A tax break for Pac-Man? Spokane considers repeal of decades-old arcade and games fee

System Amusements has been supplying Spokane establishments with games since jukeboxes spun real records and city officials worried that gambling on pinball was becoming a social scourge.

Now in its third generation of family ownership, the Spokane-based company has survived the advent of Nintendo and decline in popularity of games like shuffleboard.

But until now it had never had to deal with lockdowns imposed due to a pandemic.

It’s been decades since the heyday of the arcade, and the COVID-19 pandemic forced the relatively few remaining games owned by local businesses to collect dust for much of the last year.

But that didn’t stop the city from collecting the licensing fees on every Space Invaders terminal in town.

Now, the Spokane City Council is considering a full and permanent repeal of the $25 license fees collected on “amusement devices,” a relic of a bygone era imposed on businesses that offer patrons entertainment from pinball to pool tables.

The annual fees collected from licensing billiards tables and video game machines adds up to a pittance for a city with a nearly $1 billion budget, but it stings the bars, restaurants and arcades that house them – especially after struggling through the pandemic that limited indoor capacity and ate into profits.

System Amusements supplies games like air hockey tables and foosball tables to businesses in Spokane. It owns the machines and negotiates a revenue-sharing agreement with the businesses that house them.

With more than 100 machines throughout the city, System Amusements and its clients were on the hook for a hefty bill at a time when business was struggling.

Noticing the state had recently waived liquor license fees, System Amusements owner Bob Carroll asked the Spokane City Council in March to do the same with amusement devices.

“I don’t mind paying, (but) let’s let business build back up. We’re still maybe at 55% of normal revenue,” Carroll said.

Berserk Bar has eight pinball machines in its Stevens Street establishment, according to co-owner Lon McRae.

“Anything that lowers our expenses is a benefit to the business,” McRae said.

That’s especially true after a pandemic. The bar was closed for a year but reopened about a month ago.

“We lasted through it but now that we’re back open it’s great, we’re doing well,” McRae said. “We could be doing better once the state goes to fully open and we get to stay open until 2 a.m. and eventually get to have live music again, things will be even better.”

The rules

When men play pool, they get into fights. And when men get in fights, someone has to call the police.

Initially, fees were imposed on owners of billiards tables because the city was spending resources to intervene in these disputes, according to Carroll.

Along came Pong and video arcades in the subsequent decades, but Carroll said device owners didn’t mind paying the fees because they would sometimes be broken into or stolen.

“They were on every corner back in the day,” Carroll said.

Now, there are fewer machines and issues are rare.

The city of Spokane has an entire section of law dedicated to the regulation of “amusement devices.” They’re defined as any “mechanical or electronic device, including specifically an electronic video game, designed to be played or operated by the insertion of a coin, slug or token, or otherwise upon payment of a fee, for the purpose of amusement, entertainment or music.”

The definition does not include coin-operated riding machines for two or fewer people, so mechanical bulls are excluded. The law also does not apply to “adult arcade devices,” which the city defines as being also known as “panoram,” “preview,” “picture arcade,” or “peep show.”

As late as 1971, the city adopted an ordinance that prohibited people under the age of 16 from using amusement devices and barred the games from being located within 600 feet of a school.

The regulations were eased as the city embarked on a wave of deregulation that occurred in the late 1970s. In 1982, the city passed an ordinance that shifted focus from “regulation” of such devices to licensing them explicitly for revenue.

Under the current regulations, the operator of an amusement device must pay a $40 fee for an operator’s license, plus an additional $25 fee for every amusement device they own.

Circuses and carnivals get a break, paying only $10 per amusement device.

By 2019, the annual revenue collected by the city had fallen to $9,888.

Change

When Carroll reached out to the Spokane City Council, he asked simply that the fee be temporarily waived due to the pandemic.

The City Council did him one better, offering to permanently repeal the fees and refund them for any fees paid in 2020.

“I was really surprised to get a call today,” Carroll told The Spokesman-Review.

The council discussed the proposal at a meeting of its Finance and Administration Committee on Monday but has yet to take a formal vote on an ordinance.

The fees, Councilwoman Karen Stratton argued, have “just become a hardship” and a holdover from a time when “this was all put together to cover the cost of police that could come in and settle disputes and gambling issues.”

Repealing them, she added, is “one small thing we can do to kind of move to the future and take care of this.”

City Chief Financial Officer Tonya Wallace also expressed support for the measure, noting there’s a cost to the city to these types of licenses that bring in such a small amount of revenue.