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.

Senate Bill 442 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. Some parts of this bill are patterned after the Limited Gaming Facility (Greenbrier Casino) Act as found in W.Va. Code §§29-25. Licenses created. 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), (b) Licensed Racetrack Table Gaming Facility Employee(s) and (c) Provider(s) of Management Service(s). License Fees & Bonds. 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. An applicant for a provider of management services license must pay a non-refundable application and first year license fee of $100, and an annual license renewal fee of $100. Each racetrack table gaming facility licensee shall post a surety bond in an amount determined by rule promulgated by the Commission. Rules and Law Enforcement. 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. An emergency rule is allowed if filed by September 1, 2005. New Fund created; Administrative expenses. The Bill creates a new special fund named the “Racetrack Table Games Fund”. All application and license fees, and the state’s 23½% 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 on table game activities. 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. From this allowance the Commission shall also make two payments: $250,000 to the already-created Compulsive Gambling Treatment Fund, and an undetermined amount to the West Virginia Development Authority. Recipients of the tax. 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 to the West Virginia Economic Development Authority; 8% shall be paid into a fund for racing purses at the track; and 86% shall be paid to the State General Revenue Fund. As to the General Revenue Fund’s 86% share, 5% shall be directed to the Regional Jail and Correctional Facility Authority. [It is unclear whether the bill intends this 5% share to be 5% of 100%, leaving the General Revenue Fund with a residual 81% share, or whether the bill intends this to be 5% of 86% (.05 X .86 = 4.3%); we’ve run into this wording in other lottery laws as well.]

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	2,773,772	2,556,275
Personal Services	0	2,050,072	2,152,575
Current Expenses	0	369,000	49,000
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	0	354,700	354,700
2. Estimated Total Revenues	0	48,775,000	50,340,000

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

Participating venues. All West Virginia racetracks plan to offer table gaming should the proposed Racetrack Lottery Table Games Act be enacted and the county local option election, successful. Mountaineer Racetrack and Gaming Resort and Wheeling Island Gaming, Inc. 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. Neither Charles Town Gaming, LLC nor Tri-State Racetrack and Gaming Center provided any revenue projections to the Lottery; therefore, Lottery personnel made projections reflective of the other West Virginia racetracks. Assumptions. 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%. 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. The first partial year of gaming (FY 2006). Eight months of revenue are projected in the start-up year with Racetrack Table Games Gross Receipts estimated at approximately $566.6 million, with an average table hold percentage of 14.75%. This results in an estimated $84 million in Adjusted Gross Receipts. The privilege tax is 23.5% or $19,740,000. Adding Application & License Fees of $235,000 equals total revenue of $19,975,000. Subtracting an estimated $2,523,772 for Lottery Administrative Costs & Expenses, and less the $250,000 deposit made into the Compulsive Gambling Treatment Fund leaves an estimated unencumbered balance in the Racetrack Table Games Fund of $17,201,229. The unencumbered balance in the Racetrack Table Games Fund of $17,201,229 would be distributed as follows: 81% or $13,932,995 to the State General Revenue Fund; 5% or $860,061 to the Regional Jail and Correctional Facility Authority;1.5% or $258,018 to the State Tourism Promotion Fund; 8% or $1,376,098 to the Special “Purses” Fund at the racetrack; 0.5% or $86,006 to the West Virginia Economic Development Authority; 2% or $344,025 to the County; and 2% or $344,025 to the Municipalities based on population. The first full year of gaming (FY 2007). Racetrack Table Games Gross Receipts are estimated at approximately $849.9 million, with an average table hold percentage of 14.75%. This results in an estimated $126 million in Adjusted Gross Receipts. The privilege tax is 23.5% or $29,610,000. Adding Annual License Fees of $230,000 equals total revenue of $29,840,000. Subtracting an estimated $2,306,275 for Lottery Administrative Costs & Expenses, and less the $250,000 deposit made into the Compulsive Gambling Treatment Fund, leaves an estimated unencumbered balance in the Racetrack Table Games Fund of $27,283,725. The unencumbered balance in the Racetrack Table Games Fund of $27,283,725 would be distributed as follows: 81% or $22,099,817 to the State General Revenue Fund; 5% or $1,364,186 to the Regional Jail and Correctional Facility Authority; 1.5% or $409,256 to the State Tourism Promotion Fund; 8% or $2,182,698 to the Special “Purses” Fund at the racetrack; 0.5% or $136,419 to the West Virginia Economic Development Authority; 2% or $545,674 to the County; and 2% or $545,674 to the Municipalities based on population. The effect of the bill on video lottery estimates. 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 $64 million over original projections for FY06 is expected, of which $28.8 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 $51 million over original projections, of which a total $20.5 million is available for appropriation by the State, ($4.2 million in the Lottery Fund, and $16.3 million in the Excess Lottery Fund). In fiscal year 2009, the total video lottery revenue is expected to increase by $57.5 million over original projections, of which a total $23.9 million would be available for appropriation by the State, ($3.7 million in the Lottery Fund, and $20.2 million in the Excess Lottery Fund). In fiscal year 2010, the total video lottery revenue is expected to increase by $64.5 million over original projections, of which a total $29.0 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). Administrative Expenses. Not including the $250,000 deposit made to the Compulsive Gambling Treatment Fund and the undetermined deposit amount to the West Virginia Development Authority, the Lottery’s expenses for the first year of gaming (FY2006) are estimated at $2,523,772; 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 $2,306,275 in FY 2007, $2,413,904 in FY 2008, $2,526,914 in FY 2009, $2,645,575 in FY 2010, and total expenses in FY 2011 of $2,770,169.

