ACTION REQUESTED:
Title
Communication from the City Manager and the Corporation Counsel with a Request to HOLD A POLICY DISCUSSION AND/OR ADOPT One of the Following Ordinances Amending Chapter 3 of the Code of the City of Peoria Regarding Liquor Regulations Relating to Proposed Establishments that Operate Primarily as a Video Gambling Café: (Refer to Item No. 14-333)
Option 1: An Ordinance Amending Chapter 3 of the Code of the City of Peoria for a Temporary Moratorium of Site Approval of Establishments Whose Primary Purpose is to Operate as a Video Gambling Café.
OR:
Option 2: A) An Ordinance Amending Chapter 3 of the Code of the City of Peoria Creating a Separate Class "G-V" License for Establishments Whose Primary Purpose is to Operate as a Video Gambling Café;
B) An Ordinance Amending Chapter 3 of the Code of the City of Peoria Creating a Separate Class "G-V" License for Establishments Whose Primary Purpose is to Operate as a Video Gambling Café and Limiting the Number of "G-V" Site Approvals to 4 Per City Council District;
C) An Ordinance Amending Chapter 3 of the Code of the City of Peoria Creating a Separate Class "G-V" License for Establishments Whose Primary Purpose is to Operate as a Video-Gaming Café And Requiring Minimum of 25% Net Revenue be from the Sale of Food, Drinks, and/or General Merchandise.
Body
BACKGROUND:
Chapter 3 of the City Code allows the City Council as well as the Liquor Commission to consider the fact that a proposed establishment's primary purpose is to have video gambling machines as a detrimental factor and allows the City Council to impose a condition that the location can have video gambling machines only after it has been operating for at least one year without video gaming machines.
The Liquor Commission at its last meeting on August 4, 2014, voiced concerns that although this recent change allows the Commissioners to consider the factor that the business's primary purpose is to have video gambling machines, they would like a bright line on how to regulate video gambling cafes. The minutes from this meeting is contained in an attachment to this Council Communication. Based on the comments by the Liquor Commission and research by staff, four options with amendments to the City's Liquor Code were drafted to guide the City Council in its discussion and the City Council can choose to adopt any one of the options or direct Staff to bring another option that it deems appropriate.
There are both anecdotal evidence and media stories indicating the increase in number of what has been called video gambling cafes. Copies of the on-line news articles are contained in the attachment to this Council Communication. Since the City of Chicago does not allow video gaming machines, these video gambling cafes have popped up in Chicago's surrounding suburbs such as Bartlett. Most municipalities are using their current liquor regulations to address these video gambling cafes and are not creating a new class of liquor license for video gambling cafes. A few of the smaller communities such as South Beloit and City of Olney have created a separate class for video-gaming and have limited the issuance of this type of class to a low number such as 4 or 2. Copies of these ordinances are contained in the attachment to this Council Communication. Normal allows only restaurants to have a liquor license allowing for on-site consumption, so video gambling cafes cannot get a liquor license without selling food and operating as a restaurant.
The earlier operators that have come before the Liquor Commission have presented visions of "up-scale" video gambling cafes that would cater to women with service of some food and a limitation on the number of alcoholic drinks. The latest applicants that have come before the Liquor Commission have been open about their intent to only have bottles or cans of beer stored in a refrigerator just to get the video-gaming license, without any desire to provide ice or glass since that would require a food/drink license from the City/County Health Department.
Although the Video Gaming Act requires that a terminal operator be a licensed establishment to draw, pour, mix, or otherwise serve for consumption on the premises alcoholic beverages, recent businesses that want to operate as a video gambling café have opted for the loose interpretation of "serving for consumption" as selling a can or bottle of beer without pouring. Under the current City Code, the video gambling cafes are choosing Class G (beer & wine only) because they want revenue from gambling and are not interested in being a tavern with a full service bar.
