PIERRE | Officials said Thursday that South Dakota’s video lottery revenue is nearly back to the peak reached in 2008, before voters approved the statewide ban in 2010 against smoking in bars and restaurants that drove a big decline in gambling play.
The state takes 50 percent of the money lost or left behind in the privately owned gambling machines. Based on results so far for the state's budget year that began July 1, video lottery is on track in fiscal 2018 to produce nearly $221 million that owners, operators, establishments and state government will share.
The record amount was nearly $224.7 million in fiscal 2008. Revenue stair-stepped all the way down to $176.6 million for fiscal 2012. It hovered at about $185 million for fiscal 2013 and 2014, then slowly began climbing back to nearly $212.4 million for fiscal 2017.
Video lottery currently ranks as the second-largest source of revenue for the state's budget. South Dakota’s sales and use tax is first. But a sluggish economy led Gov. Dennis Daugaard earlier this month to propose zero for increases to state aid to K-12 schools and state government employees for the coming year.
Revenues from instant scratch tickets and online lotto games also were up so far this budget year. Together they are expected to produce about $122.75 million for state government when the 2018 budget year ends June 30. That would be an increase of about $5.3 million from 2017.
Meanwhile South Dakota Lottery officials are drafting a request for proposals that would include video lottery’s central administrative system. The current contract runs into 2019 with five one-year extensions available.
South Dakota Lottery Executive Director Norm Lingle told lottery commissioners Thursday he wants to issue the RFP by the end of January.
Much of the meeting discussion focused on the future of VLC 8700 video terminals that still remain in use since the Legislature allowed video lottery to start in 1989. Lottery business analyst Sam Stanforth said net machine income continues at $45 to $50 per day for the legacy terminals and is $90 to $95 per day for modern line games.
Video lottery revenue has been growing twice the rate of inflation, according to Stanforth. “I think it’s been looking pretty good for the past six years,” he said.
“That was good news, and I hope we can continue on with that,” commission chairman Jim Putnam of Armour said.
The meeting drew more people than usual to room 412 in the Capitol because of the topic of the legacy machines. “I’m glad to see such a large crowd. It shows we have great interest in the subject matter,” lottery deputy director Clark Hepper said. He commented that legacy machines have been solid producers for the lottery but noted that change is constant.
Hepper recalled that the commission in 2008 decided to declare the original VLC 8700s obsolete. Nearly 10 years later, thousands remain in use among the approximately 9,100 terminals in play.
Line games debuted in 2011, he said, and now produce “very solid” revenue. Based on the rate of replacements during the past few years, Hepper estimated 12 years would be needed to move all of the legacy terminals out of the establishments.
“They’re still earning good coin for us and our operators,” Hepper said. He called for a plan to be developed that would cover every part of the video lottery industry.
“Well, that’s a lot of meat — and we all want to know where the beef is,” chairman Putnam said.
Bob Riter Jr., a Pierre lawyer who has represented the Music and Vending Association of South Dakota since video lottery’s 1989 start, stressed the need for machine owners to be part of the conversation with lottery staff and later with the commission when the discussion reaches that point.
Riter said they stand “ready, willing and able” to meet as needed. He said Hepper’s presentation reminded him the commission originally set the state’s share between 15 and 35 percent. The move to 50 percent that the Legislature adopted created issues inside the industry, he said.
Legacy machines are being used by “lots” of people as an income base to pay for new machines, according to Riter. He argued the legacy machines have made the system successful and reminded the commission that the smoking ban made a difference.
“Yeah, it has come back, but in the meantime, it’s been a struggle for the people in the audience as well as a reduction in state revenue,” Riter said.
“We’re not looking for a debate. We’re looking for a remedy,” Putnam told Riter.
Also speaking to the commission were Matt Krogman, a Brookings lobbyist for the South Dakota Licensed Beverage Dealers and Gaming Association, and Troy Erickson, president for M.G. Oil Co. based in Rapid City.
