Sources of Revenue:

Special Fund

Legislation creates:

A New Program,A New Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

House Bill 2848 allows for the holding of local option elections in Hancock, Jefferson, Kanawha and Ohio Counties to determine whether “table games” may be operated by pari-mutuel racetracks licensed to conduct racetrack video lottery games under W.Va. Code §29-22A-1 et seq. Some parts of this bill are patterned after the Limited Gaming Facility (Greenbrier Casino) Act as found in W.Va. Code §29-25-1 et seq. The Bill creates racetrack table games licenses for the four current pari-mutuel racetracks operating in the State. Holders of racetrack table games facility licenses are authorized to conduct a variety of Monte Carlo-styled table games within the licensed facility. A local option election is a prerequisite to the issuance of a racetrack table games facility license. The Bill also creates other licenses for (a) Licensed Racetrack Table Gaming Supplier(s), and (b) Licensed Racetrack Table Gaming Facility Employee(s). The State Lottery Commission would be required to adopt a legislative rule to provide for the implementation and enforcement of the article generally. The State Lottery Commission is permitted to use state law enforcement officers, and the costs for the services of state officers would be paid from the Racetrack Table Games Fund. The Bill creates a new special fund named the “Racetrack Table Games Fund”. All application and license fees, and the state’s 12% tax on adjusted gross receipts from table gaming, are to be collected by the Commission and deposited into the Fund. The tax on adjusted gross receipts from table games is payable in weekly (Wednesday) installments following the week in which the adjusted gross receipts were received and the tax levied. With the exception of the ad valorem property tax, this tax is in lieu of all other state and local taxes. From the balance in the Fund, up to 15% of adjusted gross receipts may be used by the West Virginia Lottery Commission for administration of the new law. The remainder (a new 100%) is to be allocated as follows: 2% shall be paid to the county commission of the county where the facility is located; 2% shall be divided among municipalities within the county prorata based on population; 1.5% shall be paid to the Tourism Promotion Fund; 0.5% shall be paid into a fund for a Licensed Racing Association employee pension plan; 8% shall be paid into a fund for racing purses at the track; and 86% shall be paid to the State General Revenue Fund. The bill creates a maximum of four racetrack table games licenses. There is a first year license fee of $25,000 and an annual license renewal fee of $25,000 for each racetrack table games license. An applicant for a table games supplier must pay a non-refundable application and first year license fee of $100, and an annual license renewal fee of $100. Racetrack table games employee licenses carry a $100 non-refundable application fee (which the employer racetrack may elect to pay) and up to a $100 annual license renewal fee as set by the Lottery Commission depending on the occupation. Each racetrack table gaming facility licensee shall post a surety bond in an amount determined by rule promulgated by the Commission.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2005 Increase/Decrease (use"-")	2006 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	1,294,748	2,770,169
Personal Services	0	1,054,348	2,616,469
Current Expenses	0	192,400	49,000
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	48,000	104,700
2. Estimated Total Revenues	0	19,565,000	47,550,000

Explanation of above estimates (including long-range effect):

