Memo-Charitable Gambling
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Department of Administration I
Memorandum
To:
Hopkins City Council
Jim Genellie
From:
Date:
Subject:
May 9, 2003
Charitable Gambling
The Council wants to review and possibly revise the City's lawful gambling policy. There currently
is a moratorium on permit applications that is scheduled to expire on June 29, 2003.
Attached is the current policy - Legislative Policy 4-A.
Also attached is information that was generated for previous discussions of this issue:
. Lawful Gambling Regulation - 1999
. Revision of Lawful Gambling Policy - December 2, 1997
. Lawful Gambling Policy - October 10, 1997
\Admin MEMO doc
Except as otherwise enumerated herein, the provisions of Minnesota Statute Chapter
349 relating to the definition of terms, licensing and restrictions of gambling are
adopted and made a part of the statement of policy promulgated by the City of Hopkins
as if set out in full
An applicant for a license shall be a registered Minnesota nonprofit corporation or an
organization which is designated as exempt from the payment of income taxes by the
Internal Revenue Code and whose principal location or office is within the City of
Hopkins.
2.03 The organization defined in Section 2.02 must be engaged in its activities for the benefit
of the community within the City of Hopkins for at least five years on a perpetual,
continuous, uninterrupted basis and have at least 30 active voting members.
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1.01
2.
2.01
2.02
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POLICY 4-A
LAWFUL GAMBLING
PURPOSE
The purpose of this policy is to establish rules and procedures for lawful gambling in the
City of Hopkins.
REGULATIONS
2.04 Gambling allowed by the city shall be carried on only within premises owned, occupied
or leased by the organization except such activities permissible under M.S. 349.166.
2.05 No application for a premises permit will be approved for any organization to conduct
gambling on any premises other than the premises of an on-sale liquor licensee or the
premises of a fraternal, veterans or other non-profit organization. In order for a fraternal,
veterans, or other non-profit organization to conduct gambling on their premises, such
premises must have been continuously owned and occupied for a period of at least five
years. No application for premises permit shall be approved for any organization for a
site established for the primary purpose of conducting gambling. This section shall not
apply to any organization which is exempt from the requirement for a gambling license
according to M.S. 349.166.
2.06 A Class A license will only be approved for an organization that is licensed pursuant to
Minnesota Statute, section 349.16, and that conducts gambling on premises that it owns
and operates.
2.07 More than one organization, as defined in Section 2.02, may conduct gambling within a
single owned, occupied or leased premise. More than one organization may jointly
conduct a lawful gambling game at one location. However, two or more organizations
shall not separately conduct the same game at the same time at one location.
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Legislative Policy Manual -- Chapter 4-A
2.08 The operation of gambling devices and the conduct of bingo and raffles licensed or
approved pursuant to the authority granted to the City of Hopkins shall be carried on
under the supervision of a gambling manager designated by the organization. The
gambling manager shall be responsible for the operation of the gambling activity and the
receipts and profits generated from the operation.
2.09 The gambling manager shall be an active member of the organization issued the license
and shall qualify under state law.
2.10 Organizations seeking approval for a premises permit, that are not cUlTently conducting
gambling in the City, must provide the City, in addition to the application forms, a copy
of the minutes of a general membership meeting, where a quorum was present, wherein
the organization approved a motion authorizing the gambling activities.
2.11 Participants in raffles, paddlewheels, pull tabs and tip boards shall be restricted to
individuals who have attained the legal drinking age. This restriction only applies to
premises where liquor, wine, beer or 3.2 beer is served. Where intoxicating beverages
are not served the age shall be eighteen.
2.12 Organizations wishing to renew a gambling license must provide the City with a
financial audit of its lawful gambling activities and funds for the previous two years.
The audit(s) must be performed by an independent accountant licensed by the state of
Minnesota.
2.13 In addition, such organizations must provide the City with information on all
expenditures of lawful gambling funds during the previous two years. Such information
must include at a minimum the name of the recipient, the amount of the expenditure or
contribution, and a brief description of how the expenditure or contribution meets the
definition of "lawful purposes" as defined in M.S. 349.12. The City reserves the right to
require additional documentation from licensed organizations, or organizations seeking
licenses, as it deems necessary.
2.14 A fee of $100.00 shall be charged to all organizations submitting a Premises Permit
Application or Applications for approval by the City.
Established 11/19/85 by Resolution 85-3218
Revised 4/19/94
Revised 12/16/97
City of Hopkins
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Legislative Policy Manual -- Chapter 4-A
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1999
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LAWFUL GAMBLING REGULATION
Charitable gambling in Minnesota is controlled by the Gambling Control Board.
