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Charitable gambling not a big money maker locally

Janine Nelson has sold pull tabs at the Eagles Club for 12 years. With a sour economy, changes in liquor laws and a non-smoking ban at most establishments, business has plummeted, she said. "They don't come out and drink as much as they used to, don't play pull tabs like they used to," she said of the trends. (Sarah Smith / Enterprise)

Traditional milestones such as 25th anniversaries are usually celebrated with silver, gold if you make it 50 years.

But with Minnesota's quarter century of legalized gambling, the celebration will be in copper.

Because the state's Gaming Control Board recently issued a report stating charities, the presumed recipients of a $1 billion annual industry, saw a 3-cent return for every dollar spent in fiscal year 2010.

And that's if those 1,300 charities got the luck of the draw. Most are getting pennies for a return.

The Enterprise tracked nine area charities and their track record was typical of similar charities throughout the state.

The nine grossed $8,549,569 in sales and donated $91,611 to charity, about a 1 percent return.

"No they really don't" make much money, acknowledged Doug Syverson of the profit margin charities can anticipate.

Lofty plans by state lawmakers a quarter century ago to give charitable organizations a source of revenue from bingo, pull tabs, paddlewheels, tip boards and raffles simply haven't panned out. The gold has tarnished, dried up altogether in many areas.

Since more than 90 percent of gaming is pull tabs, that's usually what gambling managers are referring to. Pull tabs and bingo.

"The payout runs in this area between 75 and 85 percent," said Syverson, longtime manager of the Eagles Club's gaming division in Park Rapids. Without those percentages of prizes, the games would not attract many players, he said.

"It's been awhile since I tracked our payout but I think it's at least 90 percent," Syverson said. "You can't sell a box (of pull tabs) that has originally when it starts out, more than 85 percent of a payback."

Each game of pull tabs lists the percent of prize money paid versus what is taken in, usually around 85 percent. Syverson said most area charities don't hide that information from customers, so gamblers know which are the "hot games," the ones with the most winners outstanding.

Taxes and overhead eat up the remaining profits, he said.

A perfect storm of factors collided to dramatically decrease charitable gaming at all establishments, he said.

"We're down 60 percent from five years ago."

Tougher DWI laws and dram shop liability, along with non-smoking ordinances and a tanking economy all took their toll on clubs and gamblers.

Syverson said clubs with $1 million in gross sales five years ago now only have $400,000 to start from.

And, said pull tab seller Janine Nelson, "many of our customers aren't around any more."

It's not a game that appeals to GenX'ers. The "big time gamblers are gone," Nelson said.

Nelson said many regular gamblers are savvy about the percentages of winners in a particular jar. They'll play the game that returns 84.9 percent over the one that returns 84.62 percent even though "there's just a frog hair difference."

Of the nine charities studied, the two that seemed to donate the highest percent of net profits are the two fire departments that run gaming operations.

Nevis fire chief Kerry Swenson can't explain why there's a difference because the gaming industry is so heavily regulated.

"By law you have to give a percentage of it away," he said. "We can only use 30 percent of it. The rest has to be given away after expenses."

Swenson doubted there could be exceptions to allowable expenses that would account for the differences.

"You can only use a certain percentage for administrative costs," he said. "Otherwise you get put on probation. There's a lot of rules and regulations that you have to follow but we all follow the same rules. It may just be a difference in profits."

However, some charities can claim "other allowable expenses," which are primarily for property taxes and some building repairs.

"Ourselves and the Legion are allowed to pay utilities at the clubs if we have any money left over," Syverson said.

But between taxes and expenses, there's just not much left, he said.

Some charities pay rent to the establishment that houses their games.

State taxes begin accumulating by month starting July 1 every year, Syverson said.

"You're not taxed on your income whatsoever," he said. "You're only taxed on your sales so you can lose money and still pay $5,000 a month in taxes. Not a good thing."

Many charities have considered getting out of gaming altogether.

But Syverson hopes the trend turns around. And he doubts most customers know the small percent of monies actually go to charities.

Swenson said there's one place those monies are not going.

"None of it can go into our retirement account," he said. "I don't think people really realize how much we've given away in the past year and a lot of people think that goes into our retirement. It can't go there. That's one of the things we're trying to combat is all we're doing is getting fat off of pull tabs. That's not the case."

Sarah Smith

Sarah Smith is the outdoors editor. She covers courts, business and breaking news in addition to outdoors events.

(218) 732-3364
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