Charitable groups seek to cash in on slot machines

Veterans ask for permanent solution for video lotteries
March 19, 2013

Veterans in Delaware are calling on the General Assembly to develop a bill that allows them to keep slot machines in their clubs as a permanent source of revenue.

The House Gaming and Pari-mutuels Committee met March 13 at Legislative Hall in Dover to discuss the future of House Bill 1.  The bill was passed in January to temporarily allow the clubs to use slot machines as a revenue source, but the bill is scheduled to sunset in June.

Greg Patterson, Gov. Jack Markell’s deputy chief of staff, and Secretary of Finance Tom Cook have met with representatives of Delaware fraternal organizations to craft permanent legislation that would bring the clubs in line with Delaware law.

Patterson said more than 30 fraternal organizations in the state have been licensed under HB 1.  The state is taking 43.5 percent of the revenue from the machines, while the clubs take 56.5 percent.  “The organizations are making substantially less money now,” Patterson said.

In order for the clubs to operate the machines legally, Patterson said, a certain percentage must be given to the state.

Patterson said the permanent bill has not yet been drafted, but it will likely include the following provisions:

  • The Delaware Lottery must license clubs, and machine vendors must sign contracts with the state, not with individual organizations, as they had done before the law was enforced.
  • Only 10 machines would be allowed at each site, plus one additional machine for every 70 members over 500.  A maximum of 25 machines would be allowed per club.
  • Players could win 60 percent to 86 percent of what is put into the machines.  The temporary bill gives players back only 50 percent to 70 percent.
  • The state would take 40 percent of the revenue from the machines.  The organizations would keep 60 percent of the profits, 40 percent of which must be used for charitable donations.

Cook said if the General Assembly passes permanent legislation to allow the machines, the Department of Finance would begin tracking clubs’ profit from the slots, Wednesday, Jan. 1.  He said organizations would also be required to submit an annual financial report to his department.

Rep. Mike Ramone, R-Middle Run Valley, said the organizations should be required to follow the same laws as casinos.  “I understand how important this is to a lot of veterans’ organizations,” he said.  “I also understand this was against the law.”

Ramone said there are many charitable organizations that choose not to raise donations from slot machines, and the fraternal clubs should not be using the slot machine profits to fund operating costs.

Jeff Crouser of American Legion Post 2 in Dover said the post would not close its doors if HB 1 were allowed to sunset.  “However, all the community outreach we’ve been doing will cease to exist,” he said.

“We want to be made whole again.  Sixty-40 will not make us whole again,” Crouser said.

Bessie Staab-Hickman, government relations coordinator for Maryland, Delaware, D.C. Moose Association, said slot machines are critical to operations.  She said much of the profits from local Moose Lodges support Mooseheart, a home for children in Maryland, Delaware and Washington, D.C.

Staab-Hickman said if the lodges could not fund Mooseheart, the state would have to provide $5.5 million to feed, cloth and educate children without homes.  “We need those machines operating in order to keep us going,” she said.

Eight members of the public testified, and none were opposed to permanent legislation, but some thought it should be more inclusive.

Kenneth Shockley of Terrace Athletic Club in New Castle said his club is a nonprofit that donates to hundreds of charities.  He said Terrace could do more for its community if the bill was not limited to nationally affiliated fraternal organizations.

Paul Ogden, president of the Delaware Taproom Owners Association, said his association gives back to the community, and taprooms in Delaware would also like to be included in the bill.

John Mitchell, vice commander of Mason-Dixon Veterans of Foreign Wars in Ocean View said his post donates more money than it makes from slot machines.  He said charities trying to get slot machines now should have helped when veterans’ organizations were fighting for them in January.  “I feel like it’s a hitchhike,” he said.

Dover Downs Chief Executive Officer Ed Sutor asked the committee not to put a bill on the floor that would allow slots at all nonprofits in the state.

“We’ve never had a problem with the machines at these organizations,” he said of the fraternal groups.  “They pre-date us.”

Sutor said he hoped permanent legislation would not allow more than the 32 fraternal organizations that have already been licensed under HB 1.

Some veterans who testified, including Tom Jones of Dave Dolby AMVETS Post 2 in Long Neck and Richard Reynolds of the Maryland, Delaware, District of Columbia Elks Association, thanked Patterson and Cook for working with them to legalize the machines.  “Whatever you can do in our favor, we would greatly appreciate,” Reynolds testified.

House Minority Leader Danny Short, R-Seaford, had the final say at the hearing.  Short thanked the veterans who attended for working with officials to develop permanent legislation, and for their respect and professionalism throughout the process.

Police crack down on charitable gambling

Profits from slot machines have been used to fund donations from many fraternal organizations for more than two decades.

In November, many fraternal groups received a letter from Delaware State Police, informing them the machines were illegal and threatening to revoke liquor licenses if the devices were not unplugged.  The letter was dated Oct. 22, but many club leaders say they did not receive the letter until after the Nov. 6 election.

Hundreds of members of American Legions, Veterans of Foreign Wars, Elks and Moose Lodges and other groups held a rally at Legislative Hall, Jan. 10, in protest of the sudden enforcement.

The General Assembly passed House Bill 1 in late January, which temporarily allowed the groups to turn the machines back on.  Under HB 1, the organizations must be licensed by the Delaware Lottery; the bill is scheduled to sunset Sunday, June 30.


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