City fee on Internet cafes urged

Councilman D. Michael Collins.

A Toledo City Council member wants to impose steep licensing fees on Internet sweepstakes cafes, a move he hopes will bolster city coffers and help regulate what many officials see as a murky industry.

The cafes, which have been likened to gambling houses, would have to pay the city a $7,000-a-year operating fee and $350 more per machine, under legislation proposed by councilman D. Michael Collins. With about 32 such cafes in the city, that could generate about $500,000 annually for Toledo, the councilman said.

Mr. Collins said the proposed charges would bring Internet cafes into line with requirements placed on other businesses such as restaurants, which face licensing and inspection fees.

"They're a business and they use all of the same services that any other business in the city uses," the councilman said, citing fire, police, and street-repair services. "I feel the fees associated with what we're asking should be considered normal operating expenses."

Internet cafes have proliferated in the city and across the state over the past few years. Customers at the cafes can purchase prepaid phone cards that they use to play online games that resemble video slots. They can earn points redeemable for more Internet time or for entry into sweepstakes with cash prizes.

In 2009 a Toledo Municipal Court judge ruled that the activities at the cafes cannot be considered gambling. However, state legislators and other communities across Ohio have made various attempts to regulate the businesses.

Mr. Collins said his proposed fee structure is comparable to that of other cities in Ohio. Last year, the city of Maumee approved a $10,000-a-year license fee for the establishments and a $100 fee per terminal, although the community doesn't have any Internet cafes within its jurisdiction.

"We figured the time to do it was before we had any and not after," said Maumee councilman Richard Carr. "We put the permits on there because we figured we'd have to have an extra police presence as a result of these establishments and there would be costs to us."

Internet cafe owners reached Friday by The Blade had mixed reactions to the proposal.

Joe Rigali, owner of Kings Internet Cafe in South Toledo, denounced the legislation as an attack on his business, and said the licensing fees could force him to shut down or move elsewhere. The proposed amounts are too high and amount to an unfair extra tax on establishments such as his, he said.

"I'm shocked," Mr. Rigali said. "I want some type of explanation as to why, arbitrarily, they have selected Internet cafes to generate this much money."

The cafe owner said he doesn't make a lot of money, despite public perceptions to the contrary. He added that many customers simply use his cafe to browse the Internet and access email.

"They want to tax us for offering a service to the residents," Mr. Rigali said.

But Marvin Dabish, who owns three Players Club Internet cafes in Toledo and several in other parts of Ohio, said he backs Mr. Collins' legislation. Although he believes the fees are "kind of high" he said they wouldn't negatively affect his business. Instead, it could actually benefit him, he said.

"I'm for it," Mr. Dabish said. "It will keep my competition out."

Several councilmen voiced tentative support for the proposal, which will go before city council during its agenda review meeting Tuesday.

"We should take a very good look at that, especially if other cities are doing it," said finance chairman George Sarantou. "We have licenses for all types of other activities in the City of Toledo, so this would not be unprecedented."

Jen Sorgenfrei, spokesman for Mayor Mike Bell, said the administration is also interested in Mr. Collins' idea.

"We'll definitely work with council to explore the issues," she said. "I know that it's something that suburban communities have examined over the last couple of years so certainly it merits a closer look for Toledo."

Contact Claudia Boyd-Barrett at: cbarrett@theblade.com or 419-724-6272.