(Minnesota Statute 349) Licenses authorizing organizationsl to conduct lawful
gambling may be issued by the Board to organizations meeting the following
qualifications:
. The organization must have been in existence for the most recent three years
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preceding the license application as a registered Minnesota nonprofit corporation.
(Hopkins requires five years)
. The organization at the time of Iiceflsing must have at least 15 active members.z
(Hopkins requires 30 members)
. The organization must not be in existence solely for the purpose of conducting
gambling.
. The organization must not have as an officer of the governing body any person who,
within the 5 years before the issuance of the license, has been convicted in a
Federal or State court of a felony or a gross misdemeanor or who has ever been
convicted of a crime involving gambling or who has had a license issued by the
Board or Director revoked for violation of the law or Board rule.
. The organization has identified in its license application the lawful purposes on
which it proposes to expend net profits from lawful gambling. (M.S. 349.12, Subd.
25 defines "lawful purpose") .
. The organization has identified on its license application a gambling manager and
certified that the manager is qualified.
The term of the license is two years. Licenses may be renewed. The Gambling Control
Board shall not renew a license unless it determines that the organization is compliance
with all laws and rules covering lawful gambling and is not delinquent in filing tax returns
or paying taxes.
l"Organization" means any fraternal, religious, veterans, or other nonprofit organization.. (M.S.
349.12, Subd. 28)
z"Active member" means a member who has paid all dues to the organization, who is 18 years of
age or older, who has equal voting rights with all other members, who has equal opportunity to be an
elected officer, who has equal right and responsibilities of attendance at the regularly scheduled meetings
of the organization, whose name and membership origination date appear with the member's knowledge
and consent on a list of members qf the organization, and who has been a member of the organization for
at least six months. (M.S. 349.12, Subd. 2)
1999
A licensed organization may not conduct lawful gambling at any site unless it has first
obtained from the Board a premises permit for the site, or in the case of bingo, a bingo
hall license. The Gambling Control Board in turn may not issue or renew a premises
permit or bingo hall license unless the licensed organization submits a resolution from
the City Council approving the premises permit or bingo hall license. A resolution must
have been adopted within 60 days of the date of application for the new or renewed
permit or license.
Other:
Expenditure restrictions. Gross profits3 from lawful gambling may be expended only for
lawful purposes or allowable expenses4 as authorized by the membership of the
conducting organization at a monthly meeting of the organization's membership.
Provided that no more than 50% of the gross profit may be expended for allowable
expenses related to lawful gambling.
Net profit reports. Each licensed organization must report monthly to the board each
expenditure and contribution of net profitsS from lawful gambling. The reports must
provide for each expenditure or contribution:
. the name, address, and telephone number of the recipient of the expenditure or
contribution;
. . the amount of the expenditure or contribution;
. a brief description of how the expenditure or contribution meets the lawful purpose
criteria. (M.S. 349.154, Subd. 2)
Compensation report. A licensed organization must submit to the board once each year
a compensation report that specifies for the year being reported:
. each job category for which the organization pays compensation;
. each compensation rate paid in each category; and
. the number of employees being paid each compensation rate during the year. (M.S.
349.168, Subd. 9)
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3"Gross profit" means the gross receipts collected from lawful gambling, less reasonable sums
necessarily and actually expended for prizes.. (M.S. 349.12, Subd. 20)
4"Allowable expense" means the percentage of the total cost incurred by the organization in the
purchase of any good, service, or other item which corresponds to the proportion of the total actual use of
the good, service, or other item that is directly related to conduct of lawful gambling. Allowable expense
includes the advertising of the conduct of lawful gambling. (M.S. 349.12, Subd. 3a)
S"Net profit" means gross profit less reasonable sums actually expended for allowable expenses..
(M.S. 349.12, Subd. 27)
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CONTROL OF THE DISTRIBUTION OF GAMBLING PROCEEDS BY A CITY
COUNCIL
The City Council may institute a local gambling tax. The tax may be imposed only if the
amount to be received by the City is necessary to cover the cost incurred by the City to
regulate lawful gambling. The tax imposed may not exceed 3% of the gross receipts of
a licensed organization from all lawful gambling, less prizes actually paid out by the
organization. A city may not use this money for any purpose other than for the purpose
of regulating lawful gambling. A tax imposed is in lieu of all other local taxes and local
investigation fees on lawful gambling. (M.S. 297E. 02)
The City can require that licensed organizations contribute 10% of their net profits
derived from lawful gambling to a fund, administered and regulated by the City, for
disbursement by the City for any lawful purpose. (M.S. 349.213, Subd. 1 a)
The City may, by ordinance, require that a licensed organization, conducting lawful
gambling within its jurisdiction, expend all or a portion of its expenditures for lawful
purposes within the city's "trade area". Such an ordinance must define the city's trade
area and must specify the percentage of lawful purpose expenditures which must be
expended within the trade area. A trade area must include each city contiguous to the
defining city. (M.S. 349.213, Subd. 1 b)
LOCAL REGULATION
The city has the authority to adopt more stringent regulation of lawful gambling within its
jurisdiction, including the prohibition of lawful gambling.
