Electronic gambling, which hit Minnesota bars with great fanfare last September, did not raise a dime for the glassy new Vikings football stadium this year.
Minnesotans plunked down $15 million over the past year to play the electronic games, but 85 percent bounced back to players as prizes, new state figures show. That left about $2 million to be divided among charity expenses, donations and taxes — nowhere near the original projection of $35 million in taxes for the first year.
Ironically, the new stadium could end up getting some gambling money, but that’s because of a spike in sales of the humble paper pulltabs. They racked up nearly $1 billion in sales during the fiscal year ending in June, a five-year high.
The newest figures from the Minnesota Gambling Control Board have stadium backers breathing a sigh of relief that the state approved an alternate funding plan in May that no longer expects charitable gambling to contribute the $348 million state share of the stadium cost.
Gov. Mark Dayton, who made a Vikings stadium a top priority, said the year’s track record confirms that the e-pulltab funding formula was a gamble.
“To take an untried source of revenue for the sole source of funding for a major project is ill-advised,” he said Friday. “That’s my number one take-away from this.”
But, Dayton said, “We made an honest mistake and corrected it.”
Last September, Minnesota became the first state in the nation to roll out electronic pulltab devices. The governor and legislative stadium backers sold e-pulltabs as a way to fund the Vikings stadium without raising taxes. They predicted electronic games would create a boom in charities’ fundraising, in new young gamblers and in sales at host bars.
There were problems from the start. Wildly inflated sales projections were provided largely by the gambling industry. Charities were pressured to sell and sell fast. There was just one vendor. And the public wasn’t that interested in funding the so-called “millionaire’s stadium.”
Projected tax revenue from the e-games was slashed from the initial $35 million to $17 million to $1.7 million — all within nine months. By May, Dayton and legislators came up with alternate plan: a one-time cigarette tax and the closing of a corporate tax “loophole.”
A year of e-gambling shows the switch was critical.
Today, only 300 of the 2,800 bars and restaurants that sell paper games offer the electronic games, according to the Gambling Control Board. Total gross sales have hovered at roughly $1.8 million for the past four months: After prize payouts, about $280,000 was left.
The average net sales, per day per site, was $30 in August.
Revisiting the first five bars to sign on last September shows how sales vary dramatically by location. O’Gara’s Bar & Grill in St. Paul, the epicenter of the e-gambling rollout last year, reported after-prize revenue of $15.70 at its airport location in August and minus-$364 at its St. Paul bar and restaurant.
Mancini’s Char House in St. Paul reported net sales of $943 in August. Carbone’s CR Billiards posted net sales of $2,029. Howie’s Sports Bar in St. Cloud had $3,667: Monte’s Sports Bar in Spring Lake Park had $5,154.
Reports from the roughly 200 charities selling the e-games show that one-third earned between $0 and $500 in after-prize earnings during August. About 30 charities were in the red, and a similar number reported earnings of $500 to $1,000 and $1,000 to $2,000. Another 35 charities reported net earnings of $2,000 plus.
The games have not produced the predicted new revenue stream for charities, said Al Lund, executive director of Allied Charities of Minnesota.
Their $15 million in gross sales last year is just below earnings from paddle-wheel gambling.
“The impact on charitable gambling, whether for taxes or mission work, has been negligible to this point,” Lund said. “But we hope and believe at some point, it will have a significant impact on our ability to raise funds.”
That said, e-gambling has enjoyed some success with several charities and locations. Amanda Jackson is gambling manager for the Spring Lake Park Lions Club, which rolled out the iPad devices on Day One at Monte’s Sports Bar. Since launching the games there and at another site, the charity’s net revenue from its paper and e-games jumped $93,000 over the year, she said. The increase in paper pulltab sales contributed to that total as well, she said.
The St. Cloud Youth Hockey Association, which launched e-pulltabs on Day One at Howie’s, also is pleased, said Laurie Hayward, gambling manager. The key to getting people to play, she said, is to keep the gambling devices visible and have staff ready and willing to teach customers the games.
“If they’re not out there, people aren’t going to ask for them,” Hayward said.
Meanwhile, a small group of bars are consistently raking in cash. Tiny Porky’s Bar in St. Paul reported nearly $95,000 in gross sales in August and $18,000 in after-prize revenue. Mully’s on Madison in Mankato had $74,000 in gross sales and $13,000 after prizes.
Tom Barrett, executive director of the Minnesota Gambling Control Board, which came up with the initial projections, said this year’s experience shows that when the bars and charities work together to promote the games, they can generate money.
It also shows the importance of advertising and marketing, something the e-games have lacked. The Minnesota State Lottery has $6 million a year to pay for billboards and ads, he said. Charities and bars can’t afford that. Meanwhile, e-bingo, which rolled out earlier this year, was expected to help turn the tide. But e-bingo ran into some technical bugs initially and is still figuring out how to attract enough players at one time to make the payouts attractive.
A magnet for the young?
Another prediction was the games would attract a younger generation of players. But gambling managers say that’s not exactly right. The e-games attracted young and older players but generally folks who didn’t play paper pulltabs.
The serious paper players know how to “read” a pulltab game and maximize their chances of winning, they said. They can’t do that with the video games. But Hayward believes the e-games are drawing a younger crowd to her bars, at least in the afternoons when she works.
Political analyst David Schultz said e-gambling has served its purpose. It got a Vikings stadium bill through the Legislature. He remains incredulous that nobody in government knew that the sales projections were so off or that they had come from the gambling industry.
A year after the failed experiment, e-gambling is now reverting to what it was — an interesting idea to explore at local bars and restaurants. Charities are rethinking ways to attract new players and possibly new marketing. But they are now saddled with a legacy of bad publicity and ties to the Vikings stadium.
“Absolutely no one would say, ‘If we could do this over again, we’d do it this way,’ ” Lund said.