Listen: TR7285_Pull tab year (Nelson)

In 2012, electronic pulltabs debuted in Minnesota, to much promise. They failed. MPR’s Tim Nelson takes a look back at what went wrong, and what's next.

Politicians predicted electronic pulltabs would bring cash flow and the state's cut from the new games would pay the public share of a new Vikings stadium.


2013 Minnesota AP Award, first place in Documentary/Investigative - Radio Division, Class Three category


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SPEAKER 1: One year ago, Minnesota switched on its experiment to use electronic pull-tab gambling to pay for a new Vikings stadium. But that billion-dollar promise has mostly been a bust. The most recent figures show revenue projections are about 98% off the mark. Reporter Tim Nelson has a look back at what happened.

TIM NELSON: If you really want insight into Minnesota's gamble on electronic pull-tabs, you might try lacing up some bowling shoes at the Maple Lake Bowl. But this isn't just any bowling alley. It's owned and run by former Republican State Senator 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 the bowling alley and the bar and grill attached to it.

AMY KOCH: The pull-tabs were in place when I walked in the door on December 1.

TIM NELSON: That could make Koch one of the only people in Minnesota to help make the games legal and now, at least in part, to make a living selling them. And it gives her some unique insight into what happened. Despite high initial hopes, Minnesota has all but written the games off for stadium funding. The state is tapping new corporate taxes instead.

Koch 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.

AMY KOCH: The bars, it's incredibly expensive to put it in. I'm not a big bar, but there are smaller bars yet. There's no way they're going to be able to afford-- 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.

TIM NELSON: That's the supply side. But the demand hasn't been there either. Koch says many of her customers still prefer the traditional paper games, and that's been true all over the state. As electronic pull-tabs have flopped, regular pull-tabs are actually booming. Charitable gambling revenue was up by 8% last year over the year before. Or to put it another way, the state wanted the games more than the gamblers did.

There a list of reasons. The deal didn't require a tax increase or spend general fund money, which both the governor and lawmakers ruled out. Charitable gambling had been filling state coffers for decades, and the state needed the money quickly as the NFL was threatening to relocate the Vikings. But the idea was untested. Minnesota was going to be the first state in the US to roll the games out. And Koch says the government shutdown in 2011 also made it harder for lawmakers to voice doubts about the prospect of easy dollars rolling in.

AMY KOCH: I think there was healthy skepticism of them. But you know, you add to that the political pressure of the stadium, you add to that a governor that wanted to get a stadium done. And of course, we've learned in the budget battle that the governor's agencies, their numbers were-- they were the gospel.

TIM NELSON: The governor remembers it differently. Mark Dayton says, the Republicans didn't concede to his position during the shutdown or the stadium debate.

MARK DAYTON: 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, never stated otherwise, that it was going to be sufficient and that these projections were as good as anybody could do.

TIM NELSON: But the governor acknowledges the plan didn't work out.

MARK DAYTON: The National Transportation Safety Board says that in airplane crashes, seldom just one factor, one mistake, that is the sole causation. And I would say, in this case as well, you know, there were multiple errors made. And in hindsight, obviously, we were terribly wrong. But everything was, as far as I know, done in good faith.

TIM NELSON: And Dayton says he still trusts the Department of Revenue and the state's Gambling Control Board who came up with the projections. The gamblers themselves say it's easy to see what went wrong. [? Sherry Moen ?] plays e-pull-tabs in Amy Koch's bar. And [? Moen ?] is exactly who the state had in mind when it legalized the games.

SPEAKER 2: Because it's something fun to do, you know? And it's right in town. 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, like, 10 minutes from home.

TIM NELSON: But she and player [? Bob Wald, ?] 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.

SPEAKER 3: Certain companies, they're very interactive, like a slot machine. Pretty fun. Other ones, they're basically just like paper ones except for they go beep.

TIM NELSON: And that's reflected in revenue figures. The iPad games from one company, Express Games, took in an average of about $100 a day on each iPad last month. That's eight times as many bets as the next biggest competitor per machine. And some of the 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.

That brings us to the final reason electronic pull-tabs fell short beyond supply and demand. Al Lund is head of Allied Charities of Minnesota, the charitable gambling trade group that represents about half of gambling operators. He says, charitable gambling operators were reluctant to break out of their old habits, using the same games and same suppliers they've been using for decades.

AL LUND: That was definitely in play. The loyalty that charities had to their distributors was underestimated.

TIM NELSON: In retrospect, Lund says the Viking stadium and electronic pull-tabs may have been a doomed match from the start. 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.

But Lund also says that isn't reason to give up on electronic gambling either. He says the distribution, accounting, and playing experience of electronic pull-tabs have a clear advantage over the paper games and will likely give charities more money for more causes in the long run.

AL LUND: If there were no examples of people that have taken this new technology and run with it and had great success, I would be in the camp of people that said, maybe this was not a good idea. But I looked at the numbers for the top 10 sites in August, and they netted $81,000. So I would call that good. Is it as good as we had hoped? Absolutely not.

TIM NELSON: But in the end, Governor Dayton says it doesn't matter much now what happens to electronic pull-tabs as far as the Viking stadium goes. A one-time cigarette tax and a new tax on out-of-state corporations are expected to fund most of the actual mortgage payments on the state's share of the new stadium.

MARK DAYTON: There's every indication that closing some of the corporate loopholes was going to also meet its mark. And we'll have the stadium adequately financed for as long as anybody can proceed.

TIM NELSON: The state will test that promise this fall. Minnesota's expected to borrow $498 million for the new stadium and break ground on the new facility sometime soon after November 1. Tim Nelson, Minnesota Public Radio News.


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