Newton enters sweepstakes fray

Owners of Newton's Internet sweepstakes businesses have about 60 days to file applications and pay new fees in order to keep their doors open.

Newton City Council set a new fee schedule that requires the Internet gaming operations to pay $2,500 per business, as well as $1,000 per computer terminal within the business. Those are levied annually.

For the six existing sweepstakes businesses operating in the city those new fees could yield in the neighborhood of at least$121,000 in revenue for the city.

"We are developing an application that needs to be completed by the business owners that way we have a statement of what they have — something on record as to what machines they have on site," said Newton City Manager Todd Clark. "We would like to get that out to them in the next week and a half and them give them, roughly speaking, two to three weeks to get it back to us. We would then assess a fee based on that."

Once a business has been invoiced it has 30 days to make a payment for the fee, Clark said.

"If we don't get a response from the letter, we will do another inspection and bill based on what the police department counts," Clark said adding Newton Police Department will inspect Internet sweepstakes businesses to ensure compliance. "We will do at least bi-monthly inspections where we go in and see if additional machines have been added and sort of monitor the extent of the operation that way."

Newton City Council approved the new fee schedule for Internet sweepstakes businesses Tuesday night without any dissenting votes. The move comes as city officials have been tracking actions of state lawmakers and other regional municipalities toward the businesses which have been proliferating recently.

"We are aware that many municipalities and counties have adopted some type of fee or they are looking at doing that," Clark said Tuesday night. "The condition we set forth says the fees are due July 1 each year, and any business which opens and obtains a certificate of occupancy after that time would have the fee prorated depending on when they open."

Only sexually oriented businesses have a similar fee schedule set in place within Newton, according to Newton Planner Alex Fulbright, who said there are no businesses of that nature within the city.

Clark said six Internet sweepstakes businesses currently operate in the city, and another is planning to open. Among those businesses, there are at least 106 "Internet connection gaming machines."

"Ask yourselves, what other business has to pay $2,500 a year to conduct legal, lawful business, and on top of that $1,000 per machine. Nobody has to do that," said Burke County attorney Victor Yamouti, who said he represents Triple 7's Sweepstakes on West B Street. "This kind of fee discriminates against this business. It is like a sin tax."

Yamouti said he has been involved in Internet sweepstakes cases since 2009. He said  many people think the operation is akin to gambling.

"This isn't gambling. There is a misconception that there is alcohol served. That is not true," he said, adding his client has already paid about $720 to the city for business permits, fire marshal inspection and power connection. "These folks are paying rent to a landowner. They are hiring employees to run the place. ... These are businessmen and women in your community that, in these tough times, have come and taken money out of their pocket and chosen your city to operate a business. These people are trying to make a living."

Council member Robert Abernethy Jr. questioned the level of the fees during council debate.

"I don't necessarily think it is a bad thing that we have a fee and a fee per machine, but I think that is a lot of money. Imagine trying to come up with $25,000 (to pay the fee)," he said, while also admitting he understood the business' revenues are "substantial."

"It was a lot more than I expected," he continued. "People invest in a business, and it is a legitimate business. I hate to run anyone out of business on an investment they made by taxing them or giving them a fee that is an exorbitant amount of money."

He also said, however, that while the games aren't technically gambling, they are very addictive. Newton Police Chief Don Brown said that while there haven't been many problems connected to the businesses, police have responded to one armed robbery at an Internet sweepstakes business on U.S. 70.

Council members Wes Weaver, Mary Bess Lawing and Bill Lutz opposed any move to set fees lower, arguing that if Newton's fees were lower than surrounding areas, the city might see an influx of Internet sweepstakes businesses.

"I think you have to even the playing field," Lawing said. "If you don't set the fees and have the privilege license, the ones in Conover will move to Newton, which I understand some have already moved to Newton."

Already cities throughout the region have levied fees for the Internet sweepstakes businesses. The level of fees in Conover and Claremont is the same as Newton's, while Morganton charges $2,000 per business and $1,500 for each machine. Long View charges a flat $1,000 per business.

"I think you underestimate how many will end up in Newton if we go below (those levels)," Weaver said.

"I am more worried about what is in my backyard than what is down the road."