Thursday, December 06, 2012

MMB confirms what we all knew

The deal that gave us 'The People's Stadium' for the Vikings to play in was controversial for a host of reasons, most notably the fact that it crosses far over the line of what a government should be spending money on.  But when the details of the deal were released, some of us knew better than others that it was doomed to fail.  Now the results of that deal are starting to come in, and the news isn't good.

Electronic pull tabs (also called e-pull-tabs or E-tabs) were trotted out as the miracle solution to 'create' a new funding stream out of thin air.  While an economist could explain about the fallacy of creating new dollars in entertainment that didn't exist before and wouldn't pull from other types of entertainment, any member of the American Legion or Veterans of Foreign Wars in Minnesota could explain why E-tabs wont generate the revenue intended.

Many MN conservatives are not too familiar with the culture of pull tabs and charitable gambling that exists mainly outside of the metro area.  If you have never plunked down a couple of bucks on a meat raffle, chances are you are one of those conservatives.  My guess is that most of the legislators that negotiated the stadium deal (including the Governor) have little experience with pull tabs, yet they chose this specific form of gambling to fund a billion dollar project.

Simply put, pull tabs in outstate Minnesota is a sub-culture.  Pull tabs work much like a paper version of a slot machine.  Get a straight line of the winning prize characters and you win the amount of money listed.  Most people play a round figure, either $10 or $20 at a time.  Often people will play as a group, where 4 or 5 people all chip in $10 and split any winnings.  It's quite common to see gamblers buy $100 worth of pull tabs in a few hours, and a winning ticket is displayed triumphantly for the whole bar to see.  Top prizes can vary (and are heavily regulated by the state gambling board) but for a $1 ticket, $250 is a standard top prize.  Regulars at a bar will often remember who won a big prize recently, and who they think is due to win next.  Pull tabs are usually dispensed from a clear box like this one that start out with as many as 1500 individual tickets-

The display poster shows the larger prize amounts, which are crossed out with a marker when they are claimed.  This is important-by looking at the display poster, customers can tell how many large prizes are left.  Because the box is clear, they can see how many tickets are left.  Thus, gamblers feel they have a measure of control; buy more tickets when there are lots of prizes left but not many tickets in the box.  This feeling of control is not possible with E-tabs, which work almost exactly like slot machines, because there is an infinite number of 'tickets' and no set number of top prizes.

Also not available with E-tabs is a common setup for charitable gambling venues that do only a small volume of business; the self dispenser.  Most pull tab sales are done by a bartender, who sells and redeems winning tickets.  But for bars that don't see a lot of pull tab demand, they can instead have a self serve vending-machine type dispenser for pull tabs.  You feed a $10 or $20 bill into the machine and it spits out your selected tickets.  If you have a winner, then the bar staff is involved and you get your winnings directly from them, but since sales are the largest portion of the process, a self serve machine can cut down staff time considerably.  Again, self serve machines are not possible with E-tabs, because gamblers must hand over a valid Photo ID before getting a gaming tablet.

But far and away the biggest limiting factor in E-tabs use across outstate Minnesota is the mindset of those who oversee the most charitable gambling-veterans organizations.  In 2009, VFW's and American Legions accounted for just over 1/4 of all charitable gambling licenses in Minnesota, but accounted for over 1/3 of gross receipts.  My own post in Owatonna had receipts of over 1 million dollars in 2009.  The American Legion did better, with just over 1.3 million in gross receipts.  All together, charitable gambling in the city of Owatonna in fiscal year 2009 had 5.5 million dollars in gross receipts, with the VFW and Legion accounting for just over 40%.  Yet none of the charitable gambling venues in Owatonna currently use E-tabs, and none have committed to bringing them in.

So if VFW's and Legions are the prime movers in charitable gambling in MN, they should be hip deep in E-tabs, right?  Wrong.  Last week, at a meeting of the VFW 1st district (SE MN from Northfield south and east to the borders) the topic of E-tabs came up, and not one single VFW is using them.  Only two posts even had serious plans to introduce E-tabs.  The VFW posts in this district had just under $8 million in gross receipts in FY 2009, and only 2 of 30 are even looking at using E-tabs.

So the question is why Legions and VFW's are so unlikely to move into E-tabs?  The answer is complicated, but boils down to three main reasons.  First, demographics.  The average gambling manager and post commander is over 60 and set in their ways.  Most post officers and bookkeepers are volunteers, so they don't get paid for running the gambling operations.  But they are financially liable for any mistakes they make, meaning a simple gambling system is a safe gambling system.

Second is technology and a bit of Luddite-ism.  Despite efforts to get younger veterans involved, the majority of VFW and Legion posts in Minnesota have internet access only for email or transmitting legally required gambling reports.  E-tabs require a high speed always on internet access.  E-tabs are also 100% dependent on technology; a power outage or a computer virus means no gambling.  Paper pull tabs can be opened by candle light if necessary, and bar staff are familiar with the possible ways to scam the system.  E-tabs need additional plug ins, charging stations, always on wireless internet connections that are secure against hackers, and a big investment in training time for bar staff.

The third reason is survival.  The smoking ban that took affect in 2007 was a devastating blow to VFW's and Legions across the state, and resulted in a fair number of posts being closed.  Ever increasing taxes, ever more burdensome regulations (remember most bookkeepers are volunteers) and a recession that is dragging out into a fifth year are all taking a toll in posts statewide.  Faced with all of these issues, bringing E-tabs into a post is simply a bridge too far for most to consider. 

One last statistic to demonstrate what a bad choice it was to use charitable gambling in MN to provide revenue for a stadium. The 10 year history of gross receipts showed gambling down by almost 1/3 by the end of 2009-

FY 2010 and 2011 were down another 5%.  Although FY 2012 managed a slight increase, the FY 2010 and 2011 numbers were the most recent available during the stadium debate.  Hitching your wagon to horse that is already in decline was a bad idea to start with.  Looking to an untested and unknown new form of gambling to be a savior for a political mess made a bad idea rally dumb.

Good thing the Vikings are having such a good season to take our minds of the terrible stadium deal!


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