Bars could get bigger cut of gambling profits

SALEM, Ore. (AP) – Oregon bars and taverns with video gambling machines would get commissions averaging just under 25 percent, under a proposal made Wednesday by Lottery Director Dale Penn.

The new rates for retailers’ share of gaming revenue would take effect after slot-type games are added this summer to the machines in bars that choose to feature them.

Penn told lottery commissioners that he believes his plan would mean more lottery profits for the average retail outlet, even though the average commission payment would drop from the current level of 28.8 percent of net revenue. That’s the amount of money paid, minus prize pay-outs.

The new games are expected to prove very profitable; analysts predict more than 80 percent of machine play eventually will be slot games instead of poker.

Penn said participation will be voluntary. The rate change would revise the lottery’s contracts with the 2,000 retailers around the state; retailers could opt to continue with only video poker.

Haggling over what share retailers should get from the new games has gone on since Democratic Gov. Ted Kulongoski in January directed the lottery commissioners to add slot games to machines to raise around $120 million to fund the state police.

Penn estimated that his plan would yield $124 million for the state.

Wednesday’s proposal was a shift from Penn’s previous recommendation, which would have limited commissions on the new slot-type games to 15 percent while keeping the 28.8 percent average commission for video poker.

Penn said he revised his plan because having separate rates for different types of games could lead to confusion and accounting problems.

Bar owners’ strong protests also figured in his decision, he said. Angry retailers at an earlier hearing had said few outlets would add to the new games at a 15 percent commission rate.

Penn’s new proposal didn’t pacify them, either. Tavern owners claim most retailers won’t sign up for slot games unless the commissions paid were around 27 percent.

Meanwhile, school advocates want less money to go bar and tavern owners and more to public education.

Jonah Edelman, executive director of the education advocacy group Stand for Children, denounced Penn’s recommendation as an "unjustified giveaway."

He said the proposal "continues a pattern of over-subsidizing tavern owners at the expense of school children and other state programs."

But Kerry Tymchuk, chairman of the lottery panel, said Penn’s plan coupled with a rate cut in mid-2004 would amount to a nearly 25 percent commission reduction in one year.

"For the life of me, I can’t see why you aren’t declaring victory," he said to Edelman.

Larry Curtis, president of the Shari’s restaurant chain, said a computerized analysis indicated the new rate would need to be 26.8 percent to convince all retailers to sign up for slot games and to maximize state revenue from the games.

He dismissed as "political malarkey" studies that have concluded bar owners could make money at the 15 percent commission rate. Shari’s makes less than 6 percent profit on the games at current commission rates, he said.

"It’s unfair to claim that a commission rate is anywhere close to a profit rate," he said.

Penn said after the meeting that he estimates about three-fourths of retailers would sign up for slot games by summer under his proposed rates.

The lottery nets almost $400 million a year for the state, most of it from the 10,000 video poker machines around the state. Besides education, the money goes for economic development, salmon restoration and state parks.