Pennsylvania bars want to cash in on small games of chance

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Pennsylvania's bars and taverns are now allowed to give away prizes of up to $1,000 for a single self-sponsored event, and up to $25,000 in prizes every week, thanks to a change in state Liquor Control Board regulations.

But bar owners call it a hollow victory, since most of the state's licensees can't afford to sponsor $25,000 worth of prizes out of their own pockets in a year, let alone a single week.

What taverns really want, according to the executive director of the Pennsylvania Licensed Beverage Association -- formerly the state tavern association -- is to be treated more like the state's private clubs.

"We've been pushing this for years," Amy Christie said. "Give us pull tabs, raffles and drawings."

Gov. Tom Corbett is on the record saying that he doesn't want to expand small games of chance to all of the state's 10,000 taverns, restaurants and publicly operating liquor licensees, considering how hard it is just to monitor the state's 3,000 private clubs.

The PLCB prize-limit change, which went into effect last week, brings the bars' top prizes in line with those that are offered by many private clubs.

Under state law, private clubs -- VFWs, Moose lodges, firefighter social halls, ethnic clubs and so on, as well as purely charitable clubs without liquor licenses such as churches or Lions clubs -- are able to obtain "small games of chance" licenses. Those licenses permit contests such as 50-50 raffles, pull-tab lotteries and daily drawings.

Last year, the state Legislature approved a law that increased the values of the prizes that can be awarded at private clubs. The old limits of $500 per event and $5,000 in total weekly prize money were increased to $1,000 per single-chance payout and $25,000 a week.

Private clubs can now also offer $10,000 per month in raffle prizes, while fire and emergency-services groups can hold raffles with $50,000 limits.

The PLCB has now changed its own rules, so that public liquor-license holders may offer prizes of similar size. The new limits affect holders of restaurant, hotel, club, privately owned public golf courses, privately owned private golf courses, municipal golf courses, brewery pubs and eating-place retail dispenser licenses.

While payout limits are again equal, the playing field is unequal when it comes to how the two groups raise money.

The private clubs can spend $100 on a roll of raffle tickets and net thousands in prize money in return.

The public retail licensees have to "self-sponsor" events -- that means no raffles and no accepting prize cash from distillers or beer distributors. Which means bars must come up with their own cash to pay out prize money for, say, a Halloween costume contest.

"We're competing directly with them. They can obviously keep their prices lower than I can," said Howard Ives, owner of Howard's Park Place Pub in Point Breeze. "For us, [small games] will be a big shot in the arm," especially needed if the state revamps the state store system and allows even more retailers to sell six-packs, which are a big part of his business.

Bars say the inequality is all the more untenable because so many members-only clubs historically have flouted the rules.

Under the old state law, clubs weren't permitted to enrich themselves with raffles -- they were supposed to donate the proceeds to charities, or toward the purchase of future games and "certain" operating expenses. (And they weren't, and still aren't, supposed to operate nonapproved games -- block pools for NFL games, or casino nights, for example.)

But since there were no reporting requirements, there was no way to know how many clubs were keeping raffle money or how much they were keeping, outside of the occasional PLCB and state police raid.

In Allegheny County alone -- home to more than 300 private clubs -- dozens of clubs have been fined by the PLCB and the state police Bureau of Liquor Control Enforcement for operating illegal lotteries, games of chance and bookmaking over the last several years. (Notably, many retail bars are penalized for the same infractions every year, particularly when it comes to illegal poker machines.)

Private clubs had lobbied for the rule change over the last several years, saying increased prize pots would help the clubs stay within the law and allow them to make larger charitable donations. The prize limit had been unchanged since 1988.

The new law, Act 2 of 2012, not only gives private clubs larger contest pots, but also allows them to keep some of it for themselves -- up to 30 percent of what they clear from the contests.

"We've had some clubs that have really struggled to stay under the $5,000 cap," said Ted Mowatt, executive director of the state Federation of Fraternal and Social Organizations.

He contested the notion that raffles and small games of chance give private clubs some kind of unfair advantage over public bars and restaurants. If that's the case, he asked, why have attendance and membership been declining at social clubs for decades?

"We don't get to sell six packs or any of that sort of stuff" like public bars and taverns do. "In exchange, we do small games of chance."

Not all private clubs are happy with the new law, despite the higher limits. Act 2 also required that the clubs report their small-games-of-chance fundraising to the state Department of Revenue, although that requirement has been put off until at least Feb. 1, 2014.

Under the requirement, private clubs with liquor licenses must file reports twice a year, reporting gross winnings, itemized weekly receipts, and spending reports on the proceeds used for operational expenses, "including details regarding amount used for real property taxes, utility and fuel costs; heating and air conditioning equipment or repair costs."

Other clubs are OK with the reporting requirements but are displeased with the 70-30 split. They argue that the 30 percent share still isn't enough to pay the clubs' bills, wait staff and other overhead.

Maj. Thomas Butler, director of the Bureau of Liquor Enforcement, said his bureau has spent the last year educating clubs on the rule changes. "We're trying to get the clubs knowledgeable on the law and looking for voluntary compliance," he said.

Once the reporting requirement kicks in next year, he said, it will be easier to weed out the bad operators because those clubs that don't submit their numbers to the state will no longer be able to purchase small-games-of-chance licenses.

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Bill Toland: btoland@post-gazette.com or 412-263-2625.


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