Cash in on Internet cafe loot

If local communities are not going to take action to reverse the proliferation of Internet cafes, they should at least collect fees from the operations.

The Ohio House voted last year to regulate the businesses in such a way that an industry group said would eliminate the cafes. The bill stalled in the Senate.

Legislation is expected to resurface this year and some expect a law to pass by summer. The question will be whether the legislation eliminates the cafes or if industry lobbyists succeed in passing a less restrictive regulatory bill.

In the mean time, local communities are missing out on grabbing a piece of the action.

The Cleveland suburb Willowick has four cafes. It collects $100,000 per year from them. The money goes into the general fund.

Warren has 24 cafes. At Willowick’s pace, Warren could be adding $600,000 per year into its general fund, which is so depleted there have been layoffs in the police and fire departments and the city can’t maintain a road paving program. Granted, Willowick’s wealth and Warren’s cafe saturation might make them less lucrative here, but still, a substantial amount of money appears out there for the taking.

And not just in Warren.

There are 821 cafes in Ohio, including 47 in Trumbull County and 37 in Mahoning County. The state placed a moratorium on new cafes until June, giving the legislature time to establish the rules.

Where prosecutors and other community leaders staunchly oppose the cafes, there have been raids and the businesses driven out. Where the sentiment is tolerant, the cafes flourish.

Trumbull County Prosecutor Dennis Watkins considers them illegal gambling operations and has supported raids on some of them. Despite Watkins’ opinion, local police departments have resisted shutting down the cafes and thus, most of them continue to flourish.

There are cafes in 13 Trumbull County communities, including six in Hubbard. There are cafes in seven Mahoning communities, including 16 in Youngstown and seven each in Austintown and Boardman.

Bryan Sanshuck, executive director of the Internet Cafe Coalition of Ohio, said there are 16,000 jobs tied to the industry. He said the industry favors limited regulation and does not object to fees that help local communities.

At Internet cafes, customers purchase phone or Internet time. Based on how much they spend, they are awarded points to play games on computers. Points won in games can be exchanged for money.

Some do not consider the practice gambling. They make comparisons to corporate scratch-off games like the McDonald’s restaurants sweepstakes, saying customers pay for the product and get to play the sweepstakes games for free.

Others do consider the cafes to be gambling dens and have acted against them. This has led to uneven law enforcement and the stalemate in the legislature.

Ohoians passed a constitutional amendment approving a heavily regulated gambling industry that requires large percentage payouts to players and substantial tax payments to state, county and local governments. Internet cafes, because they are not legally defined as gambling venues, are not obligated to show where profits go. Their owners do not have to pass background checks. They have no required payout. They are not subject to inspections. And they are assessed no fees except in communities like Willowick.

Nationwide, this is a $10 billion industry that has struck a nerve with the owners of casinos and racetracks, such as those approved by Ohio voters, for siphoning off their customers. With that kind of money, lobbying will continue to be forceful.

While all this plays out, communities without fees continue to miss opportunity.