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Barriers remain for gambling in bars

Greg Gross
505-5433/@ggrossyd

When Pennsylvania lawmakers legalized small games of chance in taverns, officials heralded it as a money-making scheme to help pad the state's general fund while also increasing bars' profits.

But that has been far from the case. In the fiscal year that ended June 30, the state collected about $554 thousand, far less than the $150 million that was projected when the bill, Act 90 of 2013, was signed into law by then-Gov. Tom Corbett.

Far fewer bars owners have opted to get licenses, leading to less tax revenue. In York County, just six taverns have obtained licenses, according to the state Liquor Control Board, one of the many government agencies that have a hand in overseeing gaming in bars.

But an advocate for bar owners said financial requirements outlined in Act 90 creates barriers to entry.

"They made it completely unattractive for some business owners," said Amy Christie, executive director of the Pennsylvania Licensed Beverage/Tavern Association.

Cost: An owner must cut a check for $2,000 to the liquor control board when submitting an application, which amounts to two pounds of paper, plus must pay about $1,000 for a non-refundable FBI background check even though an owner must have already cleared a check to get a liquor license, Christie said.

If the board approves the application, the owner is on the hook for another $500 — and must pay a yearly $1,000 renewal fee.

With that out of the way, the owner must then buy, for example, pull-tab games at $25 a pack with the sales tax tacked on for a total of $26.50. And he or she must pay up front the 65 percent tax charged on the profit.

Each pack of games has the profit printed on its package. So if a pack is expected to bring in $100 in profit, the bar must pay $65 in taxes. Adding in the cost for the games, that leaves just a $6.50 profit for the bar for each pack.

"Then you hope and pray that you sell every ticket and that an employee doesn't make a mistake and pay out too much in winnings to customers," Christie said.

A typical owner can expect to spend $3,000 on the games to get started plus, if they choose, $5,000 to $8,000 on a machine that dispenses the games. At the end of the day, a bar owner can expect to spend north of $10,000 just to get gaming up and running, Christie said.

Issues: Some of those issues, as well as the unlikelihood gaming would generate the revenue officials initially projected, is part the of the reason Sen. Mike Folmer, R-York, Dauphin and Lebanon counties, voted against the bill in 2013.

"I just didn't think it was (going to turn into a revenue) generator. I was just very concerned," Folmer said.

As part of the tax structure included in the act, 5 percent of the 65 percent tax levied goes to municipalities in which the bars are located.

In Hanover, there's one bar that has a small games license. The owners of Franklin House Tavern, 300 N. Front St., who also own the Midway Inn in Adams County, were the first in the state to obtain a license when they were granted one in April 2014.

The borough received $1,063 that year for its portion of the tax, said Samuel Miller, Hanover's finance director/treasurer, adding he expects the borough to receive about the same about this year.

"It's such a small piece of the budget," he said. "We didn't expect it to be a viable revenue source."

Bars have it: Despite the high upfront costs and high tax rate, other York-area bars got licenses.

Brenn's Pub inside Colony Park Lanes North, 1900 Pennsylvania Ave. in York City, got its license about a year ago, according to the Liquor Control Board.

"People seem to like it," said manager Nicole Swords. "We get a lot of regulars coming back more often."

She can see why some bar owners have foregone the license, considering the large amount of paperwork they'd have to wade through. But, Swords said, the effort is worth it.

"I'm kind of surprised (more bars haven't gotten licenses) because of a number of people it does bring in," Swords said.

Improving: There is at least one effort in the Senate to mitigate some of the burden placed on bar owners.

Sen. Rich Alloway, R-York, Adams and Franklin counties, introduced a measure, Senate Bill 667, that would lower the overall tax rate to 55 percent from 65 percent.

It would also remove the FBI background check requirement and would lower the annual renewal fee to $500, among other things.

The measure is in the Senate Community, Economic & Recreational Development Committee.

— Reach Greg Gross at ggross@yorkdispatch.com.