Sioux Falls will allow co-mingling beer coolers to make running casinos easier

Councilors Tuesday evening loosened city alcohol rules to allow separate video lottery casinos operating under one roof to share cooler space and employee access points.

The measure also brings Sioux Falls city code inline with state law, according to proponents.

For years, Commonwealth Gaming and Holdings (CGH), a Sioux Falls video lottery industry leader, has tried to ease its overhead and make it simpler to use one employee at two separate businesses by creating a shared-space concept.

The idea is that a building might house two separate establishments, but increase efficiencies by using a single serving space and refrigeration system for both locations.

It also allows the company to maximize the number of video lottery machines it offers in one building.

PREVIOUSLY: City denies licenses to 'co-mingled' casinos

“Each (alcohol) license can come with 10 video lottery machines. They want 20 machines in there,” said Jamie Palmer, Sioux Falls licensing specialist, said in reference to a pair of Commonwealth Gaming and Holding's beer license applications in 2016 that would have been housed in a single location, but technically owned by two separate establishments.

Councilors, though, had struggled to get behind the idea as city rules prohibit alcoholic beverages from being taken from one establishment to another. They also require walls to separating two businesses holding alcohol licenses.

Those rules were the reason councilors in Sioux Falls on at least two occasions denied Commonwealth Gaming and Holdings beer and wine licenses.

Still, the company has been able to use a single employee to oversee one location. However, the city restrictions require that person to pass from one location to the other through a primary entrance and exit also accessible to the public.

Councilors Janet Brekke and Greg Neitzert, with the support of four of their colleagues, simplified that process Tuesday night with a measure to allow the businesses to share cooler space and place a employee passage way between two licensed establishments.

The openings between the two establishments can't be accessible to patrons, only employees, and the cooler space would still require a partition of some kind between the two licensed establishments in order to ensure separate establishments aren't co-mingling the beverages they sell.

"There may also exist an opening within a refrigerated unit to allow refrigerated air to flow between two licensed premises so long as alcohol cannot pass between the two licensed premises," it reads.

The ordinance change maintains the prohibition on transporting open alcohol containers between the two locations.

Brekke said while this issue arose due to video lottery casino businesses, the changes she's proposing are aimed at easing what she says are unnecessary regulatory hurdles for anyone in Sioux Falls that wants to open two separate restaurants or bars under one roof.

"I put on my small business hat, and ... it just doesn’t make practical sense," she said of the existing rules prohibiting co-mingling of kitchen and cooler space. "Often you see that in government."

Brekke noted that the South Dakota Lottery Commission allows shared spaces among separate beer license holders that operate video lottery machines.

The state Supreme Court has also ruled that municipalities can't get into the business of regulating how video lottery establishments operate, so the ordinance change ensures the city is in compliance with state preemption rules, Neitzert said.

"We're talking about video lottery and we're tacitly admitting that we're doing something that we're not allowed to do," he said. "Just based on that alone, all of these regulations need to go away. The state preempts. End of story."

It's not the first time the issue has come before the council. A similar proposal to change ordinance and make the regulatory climate around video casino bars in Sioux Falls less burdensome failed in October 2017 when then-Mayor Mike Huether broke a 4-4 tie.

Only two of the four councilors who voted against it then remain on the council. Those same two, Councilors Pat Starr and Theresa Stehly, voted in opposition to the Brekke-Neitzert proposal Tuesday night.

Stehly's beef with the rule change centered around her concern that a single employee is manning two separate businesses and being held responsible for the operation of what could be as many as 20 video lottery machines, though that's already taking place at some casinos in Sioux Falls.

"I have a great concern about the safety of the employee," she said. "If it were two separate bars, I'd say the same thing. Have two separate employees manning this."