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November 14, 2023
ITEM TITLE
Gaming Operations: Amend Chula Vista Municipal Code Chapter 5.20 and the Chula Vista Gaming Plan to Authorize an Existing Licensee to Hold More Than Two City Licenses, Subject to the Maximum Number of Licenses Allowed by Law
Report Number: 23-0323
Location: No specific geographic location
Department: Economic Development
Environmental Notice: The Project qualifies for a Categorical Exemption pursuant to the California Environmental Quality Act State Guidelines Section 15301 Class 1 (Existing Facilities).
Recommended Action
Council conduct the public hearing, adopt the resolution and place the ordinance on first reading.
SUMMARY
In 2019, the City Council approved an amendment to the gaming plan with Seven Mile Casino that increased the number of tables from 20 to 26 as well as increased the number of backline betting, the quarterly table fee and allowed for a five-year operating agreement with an ability to extend for an additional five years.
Recent changes to state law require amendments to the City’s gaming ordinance and the gaming plan so Seven Mile Casino can realize the previously approved increase in the number of tables. The amendment to the ordinance will allow Seven Mile to hold more than two licenses in one location, which would allow them to realize the 2019 amendment to the gaming plan. The amendments to the gaming plan will implement the amendments to the ordinance.
ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed project for compliance with the California Environmental Quality Act (CEQA) and has determined that the project qualifies for a Categorical Exemption pursuant to State CEQA Guidelines Section 15301 Class 1 (Existing Facilities), because the proposed project would not result in a significant effect on the environment, create a cumulative impact, damage a scenic P a g e | 2
highway, or cause a substantial adverse ch ange in the significance of a historical resource. Thus, no further environmental review is required.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable.
DISCUSSION
Background
Cardrooms are one of California’s oldest forms of legal gambling, with o perations ranging from “mom and pop” storefronts, to larger, more sophisticated establishments. Historically, card clubs were regulated by local governments. Beginning in the mid-1980s the State gradually increased its regulatory oversight. The stated primary purpose of this increased oversight by the State was to attempt to prevent criminal activity from being associated with these businesses.
In 1996, then Attorney General Daniel Lungren and Senate Pro Tem Bill Lockyer introduced and passed the California Gambling Control Act. (SB 8 was enacted; the language is in Business and Professions Code: 19800 — 19887.) The Act established the California Gambling Control Commission (“State Gambling Commission”) and the Bureau of Gambling Control (“Bureau”) in the California Department of Justice. The State Gambling Commission and the Bureau are responsible for the development of policy, regulatory oversight, and enforcement of the State’s gaming laws at California cardrooms.
With these changes, California cardrooms are now regulated at both the local and state levels. Of the 80 or so cardrooms in California, one of the largest is the Commerce Club, located in the City of Commerce, with approximately 374 tables. The largest cardroom in San Diego County is Oceans 11 in Oceanside which is currently operating fifty (50) tables.
History of Chula Vista Gaming Plan
Prior to enactment of the City’s Gaming Plan in 1995, cardroom operations were regulated by City ordinance.
The City Council amended the ordinance was amended on six occasions between 1977 and 1995 for various reasons.
The Gaming Plan concept was introduced to the City Council on November 28, 1995, because the City Attorney’s Office determined that then -pending state laws would pre -empt local control by City code. By creating a structure under the City code where future changes would be adopted by resolution, the Gaming Plan preserved Chula Vista’s local authority over its cardroom operations. This revision authorized the City Council to adopt or amend the Chula Vista Gaming Plan by resolution after a public hearing. Under this revised structure, the initial Gaming Plan was adopted in February 1996.
In 1998, the Gaming Plan was amended at the request of the City Council to eliminate th e issuance of additional licenses without a vote of the people. At the time, 4 licenses were issued in the City. Two were held by the Chula Vista Bay Club, Inc., and two were held by Harvey Souza. In 2000, the Gaming Plan was amended again, this time to surrender 2 of the outstanding 4 licenses and consolidate the remaining 2 licenses under Mr. Souza’s ownership. This was accomplished by Mr. Souza acquiring 2 licenses from Chula Vista Bay Club, Inc., and immediately surrendering them to the City. Other updates at this time included: 1) expanding the allowed hours of operation; 2) allowing more types of games to be played; 3) increasing bet limits; 4) allowing the service of alcohol; 5) increasing license tax fees; 6) enhancing employee screening; and 7) allowing backline betting and requiring enhanced security.
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In 2009, consistent with state law changes, the gaming plan was amended to increase the number of card tables allowed to operate under a consolidated license from 12 to 16. In 2012, gaming plan was amended to increase the number of card tables from 16 to 18. In 2015, again consistent with state law changes, the maximum number of card tables was increased in the gaming plan from 18 to 20. In 2019, the maximum number of card tables was increased from 20 to 26.
When Seven Mile applied to the state to realize the increase approved by the City Council in 2019, the State determined that Seven Mile had no more capacity for additional tables based on the existing two consolidated licenses. To resolve t his issue and allow Seven Mile to realize the previously approved amendment to the gaming plan, staff proposes a minor amendment to the section 5.20.035 of the Municipal Code and a conforming amendment to the gaming plan making.
Proposed Amendments to the Ordinance
The Gambling Control Act restricts ordinance amendments that would result in the expansion of gambling unless the amendment is submitted for voter approval. The proposed amendment does not propose to expand gaming in Chula Vista beyond what was approved prior to January 1, 1996. Rather the proposed amendment to section 5.20.035 would liberalize the existing rule limiting card rooms to two licenses, and instead allow cardrooms to hold additional licenses, provided the total number of licens es in the City does not exceed the overall limitation on licenses provided by section 5.20.030 (one license per 40,000 residents).
Proposed Amendment to the Gaming Plan
The proposed amendment to the gaming plan consists of amendment to section 2.6.3 to clarify that, upon a licensee’s acquisition of a second license, the two licenses shall be deemed consolidated. Upon acquisition of a third license, the first two licenses continue to remain consolidated, but the third license shall not be consolidated. Upon acquisition of a fourth license, the two sets of licenses shall both be deemed consolidated into two pairs.
Staff recommends approval of the above changes to the Municipal Code and gaming plan to support the expanded operation of Seven Mile Casino, as approved in 2019. Seven Mile has been a responsible operator and the redevelopment of the City’s waterfront for visitor-serving uses creates more demand for Seven Mile’s gaming tables.
DECISION-MAKER CONFLICT
Staff has reviewed the Councilmember’s real estate holdings within Chula Vista and has determined that no property is within 500 -foot of the project location. Staff is not independently aware , and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
There is no current fiscal year impact by approval of this item.
ONGOING FISCAL IMPACT
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There is no ongoing fiscal year impact by approval of this item.
ATTACHMENTS
1. Proposed Revised Chula Vista Municipal Code Chapter 5.20 (redline strikeout)
2. Proposed Revised 2023 Gaming Plan (redline strikeout)
3. Proposed Revised 2023 Gaming Plan (clean)
Staff Contact: Eric Crockett, Development Services Director; Megan McClurg, Assistant City Attorney