The city may not require an organization to make specific expenditures of more than
10% of its net profits derived from lawful gambling. (See #2 above)
The city may not require an organization conducting lawful gambling within its
jurisdiction to make an expenditure to the city as a condition to operate within that city.
A more stringent regulation or prohibition of lawful gambling adopted by a city must
apply equally to all forms of lawful gambling within a jurisdiction of the political
subdivision.
WHAT COULD THE CITY DO DIFFERENTLY?
The City could prohibit gambling entirely. This would have an adverse impact on the
Raspberry Festival, a number of local organizations which have come to depend on
contributions from the Jaycees and the Raspberry Festival, and the City which has also
received donations.
The City could impose the 10% requirement and set up a fund to disburse gambling
proceeds. This would put the City into the business of deciding who receives up to 10%
of the gambling proceeds in Hopkins.
The City could designate a "trade area" and require all or a portion of gambling
proceeds to be spent in the City's "trade area". The City currently accomplishes
something similar to this by limiting gambling to Hopkins' based organizations.
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REVISION OF LAWFUL GAMBLING POLICY
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Overview )
The City Council discussed the current City policy on Lawful Gambling during October.
The Council requested that staff provide language addressing various revisions to
Legislative Policy 4-D. The City Council further directed staff to solicit comments and
suggestions from local businesses, fraternal organizations, and other interested parties.
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The following issues were raised:
. Establishing a moratorium
. Limiting the number of sites where gambling can take place
. Limiting bingo
. Directing where a percentage of lawful expenditures would have to be made
. Limit the number of sites where an organization can conduct gambling
. Prevent the co-mingling of money from one site to another or from one form
of gambling to another
. Requiring organizations, which conduct gambling on premises that they own,
to offer their halls for public use
The City Council approved a moratorium on October 21, 1997 that took effect on
November 6, 1997. The moratorium is set to expire on January 1, 1998. Language
addressing the above issues was prepared and distributed to the Council and other
interested parties. As of this date the City has received three letters with comments
about the proposed changes. The City also received a letter opposing gambling.
Fraternal organizations, on-sale liquor establishments and other interested parties have
been informed that this issue will be discussed at the December 9 Worksession.
The Council also had questions concerning where lawful expenditures are made and
how much money would be raised if the Council established a "10% fund" as proposed
on page 3. A table on page 5 answers these questions.
Attachments
An overview of the proposed changes along with a summary of comments that have
been received.
. A summary showing where Lawful Expenditures are made.
. Letters.
. Legislative Policy 4-D.
. Resolution 97-107 establishing the moratorium.
James A. Genellie, Assistant City Manager
Issues to Consider
1. Moratorium. Staff has prepared a Resolution imposing a moratorium on the
approval of any new premises permits in the City. The moratorium as currently
written, however, may apply to an existing organization seeking a renewal of a
current premises permit. The moratorium could conceivably be rewritten to only
apply to applications for premises permits at new sites in Hopkins.
Jaycees: No response.
American Legion: Opposes any future moratoriums.
2. Limitino the number of sites where Qamblino can be conducted. If the Council
wishes to incorporate this restriction into its policy, staff suggests using the following
language: "The maximum number of premises permits issued pursuant to
Minnesota Statute section 349.165 shall be eleven (11 )."
Jaycees: No limit.
American Legion: No limit.
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3. Limitino binoo. The State of Minnesota recognizes that bingo is different from other
forms of Lawful Gambling. An organization must get a Class A license, for which it
must pay more, in order to conduct bingo. The only difference between a Class A
license and a Class B license is the ability to conduct bingo.
The City of Hopkins has also, in the past, treated bingo differently from other forms
of lawful gambling. The City has turned down the Jaycees twice when that
organization sought to establish bingo halls. In 1991 the City Council approved
bingo at the Boston Garden but only with the assurance that bingo would be
conducted on just two nights per week.
There are a number of ways that bingo could be restricted:
. Restrict bingo to sites owned and operated by licensed organizations: "A Class A
license will only be approved for an organization that is licensed pursuant to
Minnesota Statute section 349.16 and that conducts gambling on premises that it
owns and operates. Organizations with Class A licenses may not conduct any
other gambling at any other site within the City."
