City mulls Internet sweepstakes cafe issue

Published 5:22 pm Tuesday, May 18, 2010

Contributing Editors

Washington officials are not sure what they will do about Internet sweepstakes cafes operating in the city.
A public hearing regarding the possible imposition of a moratorium on such entities — there are two in the city, according to city officials — has been scheduled as part of the City Council’s May 24 meeting. The city’s Planning Board recommends a moratorium to allow city staff an opportunity to review such operations and their compatibility with city plans and other land uses.
During the council’s meeting last week, Councilman Doug Mercer and other city officials said the legality of Internet sweepstakes cafes is questionable. John Rodman, director of the city’s Planning and Development Department, said the two Internet sweepstakes cafes in Washington opened under the “computer services” designation on the list of permitted uses in their zoning classifications.
Mercer said because Internet sweepstakes cafes are not specifically listed as permitted uses in the city’s zoning ordinances, they are prohibited. The city’s zoning ordinances say that if a use is not listed as a permitted use, then that use is prohibited, Mercer added.
Mercer also said he believes the two entities misled the city when they filed the needed paperwork to obtain business licenses to operate in the city. Apparently, that paperwork did include a mention of “Internet sweepstakes” activities, according to city officials.
Mercer said that in his opinion “these two operations are illegal according to our zoning ordinances.”
Mercer suggested the city tell the two entities to “cease and desist” their operations.
City Attorney Franz Holscher said he agrees with Mercer’s interpretation of the city’s zoning ordinances.
Mayor Archie Jennings said the term “Internet cafe” is “the Trojan horse” masking the true activities taking place at the two businesses.
Councilman Gil Davis said he believes such operations will have to be allowed in at least one zoning classification in the city. He also recommended charging each Internet sweepstake cafe $250 for each machine used for Internet gambling when it renews its business license in July. The $250 charged for each machine could discourage them from continuing in business, Davis indicated.
Mayor Pro Tempore Bobby Roberson said it may be difficult for the city to shut down the Internet sweepstakes cafes without facing some form of liability. After all, Roberson noted, the city gave the OK for the two businesses to open. As for issuing them a business license but charging them $250 for each machine, issuing the business licenses could be interpreted as the city recognizing them as legitimate businesses, Roberson added.
The council, noting that the N.C. General Assembly could take up the issue of Internet sweepstakes cafes during its short session that began Wednesday, decided to further study the matter before making a final decision. As for Davis’ suggestion concerning a $250 charge for each machine, the council will address that during its upcoming budget work sessions.
Internet sweepstakes cafe customers play games such as poker, keno and slot machines. They also purchase Internet time and phone cards. With their Internet time, customers search the Web, file for unemployment-insurance benefits and pay bills.
Some people view the businesses as ways to get around state laws. In 2006, the state banned video poker machines. Two years later, the laws were changed so that specific “server-based electronic game promotions” became illegal.
The 2008 law is under legal challenge. A Superior Court judge in Guilford County issued an injunction preventing law enforcement from cracking down on the sweepstakes cafes while the legal challenge continues.
The town of Spencer imposed a 60-day moratorium on any new Internet cafes. Other cities and towns are revising zoning ordinances and imposing moratoriums to slow the proliferation of Internet cafes.
The Salisbury Post quotes China Grove Town Manager Bill Pless as saying, “We don’t want to become a mecca for these things.”