State Lottery Director Brenda Rocklin is recommending that average commissions the Lottery pays to bars and taverns with video poker be trimmed from 32 percent to about 28.5 percent.
State Lottery Director Brenda Rocklin is recommending that average commissions the Lottery pays to bars and taverns with video poker be trimmed from 32 percent to about 28.5 percent.
Rocklin issued her final recommendation Tuesday, estimating it would net an additional $20 million a year for the state over the next four years.
The Lottery Commission is to decide Wednesday on new compensation rates for poker outlets.
Rocklin's plan would allow Lottery retailers to choose from two rate options. Commissions paid to the 2,000 establishments with video poker, which accounts for 80 percent of the Lottery's total revenue, are based on net revenue. That's money played less prizes paid out.
A total of $159 million in commissions were paid averaging about $77,000 per retailer the last fiscal year.
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The Lottery panel's decision comes after hearings at which retailers argued against any reduction in commissions, saying the cuts would force bar owners to shave hours or even remove machines.
But critics say the commission payments are too generous and amount to a subsidy to the bars.
Rocklin said she believes her proposal — with rates of 19 percent to 32.5 percent depending on sales — meets the Lottery's legal obligations to maximize state revenue and to give retailers an adequate rate of return.
Commission critic Steve Novick of Portland pointed to several studies that have concluded that bars would make money on the poker machines with much lower commissions.
Rocklin's plan "is clearly illegal, and I hope the commission rejects it," Novick said.
The Oregon Restaurant Association continues opposing commission cuts and dislikes Rocklin's proposal to shorten retailer contracts from six to four years, said ORA spokesman Bill Perry.
Current contracts expire June 30. The association represents about one-third of the poker retailers.
"I don't think shorter contracts make good business sense," Perry said.
He said business operators "are going to be adjusting and trying different things" after payments are cut and it will take time to gauge the impact.
But Rocklin said she thinks a new commission system should be reviewed after two or three years to see how it's working.
Her plan would let retailers make an annual choice between two commission payment plans.
One plan would pay commissions of 32.5 percent to the smallest retailers, those with annual sales of less than $150,000. They make up almost one-half of the total poker outlets and now are paid the top commission rate of 35 percent.
Commissions would drop to as low as 17 percent as sales increased.
The other plan would pay 26 percent commissions on the first $650,000 in sales and 19 percent on sales above that. Rocklin said that option would give high-sales outlets more incentive to maintain or increase sales.
Perry said the average poker retailer has net annual sales of about $225,000.
That retailer receives about $77,000 in commissions under current rates and would receive about $68,000 under the most favorable new rate plan.
Source: Charles E. Beggs, Associated Press
