NOT PLAYING AROUND
VIDEO GAMBLING PUSHED AS POSSIBLE LIFEBOAT FOR BARS
As restaurants and bars continue to suffer devastating losses from COVID-19 shutdowns across the state, a movement to bring in “video gaming terminals” appears to be gaining some traction.
“I think the expansion that we’re seeing is being pushed by the desire to kind of find another revenue source for the commonwealth,” said state Sen. Tim Kearney, D-26 of Swarthmore. “It’s been an issue that’s been batted around for years, and there’s all sorts of different definitions about what a ‘game of chance’ is and what the VGTs actually do and everything else, and there’s really strong feelings on all sides.”
The state has already been running a pilot program for VGT gambling at truck stops thanks to an expansion of gaming laws in
2017. The first terminals were approved in April
2019 and allow maximum bets of $5 with maximum payouts of $1,000, according to the Pennsylvania Gaming Control Board.
The minimum theoretical payout percentage for VGTs is 85 percent, the same as slot machines, with 42 percent of gross revenues going into Pennsylvania’s general fund. Another 10 percent of the gross revenue goes toward county-level grants, administered through the Commonwealth Finance Agency.
As of March, total wagers at VGTs for the 2019/2020 fiscal year totaled approximately $60 million, with more than $54.7 million in payouts. Those figures would be higher, but there was no terminal play in April and May due to the pandemic.
Jerry McArdle, owner of Jack’s Tavern in Media, said neighborhood bars and restaurants were already in a downturn before COVID-19 hit. The long closure has been devastating across the country, he said, and trade magazines are now estimating closure rates for small independent taverns could soar as high as 85 percent.
“Some places will not even open back up and the ones that do open back up may not be able to make it for very long,” he said.
McArdle, who has owned Jack’s for 36 years and also has another establishment in Lancaster County, said he was able to do takeout food and beer service, and more recently added a tent for outdoor service, but the revenue loss has been
“This proposal is nothing new. Bars and restaurants are very much in need of these. Before this (pandemic), we needed an extra stream of revenue to just keep afloat and be able to employ people in a very competitive market, so before this ever happened, we had been trying to get this.
And now that this pandemic happened, there is just all the more need.”
staggering.
McArdle was one of only about 50 or 60 bar owners to wade through a voluminous (and expensive) application process and background check to get a Small Games of Chance license a few years ago so he can sell pull-tab game cards in his tavern, and he believes he might still be the only bar owner in Delco to hold one.
Businesses like his have been advocating for VGT-style gambling probably since about 1986, he said. They got close once years ago, McArdle noted, but a bill passed by the state Senate and House was vetoed once it hit former Gov. Bob Casey’s desk.
“This proposal is nothing new,” he said. “Bars and restaurants are very much in need of these. Before this (pandemic), we needed an extra stream of revenue to just keep afloat and be able to employ people in a very competitive market, so before this ever happened, we had been trying to
Rick Meitzler, CEO of Illinois-based VGT manufacturer Novomatic Americas, said the devices are already present in a “grey market” of illegal gambling. Bringing them into the “street market” through legislation would allow the commonwealth to get in on that revenue stream while helping boost the “coin operator” trade, he said, and helping bars and restaurants get a few more sales along with a part of the take.
get this. And now that this pandemic happened, there is just all the more need.”
McArdle said there are a lot of “mom and pop” taverns and restaurants in Delaware County that make up the fabric of the community, and getting a little boost of revenue can help them continue to do things like host “beefn-beer” fundraisers, support little leagues, and donate money to groups like churches and American Legions.
“We’re just asking to be able to continue doing this, that’s all we’re asking for,” he said. “You’re not going to get rich off of these things, but it’s going to help you pay your bills, hire people. It’s just another revenue stream for people to stay afloat and be able to pay your employees.”
Rick Meitzler, CEO of Illinoisbased VGT manufacturer Novomatic Americas, said the devices are already present in a “grey market” of illegal gambling. Bringing them into the “street market” through legislation would allow the commonwealth to get in on that revenue stream while helping boost the “coin operator” trade, he said, and helping bars and restaurants get a few more sales along with a part of the take.