Two of the four West Virginia racetracks have informed the Lottery they plan to offer table gaming should the proposed Racetrack Lottery Table Games Act pass. These two tracks, Mountaineer Racetrack and Gaming Resort and Wheeling Island Gaming, each provided their projected table game mix and revenue projections to the Lottery. Lottery personnel reviewed this information, and appropriate changes were made to make the projections reflective of other U.S. markets that offer table gaming. Lottery personnel have projected that Charles Town Gaming, LLC may begin offering table gaming as soon as FY 2009, and Tri-State Racetrack and Gaming Center may begin offering table gaming as soon as FY 2010. Neither Charles Town nor Tri-State provided any revenue projections to the Lottery; therefore, Lottery personnel made projections reflective of the other West Virginia racetracks. Research indicates that the "hold" [money kept by the house] per table per day for table gaming can range from $485 to $4,750, and the overall table hold percentage ranged from 14% to 18%. The West Virginia Lottery projected a middle of the market result of $2,260 hold per table per day, with an overall average hold percentage of 14.75%. Upon enactment, it is projected that table gaming will not begin until November 2005, in fiscal year 2006. Prior to FY 2006, the Lottery may incur minimal expenses, but no table games revenue. During FY 2006, eight months of revenue is projected with Racetrack Table Games Gross Receipts estimated at approximately $284.4 million, with an average table hold percentage of 14.75%. This results in an estimated $42 million in Adjusted Gross Receipts. The privilege tax is 12% or $5,040,000. Adding Application & License Fees of $125,000 equals total revenue of $5,165,000. Subtracting an estimated $1,294,748 for Lottery Administrative Costs & Expenses, leaves an estimated unencumbered balance in the Racetrack Table Games Fund of $3,870,252. The unencumbered balance in the Racetrack Table Games Fund of $3,870,252 would be distributed as follows: 86% or $3,328,417 to the State General Revenue Fund; 1.5% or $58,054 to the State Tourism Promotion Fund; 8% or $309,620 to the Special “Purses” Fund at the racetrack; 0.5% or $19,351 to the Racing Commission Employees Pension Plan; 2% or $77,405 to the County; and 2% or $77,405 to the Municipalities based on population. Mountaineer's plan would install a total of forty gaming tables of varying kinds: 4 craps tables, 3 roulette tables, 4 Caribbean Stud tables, 4 Spanish 21 tables and 25 blackjack tables. Wheeling's plan would install 36 tables: 4 craps tables, 3 roulette tables, 4 Caribbean Stud tables and 25 blackjack tables. Lottery personnel projected Charles Town to install 62 tables: 6 craps tables, 5 roulette tables, 6 Caribbean Stud tables, 5 Spanish 21 tables and 40 blackjack tables. Lottery personnel projected Tri-State to install 14 tables: 2 craps tables, 1 roulette table, 2 Caribbean Stud tables and 9 blackjack tables. For the first full year of gaming (FY 2007), Racetrack Table Games Gross Receipts are estimated at approximately $426.6 million, with an average table hold percentage of 14.75%. This results in an estimated $63 million in Adjusted Gross Receipts. The privilege tax is 12% or $7,560,000. Adding Application & License Fees of $117,000 equals total revenue of $7,677,000. Subtracting an estimated $1,192,065 for Lottery Administrative Costs & Expenses, leaves an estimated unencumbered balance in the Racetrack Table Games Fund of $6,484,935. The unencumbered balance in the Racetrack Table Games Fund of $6,484,935 would be distributed as follows: 86% or $5,577,044 to the State General Revenue Fund; 1.5% or $97,273 to the State Tourism Promotion Fund; 8% or $518,795 to the Special “Purses” Fund at the racetrack; 0.5% or $32,425 to the Racing Commission Employees Pension Plan; 2% or $129,699 to the County; and 2% or $129,699 to the Municipalities based on population. The Lottery will incur an expected $1,192,065 of expenses, including personnel salaries, building lease, training, among other expenses for FY 2007. Currently, the Lottery’s official revenue estimates include a reduction in total Racetrack Video Lottery revenue because of expected competition in other states; however with the addition of table gaming, the video lottery revenues are expected to increase by 10% over original projections for the tracks that offer table gaming. With the addition of table gaming, assuming video lottery competition from other states, an increase in total video lottery revenue of $32 million over original projections for FY06 is expected, of which $14.4 million is available for appropriation by the State (in the Excess Lottery Fund). In fiscal years 2007 & 2008, the total video lottery revenue is expected to increase $23 million over original projections, of which a total $8.0 million is available for appropriation by the State, ($4.3 million in the Lottery Fund, and $3.7 million in the Excess Lottery Fund). In fiscal year 2009, when Charles Town may begin offering table gaming, the total video lottery revenue is expected to increase by $27 million over original projections, of which a total $10.2 million would be available for appropriation by the State, ($3.7 million in the Lottery Fund, and $6.5 million in the Excess Lottery Fund). In fiscal year 2010, when Tri-State may begin offering table gaming, the total video lottery revenue is expected to increase by $58 million over original projections, of which a total $26.1 million would be available for appropriation by the State (in the Excess Lottery Fund). In fiscal year 2011, total video lottery revenue is expected to increase by $71.5 million over original projections, of which a total $32.2 million is available for appropriation by the State (in the Excess Lottery Fund). The Lottery’s expenses for the first year of gaming (FY2006) are estimated at $1,294,748; which includes start-up expenses such as hiring and training personnel, preparing Lottery facilities and licensing of racetracks, suppliers and employees. Subsequent years will reflect a 5% increase in personal services, resulting in total expenses of $1,192,065 in FY 2007, and $1,247,419 in FY 2008. Charles Town is projected to begin table gaming in FY 2009, which increases Lottery estimated expenses to $2,136,509 in FY 2009, and Tri-State is projected to begin table gaming in FY 2010, which increases Lottery estimated expenses to $2,690,175 in FY 2010; and total expenses in FY 2011 is $2,770,169. Lottery projects that full implementation of table gaming will incur in FY 2011.

Memorandum

Page 4, Line 9 – the word “appropriations” was omitted between “of all” and “to the Fund” Page 5, Line 7 – “five-a” should read “two-c” Page 16, Line 22 – remove definition of “Conflict of interest” as it is not used in the text Page 19, Line 22 – insert the word “table” before the word “gaming” Page 20, Line 1 – remove definition of “Identification document” as it is not used in the text Page 20, Line 15 – remove definition of “Junket enterprise” as it is not used in the text Page 21, Line 19 – remove definition of “Managerial employee” as it is not used in the text Page 22, Line 17 – add the terms “patron” and “wagerer” with the word “Player,” as in “ ‘Player,’ ‘patron’ and ‘wagerer’ mean … “ Page 24, Line 10 – add the word “minimum” before “internal control standards” Page 37, Line 7 – remove the word “racetrack” Page 42, Line 18 – the table games supplier application fee is in lieu of the first year’s license fee as stated on page 42, line 3; but the bill states that an annual license fee is paid for an initial term beginning prior to the date of the supplier’s first sale Page 44, Line 23 – it is not stated when the employee license expires. Page 48, Line 13 – add the word “adverse” before “action” Page 48, Line 20 – change the word “given” to “sent” Page 60, Line 10 – The Lottery is allowed up to 15% of adjusted gross receipts for administrative expenses, yet the tax rate (from which administrative expenses come) is only 12% of adjusted gross receipts. See page 56, Line 21. Page 68, Line 3 – remove the strikethrough on the “s” on “methods” Page 71, Line 18 – change the term “slot machines” to “video lottery machines” Page 71, Line 19 – change the term “casinos” to “racetracks”

Person submitting Fiscal Note: John Melton
Email Address: jmelton@wvlottery.com