Gambling firms drove flawed Minnesota e-pulltab funding plan

The botched projections showing that electronic pulltab sales would explode in Minnesota and immediately start paying for a new Minnesota Vikings stadium were based largely on estimates made by gambling businesses with a vested interest in the new but untested form of charitable gaming, the Star Tribune has found.

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Electronic pulltab games

 

The botched projections showing that electronic pulltab sales would explode in Minnesota and immediately start paying for a new Minnesota Vikings stadium were based largely on estimates made by gambling businesses with a vested interest in the new but untested form of charitable gaming, the Star Tribune has found.

Sales estimates were based on different kinds of gambling devices played in other states, made by national gambling equipment managers and vendors, according to e-mails obtained by the Star Tribune. Express Games MN, the first e-game vendor approved by the Minnesota Gambling Control Board, reviewed and analyzed the sales estimates that were part of the final stadium legislation.

Charities selling the games had little input into the projections, according to e-mails and interviews with key players in the stadium debate. The e-mails also reveal the fine line walked by the board between being a regulator and an advocate for the new games, despite no track record with consumers.

Nearly a year later, those sales estimates turned out to be so wildly inflated that they’ve undermined the funding formula for the state’s $348 million share of the Vikings stadium, putting unprecedented pressure on charities to sell the games. State officials have acknowledged they may have to come up with an alternative funding source for the stadium.

Tom Barrett, executive director of the state’s Gambling Control Board, defended turning to gambling industry executives for sales estimates because Minnesota’s games didn’t exist anywhere in the country and they had sales expertise with similar games. In retrospect, however, Barrett said he would have consulted further with local charities and other Minnesota players.

“We would have looked to the industry, including charities, bars, manufacturers and distributors,” Barrett said.

The sales estimates were developed in the rush to find a funding formula for a new football stadium, and records show they were not challenged by the Department of Revenue or other fiscal analysts.

The Vikings lease at the Metrodome had expired, the team was threatening to move, and Gov. Mark Dayton and many legislators were committed to keeping the team in Minnesota.

Those estimates became the foundation for the state Department of Revenue’s projection that the new games would rake in $35 million for stadium funding by the end of this year.

In November, that figure was sliced to $17 million. In February, it was slashed to $1.7 million.

“There was a willful blindness ... driven by pressure politics,” charged David Schultz, a Hamline University political analyst and a professor of nonprofit law.

‘How do I build a model?’

While flawed, the gambling board’s sales estimates were extremely detailed, including the number of bars and restaurants that would adopt e-gambling, the number of devices in play, what hours they would be played and how much money would be wagered.

It projected 2,500 sites would be selling electronic pulltab within six months, or nearly 14 bars and restaurants joining in per day. Each site would have an average of 6.16 devices. Average daily gross receipts per device would be $225. Average gross receipts per bar or restaurant per day would be $1,386.

This model for estimating expected sales was recommended by Eric Casey, sales director at the California-based Planet Bingo, which manufactures electronic bingo games, Barrett said. Barrett said he called Casey, who has worked in the gambling industry for decades, and asked, “How do I build a [revenue] model? What are the factors that need to come in?”

Barrett said he also consulted Capital Bingo Inc., a California pulltab and electronic equipment manufacturer, which compared future Minnesota sales to its “electronic instant bingo” in Florida. Kevin Freels, president of Capital Bingo, later wrote a letter endorsing the board’s projections, calling them “reasonable and perhaps even a little conservative.”

Meanwhile, Jon Weaver, now president of Express Games MN, was in frequent contact with Barrett from March through May 2012, when the funding formula was approved. Weaver at times contacted Warren White at Acres 4.0, the first manufacturer approved in Minnesota.

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