What happened to e-pull tabs?Revenue is down nearly 100 percent from projections. Bar owners dismiss e-pull tabs as not worth the cost and a hassle to install. Gamblers say the electronic games just aren’t that much fun.
By: Tim Nelson, MPR.org/100.5 FM
Gamblers would love electronic pull tabs. Cash would flow and the state’s cut from the new games would pay the public share of a new Vikings stadium.
That’s what Gov. Mark Dayton and other politicians predicted.
A year later, that billion-dollar promise mostly has been a bust. Revenue is down nearly 100 percent from projections. Bar owners dismiss e-pull tabs as not worth the cost and a hassle to install. Gamblers say the electronic games just aren’t that much fun.
A fiscal train wreck? More like a plane crash, Dayton told MPR News.
“The National Transportation Safety Board says that in an airplane crash, there’s seldom just one factor, one mistake that is the sole causation, and I would say in this case as well,” Dayton said in a recent interview.
“You know, there were multiple errors made, and in hindsight, obviously we were terribly wrong. But everything, as far as I know, was done in good faith with the best of intentions.”
The NTSB typically identifies who’s at fault in plane crashes. A year into e-pull tabs, people are still picking through the pieces, trying to understand what happened.
“We all agreed that we didn’t want to use general revenue funds, so this was a new source of revenue, and one that everyone who was involved appeared to believe,” Dayton said, who backed a hike in cigarette and corporate taxes to finance the Vikings stadium bonds after it was clear that e-pull tabs were falling short. “These projections were as good as anybody could do.”
Few see the situation as clearly now as former Republican State Sen. Amy Koch.
As Senate majority leader in 2011, she was among the inner circle debating a stadium deal, and eventually voted to approve the plan in the Senate. After she left the Legislature, she bought a Maple Lake bowling alley and the bar and grill attached to it, complete with an e-pull tab business.
Koch now says the state got some key things wrong when it banked on electronic pull tabs.
First was the expectation that 2,500 bars would install more than 15,000 games as fast as they could plug them in. The latest count has about 300 bars and only about 1,300 games.
“(For) the bars, it’s incredibly expensive to put them in,” Koch said. “I’m not a big bar. There are smaller bars yet. There’s no way they’re going to be able to afford to buy equipment and take six, eight months to pay off your investment and then see maybe a couple hundred bucks a month. It’s not worth the trouble.”
Meanwhile, she says many customers still prefer paper pul ltabs — and that’s been true all over the state. As electronic pull tabs have flopped, regular pull tabs are actually booming. Charitable gambling revenue overall was up by 8 percent last year over the year before.
Why e-pull tabs?
The deal that included electronic pull tabs was attractive to lawmakers because it didn’t require a tax increase or spend general fund money, which both the governor and legislators ruled out. Charitable gambling had been filling state coffers for decades and the state needed the money quickly, because the NFL was threatening to relocate the Vikings.
But the idea was untested: Minnesota was going to be the first state in the U.S. to roll out the games.
Koch says the government shutdown in 2011 also made it harder for lawmakers to voice doubts about the prospect of easy dollars rolling in.
“I think there was healthy skepticism of them,” she said. “But you add to that the political pressure of the stadium, you add to that you know a governor that wanted to get a stadium done. And, of course, we learned in the budget battle that the governor’s agencies, their numbers, were the gospel.”
Dayton says he still trusts the Department of Revenue and the state’s Gambling Control Board, which came up with the projections.
Gamblers say it’s easy to see what went wrong.
Sharri Moen plays e-pull tabs in Amy Koch’s bar. Moen is exactly who the state had in mind when it legalized the games.
“It’s something fun to do … and it’s right in town,” she said. “So instead of traveling an hour and a half to go to a casino, and have fun there, we get to come to a bar, and we’re only 10 minutes from home.”
But she and player Bob Wold, who have tried different versions of the games, say many of the e-pull tabs aren’t much of an improvement on the old-fashioned pull tabs.
Some machines are “very interactive, like a slot machine, pretty fun,” Wold said. “Other ones, they’re basically just like paper ones, except that they go beep.”
That’s reflected in revenue figures.
The iPad games from one company, Express Games, took in an average of about 100 dollars a day on each iPad last month. That’s eight times as many bets as the next biggest competitor, per machine. And some of lower-performing machines took in less than $2 a day in August, on average.
That compares to the $225 a day, per machine, the state was expecting.
The Vikings stadium and electronic pull tabs may have been doomed from the start, said Al Lund, who heads Allied Charities of Minnesota, which represents about half the state’s charitable gambling operators.
While the e-pull tabs promised excitement, operators were reluctant to break out of their old habits, using the same games and the same suppliers they’ve been using for decades, Lund said. “The loyalty that charities had to their distributors was underestimated,” said.
Looking back, he says it was unrealistic to expect the business could grow so large. The state projections suggested e-pull tabs could rival the estimated size of tribal gambling in Minnesota in a matter of months.
The problems though, aren’t a reason to give up on electronic gambling, Lund said. The distribution, accounting and playing experience of electronic pull tabs have a clear advantage over the paper games and probably will give charities more money for more causes in the long run, he said.
“If there were no examples of people that had taken this new technology and run with it and had great success, I would be in the camp of people that said maybe this wasn’t a good idea,” Lund said. “But I looked at the top 10 sites in August and they netted $81,000. I would call that good. Is it as good as we’d hoped? Absolutely not.”
In the end, Dayton says it now doesn’t matter much what happens to e-pull tabs, at least for the construction of the Vikings stadium. A one-time cigarette tax and a new tax on out-of-state corporations are expected to pay for most of the mortgage payments on the state’s share of the stadium.
“There’s every indication that closing some of the corporate loopholes is also going to meet its mark, and we’ll have the stadium adequately financed for as long as anyone can foresee,” he said.
The state will test that promise this fall. Minnesota is expected to borrow $498 million for the new stadium and break ground on the new facility sometime soon after Nov. 1.
Minnesota Public Radio News can be heard in Duluth on 100.5 FM and online at MPRNews.org.