Clayton News-Star

Following DA’s letter, Clayton shuts out sweepstakes business

Clayton leaders on Monday officially closed the door on a sweepstakes parlor planned along U.S. 70 Business.

The Town Council’s unanimous vote to deny RNC Entertainment a special-use permit comes about a month after Johnston District Attorney Susan Doyle deemed the electronic gaming businesses illegal. Doyle’s stance, conveyed in letters to every sweepstakes parlor in the county, gave clarity to local governments and law enforcement agencies uncertain about the legality of the industry.

After the General Assembly outlawed sweepstakes games four years ago, many parlors remained open, with their owners saying they had started using tweaked software that complied with state law. Lower-level courts offered different rulings on the new software, which left some sheriffs and police chiefs scratching their heads.

Tony Ro, a Raleigh man who applied to open RNC Entertainment, had said his business would only use “pre-reveal” software, which he said was essentially approved in North Carolina. But Ro did not attend the Town Council meeting on Monday to defend his business.

Councilman Michael Grannis, in his motion to deny the special-use permit Ro needed, said the business could materially endanger the public’s health or safety. That’s one factor the council considers with all special-use permits, which typically include conditions developers must meet at a site.

“Most notably, we have had no expert testimony to substantiate the applicant’s statements,” Grannis said, referring to Ro’s absence from the meeting.

Grannis also said the business would not comply with the town’s rules and could decrease neighboring property values.

Ro could not be reached for comment.

In her Sept. 16 letter to more than a dozen sweepstakes parlors, Doyle said authorities had evidence that each business was operating illegally and that her office would start filing criminal charges starting Nov. 1. Jaime Schwedler, one of Clayton’s attorneys, told the council that Doyle’s letter did not technically apply to the RNC Entertainment, “because it is not currently in operation.”

The proposed business planned to have 80 gaming machines inside a 5,664-square-foot storefront in Clayton’s Walmart shopping center. Based on the town’s privilege-license fee schedule – a flat $2,500, plus $350 per machine – the town would have collected about $30,500 from the parlor.

Privilege tax going away

The state will soon take away the town’s power to charge privilege-license fees, which have netted Clayton more than $400,000 in the past five years. State lawmakers have repealed the tax, starting July 1, 2015.

Town Manager Steve Biggs said Clayton intentionally budgeted to receive less in privilege-license fees, so the change won’t affect this year’s books. However, in time, the repeal will take away a healthy revenue stream, he said.

“The feeling I get from the state is that we have to increase property taxes,” Biggs said, adding that the town had already cut spending to weather the recession.

“Cutting expenses is not a solution for us,” Biggs said. “It will mean-property tax increases if they keep undermining our tax base.”

The town budgeted to receive about $74,000 in privilege-license taxes this fiscal year and has gotten about $75,000 so far.