Novomatic manufactures and helps operate 230,000 such machines around the world, Meitzler said, and would open up shop in Pennsylvania to produce more in the state if legislation is passed. There is the added bonus for bar owners that police would help set up the machines rather than kick down doors to take them out.
Meitzler, who sits on the board of a lobbying group for VGTs called the Pennsylvania Video Gaming Association, said Illinois has taken in a little better than $2 billion since opening up to gambling in 2009. Terminals came online in 2012 and have helped businesses produce anywhere from $40,000 to $50,000 in the low end and as high as $500,000 annually in extra income at the top, said Meitzler.
“That really became a nice little added bonus to them that they could revitalize their bars, put some money into them, and it became a viable option for them,” he said. “And whatever their getting, the state’s getting the same, or about the same, so the state’s happy, bars are happy and obviously manufacturers like us are happy for providing games to a regulated market.”
PAVGA argues that expanding VGTs into licensed liquor establishments would provide bars and restaurants – as well as private clubs for things like veterans and fire fighters – the ability to fund raise, grow and improve their businesses.
Using Illinois as a model, PAVGA estimates the terminals could bring in $100 million in new tax revenue in the first year of operation and about $472 million annually when fully implemented.
The current structure of the pilot program allows up to five terminals per location and the same could be true for any expansion plan. Each terminal is a standalone device, which is connected to a centralized computer system monitored and run by the Department of Revenue – the same setup as with casino slot machines, said PGCB spokesman Doug Harbach.
PAVGA spokesman Jeff Sheridan said the group generally supports a model in which the “gross terminal revenue” – or the postpayout revenues – would be split equally between government, terminal operators and establishments.
“In PAVGA’s model, the commonwealth tax rate and local share account would equal 33 percent of GTR, and operators – who absorb the majority of the upfront cost and risk – would receive 33 percent of GTR, and establishments would also receive 33 percent of GTR,” he said. “This model would produce substantial new revenues for the commonwealth and local governments via the local share, while supporting small businesses. This operator-based model would mirror the successful legalization of VGTs in Illinois, which has been the most successful state to implement VGTs.”
State Reps. Jennifer O’Mara, D-165 of Springfield, and Steve Barrar, R-160 of Upper Chichester, don’t normally see eye-to-eye, but on this issue they agree: Small businesses need any help they can get.
“Anything we can do right now to help revenues but also to draw customers to our local businesses, I think would be a great idea,” said O’Mara. “Right now, we really have to focus on helping the people who were shut down for the last couple of months. Everyone needs to collectively come together and support our small businesses that are going to reopen.”
Barrar previously sponsored a bill that would expand VGTs and said they could be a boon to private groups and clubs like veteran’s organizations and fire companies. In the case of veterans groups, he said, the money would have to go to things like outreach for veteran services.
Barrar, who retires at the end of the year after 24 years in state office, said he hopes to bring the issue up on Monday when he returns to Harrisburg and get a bill to the floor as soon possible. The General Assembly is not known much for summer work, he said, but at this point there are too many issues facing the state to ignore.
Gov. Tom Wolf seems less than enthused, however, according to Deputy Press Secretary Kevin Hensil.
“There are a multitude of legal gaming options already available for Pennsylvanians to play, including lottery, ilottery, slot machines, table games, sports gaming, internet gaming, fantasy sports, etc.,” said Hensil, adding the 2017 gambling expansion has not even been fully implemented yet. “Any new gaming dollars will siphon existing gaming revenue streams that benefit Pennsylvanians, like the lottery fund and property tax relief fund.”
Kearney was likewise lukewarm.
“I’m not a big fan,” he said. “I’m not a big fan of gambling in general, just because I think it’s essentially like a vice tax, where we the commonwealth are able to make money off peoples’ desire to gamble. On the other hand, I don’t really care much about how people choose to spend their money either.”
Keaney said he feels for small businesses and clubs that could generate some cash from it, but said he still would not want to rush into creating a new way of trying to find revenue without carefully examining the potential impacts.
“Not that we don’t have a huge problem in the commonwealth in terms of revenue – we’re billions of dollars down from where we were this time last year in terms of dollars coming in – but I would prefer to sort of push this off and work on it in the fall when we have a little bit more time,” he said. “I don’t think it’s the answer for all of this. It may be part of the answer, but we need a little bit more time to figure that out.”