One says he likely will “no longer be” if the video-poker rate is reduced.
Owners of two Salem restaurants and taverns joined a chorus of opposition Thursday to any reduction in their take from video poker machines.
They told the Oregon Lottery Commission that they will have to lay off workers, reduce operating hours or even close if their income from video poker is cut in the new contracts, which are up for approval in the next few months.
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“Every cost of mine goes up; nothing goes down,” said Mike Lewelling, who has owned Mike’s Steak and Seafood House for nine years and is a former chairman of the Oregon Restaurant Association.
“As my partner, I say to you that I am not going to get a raise this year. I think you have to say you don’t get a raise, either.”
A similarly blunt message was delivered by Jim Eastridge, owner of Magoo’s, another Salem tavern and eatery.
“The Oregon Lottery is successful because we are successful,” he said. “If there were to be some kind of reduction in commissions, I would be looking at reducing our hours of operation. In the end, it’s likely that Magoo’s will no longer be.”
But Steve Novick, a longtime critic of the compensation rates that the Oregon Lottery pays to bars, taverns, restaurants and others, said many would do just fine with lower rates, and the rest should not be in business.
Some real estate brokers said earlier that sales of some restaurants and taverns are caught up in the uncertainty about the pending rates.
“But somebody else will take over those taverns and continue to offer video poker,” Novick said. “It’s certainly not the job of the Oregon Lottery to subsidize people who make foolish business decisions.”
Novick said the state also has millions of dollars at stake.
“Based on the evidence I have seen, your predecessors were a disgrace to the state,” he said. “There is no other word to describe it. They gave away hundreds of millions that should have been spent on education, economic development, parks and salmon. They did that by approving contracts, which manifestly did not maximize revenue to this state.”
The Lottery Commission must decide in the next few weeks on compensation for about 3,400 retailers, 2,000 of which offer video poker. The current six-year contracts end in June.
The decision is entirely in the hands of the commission, three of whose four current members took office recently and are appointees of Gov. Ted Kulongoski. When voters created a state lottery in 1984, they empowered the governor to choose, and the Senate to confirm, the director and the commission members — but that was it.
When video poker started in 1992, the rate was a flat 35 percent.
The current rates are in four tiers, starting with 35 percent on the first $200,000 of net receipts and declining 5 percentage points for each additional $200,000, until the rate reaches 20 percent for net receipts of more than $600,000.
Not all of the supporting testimony for the current plan came from bars and restaurants.
“I believe that the Lottery Commission should not be influenced by the proposal that 15 percent would be a fair rate of return for retailers,” said Grover Simmons, who represents the Oregon State Elks Association. “It was arbitrary in 1994; it is still arbitrary today.”
A 15 percent rate of return is assumed in a new report from ECONorthwest, an economic consulting firm that estimated what minimum incomes from video poker would have to be for businesses of various sizes to cover costs and earn a profit.
Mike McCallum, president of the Oregon Restaurant Association, said his group has not had time to review that report. But he was critical of an earlier report from the state Audits Division, which concluded that Oregon paid more than video lottery operations in Canadian provinces.
“All these reports have done is raise the ire of Oregon Lottery retailers,” he said. “How that plays into more revenue for the state is hard for me to figure out.”
Rep. Billy Dalto, R-Salem, said the Legislature never intended the Lottery Commission to reduce retailer rates. “It would deal a serious blow to retailers and cause Oregon’s economy to stumble as we pull out of a recession,” he said.
But the 2003-05 state budget also assumes that the Oregon Lottery will generate $67 million more, which actually translates into $108 million because of required transfers. The only specific bill was for the Oregon Lottery to allow six video poker terminals in one location, instead of five.
“There may be some changes; there may be none at all,” said Stan Robson, a new Lottery Commission member from Sisters. “But I am trying to put it on the line that the Legislature put us on the spot — and we have to look at everything.”
Source: Peter Wong, Statesman Journal