Erickson said people in the room represented probably 8,000 machines. He said legacy terminals are “an anchor” that still make money for the owners and state government.
The timetable for the current video-lottery administrative contract indicates seven years remain for the legacy machines to be replaced, according to Erickson. That would mean some 3,500 of them could be moved out through natural attrition, he said.
Shutting off the legacy machines in 2019 would be a mistake, Erickson said. He suggested the commission consider as future steps adding progressive-style terminals that set aside a small fraction from each bet for big jackpots, making state government a partner in machine ownership and offering higher limits than the $2 maximum that’s been in place for nearly 30 years.
“With the right planning, we can all make a lot more money,” Erickson said said. “I think we’ve got some time where we can create a heck of a system.”
PIERRE | Officials for the state's Wildlife Division want more water flowing down Rapid Creek so trout can better survive future winters.
So far they’re not even getting what they need. That’s the message Geno Adams delivered Friday to South Dakota Game, Fish & Parks Commission members.
The fisheries program administrator said some of his staff have been talking with counterparts for the U.S. Bureau of Reclamation and Rapid City municipal government.
The topic: winter releases — specifically, the lack of them — from Pactola Reservoir upstream in the Black Hills. Adams said adult trout don’t do well when the flow is less than 20 cubic feet per second.
Pactola’s minimum standard release is 37 cfs. During winter months a municipal worker controls a valve that further reduces the amount. The flow dropped below 20 on Dec. 12 and currently is at 15, Adams told commissioners.
“It’s basically an all or nothing system,” he said. “We expected it to happen. We didn’t expect it to happen this soon.”
The reservoir began operating in 1954. City officials want it full by May 1.
That means cutting releases. But when the flow goes below 20 cfs for more than one winter in a row, Rapid Creek can stop being a class-one stream, according to Adams. “Dewatering is a big concern for the fishery,” he said.
The talks so far haven’t produced any change for the winter that officially arrives in a few days. But the South Dakota School of Mines & Technology plans a research project that could produce new models for water management, Adams said.
Gary Jensen, a state commission member from Rapid City, said the panel should become an advocate for a more cooperative approach from city and federal officials.
He suggested the commission chairman sign a letter. “Everybody I think is working in good faith to get to the right answer,” he said.
Commission chairman Barry Jensen of White River agreed. “That is a worthy project,” he said.
Commissioner Scott Phillips of New Underwood asked for support of Gary Jensen’s proposal that the letter be written.
“It’s a great idea, and we need to get that done,” Barry Jensen said.
A decision by the South Dakota Supreme Court has halted the expansion of a limestone mine just south of Rapid City by reversing a lower court's conclusion.
The limestone mine, operated by Croell Redi-Mix, supplies raw material for concrete and other products. It is located about a mile east of the Bear Country USA drive-thru wildlife park along U.S. Highway 16, south of Rapid City.
The state Supreme Court decided that a mining permit was needed and a simple construction permit was not sufficient for Croell Redi-Mix to expand their mining operation, despite the land being zoned for general agricultural use. Because the Pennington County Commission denied a mining permit last year, the Supreme Court's decision means the expansion is halted immediately.
The saga for Croell to expand the limestone mine by 164 acres has been a long process with multiple court battles.
In February 2016 Pennington County Commissioners initially approved the mine expansion, but residents immediately filed an appeal. Neighbors in the area said the mine would cause environmental damage and lead to traffic delays on a busy road.
In April 2016, on appeal the commission voted to block the expansion. That decision led to a legal battle in circuit court.
Croell Redi-Mix argued in the circuit court that their intended use for the land should be authorized because that area was zoned at an A-1 General Agricultural District. That type of land allows for temporary quarries permitting the extraction of sand, gravel or minerals with a construction permit. Also, they argued the commission's decision was arbitrary and not supported by substantial evidence.
The circuit court ruled that the commission "acted arbitrarily" in denying the permit for expansion.
The commission then appealed to the state Supreme Court, and the circuit court's decision was reversed.
