Friday, October 31, 2008

San Pablo's funding gamble pays off

SAN PABLO — They're raising fees in Walnut Creek, sapping reserves in Antioch and San Leandro, slashing jobs in Oakland, Hayward and San Mateo, shaving mental health services in Berkeley and mulling rolling "brownouts" at fire stations in Alameda.

The mounting loss of sales and property tax revenues has forced painful choices upon cities and counties across the East Bay.

Yet one city barely feels the pinch.

In San Pablo, home to some of the East Bay's poorest households and highest unemployment, City Hall sits high-and-dry amid a raging fiscal storm. Here, tax revenue takes a back seat to a far different budget model: Jackpot economics.

Nearly a decade ago, the city hitched its fate to Indian gaming in a controversial pact with the Lytton Band of Pomo Indians that is now paying big dividends.

This 21/2-mile flatland city of 30,000 residents now draws about $13 million a year — nearly two-thirds of its general fund budget — from Lytton Casino San Pablo, a once quiet cardroom that now boasts 1,100 electronic bingo games that mimic slot machines.

The money supports a police force that has added officers (in part to handle a rise in casino-related calls), a growing slate of recreation programs, and services and salaries for a city that once verged on insolvency.

Three years after the tribe installed the first 500 machines, the city holds $17 million in reserves. The retiree health care liability Advertisementthat burdens other local governments is nil in San Pablo — paid in full from casino bucks.

The city will hold off on some big projects this year, including construction of a community center, because of a state raid on redevelopment money. But it does not plan to cut jobs or services.

San Pablo's success is wedded to the bankable losses of the region's gambling public, and both appear on the rise. Casino revenues have grown steadily, even while other casinos across the country see a downturn. Part of that is location; Bay Area residents may be forgoing longer trips to gamble locally, city leaders and gaming experts say.

San Pablo leaders bore a flurry of criticism over their casino dreams, and angry local lawmakers doomed the tribe's deal with Gov. Arnold Schwarzenegger in 2004 for a Las Vegas-style mega-casino with more slots than any in Las Vegas. Now, with the tribe operating bingo games that require no state oversight, city officials quietly revel in the cherries, lemons and other fruits of fiscal stability.

"Not so quietly," remarked City Manager Brock Arner, noting two of the casino's most vocal opponents back then. "Whenever I see Assemblywoman (Loni) Hancock (D-Berkeley), or Councilwoman (Jean) Quan from Oakland, I just chuckle. ... I laugh right out loud when I think about it. It's been the best thing that's happened to this community."

City officials say the economic slide, job losses and a foreclosure epidemic that has hit San Pablo hard may take its toll at the casino — but it hasn't happened yet. About 150,000 patrons a month shuffle through the Morroccan-style entrance to a 77,000-square-foot casino packed with gaming machines.

One sign of success: Last week, workers were busy installing 85 more machines, pushing poker tables out of the way to squeeze in new banks of "Tiki Torch," "Whopper" and "One Bad Apple."

The negative effects opponents feared — such as heavy crime and stifling traffic — have failed to match the rhetoric, Arner said. He described them as "less than opponents anticipated and about what I anticipated." Still, reports of petty theft, vandalism, auto burglary, disorderly conduct, drug or alcohol crimes and other offenses come frequently, police logs show.

Police calls to the casino numbered about 10 per month before the August 2005 expansion. Including routine "security checks," police visited the casino more than 1,300 times from Oct. 1, 2007, to Oct 1, 2008 — more than 100 times a month, according to police logs. Officers made 169 misdemeanor and felony arrests at the casino — about 8 percent of the total citywide.

One opponent said the city government's gain is a muffled loss to communities around the casino. Andres Soto noted vacant storefronts in nearby retail strips, saying a local economic ripple has failed to materialize.

"It appears the entire city budget is hooked on casino money. But you still see their schools are among the worst performing. You see retail throughout the city is in decline," said Soto, who led a group opposed to the Lytton compact. "You just see people on automatic pilot, pressing buttons, throwing away their money. They're everyday working people in the community. That's money that could be used to support small businesses and local charities."

Soto said the tribe has failed to spread the wealth to local charities and schools.

Tribe spokesman Doug Elmets dismissed that assertion. The 260-member tribe has quietly given almost $1 million a year to charities, including $600,000 to an American Indian health center in Sonoma County, $20,000 for Brookside Community Health Center in San Pablo and $100,000 to an Oakland school damaged by arson.

"It wasn't too long ago that the vast majority of these tribal members were relying on the generosity of others," Elmets said. "For anybody to say that the tribe and the casino are not helping charitable organizations throughout the region, they clearly have a different agenda."

Most of the city's take comes from a 7.5 percent share of gross gaming revenue under a 1999 deal with the tribe. By that measure, the casino reaps more than $150 million a year. That revenue appears stable, at least while there is no local competition for slot dollars.

Last year, the tribe struck a deal with U.S. Sen. Dianne Feinstein, D-Calif., agreeing not to expand the building. Feinstein agreed to drop her bid to revoke the gaming rights the tribe won in 2000 through legislation by Rep. George Miller, D-Martinez. Feinstein's bill cleared the Senate last year, but it remains dormant in the House Natural Resources Committee. If it dies there, Feinstein pledged to revive it next year, said spokesman Phil LaVelle.

Miller, who sits on the House committee, is not stalling the bill, said spokesman Danny Weiss, who blamed a Capitol backlog.

"He doesn't have an objection to the bill. His concern has been protecting the interests of the city and the tribe," Weiss said.

On that score, Weiss added, "I think the record will show this has been a winner."

City officials say they are wary of a slide in casino revenue. Like other cities, San Pablo expects flat tax revenue this year. The last quarterly revenue check from the casino, the highest yet at $3.1 million, came Sept. 15. The next is due Dec. 15.

"That's the next thing that will really indicate where we're at," finance director Bradley Ward said.

That's when Ward will call ahead, arrive at the casino door for a check, turn around and head for the bank.

If only the gamblers were so lucky.



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