DATE:
October 4, 2022
TO:
Adam Politzer, Interim City Manager
FROM:
April Richardson, Acting City Clerk
SUBJECT:
Discussion On Whether To Approve A Resolution Of The City Council Of The City Of Emeryville Opposing The Two Statewide Ballot Measures That Would Expand Gaming In California Recommendation
This report offers the City Council the opportunity to discuss whether to approve the above-entitled resolution.
Background
At the September 20, 2022, regular City Council meeting, Mayor Bauters requested and received majority support that an item be added to the October 4, 2022, City Council meeting agenda for the Council to receive a report from Niccolo De Luca, Vice President, Townsend Public Affairs, regarding statewide ballot propositions 26 and 27, and discuss whether to approve a resolution opposing them.
On May 14, 2018, the US Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA, 1992), lifting the ban on states being able to establish their own sports wagering industries. As a result of this decision, the State of Nevada no longer had a monopoly on legal sports betting in the country and all states are free to set up their own sports betting rules and regulations.
Currently, there are about 30 states where sports betting is legal, including 18 that allow online sports wagering. There are two Sports Wagering initiatives appearing on the November 8, 2022, California General Election Ballot:
Proposition 26, the California Sports Wagering Regulation and Unlawful Gambling Enforcement Act, Initiative 19-0029A1. The California Sports Wagering Regulation and Unlawful Gambling Enforcement Act (Tribal Initiative) is advanced by the Tribal Chairmen of the Pechanga Indian Reservation Temecula Band of Luiseno Mission Indians, the Barona Band of Mission Indians, the Agua Caliente Band of Cahuilla Indians, and the Yocha Dehe Wintun Nation.
Proposition 27, the “California Solutions to Homelessness and Mental Health Act”, Initiative 19-0029A1. The “California Solutions to Homelessness and Mental Health Act”, (DFS Initiative) is advanced by Kurt Oneto and John Moffat partners in the Sacramento law firm of Nielsen Merksamer LLP.
DISCUSSION
Proposition 26 would amend the California Constitution to expand gambling in Indian Casinos and would permit Indian Tribes to offer gambling games currently not permitted in tribal casinos, such as sports wagering, roulette, craps, and other games.
Proposition 26 also includes a provision authorizing any person or entity to act as a private attorney general to bring lawsuits seeking civil penalties of $10,000 per alleged violation and injunctions to close licensed cardrooms for any alleged violation even though licensed cardrooms play card games expressly approved under the California Penal Code and by the Bureau of Gambling Control in the Office of the California Attorney General. This provision is of concern to cities that receive tax revenues from licensed cardrooms and rely on these revenues to provide basic municipal services for their residents.
Proposition 27, the “California Solutions to Homelessness and Mental Health Act” amends the California Constitution to expand gambling over the internet and on mobile devices. It exempts all Indian Casinos from State or location taxation on all revenues from online sports betting. Instead, the state would receive the $100 million license fees paid by sports wagering operators and there is a possibility of further revenue from a proposed a 10% surcharge on these operators. This 10% surcharge is to be paid into an Online Sports Betting Fund. The money in this Fund is to be appropriated by the State Legislature as follows: (a) 85% to counties and cities for homelessness and mental health programs and the cost to administer online sports betting and (b)15% for Indian tribes that do not participate in online sports betting.
However, sports wagering operators are permitted to deduct the amount of all promotions, winnings and prizes paid out and the licensing fee from any surcharge amount they would be obligated to pay to the State Treasury. The Initiative contemplates that an operator’s adjusted gross online betting receipts will be a negative amount, in which case the operator would pay very little, if any, to no surcharges to the State Treasury. This would result in either insufficient or no revenue for counties and cities for homelessness and mental health programs.
Staff reached out to a representative from the Oaks Club regarding Propositions 26 and 27, and they reported that the Oaks Club and other card rooms are vehemently opposed to Proposition 26. The main issue reportedly surrounds the fact that there has been an ongoing dispute between the gaming tribes and the card rooms regarding so-called “rotating bank” games. The tribes have attempted to stop card rooms from running rotating bank games through the state gaming commission and have thus far been unsuccessful, but Proposition 26 would, according to this source, provide the tribes a means of litigating the issue directly with the card rooms which could be expensive for them. The representative was also felt that Proposition 26 would not provide much revenue to the state.
Regarding Proposition 27, the Oaks representative was undecided, stating it would clearly not help the card rooms but didn’t seem as detrimental as Proposition 26, and did seem to provide some funding.
Fiscal Impact
None.
Staff Communication with the Public
Staff communicated with a representative from the Oaks Club card room regarding their stance on this item.
Conflict of Interest
None.
Conclusion
Whether to take action on this item is at the discretion of the City Council.
PREPARED BY: April Richardson, Acting City Clerk
Approved and Forwarded to the
City Council of the City of Emeryville:
Adam Politzer, Interim City Manager
Attachments
Draft Resolution
Attachment A – CCGA Comparative Analysis of the Sport Wagering Ballot Measures to Amend the California Constitution in California Resolution Opposing Statewide Gaming Propositions
City Council Meeting | October 4, 2022
City of Emeryville
CALIFORNIA
MEMORANDUM