Tensions building over charitable gaming

MILFORD — One word can change everything when it comes to the tensions between members of Delaware’s Advisory Council on Charitable Gaming and state finance leaders, but it won’t help differing opinions.

The word is “connect.” 20150315_155719

The Advisory Council on Charitable Gaming (ACCG) is made up of state officials and representatives of veteran, fraternal and service organizations that employ electric slot machines — called video lottery machines in the First State — to support their operations which include charitable community giving.

In the 1980s, the state of Delaware enacted a law allowing charitable clubs, fraternal orders and some fire departments to have working slot machines. The law laid out stipulations like, allowing only members of those organizations to play the machines. The law also said that the organizations had to be “connected” to the state lottery office.

The original law was written before the internet was a thing. “Connected” has a new meaning now in the Internet Age. The intent of the original law could only mean that the entities permitted gambling machines had to regularly communicate with state officials.

The word stayed in the 2013’s SB 112, an Act to Amend Title 29 of the Delaware Code and Volume 79 of the Laws of Delaware relating to lotteries. The bill and subsequent law, sponsored by Sen. Brian J. Bushweller, D-Dover, redefined charitable gaming.
Interpreting the word “connected” and what to do about it, is where the opinions differ.

The 2013 law set out what organizations could have video lottery machines, how much of the money they raise with the machines they can keep, what to do with that money and how much they have to give to the state.

Delaware’s Secretary of Finance Tom Cook, Lottery Director Vernon Kirk and state leaders interpret the word connected as a call to action. They sought out a video gaming company that could supply the organizations with new machines that can connect via the internet directly to the state lottery office. After a selection process, the state chose Scientific Games in partnership with Williams Interactive to supply about 800 internet capable video lottery machines to charitable gaming organizations.

Even though Delaware already has licensed and approved video lottery machine vendors, they still opted for the international Scientific Games firm and its partners. The reason was connectivity.

“We are not casinos. We don’t want to be casinos. But we need these machines to create revenue,” said Russ Hall, veterans’ organizations representative on the ACCG.

The charitable gaming organizations don’t like the state’s machine choice because reduced, “revenue is the problem,” Mr. Hall said.
The current law states that 60 percent of the money played has to be returned to players in the form of winnings. The clubs and lodges get to keep 40 percent. The law further states that the state gets a cut of that 40 percent.

The “problem” with the company the state chose, is that it programmed its machines with the wrong pay-out percentages, 85/15, cutting the portion of revenues to charitable gaming organizations by more than half.

The organizations use this money to fund scholarships, help build ramps for the disabled, buy fuel oil, clothes and food for the needy, pay for housing for homeless and donate to other charitable causes.

Last year, the state sanctioned charitable gaming organizations combined gave away more than $2 million to their communities. The state took in $1.3 million for its general fund.

“The $1.3 million was a surprise to us,” said Sec. Cook during a discussion at the March 10 ACCG meeting.

If the state agreed to remove the word “connected” from the law by writing and approving a new bill, it would allow the organizations to legally refuse the state’s machines and continue with their current vendors.

The reporting procedure now consists of a form, created by the lottery office that has to be filled out by the organization and returned to the lottery. The state doesn’t like the current procedure because the reporting is inconsistent. Some clubs have been late with their accounting and others don’t use the form.

“I don’t want people turning up in the lobby of my office with numbers written on napkins,” said Delaware’s Lottery Director Mr. Kirk.
The state required every charitable gaming organization to set up a special bank account that the state could automatically access to get its share of the gaming revenue. Sec. Cook said collecting the money has never been a problem, it’s always been there. He doesn’t like the accounting process.
The state currently has its machines in seven sites out of the more than 50 approved locations. According to numbers provided by Mr. Hall some of those lodges are losing considerable amounts of money with the new machines. According to numbers provide by Sec. Cook, the state’s machines are performing well. Sec. Cook said the differences come from how the numbers were tallied and assumptions Mr. Hall made in his accounting.

“This is an inexact science,” Sec. Cook said.

Scientific Games has told state leaders that it will not go back and reprogram its machines to the Delaware percentages because it’s not financially worth it to them to do so.

After the passage of SB112 the state created a pilot program that would test the Scientific machines and their connectivity. The law stipulates that all other machines have to be removed by June 30, 2015. Since Scientific’s percentages snafu, none of that has been accomplished.

The only way for the charitable gambling and in turn some of the organizations to survive is to increase their membership, which in a current trend of declining membership is next to impossible according to some of the ACCG’s members.

“We can’t advertise. We can’t give away cars or vacations. We aren’t casinos,” said Bessie Staab-Hickman, who represents fraternal orders like the Loyal Order of Moose and the Benevolent and Protective Order of Elks on the council.

Because the commission is still experiencing tension over words and differing opinions, Sec. Cook suggested that the group ask state lawmakers to give charitable gaming organizations a two year extension to its pilot program so they can look at how to make this process work for everyone.
If the extension isn’t granted, many clubs like the Veterans of Foreign Wars (VFWs), American Legions, Moose and Elks Lodges by have to close their doors forever, said Mr. Hall.

Managing Editor Logan B. Anderson can be reached at landerson@newszap.com. Follow @LoganBAnderson on Twitter.

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