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<br />Charitable gambling
<br />not always-for charity
<br />Copy.tgnt (987 siar Tri4une broad limitations of state law:
<br />By Robert Franklin
<br />Stall' Writer
<br />Minnesota's charitable gambling op-
<br />erators are spending millions of dol-
<br />lars of their net profits on their own
<br />organizations, rather than for charita-
<br />ble purposes.
<br />Of the $386 million spent on charita-
<br />ble gambling in Minnesota IasYyear,
<br />78 percent was returned in prizes and
<br />another 10.5 percent went to .pay
<br />employees, rent and other expenses.
<br />That left 1 L5 percent - a total of
<br />$44.4 million - to spend for "legal
<br />Much of the money is going to build, purposes," which may or may not be
<br />equip or remodel veterans and frater- charities.
<br />nal clubs. That is Legal under the .
<br />"Some people say, `They're not giv-
<br />ingthe money to charity,"'said Rog-
<br />er Franke, executive secretary of the
<br />Minnesota Charitable Gambling
<br />Control Board. "My answer is: They
<br />don't have to. They must spend for a
<br />lawful purpose."
<br />Franke's .board does not assemble
<br />precise figures on individual organi-
<br />zations' spending for charitable and
<br />other purposes: But a Star Tribune
<br />examination of monthly reports for
<br />26 organizations found that some
<br />clubs have been using most of their
<br />net proceeds for such expenses as
<br />mortgage payments, real estate taxes,
<br />new kitchen and bar equipment, re-
<br />pairs, landscaping, paving parking
<br />lots, janitorial supplies, garbage col-
<br />lection, snowplowing.- even back
<br />gambling taxes levied by the U.S.
<br />Internal Revenue Service.
<br />"Paving a parking lot is not charity;'
<br />Franke said. "But it is a lawful pur-
<br />pose."
<br />Charitable gambling is no penny-ante
<br />allair. The $386 million Minnesotans
<br />spent last year on pulltabs, bingo,
<br />upboards, rafilcs and paddlewheels is
<br />nearly triple the $133.7 million wa-
<br />gered at Canterbury Downs in its
<br />April-November season.
<br />State law permits such games to be
<br />operated only by veterans, fraternal,
<br />religious and other nonprofit organi-
<br />zations. The ~ term "charitable gam-
<br />bling" has long been used in public
<br />discussion of the wagering but the
<br />statute uses it only in the control
<br />board's name. Otherwise, the law re-
<br />fers to "lawful gambling."
<br />The Minnesota Council of Nonpro-
<br />fits, which serves organizations that
<br />•help the disadvantaged, is studying
<br />gambling records and may seek
<br />changes in the law to diiect more of
<br />the profits to charity, said Jon Pratt,
<br />its executive director.
<br />"Most of the proceeds from charita-
<br />ble gambling should go to charity,"
<br />Pratt said. "I think that should be a
<br />given." '
<br />In giving certain organizations a mo-
<br />nopoly on legal gambling, he said, the
<br />law poses a public policy question:
<br />"Does that serve a public good or a
<br />private good'... There are many ac-
<br />tivities that are in no way charitable
<br />activities that"are allowable expendi=
<br />torts:"
<br />The state's 2,500 gambling organiza-
<br />lions have found pulltabs the biggest
<br />and fastest-growing form of gam-
<br />bling, grossing $312 million last year
<br />and returning $250 million in prizes.
<br />Pulltabs -pieces of paper with hid-
<br />dgn symbols that can be matched for
<br />prizes -will become legal in Minne-
<br />apolis this fall under an ordinance
<br />approved Friday by the City Council.
<br />Along with tipboards and paddle-
<br />wltccls, titcy arc expected to add $10
<br />million.to $20 million to Minnesota's
<br />gambling gross next year.
<br />Slate law places few restrictions on
<br />the use of profiis from pulltabs and
<br />the other forms of gambling.
<br />The statute says that "lawful. pur-
<br />pose" means "benefiting persons by
<br />enhancing their opportunity for reli-
<br />gious or educational advancement,
<br />by relieving them from disease; suf-
<br />fering or distress, by contributing to
<br />their physical well-being, by assisting
<br />them in establishing themselves in
<br />life as worthy and useful citizens, or
<br />by increasing their comprehension of
<br />and devotion to the principles upon
<br />which this nation was founded:'
<br />I.t also means public works, support-
<br />ing government activities, improving
<br />or maintaining an organization's real
<br />property and paying gambling taxes.
<br />In June 1986, for instance, Tri-City
<br />American Legion Post 513 of New
<br />Brighton donated`$25 to'the Vikings
<br />Celebrity Tournament, $325 for a
<br />.video cassette recorder for the Veter-
<br />ans Administration Hospital, $181
<br />for the Stockyard Days civic celebra-
<br />tion and $280 fora Chamber of
<br />Commerce baseball night.
<br />During the same month. the post
<br />spent $10,500 from gambling profits
<br />to blacktop its parking lot, $4,675 for
<br />air conditioning, $2,887 for Landscap-
<br />ing, $1,830 for a salad bar and $3,283
<br />for cabinets and other equipment.
<br />That was a period of heavy spending
<br />for remodeling the post's new build-
<br />ing, aformer supermarket 'on Old
<br />Hwy. 8 -that now boasts a• public
<br />restaurant and a large bar, complete
<br />with signs that list post blood donors
<br />and warn against profanity.
