CR 2003-136 Lawful Gambling Fund• sfr
November 5, 2003
Overview
The Hopkins City Council, at its August 19 meeting, amended Legislative Policy 4 -A, Lawful
Gambling, by adding Section 2.15. This new section required organizations conducting gambling
in leased premises to contribute 10% of their net profits to the City.
Jerre Miller, City Attorney, reviewed this issue with the Lawful Gambling Board and the
Attorney General's office. Memoranda from August 26 and September 9 are attached. Based
upon Mr. Miller's research he is recommending that the City require all organizations conducting
lawful gambling to contribute to this fund.
Primary Issues to Consider
The City Council has three alternatives:
1. Proceed with the current plan to limit contributions to those organizations that conduct
gambling in leased premises.
2. Require all lawful gambling organizations to contribute up to 10% of their net profits to a
fund set up by the City.
3. Decide not to set up a "10% fund."
Supporting Documents
s A. Genellie
ssistant City Manager
LAWFUL GAMBLING FUND
• Analysis of the Issues
• City Attorney Memorandum from August 26, 2003
• City Attorney Memorandum from September 9, 2003
• Resolution 2003 -100
Council Report 2003 -136
1
Council Report 2003 -136
Page 2
•
Analysis of the Issues
1. Proceed with the current plan to limit contributions to those organizations that conduct
gambling in leased premises.
Based upon the City Attorney's opinion, this option might result in legal action against
the City. Staff is not aware of this issue being litigated before. Should the Council wish to
proceed, staff would prepare an ordinance and bring it to the Council for first reading at
the next Council meeting.
2. Require all lawful gambling organizations to contribute up to 10% of their net profits to a
fund set up by the City.
This option would require the Elks, the VFW, and the American Legion to also contribute
a percentage of their net profits to a City fund. If the Council chooses this option, staff
would notify all organizations conducting lawful gambling of the proposed policy change
and ordinance. Staff would prepare an ordinance and bring it to the Council for first
reading at a future Council meeting. Staff would also prepare a resolution amending
Legislative Policy 4 -A, Lawful Gambling, Section 2.15 to require all lawful gambling
organizations to contribute up to 10% of their net profits to a fund set up by the City.
3. Decide not to set up a "10% fund."
Alternatives:
Staff has prepared a resolution amending Legislative Policy 4 -A, Lawful Gambling
eliminating Section 2.15.
1. Instruct staff to prepare an ordinance implementing the current language in Policy 4 -A.
This alternative would establish a City fund from a percentage of the net profits of
organizations that conduct gambling in leased premises.
2. Instruct staff to prepare an ordinance implementing the new language in Policy 4 -A. This
alternative would establish a City fund from a percentage of the net profits of all
organizations that conduct gambling in Hopkins.
3. Adopt Resolution 2003 -100. This alternative would eliminate language regarding a City
fund from Policy 4 -A.
2
JERRE A. MILLER
JEREMY S. STEINER*
WYNN CURTISS
KIRSTEN A. HOLSETH
*Real Property Law Specialist, certified
by the Minnesota State Bar Association
Date: August 26, 2003
To: James Genellie
From: Jerre Miller
Re: Gaming Statute
MILLER, STEINER & CURTISS, P.A.
ATTORNEYS AT LAW
400 WELLS FARGO BANK BUILDING
1011 FIRST STREET SOUTH
HOPKINS, MN 55343
Writer's Direct Dial No. (952) 253 -0070
(952) 938 -7635
FAX (952) 938 -7670
At the last Council Meeting, Council Person Johnson asked if the City could require contributions of 10
percent of net profits annually from organizations that lease their space and exclude organizations that own
their own space.
As a practical matter, this would mean the VFW, Legion and Elks Clubs would not be tapped for the 10
percent.
I have a concern that this could be construed as an unequal demand on lessees while excluding the private
organizations that happen to own their own premises where the gaming is conducted. My recommendation
is if a 10 percent of net profits is to be imposed on gaming organizations, that it should be imposed upon
all who engage in the activity and exclude no one.
