The city of Clinton has amended its zoning code to include electronic gaming operations, with a set of stipulations as to how those establishments can be run. Whether those businesses will be subject to an additional tax remains to be seen.

The Council’s action earlier this month was made as more and more gaming operations pop up around the state and locally.

“We’re trying to be proactive with our zoning,” said city manager John Connet during a recent meeting. “We want to be proactive rather than reactive. This is a new phase we’re getting into with these gaming machines.”

According to a zoning amendment approved by the Council, an “electronic gaming operation” has been defined as “any business enterprise ... where persons utilize electronic machines, including but not limited to computers and gaming terminals, to conduct games of chance, including sweepstakes, and where cash, merchandise or other items of value are redeemed or otherwise distributed, whether or not the value of such distribution is determined by electronic games played or by predetermined odds.”

This does not include any lottery endorsed by the state.

The Council unanimously approved the amendment, along with several stipulations.

Among the stipulations placed on such operations, is that there are maximum of 12 machines per location; and that they only operate from 8 a.m. to 5 p.m. Monday through Friday.

According to the approved zoning, the establishment must be a minimum of 500 feet from any building used as a dwelling or in a residential district. It must also be at least 1,000 feet from any other electronic gaming operation, church or religious institution, school, daycare, library, public park, recreation area or movie theater. Also, no alcoholic beverages shall be served or consumed on the premises of the gaming operations.

Following the inclusion of stipulations, the Council approved a zoning amendment to include “electronic gaming operation” as a conditional use in a Highway Commercial district.

To tax or not to tax?

Coupled with the zoning amendments to include electronic gaming operations, Connet said it may also be in the city’s best interest to establish an annual privilege license tax to help regulate these businesses. As part of the proposed tax, every person engaged in electronic gaming operations could pay an annual license tax of up to $500 per machine.

“When we began to research this, (such tax) ranged from a few hundred to a few thousands dollars per machine,” said Connet.

The tax has been enacted elsewhere in part because of a loophole in the state of North Carolina’s gambling statutes. Some members of the gaming industry have discovered that it can bypass the gambling regulations by selling time over the Internet through the use of phone cards.

Connet stated that a customer can come in and buy a phone card with a specific amount of time, which the customer can then use to play games of chance over the Internet. If the customer wins, they are awarded credits on the phone card. The phone card is then cashed out by the customer for whatever cash is on the card. These operations are opening on a frequent basis in convenience stores and at freestanding locations.

No tax was approved by the City Council, and the matter was tabled.

City staff also has begun to evaluate the method by which it collects privilege license taxes. Currently using a flat rate model, Connet said additional revenue may be available is the city converts to a gross receipts model. Under the gross receipts model, the privilege license would be based on a capped sliding scale as opposed to a flat fee for businesses in a particular category, which would likely mean a “significant increase” for some of the larger retail establishments.

The comparison between gross receipts and flat rate was accepted as information, with no action taken by the board. Some Council members shared opposition to such a proposal.

“Businesses in good time or bad don’t need more mandates from government,” said Councilman Steve Stefanovich. “I have a real problem with it. We’re being taxed to death right now. This gross receipts thing is not right. If we continually keep taxing these folks, we’re not going in the right direction.”

Councilwomen Maxine Harris and Jean Turlington agreed.

“I think we need to hold back on this,” said Turlington.

“With the economy the way it is,” Harris added, “I don’t think the timing is good.”

Chris Berendt can be reached at 910-592-8137, ext. 121, or by email at sicrime@myclintonnc.com.