Gray Machines likely the next target for gambling expansion

By Delegate John Overington

October 10, 1999

The decision last week by the Lottery Commission to increase the number of casino gambling slot machines at the Charles Town Race Track by 50% is just the latest push by various gambling interests to expand gambling in West Virginia. The next battle in the legislature will be to legalize "gray machines" in some form, followed by an effort to make the four tracks more like casinos with roulette and card games, and moving the gambling to hotel lobbies from the track areas.

A legislative interim Committee on Gaming has been studying the legalization of "gray" video poker machines. Payoffs of these machines are not currently legal in West Virginia, although there are now thousands of them across the state. A report, "Census of Gray Poker Machine" by the Alcohol Beverage Control Administration and the West Virginia Lottery was provided to the committee last month. They put the number of machines at about 8895, although they may have missed ones at locations that do not have lottery or alcohol licenses.

BERKELEY HAS OVER 200 GRAY MACHINES In Berkeley County there are 99 gray machines at 19 of the 52 lottery licensees. The convenience store chains such as Sheetz, 7-Eleven, and Texaco have not added them. Gambling payouts are illegal and the machines may have internal ways to tabulate the revenues and tax liability. The 47 businesses licensed by ABCC have a total of 224 machines.

In Jefferson County, 21 ABCC licensed business have 93 gray machines while in Morgan County, 12 ABCC licensed businesses have 63 machines.

Although the machines may be advertised for entertainment only, it is hard to imagine anyone putting money into them if there were not the chance for a payout. Can you believe someone going to Las Vegas just to watch oranges, lemons, and cherries spin and come up in different combinations?

IRS COULD TAX REVENUE At the September interim meeting in Charleston, Leslie Kulick from the IRS gave a presentation on how the IRS could tax all of the revenues going into the machines. Since payouts are not a legal deduction, all money put into the machines would be taxed as profit (less the approximately 5% in machine cost and maintenance). If/when this is enforced, it could create a huge tax liability for those with the machines. In addition they could be prosecuted for illegal gambling.

Last month I was contacted about an employee of one of these businesses who was concerned about being required to make the payoff. Although the owner and employers would be charged, some of the liability would rest with the actual employee being required to make the payout. It is easy to see why the chain stores have resisted adding these machines.

"DON'T ASK...DON'T INVESTIGATE" As the gray machines spread across the state, something needs to be done. The "don't ask, don't tell, don't investigate" policy cannot last much longer.

Some advocate banning the machines outright and enforcing the law against illegal gambling with fines, revocation of licenses, even jail time, etc. Others are advocating legalizing them and taxing them. The latter would mean a major escalation in gambling across the state with the lure of additional revenues of $150 million.

STUDY RECOMMENDS GAMBLING MORATORIUM This summer, after two years of intense work, the National Gambling Impact Study Commission (NGISC) came out with its final report. It recommended a moratorium on further gambling expansion until more is known about the adverse effects on families and communities. Meantime West Virginia, with the help of big bucks from the gambling industry, is moving full speed ahead.

What can the state expect? Look at the gambling industry's past success to see its future approach. It revolves around one thing: money and the "something for nothing" mentality. The two elections in Jefferson County showed the dark side: an arrogance through a letter mailed out to track employees to intimidate the opposition. And big bucks trying to influence elections. In 1998 gambling executives and lobbyists gave tens of thousands of dollars in state legislative races. With each expansion of gambling the state becomes more dependent on gambling revenues. The gambling industry exerts more influence over county and state government.

"BIG BUCKS" INFLUENCE ELECTION The 1994 and 1996 elections show few counties can prevail against the industry's big bucks. In Jefferson County in 1994 the Race Track lost it bid to get voter approval of video lottery despite spending $74,259.01 against opposition spending about $5000. In 1996 the Pennsylvania base owner came back spending $524,241.79 to get 8107 votes ($64.67 per vote!) vs. $5607.19 ($1.23 per vote) spent by the opposition.

SOCIAL IMPACT OF GAMBLING HARMFUL The social impact over the long term will be harmful to the quality of life and preserving what make this area and state special and unique. With the expansion of gambling comes an increase in divorce, child abuse, domestic violence, bankruptcy, crime and suicide. Dr. Robert Hunter, a clinical psychologist who works with gambling addicts, called video poker the "crack cocaine of gambling."

Articles in Charleston's newspapers have documented men and women adversely affected such as the man who have tried to withdraw money from his 401k, or a middle-aged woman with a good credit rating now facing a $57,000 credit card debt, or the man who "vaporized" his son's savings and a certificate of deposit his wife inherited.

Gambling will always be around but should the state be promoting it, bringing it into our local community knowing that a certain percentage of the population will become addicts and it hurts the poor the most. It is one thing to have it in New Jersey and Nevada, out of reach for most people except for special trips, but to put the temptation locally and daily in our community will just invite more problems.

The challenge is for those opposed to get equally organized now for the next gambling expansion push. The gambling interests have been working aggressively for almost a decade in the political process. Those concerned with this growing trend needs to take this fight to their elected officials, well in advance of the next election and legislative session.

Delegate John Overington (R-54) is a 15-year member of the House of Delegates from Berkeley County -- 491 Hoffman Road, Martinsburg, WV 25401 (304) 274-1791 --