Who gets the 20 remaining video lottery licenses? City Council will decide

The Sioux Falls City Council has 29 applications for video lottery to consider on Tuesday, Dec. 20.

The problem is they only have 20 to give out.

That’s because of a cap on new malt beverage licenses — the gateway permit for video lottery — which the council approved in November.

The council will decide whether the next 20 applications in line are approved at their regular meeting Tuesday.

City councilors Greg Neitzert and Rich Merkouris pressed for the cap, citing a sharp growth in new licenses, particularly for establishments that focus exclusively on video lottery.

Neitzert said he plans to ask each of the applicants in this round about their business plans.

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“The question will be, tell what is your proposed business going to be? Are you more than just a casino?” he said in an interview with Sioux Falls Live on Monday.

The phones at the city attorney’s office have been busy since the council approved the cap.

“I’ve been getting a lot of calls with questions,” said Jamie Palmer, the licensing specialist who handles video lottery permitting.

There won’t be any more malt beverage licenses available until at least next summer, Palmer said.

That’s when the next population estimates will be released by the U.S. Census Bureau. The cap will be increased by one for every 5,000 increase in the city’s population. The city will then hold a lottery to award whatever licenses are available.

Under the ordinance, the city will adjust the cap only in even numbered years. Since population estimates generally are released in June for the previous year, that means another opportunity for new malt beverage licenses won’t come until the summer of 2025.

The core of the issue for Neitzert is that state law says establishments can’t rely solely on video lottery for their income. The original intent when the machines were approved more than 30 years ago was that limited gambling would be allowed in restaurants and bars as supplemental revenue.

That idea was quickly overrun but the law remains.

The reality is that much of the industry is made up of small venues where the only draw is gambling. Often the beverages are free to gamblers.

Video lottery is still common in traditional bars and restaurants with just a malt beverage license, but in recent years most of the growth has been the minimalist version.

Malt beverage licenses — beer and wine — are separate from that for liquor, which includes spirits such as whiskey and vodka. Those are capped by state law and are much more expensive.

The full liquor licenses also qualify for video lottery but they aren’t part of the local cap.

Neitzert said understanding what the businesses will sell holds true to the spirit of the law, but it’s also good policy for the city.

Bars and restaurants that make money from food and beverage pay sales tax on those products.

The city doesn’t get any cut of video lottery revenue. That money is split between the machine owners and the state.

“I feel like it’s the spirit of state law that it should be something more than a casino,” said Neitzert. “And it’s just good policy for the city and the city council to support those businesses that are something other than video lottery. Those businesses are what generate the tax revenue.”

From Jan. 1, 2017, to Nov. 28 of this year, gamblers in Minnehaha and Lincoln counties have lost more than $485 million.

Among the applicants on the list are bars and restaurants that fit the spirit of the law and those from companies that are already operating businesses focused solely on video lottery. The applications will be considered in the order they were filed.

Neitzert said he doesn’t know if any of them will be denied, but he plans to ask the question just the same.

“I think at least a few of the other councilors will support me,” he said. “I don’t know that we will win the day. It could be close.”