The City Council has officially modified its privilege license fee for Internet sweepstakes establishments from $2,500 per machine to $1,000 citywide.

The move was approved in a unanimous vote following a ban of such operations by the North Carolina General Assembly last month. The city will bill the fee retroactively from July 1 to Dec. 1. If litigation allows such establishments to remain open beyond Dec. 1, the remaining portion of the privilege license fee will be due in full at that time, said city manager John Connet.

Connet first made the recommendation that the Council amend its previous action in a June memo, however the issue was continued while legislators mulled a statewide ban. Mayor Lew Starling called Tuesday’s move a “compromise” between the city and owners of affected businesses.

“I think it’s very fair,” said Councilman Steve Stefanovich, “not only reducing it, but doing it on a July to December basis.”

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. That number has stayed steady in recent months.

Like many other municipalities, Clinton enacted zoning regulations and privilege license fees earlier this year to help regulate the sweepstakes businesses. City officials said the fee is not to generate revenue, but rather to allow the city to cover its costs to monitor and service the businesses, while avoiding the cost of a lawsuit.

In May, the Council went forward with a $2,500 per machine privilege license fee.

However, in passing the law last month, the N.C. Legislature agreed to extend the 2006 ban on video poker machines to the sweepstakes games. Ban supporters argued the games were an end-around the previous ban while players gambled away their money, but owners of local establishments affected by the ban have taken issue with a law that will put many out of business.

Neil J. Hoover, president of H&L Enterprises Inc., which operates about a third of the city’s gaming terminals, said there are misconceptions about the businesses. He said crime and illegal activity are not what his and other operations are about, with retail and other services also being offered in addition to the sweepstakes. Misconceptions, Hoover said, will translate into lost revenue, jobs and livelihoods across the state.

Possible litigation against the city sparked talk of a reduction from the $2,500 fee.

Following the May approval, Connet and city attorney Dale Johnson were contacted by law firms representing the two largest Internet sweepstakes businesses in the area, including H&L and Triple S Internet Cafe. They said the $2,500 fee was excessive and violated federal law, referencing lawsuits brought against the cities of Kannapolis and Knightdale. In discussions with those firms, attorneys informed city officials of their clients’ willingness to pay a “reasonable privilege license fee of $500 to $1,000 per machine,” Connet stated.

Connet subsequently recommended the fee be reduced to $1,000. He formally presented that to Council members Tuesday.

“It’s never been about revenue,” the city manager has remarked. “It’s been about regulating these businesses. It’s been about recouping our costs as far as enforcement and monitoring these operations. It’s never been about generating revenue.”

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