Upping the ante on pull tabs

20111101_pulltabs1_33.jpgStadium negotiators are focusing on electronic pull tabs again as a way to pay for a new Vikings stadium. But they’re seeing a little more opportunity there than before.

The most recent estimate by the Minnesota Department of Revenue now pegs the potential state net on a reboot of the state’s charitable gambling industry at $72 million annually. That’s up from about $42.7 million earlier last year.

Where’d the other $30 million come from?

It’s a number of things, according to state revenue commissioner Myron Frans.

The original estimate was based somewhat on conjecture: although the state of Virginia has passed a law authorizing electronic pull tabs, it has yet to be implemented. Florida has some similar machines that are part of the original basis of the Minnesota revenue calculations.

But financial experts and the state’s charitable gambling industry have been haggling over exactly what to calculate.

The original fiscal estimate contemplated an old-fashioned twist on the gambling expansion. The proposal includes so-called “linked bingo” that would set up virtual bingo halls in bars.

“Electronic bingo is making a resurgence,” says Frans, the revenue commissioner. “One of the drivers is that you can get some pretty high payouts… You have the chance to make a couple thousand if you win.”

Last year’s estimate split new gambling: half to electronic pull tabs, half to electronic bingo. But forecasters now think it’ll be more like 5-to-1 in favor of the pull tabs, and will bring in more money.

That’s one factor in the change.

Another is the virtualization of charitable gambling: “One of the assumptions from the first revenue estimate we saw back in March or April said that 95 percent of paper pull tabs would be gone in three years,” says King Wilson, executive director of Allied Charities of Minnesota. That’s him with an electronic pull tab machine in the picture above. “We told them the day that (estimate) came out, ‘That can’t be right.'”

The new estimate says that paper pull tabs will likely take a smaller hit — the new estimates put it at a 20 percent decline. That enduring draw is the second factor in the change to the revenue estimate.

The third is a little more complex: Frans says finance experts are rethinking some of the outside factors that affect charitable gambling.

“We lost a lot of charities because of the (economic) downturn and the smoking ban,” Frans says. There are about 2,700 charitable gambling sites with pull tabs now. He says there used to be about 250 more. “We think some of those will come back,” Frans says, if electronic pull tabs are authorized by the state legislature.

What that will mean for a stadium is unclear. Both fiscal notes contemplate no change in state tax law, which is what charities were seeking when they proposed electronic gambling in the first place.

“We have some charities paying 50, 60 percent tax rates,” says Wilson, head of the gambling trade group. He says his membership wants to roll back a tax hike dating back to 1989. “You look at the average corporate tax rate, maybe 8.9 or 9 percent, and some of our folks are paying five or six times what for-profit businesses are paying.”

How much of the $72 million in new revenue from a gambling expansion can go toward the state share of a stadium may depend on how much of that money goes toward tax relief for charitable gambling operators.

Read the revised revenue estimate here:

E-pulltab Revenue Estimate

  • davidz

    Who pays the difference in the case where the revenues do not come in as predicted in these estimates? If bonds are let using these revenues to pay them back, what other funding sources will be on the hook to be used to make up the shortfall?

    I recall all sorts of rosy estimates on how well horse racing was going to do in MN if only we’d allow it again. That hasn’t really panned out. Why should we mortgage a portion of our future against such fuzzy math?

    Why would anyone buy state issued bonds against this revenue source unless there was a general state backing (e.g., general funds, aka everything else the state is supposed to be doing) to ensure that these bonds will bepaid off. The numbers are clearly in flux (which is a fancy way of saying that they’re making *&*# up).

    If the state were to issue these bonds with the Vikings clearly and squarely on the hook for any revenue underperformance for electronic pulltabs, maybe this might be a reasonable way to try to fund a stadium. I’m pretty sure the team isn’t likely to back this.

    In the meantime, this just looks like a way for the state to make numbers up in order to claim that they’re not putting in general fund dollars.