The city of Fayetteville has taken the unusual step of seizing furniture, computers and other property from two Internet sweepstakes businesses that the city said each owed more than $200,000 in privilege license fees.
At the request of The Fayetteville Observer, city spokeswoman Jennifer Lowe on Tuesday identified the two businesses as SWAT Gaming Group at 664 Country Club Drive and 777 Sweepstakes at 6257 Raeford Road.
Lowe said SWAT Gaming owed more than $238,000 in delinquent license fees, and 777 Sweepstakes owed more than $200,000.
City officials said police officers accompanied city employees with a moving truck when they took the property from inside the businesses, sometime within the past month.
Lowe said the seized property will be sold. The city plans to target other businesses with the highest amounts of delinquent privilege license fees. The fees are an annual tax charged to many entities that do business in the city limits.
Efforts to reach someone at the sweepstakes businesses were unsuccessful.
Last year, the city began charging fees of $2,000 per sweepstakes cafe and $2,500 for each computer terminal. The fees add up for owners with multiple terminals.
Other cities also have levied hefty licensure fees against the gaming businesses, which have sprung up in old storefronts and strip centers.
At the gambling businesses, customers can buy Internet or phone time to play variations of card and number games on computer terminals. Their purchased time gives them chances to win cash prizes.
Fayetteville City Attorney Karen McDonald said state law gives cities broad authority to enforce the collection of license fees. One way is seizing property, she said.
"The city is aggressively pursuing the collection of privilege license fees," McDonald said.
McDonald said seizing property from a delinquent business owner doesn't require a warrant or court action. The city is taking the action only after other attempts to collect the money have failed, including warning letters, she said.
The action is not unprecedented. The city seized property for similar reasons in the early 2000s, McDonald said.
Other remedies cities can use to collect privilege license fees from business owners, she said, are through attachments of bank accounts, garnishments of state tax refunds and lottery winnings. In city warning letters, delinquent business owners are told that "failure to pay a privilege license could result in the issuance of a criminal citation."
McDonald described the seizures under police escorts as a "levy" and "a last resort" to collect a tax that was six months past due. She said it would be incorrect to describe the actions as raids.
Lonnie Player Jr., a Fayetteville lawyer representing the gaming industry, confirmed the city has taken property from one of his clients, but he declined to elaborate.
In October 2010, Player filed a lawsuit, on behalf of about a dozen business owners. The suit sought to block the city from collecting the new fees. He said a judge in Cumberland County Superior Court ruled against his clients this summer. His appeal is pending before the N.C. Court of Appeals.
Last year, a judge granted an injunction preventing the city from collecting the fees from Player's clients pending the outcome of the lawsuit. But Player said the injunction applied only to license fees the city issued last year.
The city issued the fees again this year.
The city collected the fees last year from sweepstakes cafes that were not part of Player's lawsuit, officials said. As of June, the city had collected more than $160,000 in license fee revenue from the gaming businesses.
According to sources, the city has generated a "top 25" list of businesses with the most delinquent privilege license accounts. The city is using that list to seize property from businesses.
City officials told the Observer they would not release any information about the list, citing a state statute that restricts the disclosure of criminal investigations.
A legal adviser for the N.C. Press Association challenged that view. Amanda Martin said the criminal records statute cited by the city requires law enforcement to disclose "basic information about the alleged infractions."
McDonald said in an email that she agrees with Martin that "information regarding which businesses have paid or not paid their privilege license is a public record." Still, the city will not release the top 25 most delinquent businesses.
As a practical matter, Lowe said, city employees who attempt to collect the property could be put at risk if the top 25 list is published in the newspaper.
Lowe said Tuesday that officials found weapons at both SWAT Gaming and 777 Sweepstakes, reinforcing the city's safety concerns. She did not elaborate.
When a reporter last week sought information on the total amount of delinquent privilege license fees owed by all businesses, Lowe said the city's finance department couldn't easily analyze the data or conjure an estimated figure.
A city official said in December 2010 that they the city collects more than $900,000 a year from privilege license fees, which vary widely by occupation and a company's gross sales. Many of the fees are set by the state, and others by the city.
In 2010, the city hired MuniServices, which combs private and public databases and does other detective work, to find scofflaws of the license fee. Staff writer Andrew Barksdale can be reached at barksdalea@fayobserver.com or 486-3565
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