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Tim Nelson, Published September 14 2013

Minnesota's billion dollar e-pulltab plan a bust

Gamblers would love electronic pulltabs. Cash would flow and the state’s cut from the new games would pay the public share of a new Vikings stadium. That’s what Gov. Mark Dayton and other politicians predicted.

A year later, that billion dollar promise has mostly been a bust. Revenue is down nearly 100 percent from projections. Bar owners dismiss e-pulltabs as not worth the cost and hassle to install. Gamblers say the electronic games just aren’t that much fun.

A fiscal train wreck? More like a plane crash, Dayton said.

“The National Transportation Safety Board says that in an airplane crash, there’s seldom just one factor, one mistake that is the sole causation, and I would say in this case as well,” Dayton said. “You know, there were multiple errors made, and in hindsight, obviously we were terribly wrong. But everything, as far as I know, was done in good faith (and) with the best of intentions.”

A year into e-pulltabs, people are still picking through the pieces, trying to understand what happened.

“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 (in),” said Dayton, who backed a hike in cigarette and corporate taxes to finance the Vikings stadium bonds after it was clear e-pulltabs were falling short.

Key things wrong

Few see it as clearly now as former Republican state Sen. 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 a Maple Lake, Minn., bowling alley and the bar and grill attached to it, complete with an e-pulltab business.

Koch said the state got some key things wrong when it banked on e-pulltabs.

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.

“The bars, it’s incredibly expensive to put them in,” Koch said.

Meanwhile, she said many customers still prefer paper pulltabs.

That’s been true all over the state. As e-pulltabs have flopped, regular pulltabs are actually booming. Charitable gambling revenue overall was up by 8 percent last year over the year before.

Koch said the government shutdown in 2011 made it hard for lawmakers to voice doubts about the prospect of easy dollars rolling in.

“I think there was healthy skepticism of them,” she said. “But 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 learned in the budget battle that the governor’s agencies, their numbers were the gospel.”

Gamblers say it’s easy to see what went wrong.

Sharri Moen plays e-pulltabs in Amy Koch’s bar. Moen is exactly who the state had in mind when it legalized the games.

“It’s something fun to do, you know, and it’s right in town,” she said.

But she and player Bob Wold, who have tried different versions of the games, say many of the e-pulltabs aren’t much of an improvement on the old-fashioned pulltabs.

Some machines are “very interactive, like a slot machine, pretty fun,” Wold said. “Other ones, they’re basically just like paper ones, except that they go beep.”

Doomed from the start?

The Vikings stadium and e-pulltabs may have been doomed from the start, said Al Lund, who heads Allied Charities of Minnesota, which represents about half of the state’s charitable gambling operators.

While the e-pulltabs promised excitement, operators were reluctant to break out of their old habits. They used the same games and the same suppliers they’ve been using for decades, Lund said. “The loyalty that charities had to their distributors was underestimated.”

Looking back, he said it was unrealistic to expect the business could grow so large. State projections suggested e-pulltabs could rival the estimated size of tribal gambling in Minnesota in a matter of months.

The problems, though, aren’t a reason to give up on electronic gambling, Lund said.

The distribution, accounting and playing experience of e-pulltabs have a clear advantage over the paper games and will likely give charities more money for more causes in the long run, he said.

In the end, Dayton said it doesn’t matter much what happens to pulltabs as far as the Vikings stadium goes.