Las Vegas Sun

March 28, 2024

Fraternal clubs: Video poker cuts into charitable giving

WESTOVER, W.Va. -- Where there is gambling, there are losers. And as video poker bars continue to sprout across West Virginia, the losers are increasingly likely to include a group of people that lawmakers tried to protect when they passed the Limited Video Lottery Act of 2001.

Nonprofit fraternal organizations like the Elks and the Veterans of Foreign Wars say they're losing so much money that they can no longer support charities the way they once did.

Bob Doyle, quartermaster of VFW Post 9916, used to allocate $30,000 to $40,000 a year for local youth groups and charities. This year, the post will give half that amount.

"When this law first started, six businesses in Westover had about 30 machines. Now there are 18 businesses," he says. "The market is saturated. Every town is polluted with them."

Legislators "wanted to make them less visible," adds Miles Epling, state commander of the American Legion, "and they did exactly the opposite."

The law legalized 9,000 new video poker machines like those that had long gone unregulated and untaxed. Though for-profit operators were allowed to operate five machines at a single site, legislators decided fraternals could have 10.

But many fraternals now complain that intended advantage is being undercut by high tax rates that range from 38 percent to 52 percent, declining interest in traditional games and the proliferation of neighborhood clubs.

The Lottery Commission says fraternal organizations have 1,351 machines in 185 locations across West Virginia. In all, there are 7,625 machines in 1,614 locations.

Bingo and raffles used to be lucrative revenue sources for fraternal organizations. However, as the number of video poker machines increased, profits from the traditional games dropped off.

The state doesn't track how much fraternals make on video poker machines.

Figures from the state Division of Tax and Revenue, however, show gross receipts from bingo fell from $29.9 million in 2003 to $28.4 million in 2004. Raffle sales dropped more dramatically, from $124.6 million in 2003 to $96.7 million last year.

"People have got stars in their eyes with the machines," says Gary Nisewarner, administrator of Moose Lodge 120 in Martinsburg. "They can win $10,000, $20,000, $30,000 on a machine, but you can only win $100 off a tip jar. So where would you rather spend your $10?"

The Legislature could help by giving fraternals a tax break, argues Bob Pirner, a spokesman for SteppingStones, a nonprofit group that relies on private donations to provide recreational services to about 1,500 disabled people in north-central West Virginia.

"Organizations like the Westover VFW are generous," Pirner says. "With those kinds of organizations, you know the money is going to help out local communities.

"With these little casinos that have popped up, where is the money going? It's not going to the community. It's going into their pockets."

Linda Lugar, executive director of the Beckley-based United Way of Southern West Virginia, says one Eagles club gave $20,000 in 1999. That dropped to $5,000 by 2003, and last year, the club donated only $700.

The United Way supports 28 charities in Raleigh, Fayette, Nicholas and Summers counties, and Lugar says it feels the loss. Now, she says, charities coordinate fund-raisers "so not everyone is asking for money at the same time."

George Sinkewitz, finance officer of Ceredo-Kenova American Legion Post 93, says his post gave nearly $200,000 to charities in 2002 and only $120,000 in 2004.

"We do have more machines than the bars, but we have the same number as we had before with gray machines," he says. "We make money off the machines, but not nearly what we made before."

Now, after taxes, most fraternals split their profits with operators who lease the machines.

Sinkewitz wishes legislators would consider a rate cut but doesn't expect it "because they seem to be basing everything in the state on gambling revenue."

Lawmakers could be reluctant to change the law for another reason.

Last summer, Sen. Vic Sprouse, R-Kanawha, complained that groups with no members and no history of charitable giving have begun incorporating as fraternals to cash in on the extra machines. He called the practice "borderline fraudulent" and wants the loophole closed.

But that could have ramifications for legitimate fraternals like Elks Lodge 1452 in Beckley, a small post that gives about $2,500 a year to charity. Secretary Clay Walker says it depends on the $30,000 a year it makes from the slots.

"We wouldn't be able to keep this lodge open if we didn't have the machines," he says. "It keeps us afloat."

archive