Since the California Bell Club opened in 1980, Bell city officials have watched tax revenues from the 560-seat poker parlor soar to $2 million a year, then plummet to a fourth of that as its owners struggled to free the casino from a tangle of legal and managerial disputes.
Now the club owes $550,000 in back taxes and has failed to produce a cent of revenue for the city since September, prompting Bell officials to consider a unique solution--they want to buy the card club through condemnation and then lease it to a private operator. The Community Redevelopment Agency is expected to choose a concessionaire to run the casino operation on Monday night.
If the city is successful, the first card club in Southeast Los Angeles County could also become the first city-owned casino in the country.
Takeover Idea 'A New One'
"I grant you, this is a new one," City Administrator Byron Woosley said. "(But) we may have little choice."
City officials stressed that they will not be involved in the daily operation of the card club. Instead, the Community Redevelopment Agency--which consists of members of the City Council--will choose a concessionaire to run the business. After the agency selects a manager the next step will be filing condemnation proceedings, officials said.
"I just want out," said Sam Torosian, general manager of the Bell Club. "I think it was a terrible mistake for me to get into this business in the first place."
Whether bringing poker to this city of 28,000 was a mistake remains to be seen, city officials said.
Like other cities that suffered losses in tax revenue after the passage of Proposition 13 in 1978, Bell was looking for ways to raise revenue and card clubs seemed to be the answer. So, when a poker referendum came before residents that year, it won by a comfortable margin in spite of strong opposition from a local church group.
In September, 1980, the pioneer Bell Club opened to huge crowds. During its peak between 1981 and 1983, it was generating up to $2 million in annual tax revenue, far exceeding local expectations. But in 1984, club revenues declined and in 1985 profits hit a low of $450,651.
Partners Were Convicted
That year, a former Bell city administrator, a Bell councilman, and several of the club's general partners were convicted of various illegal activities in connection with the club, leaving it with no one in charge and an $800,000 debt owed to the city. That was when Torosian took over on behalf of the current management group, the California Bell Management Corp.
And for the last year, groups of Bell Club investors, managers and outside groups have been fighting for control of the casino, resulting in several lawsuits.
Councilman George Cole, who proposed the idea of a city-owned casino, says the club will not survive unless the city uses taxpayer money to step in and take control.
"The business is going down the tubes," Cole said. "The best way to clear up all the legal confusion and chaos is for the city to enter into it. Everybody will be bought off, paid out and we'll be starting off with a clean slate."
The council considered pulling the casino's gaming license, but later decided that process would take months and, more importantly, would do little to speed revenues to the city. Officials then began to consider purchasing the club through condemnation proceedings and selling it to one owner, but decided instead to lease the club.
In September, the city filed a "resolution of necessity" stating the grounds for condemnation.
Howard Manning, an attorney for the casino's management group, said the general and limited partners support the city's proposal, but aren't certain the city has authority to act under condemnation law.
"Usually, condemnation is used for the public good. We think this case stretches a bit far," he said.
However, Manning said that "the general consensus of the general partners was if the agreed upon price was palatable, then it would make more sense to let condemnation take place."
Agreed on Price
The city and the club's general partners have agreed on a price of $7.1 million for the entire operation--including the casino's lease, equipment, alcohol and beverage license, and the financial interest of the casino's 40 to 50 partners--Robert Flandrick said. But it will be up to the courts to decide how the purchase money will be divided among the partners, he said.
City officials propose to sell between $7.5 million and $8 million in bonds to finance the purchase, Flandrick said.
According to Mike Rumbolz, chairman of the Nevada State Gaming Control Board, no city has tried to purchase a card club before.