. Restrict the number of bingo occasions per week: "No organization with a Class
A license may conduct more than _ bingo occasions per week."
Jaycees: Only allow bingo at sites owned and operated by the licensed
organization.
American Legion: Limit bingo to premises owned and operated by the holder of a
Class A license. Consider limits to the number of bingo occasions on a case by
case basis. .
Bob Lindee: Opposes limiting bingo.
December 2, 1997
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If the City Council wishes to direct where expenditures of charitable oamblino funds
are made it can adopt a trade area and/or require 10% of the gross profits to be
contributed to the City.
a) "Of the gross profits derived from Lawful Gambling in Hopkins, percent of
the licensee's expenditures for lawful purposes must be on lawful purposes
conducted or located only within one or more of the following cities of Hennepin
County, Minnesota: Hopkins, Edina, Minnetonka, and St. Louis Park."
Jaycees: Already give a large percentage of their donations to the local area. If
there is a rule, they would support 75%.
American Legion: No restrictions on where lawful expenditures are made.
Bob Lindee: Supports a "75% trade area"
b) Each organization conducting lawful gambling within the City shall contribute at
least ten percent (10%) of its net profits derived from lawful gambling in the City
to a fund administered and regulated by the City. The City then shall make
contributions for the purposes defined in Minnesota Statute 349.12, subdivision
11.
Jaycees: Does not support the creation of a fund.
American Legion: Does not support the creation of a fund.
4. Limit the number of sites where an oroanization can conduct oamblino. The
following language would accomplish this but current sites would probably have to
be grandfathered: "No organization licensed pursuant to Minnesota Statute section
349.16 may conduct lawful gambling at more than one location within the City,
except any organization that has prior to January 1, 1998, operated lawfully at more
than one location, may continue to operate at the locations licensed as of that date."
Jaycees: No limits on the number of sites.
American Legion: No limits on the number of sites.
Bob Lindee: Opposes a limit on the number of sites.
5. Prevent the co-minolino of money from one site to another or from one form of
oamblino to another. There is no provision in State law for preventing this practice.
Organizations which conduct gambling, however, are required to make regular
reports on the amount of money earned and the expenses incurred at each site
where they conduct gambling and each type of gambling that occurs at every site.
The City could require copies of these reports that would provide information for
future changes to the City's policy.
Jaycees: If required, we could provide copies of our monthly tax reports.
American Legion: Oppose any attempt to prohibit the co-mingling of funds.
Records indicating where the money is raised could be made available to the City.
December 2, 1997
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6. Reouirino oroanizations. which conduct oamblino on premises that they own. to offer
their halls for public use. Staff is not aware of any way to legally accomplish this.
There is, however, a provision in State law that allows the expenditure of gambling
proceeds for the "Repair or maintenance of real property of capital assets when the
property is or will be used extensively as a meeting place or event location by other
nonprofit organizations or community or service groups and no rental fee is charged
for the use". Depending on how the various service organizations are justifying the
expenditures this provision may apply.
Jaycees: This rule is not necessary.
American Legion: The Legion already makes its facility available to the public. The
Legion opposes any regulation requiring organizations which own their own sites to
offer their facilities free for public use.
December 2, 1997
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Below is summary of lawful expenditures. I am using the last year for which data is
available. I have assigned expenditures to the various categories based upon the
recipient of the funds. In some cases it is not clear whether a recipient lives in the local
area.
SUMMARY OF CHARITABLE GIVING
1996 1996 1994 1994 1994
Jaycees Raspberry American VFW Elks
Festival Legion
City 134,005 0 200 0 0
School 670 0 40 17,645 702
Scholarships 4,165 2,850 0 4,000 4,670
Youth Sports 8,588 0 1,250 16,256 1 ,442
Local Charities 21,513 0 1,000 39,266 771
Civic organizations 0 0 0 0 0
Civic celebrations 43,069 105,000 0 3,483 0
_ Other youth 1 ,400 0 0 5,332 595
Other charities 16,825 3,500 42 115,820 7,825
TOTAL 230,235 111 ,350 2,532 201,802 16,005
Percent to Local 92.1% 96.9% 98.3% 40.0% 47.4%
Area:
Estimated 10% 28,860 14,272 6,906 22,752 2,119
Fund:
The Elks & the VFW support youth camps that may well serve local youth.
VFW supports a variety of veterans' facilities & programs outside of Hopkins.
If the City were to set up a "10% fund" from the net profits 1 of Lawful Gambling it would
bring in over $70,000 per year. This money, of course, would directly reduce the
amount of money available to each organization for charitable giving.
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1 net profits are gross profits less amounts expended for allowable expenses and paid in taxes assessed
on lawful gambling
December 2, 1997 5