The Supreme Court said because Croell intends to extract more than 100 cubic yards from the earth, a construction permit under A-1 General Agriculture Zoning laws would not be sufficient and the company would need to obtain a mining permit.
The court said Croell doesn't "claim its mining operation is related to agriculture," and that its "mining operation is simply a commercial enterprise that sells the product it extracts."
Thus, Croell would need a mining permit under county ordinances.
"The circuit court’s conclusion that the Board’s (Pennington County Commission's) decision was arbitrary is premised on the court’s erroneous interpretation of the controlling ordinances," the decision stated.
A $10 million civil lawsuit against the county by Croell Redi-Mix is still pending.
Custer State Park staff are concerned about the fate of three burros that are still unaccounted for following the Legion Lake Fire.
Six of the nine burros that live in the park had been found as of Thursday afternoon. "We will continue to look for the remainder of the burro herd, but at this time, it is believed they did not survive the extreme fire growth from Tuesday night," the park said in a Facebook post.
The park is still in the process of locating wildlife, and those efforts will likely continue for several weeks, said Kobee Stalder, visitor services program manager. All of the park's resources were initially used to fight the wildfire, which started Monday morning in the area of Wilson's Corner, one mile northeast of Legion Lake.
Fanned by high winds, the fire later spread beyond the park's boundaries. Investigators from the South Dakota Wildland Fire Division suspect a downed power line sparked the fire, which has grown to 53,875 acres, or 84 square miles. It's now 80 percent contained. The park remains closed.
The search for animals has primarily been confined to Wildlife Loop Road. The interior roads are still inaccessible because of the fire, Stalder said.
Officials located the park's bison herd by Thursday afternoon, and every animal found so far was alive, he said. Staff will conduct an "impromptu roundup" to assess the herd of roughly 860 bison and likely give them pneumonia immunizations because of the wildfire.
"Custer State Park is known for their herd of bison," Stalder said. "Every other question any time we post on social media is, you know, 'Are the bison OK?' 'Is the wildlife OK?' 'Are the burros OK?'"
The wildfire is the third-largest recorded in the Black Hills. There have been no human injuries, and main park buildings have been spared from the blaze, officials said. Well-wishers have posted online with concerns for firefighters but also for animals like the bison, the captivating national mammal.
There are nearly 400,000 bison in North America, many on private ranches and farms, according to the National Bison Association. Executive Director Dave Carter said there are as many as 20,000 buffalo in public herds, with Custer State Park's ranking among the larger ones in the U.S.
As firefighters have been able to hold the blaze — it's now 80 percent contained — park officials have been able to dedicate resources toward assessing wildlife and getting more information, Stalder said.
He said officials also have found the park's southern elk herd but are still searching for another group of elk and most of the pronghorn. Stalder said park staff plans to examine every herd in the park.
Becky Kienzle, a massage therapist from Dickeyville, Wis., said she's been following the fire this week and worrying about wildlife in the park. The 59-year-old has been to the last eight of the fall buffalo roundups, and Kienzle said she plans on going to the park again next year.
"I've been enjoying this park for my entire 50th decade," Kienzle said. "I'm praying for most of my animals to still be there."
Stalder said staff was able to go through early Tuesday and unlock the gates within the park boundary to allow animals to escape the fire.
"We went through and gave them the best opportunity to get out of the way of danger," he said. "They're naturally smart enough to do that."
Karen Conley, executive director of the Dakota Territory Buffalo Association, said the challenge will be wildlife including buffalo in the park having enough food sources to sustain them until regrowth occurs. She said the group has been inundated with offers to help from members of the "buffalo family."
Texas resident Rhonda Price Mokerski can't count the number of times she's been to Custer State Park. The 56-year-old outdoor product wholesaler who grew up in western South Dakota said she's been worried for people and wildlife.
"We are just always bringing people to the Black Hills to experience it," said Mokerski, whose favorite park animals are buffalo and burros. "One of the 'must dos' is to go through this park."