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Pull-tab stadium funding: Minnesota’s headache that won’t go away

MinnPost photo by James Nord
“The initial projections were obviously wrong," Dayton admitted Thursday afternoon.

The Vikings stadium is the headache that won’t go away for Gov. Mark Dayton and state legislators who believed they were done with this billion-dollar project a year ago.

The problem?

Revenues from electronic pull-tabs  aren’t producing near the revenue that was predicted when Dayton pushed the stadium bill through the process a year ago.

“The initial projections were obviously wrong,’’ Dayton admitted Thursday afternoon. “Now we have to make some corrections.’’

To date, “wrong’’ is a pretty mellow term to sum up the projection situation.

The electronic pull-tabs were expected to have grossed $35 million by this time. But, in fact, the gross from those devices is just $7.5 million.

There were expected to have been 900 sites in the state, with each device at each site grossing an average of slightly more than $200 a day.  In fact, so far there are just 130 sites and state budget officials are lowering their per-device estimate to $100 a day.

Not surprisingly, this has reporters already seeking villains in the story.

Jim Schowalter, commissioner of management and budget, refused to play that game. Rather, he said, a combination of a slow regulatory process and lack of marketing has led to the current situation.

MinnPost photo by James Nord
Management and Budget commissioner Jim Schowalter blamed the shortfall on lack of marketing.

At the moment, the favorite target of critics seems to be Allied Charities of Minnesota and its executive director, Allen Lund, who is a little surprised at the fingers being pointed at his organization.

“We were given the job of selling electronics for a stadium but no tools,’’ Lund said.

But Lund quickly adds that he’s not pointing fingers, either. In fact, the biggest surprise to Lund is that people are so quickly deciding that the key funding mechanism for the public’s portion of the stadium is a flop.

There are solutions to the immediate problems, he said. And he also said that the electronic games ultimately will produce more than enough money to fund the public portion of the stadium.

“The big problem is that right now the process is exasperatingly slow,’’ Lund said.

According to Lund, sites have been added so slowly for one major reason: Only two manufacturers and three distributors have been approved by the state’s Gambling Control Board to sell the devices in Minnesota. There are other manufacturers and distributors aching to get into the Minnesota market.

Still, he said, he understands why the process is slow. The background checks on companies selling gaming equipment is thorough. The last thing anyone in any part of the industry wants is a scandal involving a crooked company.

There is another reason that receipts have lagged, according to Lund.

He believes electronic bingo, if it is added to the mix, will be a big revenue spike. Ultimately, bingo will be a bigger revenue producer than the e-tabs, he said.

“Bingo  will be the horse that delivers the most,’’ Lund said. “We believe there are ways to move that forward quickly.’’

Under any circumstance, Lund said, it remains far too early for people to judge the bottom line of electronic gaming.

“There’s no money due this year,’’ he said.  “Panic is way premature.”

In fact, sales of bonds for stadium construction have been pushed back from this spring to Aug. 1 because of the later-than-expected start of construction of the stadium.

What Lund fears is that antsy legislators may develop new gambling games — such as keno — that would be run through the state lottery and bypass charities entirely.  Under the current bill, of course, the stadium and charities each get a taste of the electronic pull-tabs.

It is Lund’s contention that when the licensing procedure speeds up, demand for more machines in more bars will speed up. As more sites offer the e-pulltabs — and bingo — competitive pressure will grow for other sites to offer the games.

Meantime, though, the issue that pols hate and reporters seem to love has returned to the Capitol. Reporters are asking whether the stadium bill will be reopened. (That causes most, including Dayton, to wince.) There are questions about a “Plan B.”

Schowalter said the administration believes “Plan A still works,’’ but he quickly added that revenues are lower than expected.

“But it’s not an issue for today,’’ Schowalter said.

There is one reality that is clear about the revenue trickle.

“The head start [cash in the bank] we’d expected has been trumped,’’ Schowalter said.

Comments (7)

  1. Submitted by Hiram Foster on 02/28/2013 - 04:32 pm.

    Illusory agreement

    What seems to be the case is that the agreement on the stadium has turned out to be illusory. It was not a deal to finance a stadium but rather a short term deal designed to get us just far enough down the road so politicians could plausibly claim that we have gone too far to turn back.

  2. Submitted by Mark Fox on 02/28/2013 - 05:54 pm.

    Corruption or Incompetence

    As a gambling manager for a multi-million-dollar charity, I say the blame should be split between those Legislators who were in the Vikings pocket and the executives at the State’s Gambling Control Board. None of us in the industry believed the projections. But our top regulator, Tom Barrett, insisted that the numbers were sound. That’s either corruption or incompetence, as the evidence is now showing.

  3. Submitted by J Anderson on 02/28/2013 - 09:27 pm.

    Who in their right mind would have ever believed that you could fund a stadium with electronic pull-tabs. Since there was no possible way that a stadium would have passed through a vote by the people of MN, our politicians chose a fool hearty path that is going to cost the public for generations. Years ago the public spoke, and sent the North Stars packing to Dallas because we would not fund a new arena for them. The arena (Civic Center) was aged, but still usable for many years to come. Then Norm Coleman forced the city of St Paul to build the River Center, at the expense of the tax payers of St Paul. Same thing with Target Center, and Target Field. It is so easy for politicians to spend other peoples money. If I wanted to live in a communistic society, I would move to China. The people of St Paul are about to take another hit, when Norm Coleman’s brother Chris, shoves a Saints stadium down their throats. Saying that you should not elect these people again does not change what they have done. We will all be living with these decisions for a long time.

  4. Submitted by Dave Thul on 03/01/2013 - 07:29 am.

    Kill the bill

    If you went into a car dealership and hammered out a deal on a new car, only to have the dealer run a credit check and find out you didn’t make quite as much money as you claimed, you’d be laughed out of the dealership and be walking home empty handed.

    The governor’s administration, with help from too many Republicans, sold the stadium deal based on the fact that the revenue source was secure. Anybody who spends any amount of time around pull tabs could have told you it will never work. While electronic bingo does have possibilities, it will still never generate the amount of tax revenue needed to cover the stadium payment.

  5. Submitted by Hiram Foster on 03/01/2013 - 07:57 am.

    Secure revenue

    I find it hard to imagine that anyone really thought the revenue was secure. For one thing, the whole deal was done in such a hurry, that literally there wasn’t enough information available to anyone on which that conclusion could be legitimately based. The whole point of the last minute process was to avoid scrutiny. It’s the only way the deal could have been done.

  6. Submitted by Dennis Litfin on 03/02/2013 - 05:55 pm.

    Hey Republican Naysayers……

    Lets get those other 770 sites up and running before you go ga ga.

  7. Submitted by John Ferman on 03/05/2013 - 01:31 pm.

    e Pull Tabs misuse

    Those who play charitable gambling have as part of their motivation the helping of a charity. Given a choice of kind of pull tab, who many people would choose to enrich a wealthy man and his well paid team mates instead of the people who are served by the charity? I think few and see that as the reason the e pull tabs are not doing well. Moreover, since the e pull tabs are meant to raise revenue the percentage payout has to be smaller; how many people choose to just throw their money to the wind. Gamblers may have some problems, but stupidity isn’t one of them.

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