By L.A. Williams, Correspondent
Christian Action League
June 14, 2013
FAYETTEVILLE – Tar Heel municipalities appear to have lost one weapon in the war against video sweepstakes, as the N.C. Court of Appeals has ruled Fayetteville’s high tax on the businesses unconstitutional.
The June 4 ruling said the city’s privilege license fees – $2,000 per location and $2,500 per terminal – violate a clause in the N.C. Constitution requiring that taxes be levied in a “just and equitable manner.” Fayetteville initially charged a $50 annual fee per business, but raised the rates after state lawmakers passed a ban on the sweepstakes machines in 2010.
Early that year Rev. Mark Creech, executive director of the Christian Action League, warned municipalities about the dangers of becoming dependent on revenue from gambling.
“This kind of thing can be a double-edged sword,” he said. “While we urge municipalities to use fees, zoning or whatever power they can to fight back this blight on our communities, we also warn them not to begin seeing these fees as a viable budget funding source. This produces its own complications. Any revenue from gambling will always be overshadowed by the social costs — welfare, addiction, increased crime — all the negatives that gambling brings with it.”
According to an affidavit filed in 2011, former Fayetteville Police Chief Tom Bergamine said the video gambling parlors create “significantly more calls for service than are generated by other types of businesses in the city,” and therefore “burden law enforcement resources more than other types of businesses do.”
Fayetteville is not alone in setting high fees for sweepstakes parlors and then having them struck down by the courts. The N.C. Supreme Court ruled earlier this spring that Lumberton’s fees, which went from $12.50 per year to $5,000 per sweepstakes business and $2,500 per terminal (a 59,900 percent increase) also violated the state Constitution and was “an abuse of the City‘s tax-levying discretion.”
Interestingly, the N.C. Supreme Court recognized in its opinion the fact that its December 2012 ruling in favor of the state’s ban on sweepstakes “alters the contextual landscape” of the Lumberton case. But, the High Court said “there are still issues that need to be resolved, such as the disposition of the taxes that were paid and the administrative levies that were imposed between the implementation of this tax and our decision in Hest Technologies.”
According to media reports, Fayetteville has raised more than $1 million from its fees. There has been no announcement as to whether the city will voluntarily return the revenue, but attorneys representing the sweepstakes businesses in Smith v. City of Fayetteville have told the media they will take further legal action if the fees are not repaid.