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Gov. Mark Dayton

Brian Peterson, Star Tribune

Dayton says gambling regulators failed to make data sources clear

  • Article by: Baird Helgeson
  • Star Tribune
  • March 25, 2013 - 8:22 PM

 

Gov. Mark Dayton’s administration said Monday that state gambling regulators should have been clearer from the outset that they relied heavily on gambling companies themselves to estimate revenues from electronic pulltabs that would help pay for a new Minnesota Vikings stadium.

“There should have been more transparency in this part of the process,” said Katharine Tinucci, a Dayton spokeswoman. The governor, she said, “was not aware of the particulars of where the information was coming from.”

That statement comes a day after a Star Tribune article disclosed that state gambling regulators relied on projections from the pulltab companies that potentially stand to gain the most from the state’s expansion into electronic gambling.

Legislators relied on those numbers in the final weeks of a rancorous and high-stakes stadium battle, in which Dayton staked enormous political capital on closing the deal and keeping the Vikings in Minnesota. Gambling regulators stressed to legislators and state officials that electronic gambling revenue would provide ample funding for the new stadium and boost the take for local charities that run the games.

But after nearly a year, only about 200 of the 2,500 projected electronic gambling sites have come online, causing revenue to be dramatically short of expectations. Some have said the state may need to look at another source of money to cover the state’s $350 million share of the nearly $1 billion stadium.

Administration officials initially projected that the games would yield $35 million in fresh tax revenue by the end of 2013. That estimate has since plummeted to just $1.7 million for the year.

Tom Barrett, executive director of Minnesota Gambling Control Board, said Monday that he had shared the original e-pulltab proposal with some gambling companies to see if they could identify any deal-breaking problems with his projections.

No state had done what Minnesota was contemplating, Barrett said, so there was scant reliable information on which to build a business model.

Gambling companies helped refine the proposal, but, Barrett said, “Vendors did not drive the plan.” Barrett said he did share his methodology with legislators as they were racing to piece together a stadium agreement that could pass the GOP-controlled Legislature.

The stadium financing scheme proved one of the toughest obstacles to finalizing the agreement.

Some legislators wanted a far more ambitious gambling expansion, like a downtown Minneapolis casino, but a strong and powerful contingent of lawmakers remained adamantly opposed to any new gambling.

That led to a compromise in which legislators settled on the relatively tiny sliver of revenue from an untested source — electronic bingo and pulltabs, played on devices similar to an iPad.

Charities had been pushing to expand into electronic gambling as a way to boost their revenue, which had been slipping for years. More than 1,200 Minnesota charities — from youth hockey groups to snowmobile clubs to American Legion posts — rely on gambling to fund their organizations.

Al Lund, executive director of Allied Charities of Minnesota, the main group promoting charitable gambling, said legislators and budget officials stopped consulting the nonprofit groups once stadium supporters started eyeing electronic pulltabs as a way to pay for the project.

“The governor wanted the stadium,” Lund said. “The thing took on a life of its own when it became about how to get a stadium passed.”

Lund is new to the position and said he was unaware that state officials were relying on numbers from the gambling industry as a way to sell the plan to lawmakers.

Former Senate Majority Leader Amy Koch, who controlled the Senate early in the stadium debate, said that many harbored strong doubts about the reliability of those electronic pulltab estimates — regardless of where the data came from.

“Everybody was suspicious of the numbers,” said Koch, R-Buffalo. “Everybody went, ‘Huh, how could that be? How could they be that high?’ ”

As part of the stadium legislation, the state created several backstops in the event that electronic gambling revenues fell short. One option calls for an additional 10 percent tax on suite sales in the new stadium, a scenario Vikings officials are trying to avoid.

Dayton and gambling officials say they are not ready to give up on electronic gambling.

Barrett said the plan should be given additional time. The top 10 electronic pulltab sites now up and running, he said, “are doing very well and greatly exceeding the estimates,” with more sites coming online daily.

Lund said the rollout might have been extremely sluggish, but the model could prove correct.

“What we would like to see is for everyone to take a deep breath,” Lund said. “Let’s just let it play out and see what the charities can do before any radical changes are contemplated or put into effect.”

 

Baird Helgeson • 651-925-5044

 

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