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The viability of provincial pubs with poker machines and resulting grants for their communities is under threat as the Government considers reforming the sector, industry representatives say.
This week, Internal Affairs Minister Peter Dunne said changes would include more money being returned to the community, more enforcement on dishonest activity, and a reduction in red tape.
Under the changes, non-club gaming machine trusts - which operate poker machines in pubs and bars - would be required to distribute more gambling proceeds back to the community.
The sector returned $260 million to the community each year, but this figure was projected to increase by $10 million under the changes, Mr Dunne said.
However, poker machine operators spoken to by the Otago Daily Times said increasing the minimum returned to the community from the current rate of 37.12% to 42% in five years would affect the viability of small venues.
Small venues in non-metropolitan areas lacked the customers to match the returns of their big city cousins.
One industry source said it cost the same amount to run a poker machine in Central Otago as it did in South Auckland, but the latter machine would generate 10 times more proceeds.
''It will be detrimental to small communities and their fundraising efforts.''
Southern Trust chief executive Karen Shea, of Dunedin, said smaller venues ''are really going to struggle and I would say to (Internal Affairs) 20% of something is better than nothing''.
''If it gets too tight then societies will have to cut those venues because they won't be viable.''
New Zealand Community Trust chief executive Mike Knell said: ''From our perspective we can get to 42% but it may mean that we shred more and less profitable venues and look at exiting some regions''.
''You need to be careful that you don't wish for a higher percentage that can equate to less dollars distributed.''
His trust largely supported the reforms, but the ''devil was in the detail''.
Hospitality Association chief executive Bruce Robertson said the minister's move was concerning because ''societies would be first to drop those sites as they are not effective''.
''The minister is saying he expects there to be more money available to the community but, in fact, the reverse might be the case.''
Mr Dunne told the ODT that while it was possible the viability of some venues could be under pressure, ''the decline in venue numbers would have to be significant to cause a net reduction in community funding''.
''My officials will closely monitor the sector over the five-year transition period,'' he said.