The Bicycle Hotel and Casino reopened in the pre-dawn hours Wednesday following a raid by federal agents that temporarily closed the facility to the public.
But not before raising fears about the possible hit the closure could have on workers and the city of Bell Gardens where it is located.
Dozens of law enforcement officials with the Los Angeles High Intensity Financial Crime Area Task Force — which includes the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE), IRS Criminal Investigation, the California Department of Justice, Bureau of Gambling Control and the United States Attorney’s office — descended on the property around 7:00 a.m. Tuesday to execute a search warrant. Sources, speaking on the condition of anonymity, said the warrant was related to money laundering by “high-rollers” who frequent the gambling facility.
Bell Gardens police have in the past taken part in these types of joint federal task forces, but told EGP Tuesday they were not involved in Tuesday’s raid.
It is not yet clear what the task force was looking for because, according to Virginia Kice of U.S. Immigration and Customs Enforcement, “The search warrant issued by a United States magistrate judge was filed under seal in relation to an ongoing investigation.
“Because the warrant is under seal, we are not able to comment on the scope or nature of the investigation.”
The task force, however, is known to target money laundering, so there’s speculation Tuesday’s raid could be related to organized crime.
The Casino did not respond to EGP’s request for comment, but in a statement released prior to the reopening, said: “We are serving our customers and resuming normal operations immediately. Our priority is to provide a safe and fun environment for our guests.”
With the exception of a few hotel and casino managers, most employees were allowed to leave the premises Tuesday.
Boxes of items believed to be financial documents were removed from the Casino. No arrests were made.
As the raid got underway, players inside the Casino were told to leave immediately. Some were left scrambling to gather up their chips, unsure if or when they would be allowed to exchange them for cash. The Casino was closed to the public until 3 a.m. Wednesday, but hotel guests with a room key card were allowed inside.
News of the raid spread quickly through the small Southeast city, drawing people to stand outside the facility to get a closer look.
It also sparked conversation amongst neighbors, with some venturing their own ideas about the early morning raid.
Jorge Gonzales, a longtime city resident whose mother at one time worked for the Casino, told EGP he believes federal investigators are looking into criminal activity he says has been going on for years.
“I’m not surprised, it’s actually about time they look into what’s going on here,” he said.
“This place was put up with gangster money,” he said, referring to the Casino’s early history.
Founded in the mid-1980s, the Bicycle Club was seized in 1990 by the federal government after investigators said the club was partly built with laundered drug money.
For Bell Gardens City Manager Phil Wagner, retelling the past seems unfair.
“Some in the media have used the events of today as an opportunity to dredge up unrelated issues that happened 27 years ago when the Casino was under completely different ownership and management,” he told EGP in an email. “That’s totally unfair to the Casino and to this community.”
Many Bicycle Hotel and Casino employees live in Bell Gardens, so the raid Tuesday on the city’s top source of revenue is a serious concern to some residents, both for their wallets and their reputations.
“Most people who work here are honest, humble, good people,” said one employee, who did not want to use his name out of fear of putting his job at risk.
“The people gambling are not from Bell Gardens,” he added, implying the raid may have been targeting activity by foreigners.
Bell Gardens’ financial stability depends heavily on the Casino and Tuesday’s raid put the spotlight on the importance of that relationship.
“I can’t imagine what will happen if they close this place down,” said one worried employee.
“It’s not beneficial for the casino or the city” for it to be closed down, interjected a woman in Spanish.
The Bicycle Casino Hotel opened to great fanfare in December 2015. Gov. Jerry Brown was at both the groundbreaking and grand opening of the $50 million, seven-story, 100-room hotel.
In years past, nearly half of Bell Gardens’ General Fund revenue has come from the Casino. It is expected to generate $13 million in funds for the city during the 2016-17 fiscal year that ends in June, an amount projected to be slightly higher in 2017-2018.
While Casino operations appear to have returned to normal, a long time closure or the revoking of its license, or any event that results in a big drop in business, could have a negative impact on city finances. In 2012, for example, when Casino revenue dwindled to an all-time low, Bell Gardens found itself with a budget deficit that required a great deal of belt-tightening.
However, such drastic action – long time closure or revoking the Casino’s license – seem unlikely based on similar raids of other casinos.
Federal authorities last year investigated the Gardena card club formerly known as the Normandie Casino for violating anti-money laundering laws.
The partnership that ran the Normandie was ordered to pay about $2.4 million to settle federal charges that the poker club failed to report large cash transactions to federal authorities, as required.
As part of an agreement with the government, the four partners agreed to pay a $1 million fine and to forfeit nearly $1.4 million for failing to maintain an effective anti-money laundering program and conspiring to avoid reporting to the government the large cash transactions of some of the casino’s “high-roller” gamblers.