Memorandum

Page 31, Line 8 – Remove the word “license” Page 40, Line 22 through Page 40, Line 6 – Strikethrough “A licensed table games supplier shall pay to the Commission an annual license fee of one hundred dollars for an initial term beginning prior to the date of the supplier’s first sale to the a racetrack table games licensee and continuing through the end of the twelfth month thereafter whenever the licensee has paid the renewal fee and has continued to comply withal applicable statutory and rule requirements. The Commission shall renew a license to supply a racetrack with authorized table games annually thereafter.” Replace with “A table games supplier license is valid for a period of twelve months, with the initial term beginning the first day of the month the license is issued and expiring at the end of the twelfth month thereafter. The Commission shall renew a license to supply a racetrack with authorized table games for like terms annually, provided that the licensee has paid the one hundred dollar annual license renewal fee, has submitted a renewal application on the form required by the Commission, and has continued to comply with all applicable statutory and rule requirements.” Page 42, Lines 13-14 – Strikethrough “all persons required to be named in the application.” Replace with “the applicant” Page 43, Line 4 – Remove the word “still” Page 43, Line 5 – Add “Expiration date,” before “Renewal fee and form” Page 43, Lines 5-12 – Strikethrough “Each licensed employee shall pay to the Commission an annual license fee set by the Commission by rule the thirtieth day of June of each year. The fee may vary based on the job classification of the applicant, but in no event shall it exceed one hundred dollars.” Replace with “A license to be employed by a racetrack with authorized table games is valid for a period of twelve months, with the initial term beginning the first day of the month the license is issued and expiring at the end of the twelfth month thereafter. The Commission shall renew the employee license for like terms annually, provided that the licensee has paid the annual license renewal fee set by the Commission by rule, which may vary based on the job classification of the applicant, but in no event shall it exceed one hundred dollars, has submitted a renewal application on the form required by the Commission, and has continued to comply with all applicable statutory and rule requirements.” Pages 45, Line 21 through Page 46, Line 11– Strikethrough “A licensed provider of management services shall pay to the Commission an annual license fee of one hundred dollars for an initial term beginning prior to the date of the provider’s first contract with a racetrack table games licensee and continuing through the end of the twelfth month thereafter whenever the licensee has paid the renewal fee and has continued to comply withal applicable statutory and rule requirements. The Commission shall renew a license to supply a racetrack with authorized table games annually thereafter. A racetrack table games licensee may continue to use the management services provided by the management services provider while that provider was licensed, notwithstanding the expiration of the provider’s license, unless the Commission finds with the services provided are not conforming to standards established by rule of the Commission and applicable state law.” Replace with “A management services provider license is valid for a period of twelve months, with the initial term beginning the first day of the month the license is issued and expiring at the end of the twelfth month thereafter. The Commission shall renew a license to a management services provider for like terms annually, provided that the licensee has paid the one hundred dollar annual license renewal fee, has submitted a renewal application on the form required by the Commission, and has continued to comply with all applicable statutory and rule requirements.” Page 48, after Line 20 – Add a section (d)(1)(2)(3) for those licensed under management services contract – similar to (c)(1)(2)(3) Page 58, Line 12 – Remove “to the state Racing Commission” Page 62, Lines 14 – Strikethrough “amount, the Commission shall pay into the West Virginia Infrastructure Fund created in section nine, article fifteen-a, chapter thirty-one of this code.” Replace with “allowance, the Commission shall pay five hundred thousand dollars annually, to be paid among the statutorily created regional multicounty economic development authorities pursuant to rules promulgated by the West Virginia Development Authority.”

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