Under the Video Gaming Act, the terminal operator (establishment) has to pay an application fee of $5,000 and then an annual license fee of $5,000 to the State. In January 2013, the City Council approved an amendment to Chapter 18 of the City Code setting forth additional local regulations of video gaming machines with an annual license fee of $250 for the 1st machine and $50 for each subsequent machine for a maximum of 5 machines per establishment to be paid to the City. The Illinois Video Gaming Act provides that each local municipality must receive 1/6 of the 30% tax on net income from the video gaming machines in its jurisdiction. A report from the Illinois Gaming Board that shows video-gaming activities and revenues generated from "Peoria" establishments from January 2014 to July 2014, including the City's portion of the gaming tax, is included as an attachment. The establishments that have liquor licenses issued by the City of Peoria are highlighted.
Option 1 is an amendment to Chapter 3 of the City Code that sets a temporary moratorium on approvals of site applications for establishments whose primary purpose is to operate as a video gambling café. It is recommend by both the Liquor Commission and staff that if the City Council wishes to take time to review the permanent changes to the City's Liquor Code contained in Option A, B, or C, the temporary moratorium contained in Option 1 be immediately approved. The temporary moratorium will automatically end on March 1, 2015, the start of the 2015-2016 liquor license year, unless extended by the City Council.
Option A is an amendment to Chapter 3 of the City Code that creates a separate class "G-V" for video gambling cafes and requires them to pour and serve alcoholic beverages so that they would at least have to get a food/drink license from the health department. The annual license fee would be $10,000.
Option B is an amendment to Chapter 3 of the City Code that creates a separate class "G-V" for video gambling cafes and requires them to pour and serve alcoholic beverages, but also limits the number of Class "G-V" site approvals to 4 per city council district. The annual license fee would be $10,000. This was suggested by the Liquor Commission during its discussion of this issue.
Both options A and B define a Class "C-V" establishment as one that has less than 51% of the net revenue from the sale of food, alcohol, and/or general merchandise. Due to the time constraints, there was no research done to determine if any of the current taverns (Class A) will not meet the 51% threshold, but the presumption is that the newly created "G-V" license will most likely not affect the regular taverns (Class A) and restaurants (Class B or B-1) since they typically add video gambling machines as an additional component to their businesses and a majority of their revenue is not from video gaming machines.
Option C is an amendment to Chapter 3 of the City Code that creates a separate class "G-V", but also requires the "floor" or minimum non-gambling revenue be maintained. A Class "G-V" establishment must maintain at least 25% of its net revenue from the sale of food, alcoholic or non-alcoholic beverages, or other general merchandises. The annual license fee would be $10,000.
If the City Council desires to increase the license fee as an option to address the proliferation of video gambling cafes, this can be accomplished by substantially increasing the liquor license fee for establishments whose primary purpose is to operate as a video gambling café or substantially increasing the local license fee for each video gaming machine. The former can be done through a motion to amend option A, B or C to reflect the liquor license fee deemed appropriate by the City Council. The latter requires an amendment to Section 18-97 of Chapter 18 of the City Code and the City Council can direct staff to bring back an amendment to Chapter 18 of the City Code to reflect the increase in license fee for video gaming machines.
FINANCIAL IMPACT: If the City Council adopts the temporary moratorium in Option 1, the City will not realize license fees or its portion of the tax from the video gaming revenue from the video gambling cafes during the moratorium period.
NEIGHBORHOOD CONCERNS: As part of the discussion, City staff can gather neighborhood concerns regarding these establishments.
IMPACT IF APPROVED: Will regulate establishments whose primary business is to operate a video gambling café.
IMPACT IF DENIED: The Liquor Commission will continue to review the proposed site applications submitted by establishments whose primary business is gambling on a case-by-case basis without guidelines.
ALTERNATIVES: Not applicable.
EEO CERTIFICATION NUMBER: Not applicable.
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL'S 2014 - 2029 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Not applicable.
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Not applicable.
DEPARTMENT: Legal