Bay 101 Casino in San Jose Friday, August 2, 2013. The owners of the casino are submitting plans to move next door to their competitor, M8trix. (Patrick Tehan/Bay Area News Group)

1740 North First St

Posted:   09/30/2015;  by Giwargis Ramona

SAN JOSE — When Bay 101’s card room competition reinvented itself three years ago as Casino M8trix, it went for all the dazzling flash of the Las Vegas Strip. But that’s not what Bay 101 co-owner Brian Bumb has in mind for the pending reincarnation of his club across the freeway.

“We’re not looking for the nightclub atmosphere,” Bumb said. “The M8trix was going for the glitzy Vegas look. And we’re looking for a more toned-down softer contemporary look.”

Construction is set to begin in May on the $100 million first phase of Bay 101’s relocation, which includes a new two-story building for the card room, a 174-room hotel rising seven stories and a 953-stall parking lot across 16 acres of land. The San Jose Airport Garden hotel, which sits on part of the land now owned by the Bumb family, will be razed to make way for the new Bay 101. It will cost nearly $900,000 to tear down the old Bay 101 building, Bumb said.

It isn’t quite the reinvention Bay 101’s owners had initially hoped for. They had sponsored a Milpitas ballot measure last fall that would have allowed the card room to move there and escape what the owners consider suffocating taxes, fees and regulations in San Jose — Bumb at the time said “our business will kind of stagnate” if Bay 101 stayed in San Jose. But voters rejected the ballot measure, foreclosing a Milpitas move. And with time running out on their current lease, Bay 101 owners turned to their fallback plans in San Jose.

Bay 101 owners have been searching for a new home since the land owner, realty group Peery-Arrillaga, sought to build a new 2 million square-feet office development at their current North San Jose site. While the identity of the “mystery tenant” expected to occupy the site remains a tightly-held secret, the project inevitably would have booted Bay 101 out of its home of more than two decades.

“They are happy the sooner we could move,” said Bumb, whose family also owns the San Jose Flea Market. “It’s better for them because this is part of their 2 million square-feet of development. We absolutely had to find a new home.”

The city’s planning director approved the site and architectural details for the relocation last month, and the City Council signed off on the land use a year ago. The second phase of the plan calls for a new 9-story office building, 10-story hotel and large parking structure, though it’s unclear how the new developments will be linked to Bay 101. Casino M8trix, now just a few blocks down the road, also has talked about adding a hotel on their site, though plans have yet to be submitted.

The new Bay 101 will trade its old-fashioned sports bar for a chic high-end restaurant in an effort to attract employees from North First Street businesses for lunch or happy hour and lure gamblers away from inland tribal casinos that now offer more upscale amenities.

“It will be more spacious and the lighting will be different,” said Bay 101 vice president Ronald Werner. “It’s like buying a new car. It’s going to have more bells and whistles.”

Avid card player Haydeh Rad, 68, hopes Bay 101 keeps its “cozy” environment.

“They know my name here and respect me,” she said, taking a break from Texas Hold ’em. “If they become like M8trix, I won’t go there.”

Recreational poker player Raj Khanna, puffing a cigarette outside the 20-year-old casino recently, said he’s excited about Bay 101’s makeover. But he has one major concern: “I just hope they don’t decrease the number of tables,” Khanna, 41, said. “If anything, they need more poker tables.”

But adding more game tables is one thing Bay 101 officials can’t do. San Jose voters in a 2010 ballot measure granted a modest increase in gaming tables — to 49 for each card room — along with an increase in the city’s tax on their operations, now 15 percent. Bay 101 owners, however, argue they need some 60 or 70 more tables to remain competitive with tribal casinos.

But when they sponsored another ballot measure two years later that would have allowed additional gaming tables without higher taxes on card rooms, San Jose voters said no thanks.

It’s just another squabble in the love-hate relationship between the city and its card rooms, a decades-long marriage that has weathered fights over money, rules and political power.

It’s not surprising, considering San Jose’s two card rooms generate a combined total of about $15 million a year in tax revenues for the city — more than its auto dealerships.

But the two card rooms have been locked in seemingly endless legal battles with the city.

San Jose and its card rooms settled years of litigation over city efforts to keep them closed part of the night and to bar some forms of betting. But they continue to fight in court. Casino M8trix lost a lawsuit over San Jose’s refusal to allow multi-floor gaming, which frustrated the owners’ plans to provide a scenic penthouse view for high rollers on the new $50 million tower’s eighth floor.

The city’s now eyeing a case the state Attorney General’s Office brought last year accusing M8trix owners of hiding profits to skirt city taxes and avoid contributing to a gambling addiction program. Co-owners Peter and Jeanine Lunardi agreed to pay more than $1.7 million in penalties in a settlement.

The Lunardi’s and M8trix’s card room licenses have since been renewed and are valid through February 2016, said commission spokeswoman Pamela Mares. Hearings against another co-owner, Eric Swallow, began in Oakland last month. His license is considered “active/stayed” pending the outcome of his hearing.

Swallow did not return calls for comment. If it’s determined Casino M8trix underreported its revenues, City Attorney Rick Doyle said the city will go after it for the difference in card room taxes.

Bay 101 is suing the city over what the card room’s attorney, James McManis, calls unjustly high fees that aren’t based on the city’s actual regulatory costs. Doyle said San Jose has adequately disclosed how the fees are spent and he’s confident a judge will see that.