate. Torosian said the club would pay for the audit.
"I really truly believe there won't be a Bell Club. It will only exist for the next few months," said Torosian.
Club officials had argued that the club will never reach its peak again--during 1981, 1982 and 1983 it brought over $1 million each year to the city--because it suffers from a poor location and increased competition.
Wrestled With Issue
The city has been wrestling with the issue since September, when the request for a permanent reduction was first submitted. The city requested and received several documents to substantiate the club's claims and met with club officials to discuss the proposal.
On Monday, the council said it feared that the recent passage of Proposition 62 would not allow the city to either decrease the tax rate or raise it again if needed in the future, without a two-thirds vote of the public. The proposition prevents cities from creating or raising general or special taxes without a two-thirds vote of the local governing body and a majority vote of residents.
"We both got our backs to the wall. With Proposition 62, anything we do is going to be permanent," said Councilman Jay B. Price, noting that the council has not closed the door on future negotiations.
Leslie James Garber, an attorney representing the club, said the proposition is only intended for future tax increases, not reductions. He said the real issue is whether "the city of Bell wants to have as a permanent source of tax base the Bell Club."
"The club is not going to survive in the long run at 13%," Garber said. If the city "wants to continue using that source of revenue, I think a tax reduction would be in order at this time."
The club, which opened in 1980, saw revenues dwindle with the opening of newer and bigger clubs in Commerce and Bell Gardens. In 1985, it was at the brink of bankruptcy when Torosian and three other limited partners--Larry Wong, Wing Lou and Sham Yung--took over the club.
The city agreed to reduce the tax rates in August, 1985, and in April, 1986, to allow the club to restore its financial health and ensure its long-term success.
Through Sept. 30 this year, the club has paid $956,321 to the city. Last year, when the club paid an 8% rate for most of the year, the casino paid the city $738,146.
Other Casinos Pay Less
Garber unsuccessfully argued that the tax rate is unfair because it is higher than the rates for surrounding casinos. Both Huntington Park and Bell Gardens have an 8% tax rate; Commerce also has a sliding fee schedule that ranges from 7% to 13%.
In Bell, a 7% fee is paid when the monthly gross is $200,000 or less; once gross revenues reach $750,000 or more a month, a 13% rate is charged.
When it became clear the council would not permanently reduce its rate, Garber asked for another six-month reduction.
"The Bell Club couldn't have survived this long without assistance. Why not make it an interim measure. If you do it the other way and keep the rate at 13% it puts the Bell Club under the gun," Garber said.
But Councilman George G. Mirabal pointed out that the cost of running a club was decided long before Torosian and other partners took the club over. He said the council is willing to see how the club fares over the next year before deciding on further concessions.
"You put the cards where they land and see what comes up," Mirabal said.