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Chardon unsure about Internet cafes
(by Joseph Koziol Jr. - March 11, 2011)
Chardon unsure about Internet cafes
By JOSEPH KOZIOL JR.
Chardon City Council's safety committee got its first look last week at a proposed ordinance to regulate Internet cafes, although some members of council expressed a total ban may be better.
"I feel safe in Vegas, but I don't want Vegas here," Councilman Mitch Hewitt said.
Councilwoman Deborah Reiter also questioned whether such retail establishments are an enhancement or detraction for what the city wants to be.
Rather than take action, the committee agreed to pass the matter to the full council for discussion.
In addition to city officials, Geauga Sheriff Daniel McClelland and Bainbridge Police Chief Jon Bokovitz attended the meeting.
The meeting began with Steve Yaney, the city's planning and zoning administrator, giving officials an idea of what Internet cafes are.
Searching the Internet, Mr. Yaney said, he found photographs of sweepstake winners from the establishments. He said they are primarily older women. He said the operation is being described as the "bingo of the 21st century."
He said the city would normally require 10 to 15 parking spaces for retail stores, but a similarly sized Internet cafe would likely require 40 to 50 spaces because most would have 40 to 50 computer terminals that would attract that number of customers.
He said customers are sold phone cards with a certain amount of minutes on each. The cards also include a sweepstakes ticket, he said. Customers swipe the sweepstakes ticket to determine their winnings. They then use the phone cards to play games, such as video slots or poker, on computers with no prizes awarded for that play.
The same phone card, he said, can be sold multiple times to different customers, which is believed to be where the money is made.
Mr. Yaney said many of the businesses also provide fax and copy machines for customers.
Chardon Law Director James Gillette said the phone cards are used to circumvent a federal statute that prohibits use of credit cards for gambling or sweepstakes.
In the proposed ordinance, a section in the definitions is expected to ensure a predetermined, finite pool of winners, making the chances for winning random. It states, "No electronic or computerized device, game play or outcome shall have as a component thereof, or shall be operated or determined by a random number generator or compensating algorithm. The game play and outcome shall be determined by or from a finite, predetermined pool, with the odds of winning stated in the sweepstakes 'official game rules.'"
Mr. Gillette said that is a key provision in the ordinance to ensure gambling is not part of the operation.
He said licensing requirements are established similarly to those for adult activities and cell towers.
He said the city will also need to partner the ordinance with a zoning provision to regulate where the businesses set up. He said Chardon Square is likely not the place for such businesses because of its historic nature and the need for parking. He said the city may also establish distances from places such as schools, parks, playgrounds and churches.
Mr. Gillette said approvals should be given as conditional use permits, allowing for conditions of operation, including business hours.
He said most activity at these businesses occurs during the late afternoon and evening hours.
He said the sheriff's department could be used in an undercover situation to determine whether gambling is occurring.
A certified independent regulatory compliance test laboratory could be hired for expertise to ensure the businesses are in compliance.
In addition, he said, all businesses must be set up to provide clear visual inspection of the terminals while in use. If the owner decides to change the setup, they must return to the city for approval.
Licensing fees, Mr. Gillette said, are "pretty steep" but are fairly consistent with what is charged in the area. Those fees include $30 per terminal, per month. There is also an escalating fee scale for the number of terminals at each store, starting at $2,500 for one to 20 terminals. Having 100 or more will cost $15,000.
An annual $2,500 fee will be charged for each computerized sweepstake device supplier, he said.
But Mr. Hewitt said he was not sure the people of Chardon want such operations in their town. "It's not something easily received in Chardon," he said.
Mrs. Reiter said she has concerns for security, as well as appearances. "I don't feel it will enhance our city or what we want to be known for," she said.
Mr. Yaney said he has not found any "huge crime issues" with businesses already established in other communities.
Police Chief Timothy McKenna said businesses have already approached the city about including the games with their operations. He said those that have asked are located in areas where parking is not a problem.
He said the ordinance also provides an opportunity to provide additional revenues to the city and provides some protections against these types of businesses.
While Mr. Hewitt said he is pro-business, he still questioned what type of image this will project for the city.
Mr. McKenna said, without the ordinance, there is a chance they will come through the "back door" and have no restrictions in place to control them.
Mr. McKenna said he anticipates these types of businesses will run their course and be gone. "I think it's a fad right now, and what's the next thing?" he said.
Mr. McClelland said, much like an educational component to underage liquor sales, his department could educate the businesses on what is expected of them. "Businesses run best when they're in compliance," he said.
Chardon Finance Director Jeff Smock said the city also needs to track sweepstake winners to determine what portion is owed the city in taxes.
Mr. Gillette said the ordinance requires businesses to report winnings every month.
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