Under the Bank Secrecy Act, casinos are required to implement and maintain programs designed to prevent criminals from using the clubs to launder the large sums of cash that illegal activity can generate.
For example, casinos must record and report to the government the details of transactions involving more than $10,000 by any one gambler in a 24-hour period.
Wagner said he does not believe the current Casino owners and management are the targets of this investigation, citing reports that the probe is focused on individual gamblers who may or may not have used the casino to launder illegally obtained cash.
“Unfortunately for the many law-abiding customers of the Casino, its employees and the community which has suffered a great deal of negative publicity,” Wagner told EGP.
Longtime Bell Gardens resident Nury Balmaceda calls the Casino the working-class city’s “crown jewel.”
It “helped build all this,” she said, pointing to the surrounding development that now includes high producing retailers like Ross and Marshals and the newly opened Dunkin’ Donuts and Chipotle.
“It helped bring all these businesses here.”
She found the presence of ICE agents in the Southeast city, home to a large immigrant population, alarming.
“A lot of undocumented people may be afraid to come out,” said Balmaceda, who hopes nothing bad comes out of the raid.
In addition to city revenue, The Bicycle Casino Community Foundation provides scholarships for local students, recognizes local businesses and hosts an annual Christmas celebration for low-income residents.
“This is hit for the people of Bell Gardens,” Balmaceda said. “In the end we are the ones who will pay for it.”
An earlier version of this story was posted Tuesday to EGPNews website. Information from City News Story was use in this report.
The unveiling Wednesday of a much-anticipated luxury hotel in Bell Gardens at one of the region’s most well known venues drew elected officials from throughout the Southeast area as well as a second visit from California’s governor.
Gov. Jerry Brown was at The Bicycle Casino just two years ago to take part in the announcement of plans to build the $50 million, seven-story, 100-room hotel. At the time, local officials called the launch of the project a “momentous occasion” for the city of Bell Gardens.
“Today was one of the most exciting days for all of us here at The Bicycle Hotel & Casino, and for the city of Bell Gardens,” said Managing General Partner & CEO Hashem Minaiy on Wednesday.
“This is truly a dream realized and we look forward to welcoming our first guest in just a few short weeks,” he said.
The hotel is set to open to the public Dec. 1. It will feature a full spa, suites, an elevated outdoor pool, and event and private meeting spaces.
Guests at the Casino will also be able to enjoy luxurious accommodations along with live entertainment, dining and a drink at an on-site brewery and cocktail lounge. The hotel adds 230,000 square-feet to the Casino located near the 710 Freeway.
Bell Gardens Mayor Jennifer Rodriguez was among the handful of local dignitaries on stage saluting the opening of the new hotel during the elegant and festive grand opening ceremony which included lunch and entertainment.
The Bicycle Casino is the biggest economic engine for the city of Bell Gardens, which receives a percentage of the casino’s take from table games and poker tournaments.
Although the city’s reliance has decreased steadily over the years, at $11 million, casino revenues make up over 40 percent of the city’s general fund, according to the city’s 2015-2015 Fiscal Budget.
In addition, the $45 million-privately funded hotel is expected to generate $160,000 in new revenue from Transient Occupancy or bed taxes.
The opening of the hotel is expected to create 160 new permanent jobs in addition to the approximately 300-construction-related jobs while the hotel was built.
“Hashem and I set out to not only build a beautiful hotel for our guests, but a great property that can be shared with and enjoyed by everyone in the community,” said Robert H. Carter, President of Carter Management Group, Inc., a general partner of The Bicycle Hotel & Casino.
“Having the Governor, city officials and all of our guests here to see the hotel for the first time made this a most memorable day,” Carter said.
An increase in revenue coming from the opening later this year of a highly anticipated seven-story, 100-room hotel at The Bicycle Casino, could just be the winning hand Bell Gardens needs to keep its budget on the plus side.
On Monday, the city council approved a $27.9 million budget that includes a $211,000 surplus, most of which can be attributed to tax revenue the city receives from the Casino.
Lea este artículo en Español: Bell Gardens ‘Apuesta’ al Hotel del Casino
The Bicycle Casino is a “major revenue source” for the city, says Finance Director Will Kaholokula.
He said Bell Gardens receives a percentage of the Casino’s take from table games and poker tournaments, which should come to just over $11 million for the 2015-16 Fiscal Year; $1 million more than last year.
The higher revenues in the new budget are based on the “Casino’s strong performance in the 2014-2015 fiscal year and the anticipated completion of the casino’s hotel,” Kaholokula said.
While the city has for years depended heavily on revenue from the Casino to fund city services like police, parks, and street maintenance, that reliance has been decreasing steadily in recent years, dropping to 40% today compared to 50% in years past.
