The Turlock Poker room will be able to grow from the city’s maximum limit of 10 tables to the states maximum of 14 tables through a new development agreement with the City of Turlock as it was approved at Tuesday’s December 8, 2009 Council Meeting.
The City of Turlock will amend the Turlock Municipal Code to state that the new city card room table limit can be 14 while also giving the Turlock Poker Room exclusivity.
The Turlock Poker Room agreed to pay the 1 percent of gross revenues during the first year of the agreement, 2 percent of gross revenue the second year, and 3 percent in the third year of the 25 year development agreement term.
Additionally, the Turlock Poker Room will pay an increased .6 percentage of gross revenues per every additional table beginning after the 12th table with a maximum fee cap of 7.5 percent.
Partner Phil Rheinschild and legal representative Michael Warda had previous negotiations including the Council’s representative Vice Mayor Ted Howze. Up until March, their discussions agreed upon beginning the .6 percentage fee increase after the 10th table.
A request to adjust the .6 percent increase schedule was put before the entire Council in public at the Council Meeting with the reason being that these are different, hard economic times.
Vice Mayor Howze suggested staying with the negotiated agreement but suspending the additional fee increase for 3 years, as to allow the Turlock Poker Room to deal with the current economy more easily while not compromising the City’s projected long-term payments over the course of the 25 year deal.
Owner Joe Fernandez explained that front loading the agreement worth about $300,000 won’t be enough to help him make it in the long run if he has to pay more for 22 years.
Councilwoman Amy Bublak asked if it would be possible to compromise by starting after the 11th table.
Turlock Poker Room’s legal representative Michael Warda stated that in the last few weeks they were planning on coming in with an appeal to begin after the 14th. Warda also noted that the original drafts 3 years ago agreed upon beginning the fee increase after the 12th table.
Councilman Kurt Spycher suggested continuing this to the very next meeting so a solid agreement proposal could be brought before the Council to approve. The motion didn’t move forward.
Fernandez asked “That’s no problem, but what are you going to ask me here the next week that you couldn’t have asked me the last three years?”
Mayor John Lazar said “I have no problem doing this, I want to help a small business. I don’t think there’s any reason not to encourage jobs and create work and have people pay and generate income for our economy.”
Councilwoman Mary Jackson motioned to approve the agreement beginning after fee increase after the 12th table with hopes that the Turlock Poker Room will move to their pending downtown location.
Council approved the development agreement as drafted except a revision beginning the .6 percent fee increase after the 12th table instead of after the 10th table.
Phil Rheinschild responded by saying “I’m pretty happy that this is finally concluded, its taken three years.”
Rheinschild explained that the implementation timeline included another reading of the approved amendment to the City of Turlock Municipal Code, a 30 day waiting period, a Turlock Planning Commission hearing for a Conditional Use Permit, and an application to the California Gambling Control Commission for the table expansion.
The Turlock Poker Room expects to be operating at 14 tables by around April of 2010.
The Turlock Poker Room opened at West Main + Locust on June 1, 2004 with 13 employees.
Now the Turlock Poker Room employs 113 people, with the vast majority being full-time and offered the option of benefits including medical, dental, vision, and group term life insurance. Only a handful of employees are part-timers while the overall employment turnover is around 2 percent.
The Turlock Poker Room purchased a building on the corner of West Main + Broadway about three years ago with plans to expand their gaming tables and incorporate a steak house.
The development agreement process started about three years ago with the prior City Manager Tim Kerr and City Attorney Dick Burton.
Back in January of 2008, there was a proposal of a financial consideration which was to offset Turlock’s cost for police, fire, and other services provided to the poker room.
The agreement negotiations back then was calling for 12.5% of gross revenues.
Poker Room Owner Joe Fernandez referred to the demanded percentage as protection money mobsters would collect.
The City argued the point of it being like a vice tax but rather a development agreement that was to negotiate services and consistency for both parties.
In the Modbee.com article “Turlock to card room: Ante Up” examples of other city development agreements with card rooms were given noting deals of 15 percent, 9 percent, 2.5 percent and then the fact that some cities do not even allow card rooms.