At the Vermilion City Council meeting on Monday, December 2, 2019, City Council tabled the third reading of a Sweepstakes Terminal Cafes Ordinance that would raise fees for sweepstake cafés and referred it back to the January 13, 2020 Legislative Committee for further discussion. The tabling of the ordinance followed comments against the ordinance by Councilman Gabriel two weeks ago, and comments expressed by Brian Winningham, a local sweepstake café owner.
Winningham read the following letter to Council:
Good evening. I would like to start by thanking the council for giving us the opportunity to speak regarding the proposed tax increase for Lucky Duck. The statement I am about to read is the view my wife and I have regarding this matter, it may not be exactly what you were expecting to hear this evening, but it is our truth and what needs to be said, so please bear with me.
We would like to officially go on record by stating that Lucky Duck does not have any major objections to our taxes being raised, in the traditional sense. We do however have questions for this council and city officials. What protections or provisions will be made regarding Lucky Duck? What changes will be made regarding existing sweepstake café owners or any legitimate cafes that may open in the future within the City of Vermilion?
I will return to these questions, but first I feel it is relatable and important to provide some background into Lucky Duck, why we chose Vermilion as our business location, and the integrity of my wife and I. More than three years ago now, we chose to open an adult game room, or sweepstake café, as the city refers to us. We knew very little about this industry; being the people we are, we did our research and homework, we visited other cafes and attempted to speak with other café owners. What we found was both surprising and disappointing. We deliberated for some time about whether this type of business would be right for us, but after much thought we decided to forge ahead.
We are more than aware of the negative image that sweepstake cafes receive, and a large majority of the time, sadly it’s true. We saw a unique opportunity in front of us to reshape the way sweepstake cafes are operated, and ultimately the way this industry is viewed. To say that the past three years have been a struggle is an understatement. But we followed our moral compass, did what we believe to be honest and ethical and created a very successful business model; we not only followed guidelines put forth to us by the city, but we also created our own policies and procedures to help protect Lucky Duck, our location, and ultimately the city. Obviously, our hard work and determination has paid off; we were one of very few cafes in the state of Ohio who were permitted to remain open after the August 2018 investigations and raids on sweepstake cafés. Although we are not here this evening to point fingers, we can tell you that other current café "owners" in the City of Vermilion cannot boast the same accomplishments. They were forced to close twice at their previous location in Lorain County. They also cannot boast the accomplishment of helping to bring additional business, which of course means extra tax dollars for Vermilion, as Lucky Duck has done. I am referring to the new Dollar Tree opening in the South Shore Plaza. We played in integral part in the company choosing that specific location. If the council or city officials were to inquire, they may find that quite the opposite is the case at the other "owners” location. As we have found to be the case, not all sweepstake café "owners" share our same morals and business ethics, and do not appear to be outwardly concerned with how their business is run, any illegal activity being conducted, or the type of customers they permit to play at their establishment. I'm sure this council can understand how that has the potential of putting much needed tax dollars generated by sweepstake cafes in Vermilion in grave risk. You've probably all heard the saying, “it only takes one bad apple to ruin it for the bunch”.
Let me follow up on my previous statement by saying, Lucky Duck has no traditional objections to a tax increase for our business. I think we have proven that we have the city's best interests at heart, and that Lucky Duck's successful business model speaks for itself. We chose Vermilion for our business because we believed it was a supporter of small business. We represent the honest little guy trying to make a noticeable difference in their community. We not only chose Vermilion to plant roots for Lucky Duck, but also our future business. We chose to make Vermilion our home, as did our family.
Just as Lucky Duck has done in the past and will continue to do, we support our city and are happy to do what we can to help. As stated, Lucky Duck has proven itself to be successful. By our hard work, honesty, and due diligence, we have generated and secured a rather handsome tax revenue for the city. We hope to have the opportunity to continue to do so in the future, we would be disappointed and saddened if we were forced to relocate Lucky Duck due to issues that could be so easily remedied. Even though we do not outwardly object to the tax increase, we do have issues with it related to what I've outlined in this statement. We are not without our financial hardships, even though it is not within our current budget, we have required additional staff and manpower as security for Lucky Duck due to the increased number of questionable and potentially harmful type of clientele that we have noticed an increase of over the past six months. Since our initial opening three years ago, Lucky Duck has done its due diligence by having policies and procedures in place and have vetted out potentially harmful individuals. This has been proven to be very successful for us, and we are dismayed that other sweepstakes café "owners” are not concerned with adopting the same policies or even share these same concerns, as it does directly affect surrounding businesses and the city.
So our questions still remain, in return for the this tax increase, what protections, provisions or changes will the City of Vermilion make on our part to rid the city of already existing or potentially future harmful sweepstake café "owners”? Those who willfully choose not to follow guidelines put forth by the city. We are not here this evening to advise this council on how this matter should be handled, but we do have insightful suggestions as to how the city could help to secure the tax dollars contributed by sweepstake cafes. One example could be to conduct background and criminal checks on not just the person named as the actual owner of the business, but also any managers, representatives, or points of contact for that business. We would be more than happy to discuss this and other suggestions with those interested upon request, at your discretion.
In closing, we would like to thank you for giving us the opportunity to speak our truth this evening. We have confidence and faith that the city we have so openly supported over the past three years will do what's right. Thank you.
At the Finance Committee meeting on November 18, 2019, John Gabriel, Council Member, said this is an item in government he doesn’t like, especially when singling out a segment of business. He doesn’t understand why the sweepstakes businesses pay these fees because they invest in Vermilion, in their machines, computers, and everything they need to create their business. He said the city is cutting in on their business separate from the fees, licenses and permits they need to run a business anyways. They pay taxes, payroll taxes, etc., so he’s okay with building permit increases, but in this instance they are lasering down to a specific type of business. He doesn’t see the burden, and the city doesn’t provide any additional security for them.
Gabriel said this is a 23% increase and he doesn’t get the justification. He said one out of five businesses fail in the first year, and 50% fail within five years, so here are businesses that have made it and now the city is going to step in and take 23% more from these specific businesses. He said the city’s goals were to get their finances in order, improve infrastructure, and be business friendly. His opinion is they’re striking out on being business friendly.
Gabriel asked if they were going to put a bar of soap thing on Defense Soap, or go to the auto dealerships and ask for cars – where does it end? He said he was against this and wanted to go on record stating as such before the final vote.
Mayor Forthofer said, as he recalls in 2015 when the original fees were instituted for gaming, it was intended to be somewhat restrictive by restricting the number of gaming businesses in the city. He feels the fees levied in Vermilion are similar to those in surrounding communities.
Steve Holovacs, Council Member, said he was on council when this originally started, and one of the things is that every community around Vermilion was doing this because they didn’t think it was going to be very long before the state came in and took it over. Therefore, they thought they would grab the money before the state got it.
Gabriel said he called the City of Huron and they don’t have this fee, and there is nobody closer to Vermilion than Huron. They have a river like Vermilion, and their businesses are somewhat similar, and they’re far enough away from the big city.