Bell Gardens Chamber of Commerce Director Mike Salazar, however, told EGP he still thinks the city is “depending on the casino way too much.” He is worried a period of poor performance could put the city’s finances at risk, as it has in the past.
His concern is not with the new hotel’s financial viability, because he does believe it will do well, Salazar clarified Thursday. He just thinks the city could improve how it supports other Bell Gardens businesses to make them more successful.
Hotel revenues peaked at $13 million in 2008 before bottoming out in 2012, dropping to $9 million during the widespread economic downturn. As a result, the city’s finances also hit rock bottom, forcing Bell Gardens to cut back on services and froze staff positions to deal with its more than $1 million deficit.
City Manager Phil Wagner told EGP he’s not worried about the Casino hotel failing. He said the city’s estimated revenue from the hotel is on the “conservative side.”
Even with construction going on, “people have continued to make their way to the Casino,” Wagner pointed out. Casino revenues are still increasing, he said.
“We can only expect positive results from the hotel.”
The $45 million privately-funded hotel, which will open its doors in the fall, is expected to generate $160,000 of the city’s $470,000 in “Other Revenues.” The money will come from a Transient Occupancy, or bed tax.
Adding in the bed tax puts revenue from the Casino back over 40%, says the Chambers’ Salazar, and to him that’s a concern.
But Wagner defends the city’s reliance on Casino revenue. Bell Gardens is not like its neighbors, he said.
“Other cities have various manufacturers, car dealerships and other sources of revenue, our major source happens to be a casino,” he said.
Salazar says he would like to see the city diversify its general fund revenues and do more to help local small businesses be more successful.
Bell Gardens’ community development director, Abel Avalos, thinks the city is making progress in that direction. He told EGP that 55 new businesses have opened in Bell Gardens this year alone, bringing new revenue with them to the southeast city.
Wagner points out that while their contributions to city coffers might not be as large as the Casino’s, local retailers Toys R Us, Marshall’s and Ross are among “the highest producing [stores] in their chain.”
The city has been renovating shopping centers located near the Bicycle Casino. There are rumors that restaurants and eateries such as Dunkin Donuts will be opening soon in those areas.
Wagner points out that there are no big vacant lots in the 2.4 square mile city. “We’re built out, we don’t have space,” he said. “The only thing we can do is look at what we have and how can we improve them.”
Wagner is confident that the hotel will be an attractive addition to people who normally play at the Casino. He said the city is making the area surrounding the Casino more attractive in hopes of getting Casino guests to spend their dollars or winnings within the city.
The hotel will add 230,000 square-feet to the Casino footprint, creating a resort-like venue conveniently located near the 710 Freeway. Once complete, it will be one of only a few luxury hotel and casino resorts in the southeast area.
The Bicycle Casino remains the city’s largest employer, and the hotel project has added 300 construction jobs and will create 250 full-time, hotel-related jobs when it opens. That’s good news in a city where the unemployment rate stands at 8.2%, two to three points higher than the unemployment rate for all of Los Angeles County.
During the recession, the city’s unemployment rate climbed to nearly 20%.
Overall, revenues in the city are up $2.3 million over last year, but the increase is offset by $2.4 million more in anticipated expenditures, most of which can be attributed to a rise in employee-related costs for CALPERS contributions, salaries, health insurance and liability insurance.
$200,000 will be added to the city’s $2.3 million reserve or “rainy day” fund, money set aside to pay for unexpected expenses like a water main break, Wagner said.
As in years past, the city-owned water utility continues to run a deficit, with fees falling below the actual cost of operating and maintaining the aging water system. The city has not raised customer’s water rates since 1994, and the city council has been reluctant to either increase rates or sell off the city’s water rights as recommended by city staff.
“Some decisions we have brought before the council in the past will have to be addressed soon,” Wagner told the council, referring to the utility’s estimated $1 million dollar deficit.
Public Works Director Chau L Vu said the city has nearly $5 million in proposed capital improvement projects next year. Projects include floor replacements at gyms, roof replacements, citywide traffic safety enhancements and illuminated street signs.
Grants and bonds and other monies not from the general fund will pay for the projects.
“I remember thinking it can only get so bad before it can get better,” said Councilwoman Priscilla Flores. “Now that we’re moving in the right direction I would like to see some things come back,” she said, referring to services and festivals cut during the lean years.
“We are slowly emerging from the recession but we need to be cautiously optimistic because it will take some time before we see the same level of tax revenues that were generated in the past,” Wagner responded. “We’ve achieved some short-term fiscal stability, but we need to remain frugal.”
[Update 3:02 p.m.] Adds information to clarify Bell Gardens Chamber Executive Director Mike Salazar’s statement on Bicycle Casino Hotel.