<br />The post donates significantly to
<br />charity inmost months,. Commander
<br />John Hearn said. For instance, it
<br />gave $10,000- to help pay for a liver
<br />transplant for Rita Erickson, a 22-
<br />month-old Columbia Heights girl,
<br />and $5,000 to buy bulletproof vests
<br />for police officers in New Brighton
<br />and St. Anthony.
<br />He noted that the post facilities are
<br />used by. the public and require a lot.
<br />of upkeep.
<br />In Bemidji, Veterans of Foreign Wars
<br />Post 1260 paid $b9,000 for a building
<br />last December and spent $23,573 for
<br />such activities as youth hockey,
<br />scholarships,. cancer research and
<br />transporting hospitalized veterans.
<br />The post grosses more than $200,000
<br />in pulltab revenue and $25,000 in
<br />gambling profits most months, and
<br />had'a profit carryover of $423,627 as
<br />of June 30.
<br />In Mankato, Morson Ario VFW Post
<br />9713 made monthly mortgage pay-
<br />ments of $4,836 from gambling pro-
<br />ceeds. In one of few instances in
<br />which it has rejected an expenditure,
<br />the gambling control office turned
<br />the club's use of $666 for installation
<br />of Morson Ario officers. The. post
<br />had justified that expense as "bene-
<br />fiting persons by enhancing their
<br />knowledge and dedication and devo-
<br />tion to principles of this nation of
<br />ours."
<br />The control board must approve ma-
<br />jorbuilding projects, and the rules do
<br />not allow organizations to use gam-
<br />bling profits for administration or
<br />personal gain, Fmnke said. His office
<br />had turned down such expenses as
<br />telephone and computer systems.
<br />A Star Tribune examination of
<br />monthly tax returns for 26 of the
<br />largest gambling organizations shows
<br />a wide variation in purpose, gam-
<br />bling activity and spending.
<br />The Multiple Sclerosis Society appar-
<br />ently raised the most, $774,549, on a•
<br />gross of $l0.4.million for the sevcn-
<br />month period ending in Junc, and
<br />spent most of its profits on its own
<br />programs of patient services, public
<br />information, volunteer services and
<br />grants to other organizations.
<br />In six months, the Minnesota Thera-
<br />peutic Camp raised $327,611 for its
<br />Camp Confidence near Brainerd,
<br />selling pulltabs through 25 locations.
<br />Unlike those organizations, St, Jo-
<br />seph's Society for Charity, Inc., puts
<br />major effort into bingo, which re-
<br />quires renting a hall. Siz organiza-
<br />tions operated the Little Canada
<br />charity bingo hall through a collcc-
<br />tivc management until tltc control
<br />office found that to be a violation of
<br />.rules requiring each organization to
<br />be responsible for its own gambling.
<br />"We never were in compliance last
<br />year," said Lois Blomberg, St. Jo-
<br />seph's full-time gambling manager.
<br />She said she didn't have complete
<br />access to the books, and semiannual
<br />rent and salary payments caused the
<br />society to lose $19,140' in December
<br />and $49,216 in June, although it net-
<br />ted $114,684 over the seven-month
<br />period.
<br />(The law put'a cap on spending for
<br />rent, salaries and other expenses di-
<br />rectly related to gambling. They can-
<br />not exceed 55 percent 'of gambling
<br />revenues minus prizes for bingo, 45
<br />percent for other games.}
<br />The hall was reorganized with five
<br />groups operating independently and
<br />"it's worked out just beautifully,"
<br />said Blomberg, who added that she
<br />doesn't play bingo because "it's like
<br />watching paint dry."
<br />St. Joseph's also sells pulltabs at a
<br />nearby restaurant, a bar and during
<br />its two bingo nights each week at the
<br />:hall. The organization donated
<br />$225,000 to Little Canada youth
<br />sports over theJast Ph years.
<br />.:Franke of the control board touts
<br />"success stories" in a monthly news-
<br />letter sent to gambling organizations.
<br />They have included funds for a li-
<br />brary in Cloquet, a church building
<br />roof in Minneapolis, a weather warn-
<br />ing system and an adult day care
<br />operation in Bemidji, the City Hall in
<br />Mentor, numerous food shelves,
<br />United Ways, parks, youth recreation,
<br />projects; fire department and ambu-
<br />lance improvements and bulletproof
<br />vests for police officers.
<br />Bingo has been legal. in Minnesota
<br />since the 1940s and pulltabs were
<br />legalized in 198E But the gambling
<br />was regulated - or, usually, not reg-
<br />ulated - by local government until
<br />the control board was established in
<br />1984.
<br />Franke said his 12-member office has
<br />gradually upgraded requirements to
<br />report how organizations are ac-
<br />-counting for and spending gambling
<br />,funds, sometimes sending back as
<br />•many as 30-percent of tax return
<br />forms for more information.
<br />He said the result has been a greater
<br />awareness of what gambling can do
<br />for nonprofit organizations as well as
<br />the departure of some people who
<br />were misusing the system.
<br />He recalls talking to one organization
<br />that reported an increase of $25,000
<br />in net profits on -the same gross. He
<br />asked what made the difference and
<br />was told that the old bookkeeper re-
<br />tired.
<br />Staft writer Ted Jones contributed to'
<br />this article.
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