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California Trade Members Urged To Combat Proposed Entertainment Tax

Posted On: 5/14/2008

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SACRAMENTO, CA -- California's "amusement, gambling, and recreation" industries should be subject to at least $650 million in new annual taxes, according to Dr. Judy Chu, chair of the California State Board of Equalization.


On April 21, Chu sent leading state lawmakers a proposal to raise nearly $2.7 billion by imposing new taxes on a broad range of goods and services. She argued that most industrial states already have such levies and that California's budget deficit cannot be cured by spending cuts alone.


In response this week, Richard Scherer of the Pelican Group (Danville) called upon Golden State trade members to form a coalition to head off what he termed "a potentially disturbing movement to tax our businesses."


Pelican Group serves as liaison to hundreds of operators across America who service national chains such as AMF Bowling and Bennigan's Grill & Tavern. It also operates a local tavern route.


Scherer admits "California is woefully underfunded and looking for ways to get whole. Unfortunately," he added, "they are looking at us."


In an email addressed to leading industry members statewide, Scherer said, "I know that taxing my company's revenues to the tune of 8.75% would seriously impact my operation and assume it would do the same to you."


In order to press their case effectively, Scherer said, California's amusements industry and its allies may need to spend $200,000 to hire multiple lobbying firms.


That strategy, he said, is the recommendation of Dennis Loper, an experienced Sacramento lobbyist who has frequently represented the amusements industry since the 1980s. Scherer consulted Loper on his own initiative after learning of Chu's proposals. Loper actually alerted the industry to Chu's tax proposals by bringing them to Scherer's attention on May 9.


Leadership and organization may be a challenge for the Golden State's amusements businesses, even when faced with a potentially dire financial threat. California has had a checkered history with state operator associations.


At least two associations came and went from 1985 to 1995, breaking down due to a variety of causes. One problem was that a few distributors and large operators felt they usually provided the vast majority of association funds, but did not receive proportional voice in guiding association policies.


Perceived conflicts of interest between operators in the northern and southern parts of the state also contributed to past association difficulties. Members differed on how much attention should be paid to cranes and redemption, as opposed to other categories of equipment and related regulations for same.


Hope for a video lottery market, and disappointment when it failed to materialize, played a significant role in the rise and fall of one California state association.


The most recent group, the California Amusement Device Operators, enjoyed a promising launch in the late 1990s. But CADO's support seemingly petered out as the industry's fortunes ebbed overall.