With respect to adjusting the 10 percentile number, subdivision 1 of M.S. 349.213 says that a City has not
been given the authority to require an organization to make a specific expenditure of more than 10 percent
annually.
Within the same subdivision, the City is allowed to adopt an ordinance that requires a 10 percent
contribution of net profits which go into a fund administered by the City for lawful purposes.
Paragraph b) in subdivision 1 says that a City may by ordinance require an organization to expend all of
its expenditures for lawful purposes. The only hook here is that such an ordinance expands the area of
lawful purposes within the trade area which includes contiguous cities. The ordinance also requires that
the percentage of expenditures which must be expended within the trade area be specified.
Subdivision 1 seems to make the following points:
JAM /drs
Hopkins \Genellie
a) A City is limited to requiring no more than 10 percent of an organization's net
profits annually for specific expenditures.
b) An ordinance may be adopted requiring that gaming organizations contribute 10
percent annually of their net profits which would go into a fund maintained by the City and
expended for "lawful purposes." The only requirement is that an annual report must be
filed with the gaming board outlining the amount collected and what it was spent for.
c) An ordinance may be adopted that directs all or a substantial portion of a gaming
organization's expenditures be spent for lawful purposes within the City's trade area.
The statute gives the City three options: i) let the gaming organization select its own beneficiaries; ii) pass
an ordinance requiring 10 percent of net profits annually be paid into a city account where it would
distribute the funds for lawful purposes; iii) pass an ordinance requiring all or a substantial amount of
gaming proceeds be expended within the City's trade area (this statute is silent on whether the City can
designate the specific beneficiary and the perc - ' tare of contribution).
AM
-2
JERRE A MILLER
JEREMY S. STEINER*
WYNN CURTISS
KIRSTEN A. HOLSETH
*Real Property Law Specialist, certified
by the Minnesota State Bar Association
Date: September 9, 2003
To: James Genellie
From: Jerre Miller
Re: Gaming Commission
If you need anything further, let me know.
JAM/jw
MILLER, STEINER & CURTISS, P.A.
ATTORNEYS AT LAW
400 WELLS FARGO BANK BUILDING
1011 FIRST STREET SOUTH
HOPKINS, MN 55343
Writer's Direct Dial No. (952) 253 - 0070
(952) 938-7635
FAX (952) 938 -7670
This will supplement my memorandum of August 26, 2003 concerning the question whether the City can
exclude private establishments from its requirement that all other establishments contribute 10% of their
net profits to the City as provided for in the statute.
My original concern was the discriminatory nature of the exclusion and whether this could be challenged
as a violation of the equal protection theory that all parties in a class must be dealt with on an equal basis.
My opinion has been re- enforced by a telephone conversation with the compliance officer of the Gaming
Commission and further fortified by my conversation with Joe Newton, who is the Assistant Attorney
General assigned to the Commission.
Although the issue had not arisen in the past, both felt this would be discriminatory and unequal
application or the terms of this statute and ordinance.
City of Hopkins
Hennepin County, Minnesota
•
WHEREAS,
WHEREAS,
WHEREAS,
ATTEST:
RESOLUTION NO. 2003 -100
the City Council of the City of Hopkins has approved a document entitled
the Legislative Policy Manual to provide uniform guidelines on City policies
so that actions taken are consistent and fair; and
the City Council has established Legislative Policy 4 -A in order to regulate
lawful gambling; and
the City Council has determined that the existing policy needs to be
revised in order to remove language regarding establishing a City fund,
NOW THEREFORE BE IT RESOLVED, that the City Council of the City of Hopkins
hereby adopts the following changes to Legislative Policy 4 -A, Lawful
Gambling, Section 2.15 is deleted:
1 scd prcmiscs.
Adopted by the City Council of the City of Hopkins this 18th day of November 2003.
Terry Obermaier, City Clerk
By
Gene Maxwell, Mayor