CITY OF SHORELINE

SHORELINE CITY COUNCIL

SUMMARY MINUTES OF WORKSHOP MEETING

Monday, June 21, 1999

6:30 p.m.

Shoreline Conference Center

Mt. Rainier Room

PRESENT: Deputy Mayor Montgomery, Councilmembers Gustafson, Hansen, King, Lee and Ransom

ABSENT: Mayor Jepsen

1. CALL TO ORDER

The meeting was called to order at 6:30 p.m. by Deputy Mayor Montgomery, who presided.

2. FLAG SALUTE/ROLL CALL

Deputy Mayor Montgomery led the flag salute. Upon roll by the City Clerk, all Councilmembers were present with the exception of Councilmember Hansen, who arrived shortly thereafter, and Mayor Jepsen.

Upon motion by Councilmember Lee, seconded by Councilmember Gustafson and unanimously carried, Mayor Jepsen was excused.

3. CITY MANAGER’S REPORT

Larry Bauman, Assistant City Manager, asked for Council consensus to hold the Executive Session before the second workshop item. There was Council consensus to do so. Mr. Bauman also described upcoming agenda items.

4. COUNCIL REPORTS

Councilmember Gustafson reported on meetings to discuss forming a Youth Council for Shoreline, Lake Forest Park and King County. He asked that this issue be brought before Council for discussion. He also noted his attendance at the Human Services Roundtable.

Councilmember King reported on the King County Council’s actions of voting 13 - 0 in favor of the third wastewater treatment plant and 8 - 5 in support of the Kenmore interceptor.

Councilmember Ransom reported on the Suburban Cities Association (SCA) Jail Advisory Committee meeting, noting the reasons for his view that King County wishes to have SCA approval of the proposal without serious discussion. He added that the proposal could have major budget impacts.

Councilmember Hansen arrived at 6:35 p.m.

5. PUBLIC COMMENT

(a) Ros Bird, Executive Director of the Shoreline Arts Council, invited the Council to the Shoreline Arts Festival this weekend and distributed the Concert in the Park schedule.

6. WORKSHOP ITEMS

(a) Council review of alternatives to be evaluated in the development of the Richmond Highlands Community Center

Wendy Barry, Parks, Recreation and Cultural Services Director, reviewed the staff report, highlighting the existing condition of the facility, which is marginal for current uses. She outlined the alternatives identified by staff: 1) rehabilitation of the existing facility; 2) development of a new or expanded facility; and 3) partnering with the School District’s proposed improvements at the Shoreline Center athletic facility. Ms. Barry concluded that the evaluation of alternatives will involve an extensive public involvement process, including review by the Parks, Recreation and Cultural Services Advisory Committee.

Councilmember King commended the approach of working with the School District and mentioned her dream of having a coffee house for teens.

Responding to Deputy Mayor Montgomery, Ms. Barry said there is $800,580 in the capital budget for this project. Once an alternative is selected, the Council will have an opportunity to revisit this allocation if necessary.

Responding again to Deputy Mayor Montgomery, Ms. Barry said the teen program takes up a lot of time at the facility, but it is also used for indoor playground programs and rented to the community. She said Alternative #1 would upgrade the facility but within the existing footprint.

Councilmember Gustafson felt that the options should not be limited at this point. He recommended that the School District committee looking at upgrades to the Shoreline Center athletic facility make a presentation to Council as it did to the School Board. He felt the vision should be kept open.

Responding to Deputy Mayor Montgomery, Councilmember Gustafson said the current plan does not include enhanced parking. However, additional parking between the stadium and the gymnasium has been discussed by the committee. Ms. Barry added that the times the Shoreline Center would be in use would differ from age group to age group, thus spacing the demand for parking throughout the day.

Responding to Councilmember Lee, Ms. Barry said the City would upgrade the Richmond Highlands Center under each of the alternatives. She clarified that the alternative selected will determine the extent of the upgrade and the amount of additional funding needed, if any.

Councilmember Hansen said completely redoing the facility would not necessarily preclude partnering with the School District. He agreed that all options should be kept open.

EXECUTIVE SESSION

At 7:09 p.m., Deputy Mayor Montgomery announced that Council would recess into Executive Session for 30 minutes to discuss one item of agency enforcement or potential litigation. At 7:59 p.m., the Executive Session concluded, and the workshop reconvened.

(b) Guidelines for regulation of food and drink businesses conducting social card games, punch boards, or pull tabs

Tim Stewart, Director, Planning and Development Services, outlined the Council’s options in dealing with establishments conducting social card games, punch boards or pull tabs: 1) allow gaming establishments; 2) allow and encourage gaming establishments; 3) allow gaming establishments with conditions and restrictions; 4) prohibit new gaming establishments; and 5) prohibit all gaming establishments.

