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City Receipt of 10% of Net Profits <br />The state statues have a provision to allow local units of government to adopt an ordinance -that <br />allows for the collection of up to 10% of the net profits from a charitable gambling operation to be <br />used for "laUiul purposes" by the local government. Net profits, after deduction of prizes, allowable <br />expenses, and state taxes, are approximately 10% of the gross revenues. This means that local units <br />of government that collect 10% of die net profits are receiving about 1.0% of the gross revenues <br />from a charitable gambling operation. Based on one yrai of financial reports for the MS Society’s <br />charitable gambling operation in Orono, the City could receive approximately $1,500 per year to <br />be used for lawful purpose expenditures. <br />When this issue was reviewed in 2001, the estimated City receipts would have been approximately <br />$10,000 per year, however the Mound/Noithwest Tonka Lions Club pull tab operation at the Navarre <br />Lanes Bowling alley would have contributed $8,000 of this estimated $ 10,000 in annual revenue to <br />the City. However, the Lions Club discontinued pull tabs at the bowling alley in November of2001 <br />and did not renew their licence for 2002. <br />These funds are administered and regulated by the local unit of government for any lawful purpose <br />the local unit of government is allowed to participate in. The discussions in Orono have been to use <br />the revenue for paric improvements. Exhibit B, the armual City reporting form, contains a listing <br />of allowable "lawful purpose expenditures." Expenditure A-7 is for "activities and facilities <br />benefitting youth under age 21." This category appears to allow the expenditure of funds for park <br />and playground improvements. <br />The organization conducting the gambling operation submits an annual reporting form to the local <br />unit of government that details the net profits from the operation along with payment of 10% of the <br />net profits. A local unit of government that collects a percentage of the net profits fi’om gambling <br />operations is required to submit an annual report to the State Gambling Board that lists all such <br />revenues collected and expenditures for the year. The State Gambling Board has standard forms that <br />are used by locul units of government for annual reportmg. <br />The amount of staff time required to implement collection of 10% of the net profits from the <br />charitable gambling operations in the City appears to minor. Long Lake staff stated that completion <br />of the annual reporting form. Exhibit B, for the State Gambling Board takes several hours each year. <br />City Designation of a "Trade Area" for Expenditure of Net Profits <br />Another provision in the state statues, which is also used by Long Lake and Delano, allows local <br />units of government to specify where the net profits from charitable gambling are to be spent by the <br />organizations conducting the operation. The local unit of government can define a "trade area" in <br />which the net profits from a charitable gambling operation must be spent. The Long Lake ordinance <br />requires that 75% of the net profits be expended in the cities of Long Lake or Orono. The City of <br />Page 2 of 3