Published: September 10, 2006 03:38 am      

Legal and visible

Video gamblers pumping millions into games

FAIRMONT — Five years into West Virginia’s legalization of video gambling machines, the number of machines in Marion and Harrison counties has dropped, while the number in Monongalia County has risen.

Meanwhile, their visibility has grown in all three counties.

Once found in bars and fraternal and civic clubs, the legalization of the machines spurred the development of “mini casinos,” or establishments devoted strictly to the machines.

The machines themselves are not illegal. But payouts to winners of the games on them were being made under the table, in violation of state and federal tax laws that require gambling winnings to be reported as income.

Fairmont now has 48 locations where the machines can be played, according to state lottery records.

As of July 31, there were 74 “retail” locations in all of Marion County, offering 350 machines or “terminals” in the lottery’s parlance. The machines are monitored by computers in Charleston at the lottery’s headquarters. The lottery’s statewide backup computer site is at the Middletown Mall in White Hall.

A 1999 survey by the state Alcohol Beverage Control Administration (ABCA) and the West Virginia Lottery reported there were 474 of the then illegal “gray” machines in Marion County.

Two years later, a count just by the ABCA in licensed bars and taverns said there were 576 machines in the county. The count was taken just before the Legislature approved Gov. Bob Wise’s plan to cap the number of machines at 9,000 statewide and to “reduce, restrict and regulate” them. The state’s venture with the legal machines started on Dec. 17, 2001, when the first 34 machines came online.

In Monongalia County, there were 300 machines in the 1999 count. The number also jumped to 446 in the 2001 ABCA count.

As of July 31, there were 97 locations and 469 machines in Mon County.

In Harrison County, there were 307 machines in 1999 and 632 in 2001. As of July 31, there were 80 locations and 421 machines.

An accompanying chart shows the top 10 locations by revenue in each of the three counties for July. The chart shows the amount put into the machines by players, the amount they won (amount out plus handpay from bartender depending on the size of the prize) and the resulting net revenue.

The revenue is divided several ways. The lottery itself gets 2 percent for administrative costs while counties and incorporated municipalities also get a 2 percent slice (based on population, not use of the machines).

Currently, the owners of the machines get 50 percent, while the state gets 46 percent of the revenue. The state’s share can vary from 30 percent to 50 percent by quarter, according to state law.

As the chart shows, Marion County video gamblers put $3.96 million into the county’s 350 machines in July. They won $2.96 million, resulting in revenues of $996,239.35.

The monthly amount put into all 350 machines comes out to $11,320 per machine. On a daily average, that’s $365.16 per machine.

A spot check of monthly revenues for two other months — July 2005 and December 2005 — shows county monthly revenues hovering around the $1 million mark. This despite the fact that in July 2005, the county had 29 more machines — 379 machines with $1.06 million in revenue — at five more locations, or 79 spots.

The daily revenue average for all 350 machines this July was $32,136.75. The daily revenue average for each machine was thus $91.81 (in a 31-day month).

The lottery’s computer control systems are so precise they can monitor each of the 7,958 machines currently in use around the clock.

While the state has awarded 9,000 licenses — each machine comes with a permit — operators and retailers carefully track the market. Since the machines are computerized, they can quickly be put online or shut down.

Licensed retailers must hold a qualifying permit from the ABCA for the sale and consumption of alcohol. Permit holders can be either a retailer or an operator, but not both.

There are 37 companies that hold permits as operators. There are about 350 permit holders in all, but the operators have the lion’s share of the 9,000 permits.

Advanced Lottery Tech of Keyser has 558 permits, for example. Jack’s Amusements of Fairmont holds 199, while Woodward Video LLC of Bridgeport has 177.

Progressive Video Lottery in Morgantown has 238 permits while Worldwide Gaming LLC of Fairmont has 47. Shaffer Amusement Co. in Clarksburg has 430 permits, S&B Gaming LLC of Fairmont has 50 and Ellifritz Amusement Co. of Morgantown has 46. Only 31 machines in Marion County are owned by retailers with the other 319 owned by various operators.

Meanwhile, there are 1,628 licensed retail locations across the state.

In fiscal 2006 which ended June 30, the lottery’s gross profit after its 2 percent administrative expenses share for its “limited video lottery” games was $354,937,668.

The state’s share was $152,726,594, funds which go to support a laundry list of programs. The programs are principally related to education, senior citizens and tourism.

Machine owners, meanwhile, made $195,112,321.

E-mail Bill Byrd at bbyrd@timeswv.com.