Consulting Attorney Bruce Disend said the status of Washington law with regard to gambling operations is quite clear. He explained that Shoreline can authorize gaming establishments to operate, or it can ban them completely. Current law is more ambiguous about: 1) the imposition of regulations related to zoning; 2) the way operations may occur; and 3) the ability to prohibit new establishments while allowing those in existence to stay. If Council chooses one of these options, there is the possibility of legal challenge.

Deputy Mayor Montgomery called for public comment.

(1) Sam and Linda Lantow, 14525 Aurora Avenue N, owners of the Hideaway Card Room, described the benefits given to 52 employees and the amount of taxes paid per year ($250,000). Ms. Lantow felt it would be "un-American" to close their business.

(2) Dolores Chiechi Whitmore, 1501 S Capital Way, Suite 201, Olympia, represented the Recreational Gaming Association. She emphasized the difference between mini-casinos (enhanced card rooms) and casinos, noting that mini-casinos allow the private sector to compete for the players who were visiting tribal casinos. She noted that tribal casinos pay a volunteer community impact contribution of 2 percent, while card rooms pay 2 percent Business and Occupation (B&O) tax to the State and can be taxed up to 20 percent at city/county levels. She concluded that these establishments provide living wage jobs as well as tax revenue to their communities and that a new Gallup poll shows that 63 percent of Americans approve of legalized gambling and 67 percent say casinos generally help a community’s economy.

(3) Bob Tull, 708 Dupont, Bellingham, spoke representing Goldie’s. He emphasized that the jobs created by gaming establishments are not entry-level but living wage jobs when tips are included. He said the City has no justification to pursue the harsher options, but he could support Option #3, which allows the City to start regulating where new establishments can locate. He recommended looking at the percentage of floor space allocated to non-eating and drinking activities. This could be a screen to trigger a site review or conditional-use process.

(4) Melissa Harold, 4207 222^nd St. SW, Mountlake Terrace, said that her part-time job in a gaming establishment allows her to go to school full-time. She said this industry pays decent wages and supports a large number of people.

(5) Tu Lifser, 205 134^th St. SW, Everett, spoke as another college student able to attend school because of the wages and tips he earns at a gaming establishment.

(6) Rishi Noriega, 15420 40^th Avenue S., Tukwila, supported previous speakers, noting jobs in the gaming industry allow workers to support their families and get off welfare.

(7) Sanji Noriega, 15420 40^th Avenue S., Tukwila, also a student and an employee of the gaming industry, said his job allows him to take care of his family and to go to school.

(8) Mark Collier, no address given, said he is living from place to place and trying to get back on his feet. He asked Council to consider how much harm gambling does to the community and whether a ban would do more harm than good.

(9) Robert Noriega, 15420 40^th Avenue S., Tukwila, said those who work at Goldie’s Casino need their jobs and will have nothing if they are taken away. They simply want a fair chance to work.

Councilmember Ransom pointed out a series of "errors" in the staff report, explaining that Parker’s, as well as the Drift on Inn, has recently been approved for increased betting limits from $25 to $100 under its Phase 2 mini-casino license. However, the statement on increased betting limits at Goldie’s is misleading, in that Goldie’s is still operating under a Phase 1 license at the $25 betting level. He also noted that the statement that Washington State does not tax gaming establishments such as card rooms is inaccurate because the State applies a 2% B&O tax.

Continuing, Councilmember Ransom said the report does not make a distinction between social card rooms and food and drink establishments with pull tabs or punch boards. He noted that Seattle banned card rooms, but not pull tabs or punch boards. Furthermore, he disputed the statement that "the value of gaming is generally reported to be limited because it produces no product and no new wealth, and thus makes no genuine contribution to economic development." He said this could be said about sport events or any recreational activity, as well as restaurants. Gaming is no different from a large part of the economic base.

Councilmember Ransom disputed references to the gaming industry as providing entry-level jobs with no chance of promotion. He said most of the entry level jobs earn about $30,000/year including benefits and tips. Furthermore, there are many opportunities for promotions because there is one floor supervisor for each five dealers, with at least one gambling manager per shift. He also felt that references to crime should not be to places like poor counties in Mississippi when the State Gaming Commission has done substantial studies which staff had available but did not use or make reference to. These studies of Phase 2 gaming establishments show no crime problem, and Shoreline’s Police Chief has told him there is no crime problem at gaming establishments in Shoreline. He emphasized that gaming establishments would lose their licenses if illegal activities are found to be occurring on the grounds.

