In May, the city of Clinton established a privilege license fee of $2,500 per video gaming machine for electronic gaming operations, with up to 30 machines allowed in a single establishment. Future action, including possibly reducing that fee, was tabled earlier this week after the N.C. Senate passed a bill that would ban video gaming operations.
“The Legislature will be doing something on this in the next couple weeks, so we will just table this until then,” said Mayor Lew Starling.
City manager John Connet stated in a memorandum to Council on June 15 that he and attorney Dale Johnson were contacted by law firms representing the two largest internet sweepstakes businesses. They said the fee was excessive and violated federal law, referencing pending lawsuits against the cities of Kannapolis and Knightdale.
The establishments are operating within the law, however there has been two bills introduced in the N.C. General Assembly that would eliminate or regulate these businesses. Less than a week after Connet prepared his memorandum, the General Assembly moved closer to banning internet sweepstakes on June 21 when the N.C. Senate voted 47-1 to criminalize the operations.
House Bill 80 would make all internet sweepstakes activity illegal as of Dec. 1, 2010.
Existing law prohibits local taxes on illegal gambling operations, so if the sweepstakes ban becomes law then municipalities could no longer levy taxes on the operations after Dec. 1.
Many cities in recent months have enacted zoning regulations and privilege license to help regulate the sweepstakes businesses. Those same cities have found themselves negotiating with these businesses or facing lawsuits, the “test case” being the one in Kannapolis, Connet noted.
In talks with firms representing the two local businesses, attorneys have informed city officials of their clients’ willingness to pay a “reasonable privilege license fee of $500 to $1,000 per machine,” Connet stated in the memo.
“If the city maintains the fee at the current price, they will be forced to pay under protest and wait for the outcome of the Kannapolis case or file a separate lawsuit against the city of Clinton,” Connet stated.
The city manager presented options for the Council at a special meeting earlier this week. Among the options were: keeping the fee at $2,500 per machine; reducing the fee to $500 or $1,000 and await final action by the courts or General Assembly; or set aside the May action until the August City Council meeting to determine what action, if any, will be taken by the General Assembly.
In the June 15 memo, Connet recommended the fee be reduced to $1,000, allowing the city to cover its costs to monitor and service the businesses, while avoiding the cost of a lawsuit. Following the N.C. Senate’s passing of the bill, which has now been sent on to the House, no action was taken by the Council earlier this week.
“I went to visit some last week while I was in town,” said Rep. Larry Bell (D-Sampson), a Clinton resident. “I went to the one over by Food Lion, and the one by Glam-O-Rama. They tried to convince me that everything was all right and that you could use (the machines) for more than gambling. I didn’t see anything else going on while I was there.”
That said, however, Bell said he does not see anything inherently wrong with the gaming establishments if they can be regulated.
“I don’t have any reason not to have it if it’s regulated,” said Bell. He noted that if there are going to be regular lottery games in which people can readily participate, video game establishments should be able to co-exist. “If you’re going to have one, you should have another. I don’t have any real problems against it.”
The bill’s lead sponsor in the Senate, Sen. Josh Stein (D-Raleigh) said 600 sweepstakes parlors now operate statewide, but some put the number closer to 1,000. A preliminary study by the Clinton Police Department showed that, as of the end of April, there were 89 machines at seven different locations within the city limits.
Now through the Senate, the anti-sweepstakes measure has returned to the House, where Bell doesn’t think it will be dealt with during the current session. Connet said he has had “conflicting reports” about whether the matter will be addressed during this session, noting in his memo he didn’t believe the matter would be resolved “in the next three months.”
Bell said he hopes a study can be conducted to see how towns could reap benefits from the gaming establishments. If the businesses are regulated, they could prove very beneficial to municipalities where they are located, especially during tough budget times, he said.
“Some towns have already incorporated that revenue into their budgets,” said Bell, who has heard some owners are willing to pay $1,500 per machine. “So (the businesses) are making some money. I think we need to talk with municipalities. If they’re causing problems, we can deal with it. If not, it could be a source of revenue.”
Rep. J.H. Langdon (R-Sampson, Johnston) said he will probably vote for the bill to ban the sweepstakes operations.
“I will probably vote for that unless it changes in committee,” said Langdon. “Many in communities are opposed to these (operations). There is something that is evidently going on in their community.”
Zoning changes and other regulations have been enacted on a local level to accommodate the businesses and the people around them. Some have been successful, others are having issues, Langdon said.
“I don’t have a problem with regulating it, if the majority decided they wanted to do that,” he remarked. “Evidently there are a lot of people that like this sort of stuff because they have a lot of clientele.”
Regular customers are far from the only ones affected. Langdon said there were “a lot of people” at the Legislative Building recently to make their qualms with the bill known. Many were owners or operators of such businesses, and the bill would have an apparent negative impact on them.
“I’m a person that like business to function,” attested Langdon, who pointed to video poker’s history in the state. “If it was run like it was supposed to be run, video poker would probably still be in North Carolina. That’s not how it worked.”
The bill has not been read in the House, and Bell does not think it will anytime soon. He said the bill should be looked at further before a vote is taken.
“It has not been read. I think most people don’t want (the bill) to come here,” he noted. “I really don’t think it will be dealt with in this session. If it did, it would surprise me.”
Langdon said any opposition, or changes, to the bill once in the House would delay it.
“If we change anything, it will have to go back to the Senate,” he said. “That would take at least three days. It’s really a tight schedule. (If there are changes), it’s liable to end up sitting there.”
Chris Berendt can be reached at 910-592-8137, ext. 121, or by email at sicrime@heartlandpublications.com.
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