The fiscal news about electronic pulltabs was tucked away on Page 15 of the state’s November economic forecast. In two plainspoken paragraphs, the document’s authors noted that the devices, slated to generate the state’s $348 million portion of funding for a new Vikings stadium, had taken in only about half of the money projected by this point.
By the numbers, the machines are currently predicted to take in about $16 million for fiscal year 2013. That’s down from the $34 million projected earlier in 2012, when Gov. Mark Dayton and the Legislature teamed up to pass the $975 million stadium financing bill. Even that number was halved down from an original $72 million projection. By now, Minnesota Gambling Control Board executive director Tom Barrett had thought about 300 bars would be using the games, which are commonly played on an iPad. As of Wednesday afternoon, about 89 bars were officially using e-pulltabs in their establishments, he said.
“The forecast reduction reflects a slower than expected implementation of electronic gaming options and reduced estimates for daily revenue per gaming device,” the forecast read. “As a result, the stadium reserve balance is now expected to be $47 million by the end of 2017, $36 million lower than end-of-session estimates.”
The lagging numbers prompted the governor to immediately schedule meetings with the gambling board. He even mused that the devices could potentially be expanded to grocery stores. The timing wasn’t great for the governor: The low revenue numbers came just weeks after he had a public scuffle with Vikings ownership over charging one-time seat licensing fees to ticket holders to help pay the Vikings’ share of the stadium cost. That plan, Dayton said, had not been discussed while they worked on the bill.
As in the dispute over seat licenses, Dayton and his team worked to quickly smooth over any worries that the highly contentious stadium plan was running into trouble. While charities have been slow to embrace the new technology, Dayton predicted the problem would “resolve itself” as the e-pulltabs became more popular around Minnesota.
“We want to be sure that we are doing things right the first time,” Dayton Deputy Chief of Staff Bob Hume wrote in an email. “We do not want to rush implementation. It is more important to ensure the long-term integrity of the new gaming format than it is to meet temporary revenue targets.”
Making changes to increase revenue
After meeting with Dayton, the Gambling Control Board is pursuing a number of different avenues to increase revenue. At a recent meeting, the board approved new vendors of e-pulltabs and another electronic bingo game. Previously only one company had been authorized to sell the games. The board also gave the OK for bars at the Minneapolis St. Paul International Airport (MSP) to start using the games.
On Monday the Metropolitan Airports Commission opted to allow a pilot project to put e-pulltabs in six airport locations with the goal of attracting some of the millions of visitors to the airport each year. The airport already sells paper pulltabs and is one of the largest sellers of lottery tickets. MSP will be the first airport in the nation to offer electronic gambling.
Barrett acknowledges that the devices haven’t been catching on as hoped. “It has not been fast enough. That’s been the concern,” he said, noting that the “wait-and-see” attitude of the charities has been the most surprising factor.
But he says they have been in talks with the Allied Charities of Minnesota and the Minnesota Licensed Beverage Association (MLBA) — which lobbied hard for the expansion — to ramp up a marketing campaign to help more bars learn about the new option and how to get the games installed.
“There’s been no coordinated effort to promote this. This is not Mystic Lake or any of the other casinos that have huge budgets for marketing,” Barrett said. “These are charities doing this, and they are focused on their bottom line.”
There are currently about 6,000 bars and restaurants in the state that could have e-pulltabs, but Barrett says they are working off a list of about 2,500-2,800 bars that would typically have these kinds of games. Barrett says they are not currently looking at expanding to grocery stores, despite the governor’s comments. Pulltabs are currently only prohibited where on- or off-sale liquor is sold. One possibility is expanding the games to convenience stores and other locations that sell 3.2 beer.
“I’m still very optimistic given the increase in vendors and distributors and choices in games,” he said. “If you talk to some of those who have already used the devices in their bars, the response has been very good.”
Stadium revenue up for debate in 2014?
Dayton has said he sees no reason to reopen the Vikings stadium issue in the 2013 session, and that may be partially due to the fact that the dollars aren’t immediately needed.
Currently any revenue generated by e-pulltabs go into a reserve fund for the stadium, meaning there’s little pressure on officials to open the politically sensitive issue for debate again this session. The real action, some say, could come in 2014.
That’s when anti-gambling advocates fear that more gaming expansion could be back on the table if pulltab revenue is still lagging — anything from slots in bars to a racino to a casino in Minneapolis’ Block E area, one Capitol watcher predicted. Others fear a possible liquor tax increase.
“It’s kind of this hovering dark cloud,” the gambling observer said. “The bill itself to build the stadium backs the bonds out of the general fund if pulltabs don’t work, so if this doesn’t work, the bonds would be sold and the stadium would still be built.”
DFL Rep. Terry Morrow, who was one of the lead authors of the stadium legislation in the House, says a solution will likely be figured out before any legislative action needs to be taken. “It’s not a crisis by any means,” he said. “It’s probably more of a nuisance that is being resolved. It’s a small bump in the road. It’s not something that can’t be worked with.”
But Morrow, who announced his retirement from the Legislature on Wednesday, acknowledges that he doesn’t know what other legislators might do, either during the 2013 or 2014 session. Many raised concerns about revenue from e-pulltabs during the stadium debate. “You never know what a legislator is going to do, I suppose,” he said. “I would imagine if there is felt to be a concern, folks will look at some of those options discussed during the debate, anything from seat taxes to user fees. I just can’t see any reason for that to happen immediately.”
DFL Rep. Joe Atkins, a critic of the e-pulltab funding idea in 2012, said of the outlook, “I think it’s a little too early to say, now that we’ve got a couple more vendors approved. I think that will be much more telling in a few months from now, so I’m just trying to stay attentive to it but not get overly anxious and worried.” Atkins says if the numbers are still “stark” in a few months, he expects the Legislature will look at other revenue options this session.
For now, the slow start in revenues has earned Dayton and his team some bad press. The St. Cloud Times took the state to task this week in an editorial titled “E-pulltab push has a pathetic beginning.”
With the state looking to collect $348 million plus interest toward the Vikings stadium, the editors estimated annual state payments at $12.8 to $20.8 million over the next 30 years.“[I]f the next report on these pulltab profits again comes in lower than state estimates,” the Times wrote, “it could be time to get serious about alternative ways to make that stadium payment, whatever it is.”