Turning to the statistics on taxes, Councilmember Ransom said that the cities mentioned in the report as having tax rates of 20% do not have existing card rooms. He felt the City of Everett, with a 3.5% tax rate, and Snohomish County, with a 5% tax rate, should have been included in the jurisdictions listed to create the average. He also disputed the figures provided on the social cost of treating compulsive gamblers, which he said were provided by anti-gambling publications. He pointed out that the figure from the National Gaming Impact Study Commission released on February 1, 1999 involves an actual study and gives the lifetime cost of treating a compulsive gambler at $5,000/$6,000, which is only one-tenth of the figure in the staff report.

Finally, Councilmember Ransom concluded that the statement that "the City would incur long-term costs resulting from lost economic development (i.e., other businesses migrate away from gambling uses)" can be countered by other studies, as well as by comments by the City’s own Economic Development Specialist that gaming establishments can be anchor stores attracting businesses.

In conclusion, Councilmember Ransom said this report came out before the gaming businesses in Shoreline had a chance to present their case to staff or Council. He emphasized that the State Gaming Commission has put out numerous publications not included in the report. He said the business community does not feel it has been heard.

Deputy Mayor Montgomery responded that it is usual procedure for a staff report to be issued before a public hearing. Councilmember Ransom’s concern was that staff had not presented a balanced picture.

After commenting that staff was quoting data on this topic and not producing its own information, Councilmember Lee asked whether the City of Federal Way has gone to a 20 percent tax rate. Mr. Stewart responded that as of March 24, 1999 Federal Way was listed as taxing at 11 percent.

Responding to Councilmember Lee, Mr. Disend said staff agrees with the Gambling Commission that it has exclusive authority to license gambling establishments. Cities cannot deny a license but can deny the operation of gaming establishments within their confines. Where cities have diverged from the Gambling Commission’s view is the scope of regulations that might be imposed by local jurisdictions on existing gaming establishments or those that may be coming in to a jurisdiction.

Deputy Mayor Montgomery agreed with the view that Mayor Jepsen previously expressed to Council that the City should phase in a 20-percent tax rate regardless of the option Council chooses.

Councilmember Ransom said that the governor vetoed a bill last year that had passed both houses by a substantial margin. It put a cap on the potential tax rate at 10 percent. This year the governor initiated a moratorium on mini-casino licenses and asked cities not to raise their taxes during this period. He reported that two casinos in Spokane went out of business when the tax rate there was raised to 20 percent and that a third is failing.

Councilmember Gustafson felt he needed clarification on whether existing businesses create harmful secondary effects and whether new gaming establishments would be consistent with the Comprehensive Plan and development regulations. He hoped that the public hearing would address the first issue.

Mr. Stewart explained that the existing moratorium expires on August 8, 1999, although it can be extended. He asked Council to review the options and the studies and then reflect on Shoreline’s community values. He encouraged Council to remember that not all places are the same. Council should keep in mind how Shoreline relates to its neighbors and its citizens. He said Council will be asked to move forward to public hearing.

Councilmember Gustafson emphasized the importance of reviewing the Comprehensive Plan and the development regulations.

Responding to Councilmember Gustafson, Mr. Stewart said Option #4 will require careful crafting of the regulations to allow legally existing uses to continue.

Mr. Disend added that Option #3 limits the ability of businesses to operate, which always raises the possibility of a court challenge. Option #4 might receive a challenge from new businesses seeking to locate in Shoreline.

Councilmember King favored Option #3. She liked the feel of the Hideaway, which "fits into what Shoreline is all about." She suggested that if the tax rate were increased to 16 percent, the additional 5 percent in revenue be dedicated to youth activities.

Deputy Mayor Montgomery clarified that Mayor Jepsen had suggested going to 16 percent the first year and 20 percent the next.

Councilmember Hansen felt he should not take a position on the options until after he has heard all the public comment. He wanted to explore all the options.

Deputy Mayor Montgomery said in her dealings with the public, there has not been much support for Options #1 and #2.

Responding to Councilmember Ransom, Mr. Disend clarified that a legal differentiation can be made between card rooms and establishments with pull tabs, and between social card rooms and mini-casinos.

Councilmember Lee asked staff to check on Federal Way’s rate, which she thought had gone up to 20 percent. Mr. Disend said the Council has the independent authority to set the tax rate. She asked for additional information on the impacts of raising the tax rate.

Councilmember Gustafson also wanted to keep the options open, but agreed with Deputy Mayor Montgomery that in his conversations with the public Options #1 and #2 have not been favored.

Councilmember Ransom felt there should be some restrictions on mini-casinos, which are regional businesses, so he was leaning toward Option #3. He said mini-casinos do not belong in neighborhoods, since they are regional businesses.

