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Wednesday, 22 February 2012 20:34

Principles aside, Waynesville looks to tap a piece of sweepstakes action through hefty fees

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If you can’t beat ‘em, then you can at least benefit from ‘em.

Waynesville officials are considering joining the growing ranks of towns that impose fees on businesses that operate sweepstakes machines, a recent reincarnation of the previously outlawed video gambling.

“This board has always taken the position that one, these things are illegal; and two, we are not going to tax something that is illegal,” said Waynesville Town Manager Lee Galloway during a long-range town planning meeting last week.

The controversial machines have been through an “Are they? Are they not?” legal battle during the past few years as state legislators continue to try to outlaw sweepstakes machines and as proponents of the contraptions continue to find loopholes in the law.

“We’ve been back and forth on this a number of times,” Galloway said.

However, with no end in sight, Waynesville has decided to jump on the bandwagon. If they are going to exist anyway, why not benefit from them?

“There are folks out there that are going to find their way around (the law no matter what),” Galloway said.

At the same meeting, town leaders were grappling with where they would find money to build a skateboard park. During their talks about the sweepstakes machines, they realized they could kill two birds with one stone.

Aldermen decided to move forward with fees on sweepstakes machines to fund the skate park and other recreation initiatives.

“I think the idea of funding recreational activities would be appropriate,” said Alderman LeRoy Robinson.

The discussion led board members to another question: How much can the town charge?

Maggie Valley and Canton currently tax the sweepstakes machines in their respective towns. Both demand $2,500 for the first four machines and charge $750 for each subsequent machine. Maggie collects $8,250 a year, while Canton makes in nearly $32,000 each year. The town of Franklin makes $10,000 a year.

Galloway said that Waynesville will likely charge similar amounts. But, it could see higher benefits given the town’s larger size and potentially larger establishments.

A sweepstakes poker café opened on South Main in June 2010, and recently, two people have come into the police department asking for permits to start operations with as many as 40 to 60 machines — meaning that the new fee could be a boon for the town.

“According to Canton and Maggie Valley, they are standing in line to register machines,” said Bill Hollingsed, Waynesville’s chief of police.

No machine owners would be exempt from the new tax; no one will be grandfathered in. Waynesville will issue decals, which people can display on their sweepstakes machines, indicating that the device has undergone the proper inspection.

“They (machine owners) will not argue with that,” said Mayor Gavin Brown.

 

Future up in the air

While the fees could be a boon, it’s unclear just how long- or short-lived the fees could be. The sweepstakes machines could be outlawed, this time for good, once an appeal works its way through the state courts.

The General Assembly first banned video gambling in 2007. It didn’t take long before so-called “sweepstakes” cropped up as an alternative. Lawmakers viewed the sweepstakes as a reincarnation of video gambling under a different name, designed to circumvent the previous ban. So, the General Assembly went back to the drawing board and passed another ban in 2010 aimed at putting sweepstakes cafés out of business as well. But, lawsuits challenging the ban have allowed the games to continue.

“They found one judge in Greensboro, I think, who found one part of the law and said ‘Well, no, maybe this is not illegal,’” Galloway said.

The ambiguity, meanwhile, has left local law enforcement officers caught in the middle and confused about whether sweepstakes machines operating in their counties are illegal or not.

“The video poker law is unenforceable,” Hollingsed said. “It puts us in a bad position.”

Any gambling machine connected to the Internet is caught in limbo, and law enforcement officials cannot fine or arrest their owners without fear of being held in contempt themselves.

“It is very frustrating for us, I assure you,” Hollingsed said.

The only machines that are definitely illegal are stand-alone devices, including the Lucky Seven and Pot O’ Gold, which are not connected to the Internet.

“Those machines are clearly still illegal,” Hollingsed said.

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