Lacey City Council takes up card room tax issue

The Lacey City Council discussed the possible repeal of a 1999 ordinance barring new card rooms from operating within city limits. 

The restriction, which is embedded in Lacey Municipal Code 5.06, has shielded the city's lone social card room from competition for 26 years. Repealing it could reshape the local gambling market and unlock a new revenue stream. 

Council members hammered out a proposal at a work session on Jan. 13. They also called for a punchboard and pull-tab tax hike to 6% from 4%, rejecting a staff proposal of 8%. 

Staffers have spent months looking for new revenue. The city slashed $959,630 in spending last year and expects roughly $720,000 from a 6% cable utility tax adopted in December 2025. 

Monopoly 

Fortune Casino, formerly Hawks Prairie Casino, has operated as Lacey's sole card game establishment since the ordinance took effect. It generates about $500,000 annually in gambling tax revenue at the current 7.5% rate. 

Council members questioned why the city continues shielding one operator from competition. 

"I definitely think we should seriously consider the removing the prohibition," Council member Lenny Greenstein said. "It makes very little sense to me why we have a prohibition and basically creating a situation, a monopoly of one business, that no one else can open a business in the city." 

Deputy Mayor Malcolm Miller called it a "stranglehold" on the industry. Council member Maren Turner labeled the arrangement “unfair.” 

Council member Carolyn Cox cast the repeal as both a fairness fix and fiscal necessity, calling gambling tax revenue "a resource that's badly needed." 

"I think this is kind of a situation ... if you build it, they will come," Cox said. "So if we lift the ban, we probably would see maybe not a great deal, but some interest." 

However, no guarantee exists new operators would follow. City Manager Rick Walk said the last inquiry came five or six years ago from a company scouting locations, but it never led to a formal proposal. 

Greenstein noted card room growth statewide has stalled, as tribal casinos draw customers away. 

"I think more we probably have had across the state, more closed and open," he said. 

Council member Nicolas Dunning said lifting the ban would allow the city to test demand before considering tax hikes. 

"I would probably lean with (Council member) Carolyn (Cox) about opening it up to more businesses to see if there is a demand in the first place," Dunning said. "Because lastly, I'd want to do is push out a business just by raising their taxes, if there's not that level of support in the first place." 

Tax rate frozen 

Council spared Fortune Casino from an immediate tax increase, holding the card game rate at 7.5%. Members opted to monitor revenues and revisit the issue later. 

The decision followed staff outreach to the casino's owner, who warned any hike could force the business to close. 

Washington State Gambling Commission data backed that possibility. The Lacey location's net income plunged to $256,535 in 2023 from $735,864 in 2019. Expenditures consumed 97.1% of revenue. 

Greenstein flagged the razor-thin margins. 

"When you do the math on that net income from their revenue in '23, you're less than a 4% running, less than 4% net income from the total labor," Greenstein said. "It's not like they're crushing it." 

Among four Fortune Casino locations statewide, Lacey ranks as second least profitable. Renton posted $4.9 million in net income on $23.4 million in revenue in 2023. Tukwila netted $1.07 million. LaCenter lost $87,442. 

The cautious approach mirrors history. In 2014, the Lacey City Council adopted Ordinance 1430, gradually cutting the gambling tax to 7.5% from 10% over three years after then-owners of Hawks Prairie Casino sought relief. 

Greenstein served on council during that period. 

"The reason we lowered the tax was a direct request from the facility," Greenstein said. "They actually came in, talked to council and asked us for that reduction, because they were struggling a little bit." 

Lacey's 7.5% rate trails most peers. Comparable cities average 10.5%, according to the Association of Washington Cities 2024 Utility and Fee Survey. 

Tumwater taxes card games at 20%. Redmond charges 12%. Kirkland, Lakewood, Kent, Burien and SeaTac each levy 11%. University Place sits lowest at 5%. State law caps card game taxes at 20% of gross receipts.

Pull-tab hike  

Bars and taverns selling pull-tabs face a smaller hit than initially proposed. 

Pull-tabs are lottery-style, peel-open tickets sold at drinking establishments. Customers buy them at the counter, peel open the paper and check for matching symbols to win cash prizes. The games currently generate about $40,000 annually for the general fund. 

A bump to 6% adds an estimated $20,000 in revenue. Staff proposed 8%, which would have doubled revenue to $80,000. But the council balked.

Miller pushed for gradualism. 

"I personally was thinking that if we, if we did 6% and we monitor this for a year or two to see what kind of effect that we are having on these businesses, and then we could go to 8%," Miller said. "You guys know that I'm not really just into jumping all the way in, but would rather weigh it in and give people a chance to respond." 

Greenstein concurred.

"I'm with you on that. I prefer to do it gradually than to do it all at once too," Greenstein said. "Four to eight doubling in one shot seems like a bit of a slap. It's a lot of money and it's across multiple businesses." 

Unlike the social card game tax affecting one proprietor, the pull-tab increase hits numerous establishments across Lacey. Greenstein noted pull-tabs are a sideline for bars, not their primary business. 

 Comparable cities average 5.3% for pull-tab taxes. Yakima and Pasco charge 10%. Walla Walla levies 8%. Olympia and Tumwater each impose 3%. State law caps the rate at 10% of net receipts. 

Walk noted pull-tab prices are regulated. Operators cannot easily pass the tax to customers. The burden falls squarely on businesses.  

The council took no formal action during the meeting. The work session served as a policy direction exercise, and staff will return with draft ordinances for council adoption at a future meeting.