Mr. Bauman confirmed that staff will set a date for the public hearing and that none of the options will be eliminated.

7. CONTINUED PUBLIC COMMENTS

(a) Michael Preston, 317 22^nd E, Seattle, pointed out that no other business is as highly regulated and taxed as the gaming industry and that no other business could survive with a 20 percent tax rate. He said taxing at that rate will mean the elimination of health benefits. He made several other points: 1) the value of a casino after enhancement far exceeds any building of comparable size and accoutrement; 2) casinos do not create any more crime than any other concentration of population; 3) the industry provides high wage jobs that have a residual economic impact because employees spend their money where they work; 4) people in the industry care about what happens in the City; and 5) young people are given training and a livable wage. Mr. Preston emphasized that you can tell when people feel strongly about something when they come out to testify on the issue. He pointed out that no one spoke in opposition to the mini-casinos at the last public hearing. He supported Options #3 or #4.

(b) Mark Mitchell, Drift on Inn, said there has been no crime in the year of operation of the Drift on Inn as a mini-casino. He felt that if tax rates are increased across the State, the next legislature will set a cap of 10 percent. Noting that his operation pays more taxes than Sears, Home Depot, K-Mart and Costco combined, he predicted that if Shoreline’s rates are increased, other establishments will not survive. He concluded by pointing out that the average tax rate is lower than Shoreline’s current rate.

(c) Melissa Harold, 4207 222^nd St. SW, Mountlake Terrace, said raising taxes will close down some of the card rooms, and will reduce health benefits for employees. She said she saw more crime on the night shift at Denny’s than at the card room. She advised Councilmembers to visit card rooms and concluded that gambling allows people to have fun.

(d) Adam Borgia, 628 NE 154^th St., Kenmore, said gambling is a form of recreation that many people enjoy. He urged against raising taxes because it will cause employees to lose health benefits.

(e) Dolores Chiechi Whitmore, 1510 S. Capital Way, Suite 201, Olympia, said numerous bills were introduced in the 1999 session regarding gaming, and a legisla-tive committee is now working to make recommendations to the 2000 legislature. She requested that the City delay any decisions until the legislature has had a chance to act, and she offered to work cooperatively to resolve the issues around enhanced card rooms so they can continue to provide living wage jobs and tax revenue for the local communities.

(f) Sanji Noriega, 15420 40^th Avenue S., Tukwila, said raising taxes will impact competition and encourage monopolies because many businesses will close. He pointed out that dealers are paid at minimum wage but tips increase that to a living wage.

(g) Carol Henry, 17001 Aurora Avenue N., spoke as an employee of Parker’s. She said one issue that hasn’t been addressed is that Parker’s is not being allowed to repair bathrooms because of the moratorium. She asked for an interim measure to address Parker’s needs to do repairs. She also mentioned the need for construction of a wall in the expansion area in order to have a quality of sound that will allow booking of national acts. Turning to the tax issue, she said some mini-casinos would go out of business if City raises the tax rate. She said a 16 percent tax would force Parker’s to cut benefits for staff.

(h) Robert Noriega, 15420 40^th Avenue S., Tukwila, said Goldie’s received a license to operate a mini-casino in January. It has acceded to the City’s request not to make enhancements. Now he would like clarification from the Council about whether simple repairs to bathrooms, air conditioning systems, etc. can be made. He asked that the Council not hold the gaming establishments hostage when they have worked every step of the way with Council.

(i) Ralph Howland, 1013 Summit Avenue E., Seattle, owner of Cliff’s Tavern and Card Room, opposed being grouped together with casinos and mini-casinos. He said his is a small card room and he did not think he could survive at a 20 percent tax rate.

Mr. Stewart explained that the moratorium prohibits expansion or intensification of existing gambling operations. The issue is what constitutes intensification. He said Parker’s had discussed with staff the proposed expansion of the gaming area and this was deemed not permitted. To his knowledge, no inquiries or applications have been received concerning restroom facilities. He said work on the bathrooms at Goldie’s was not deemed an expansion or intensification of the operation and staff would be happy to receive an application.

Deputy Mayor Montgomery thanked the speakers for their comments, noting they were articulate and reasonable.

8. EXECUTIVE SESSION

At 9:24 p.m., Deputy Mayor Montgomery announced that the Council would recess into Executive Session for 30 minutes to discuss City enforcement matters. At 9:56 p.m., the Executive Session concluded, and the workshop reconvened.

9. ADJOURNMENT

At 9:56 p.m., Deputy Mayor Montgomery declared the meeting adjourned.

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Sharon Mattioli
City Clerk