CITY OF MAYFIELD HEIGHTS

COMMITTEE OF THE WHOLE MEETING MINUTES

September 27, 2010

The Committee of the Whole meeting was called to order at 7:30 P.M. by Council President Michael Ballistrea.

ROLL CALL:          PRESENT:   Mr. Michael Ballistrea, Mr. Anthony DiCicco, Mrs. Donna Finney,

                                                  Mr. Ronald Kobunski, Mr. Joe Mercurio, Mrs. Diane Snider

                              ABSENT:     Mr. David Sasak.

Also present were Mayor Gregory Costabile, Law Director Leonard Carr, Director of Finance/Clerk of Council Robert Tribby and Deputy Clerk of Council Lisa Benedetti.

The purpose of the meeting was to discuss Internet Cafes.

Mr. Ballistrea asked Law Director Leonard Carr to give some background on Internet Cafes.

Mr. L. Carr stated that he has had about nine inquiries on this matter. He asked Bryan Carr to explain the subject.

Mr. B. Carr stated that these types of businesses have been going on for several years. It came to the attention of the Law Department and the Building Department when a request for an occupancy permit was received by the Building Department. The Law Department started to research the issue. At that time, articles began appearing in the newspapers. The Law Department met with the applicant and inquired as to the nature of the business.   The applicant advised that it is a franchised business. The applicant sells cards that contain pre-paid phone or internet time. Along with the phone/internet minutes a purchaser also receives 2,000 “points” that are used to play “sweepstakes” games that resemble slot machines, and pay out cash prizes up to $5,000.00. The applicant stated that these are not slot machines, regardless of their appearance. The applicant stated that it is pre-determined whether the card is a winner or not. It appears that this may be gambling, similar to “instant bingo” cards. The applicant is taking the position that there is no risk and the purchaser receives the phone/internet minutes regardless of whether the card is a cash winner. According to the applicant, there is nothing a person can do to increase the chances of winning the “sweepstakes” games. A municipal court in Toledo determined, under Ohio criminial statutes these “phone cards” are not gambling. However, the Law Department reviewed the applicant’s Franchise Agreement. The Franchise Agreement contained a provision that addressed the fact that this may be considered gambling and how disputes would be handled, as between the Franchisor and Franchisee. This raised a “red flag” with the Law Department.  

          There have been additional calls from people inquiring as to the City’s position on this issue. Richmond Heights and the City of Cleveland are putting this on the table for further research. The Ohio Supreme Court is currently looking into a case that could have direct consequences on activities such as this. Given the number of inquiries, the Law Department felt that Council needed to address this issue. These “Internet Cafes” also provide copying, faxing and Internet access services. The hours of operation are later into the night and early morning.

Mr. L. Carr added that Richmond Heights is looking closer at this subject. To address this issue, some cities are taxing these businesses. Council can legislate and allow it, take the position that it is not permitted under the Zoning Code, or place a moratorium on it. It appears to be a pretext for gambling. Mr. B. Carr added that a person can supposedly just swipe a card to see if it is a winner.

Mr. Ballistrea asked if any of these establishments offer true Internet use without the sweepstakes. Mr. B. Carr responded that all of these establishments offer the “sweepstakes.” The sole purpose of the establishments seems to be the “sweepstakes” and the internet/phone use is secondary. Mr. L. Carr commented that the Attorney General has not offered an opinion. The Attorney General may be waiting for the Supreme Court to make a decision. Mr. Carr stated he does not know where this would lead if this is allowed and if it will open the doors to more real gambling.

Mr. B. Carr added that, upon reviewing the back of the applicant’s phone card, the minutes expire after 90 days, so the phone/internet aspect of the card seems somewhat questionable. Mrs. Finney mentioned that she thought Richmond Heights already had these places. Mr. L. Carr stated their law director did not think them problematic AT THE TIME HE FIRST REVIEWED IT, ALTHOUGH HE IS STILL CONSIDERING A LEGAL OPINION. Mrs. Finney asked why one year was chosen for the moratorium. Mr. B. Carr replied that the Supreme Court sometimes takes a long time to make a decision. Mr. DiCicco asked if there was any kind of liability for the moratorium. Mr. L. Carr stated that the city is exercising good faith and due diligence. There is always the chance of being open to litigation, but that the City has numerous defenses available to it and that liability is not a real issue. Mr. DiCicco commented that his research showed some possiblity of deep pocket persons who leave town.

Mr. Ballistrea stated that on the advice of the Law Director he has put a motion on the Council agenda for a moratorium in order to conduct research. The time can always be extended. Mr. Kobunski stated he agreed with the longer moratorium as there is too much uncertainty. Mr. L. Carr stated that the Law Department will continue to monitor the subject.

----------------------------------------------------------------------------------------------------------------------

There being no further business to come before Council, Mr. Ballistrea adjourned the meeting at 7:28 P.M.

Approved:                                                       Respectfully submitted,

Michael Ballistrea                                           Lisa A. Benedetti, MMC

Council President                                           Deputy Clerk of Council