House Votes 108-7 to Ban Internet Cafes; Impact in Palm Coast Will be Limited

With little opposition, the Florida House on Friday approved a measure to outlaw the electronic games played in strip malls across Florida at Internet Cafes and adult arcades.

The 108-7 vote came a little more than a week after the state’s lieutenant governor resigned due to ties with an Internet cafe group at the center of a multi-state racketeering investigation. It is likely the first step in closing the businesses, which have been popping across the state with more frequency in recent years.

“It’s about time we actually shut down something that has clearly been illegal in my opinion,” said Rep. Carl Zimmerman, R-Palm Harbor. “Recently people in my district have come to me and told me about some of these establishments that don’t pay out the $3,000 win that a person gets in one day. Instead they pay out $599 per day to avoid taxes. If this is true I think they have other problems yet to be faced.”

The measure (HB 155) is opposed by some of the major pro-business advocates in Tallahassee, including the Florida Chamber of Commerce, but became almost inevitable after the investigation into the cafes was announced earlier this month.

Palm Coast at one point had nearly a dozen such businesses. Last week it had seven. This week, according to Palm Coast Mayor Jon Netts, the number was down to three, as several of them have done what the store at City Marketplace–next-door to Palm Coast’s city hall–did: pre-emptively shut down, as they’ve anticipated that a new law would shut them down anyway.

Netts had led the campaign from Flagler County to better control–but not ban–Internet cafes, going back two years. Palm Coast last year passed an ordinance strictly regulating the businesses, with an eye on public safety and transparency. Netts sought legislative action to universally regulate the Internet cafes and tax them. He was opposed to the patchwork of local laws, and absence of laws, defining how the establishments could (or could not) operate.

“Clearly this is discretionary dollars, this is not taking pablum away from the kids or cat food away from the cats,” Netts said. “I see nothing wrong with taxing it, but the hodgepodge we had at least in my mind was unacceptable.”

Netts, uncomfortable with the notion of banning the businesses outright, said no one is forced to go to them, while the argument that they are a magnet for crime hasn’t held up, at least not in Palm Coast. Local sheriff’s officials have reported to the city that there’s been no noticeable additional criminal activity related to the businesses. The clientele is in fact typically older, calmer and much less interested in sleaze than what the establishments call “sweepstakes” (their preferred euphemism for small-stakes gambling). The marketplace was also regulating the number of businesses on its own: when Palm Coast had nearly a dozen cafes, most struggled for customers, forcing several to close.

Their coming closure, assuming that the Florida Senate follows the House’s action (as it is expected to) will have some impact on Palm Coast, but not a drastic one. “The number of jobs created was not significant, but let’s face it, a job is a job is a job,” Netts said. “I hate to see three more empty storefronts. In terms of revenue to the city, we did not get an awful lot of revenue from them.”

The House approved a similar proposal last year, but the measure never reached the Senate floor.

This year the Senate version of the proposal (SB 1030) is expected to appear before the Rules Committee, chaired by Sen. John Thrasher, R-St. Augustine, who sponsored the bill, before going before the full Senate.

Opponents questioned the hasty effort to close businesses that they say employ about 1,300 and could generate up to $13 million a year in revenue to the state.

Rep. Elaine Schwartz, D-Hollywood, also said the proposal is taking away an activity that is enjoyed by the elderly.

“Why jump to making it illegal, when the standard is simply to regulate and tax it and having it be in the same world as other gambling?” Schwartz said. “I don’t see why we have to jump to make it a crime when it is something that is very pleasurable, something that can be enjoyed. There is no reason that it should be a criminal activity.”

But Rep. Dennis Baxley, R-Ocala, said the arcades were a “predatory” industry that prey on people with gambling addictions. He also said the cafes have proliferated in poor neighborhoods and the cafe owners amass millions of dollars in profit at the expense of poor people who can’t afford to lose money.

Backers also say the measure simply clarifies existing rules that prohibit the games of chance – and that the places should have been illegal all along. They also dismissed the fiscal impact numbers, saying the total could include amusement games found in businesses such as Chuck E. Cheese and Dave & Buster’s that aren’t impacted by the prohibition – because their offerings are games of skill.

While legislators have been critical of the arcades for several years, the bill has rapidly made its way through both sides of the Legislature in response to the statewide investigation into alleged illegal gaming by a charity, Allied Veterans of the World.

The probe already has led to 57 arrests. The investigation also resulted in the resignation on March 12 of Lt. Gov. Jennifer Carroll, who had consulted for Allied while in the Legislature.

“I suspect that this is not over,” Netts said, suggesting that the state’s ban may lead to a new form of arcades. “It became apparent that the existing regulations were inadequate. It’s certainly quicker to do an outright ban. To try to put in place new regulation, that would have taken two more years, who knows. Maybe this is a work in progress, ban them as they exist, then pass some time in writing ordinances that are clear and maybe they can be recreated in a different format. That remains to be seen, but that probably would be the best of all worlds.”

–FlaglerLive and News Service of Florida