Sources of Revenue:

General Fund,Special Fund,Other Fund Licensed Racetrack Modern

Legislation creates:

A New Fund

Fiscal Note Summary

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

•The Bill amends the state racing law by adding a section to allow simulcast pari-mutuel wagering at the Greenbrier Casino on horse and dog races held either at any of the four licensed racetrack, or at our-of-state racetracks approved by the West Virginia Racing Commission. There is an exemption from sales and use taxes, both on pari-mutuel racing wagers received by the Casino and on the purchase of equipment, services and supplies directly used in pari-mutuel wagering. [W.Va. Code §19-23-12d] •The Bill eliminates the maximum bid amount for any video lottery terminal bid, currently $5.00, at the racetrack and Greenbrier casinos. The Bill allows video lottery terminals at racetracks to accept $50 and $100 bills; this is already allowed at the Greenbrier Casino. [W.Va. Code §29-22A-6 and §29-25-22] •The Bill establishes a new fund – Licensed Racetrack Modernization Fund - within the existing State Lottery Fund. After the close of each year – beginning with FY 2011 – the State Lottery Commission may transfer any remaining surplus from the 4% allowance for administrative costs into the new fund. This transfer is capped each year at $10 million. The Lottery separates this annual transfer into four accounts, one for each licensed racetrack, in the same proportion as each racetrack contributed to the 4% allowance in the fiscal year. Beginning during FY 2012, each racetrack may purchase new and unused video lottery terminals for their casinos and receive $1 for each $2 spent for the purchase, capped at the amount of the racetrack’s account for the fiscal year. This program lasts for ten years, and any unused amounts in a racetrack’s account may carry forward only one additional year. Video lottery terminals acquired by this matching program must remain at the racetrack for a minimum of five years. [W.Va. Code §29-22A-10] •The Bill amends the existing capital investment program by reducing from seven to three years the minimum useful life of an eligible asset, and the carry-forward of the purchase is extended from seven to fifteen years. [W.Va. Code §29-22A-10c] •The Bill establishes a new fund – Historic Resort Hotel Modernization Fund - within the existing Historic Resort Hotel Fund. Beginning in FY 2012, 2½% of gross terminal income will be deposited into the new modernization Fund. Beginning during FY 2012, the Greenbrier Casino may purchase new and unused video lottery terminals and other related electronic equipment and receive $1 for each $1 spent for the purchase, capped at the amount of the Modernization racetrack’s account for the fiscal year. This program lasts for ten years, and any unused amounts in a racetrack’s account may carry forward only one additional year. Video lottery terminals acquired by this matching program must remain at the racetrack for a minimum of five years

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2011 Increase/Decrease (use"-")	2012 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	0	9,325,000	9,325,000
Personal Services	0	25,000	25,000
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	9,300,000	9,300,000	9,300,000
2. Estimated Total Revenues	0	182,000	182,000

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

EXPLANATION OF FISCAL NOTE DETAIL The Director of the State Lottery Office and the Executive Director of the West Virginia Racing Commission collaborated in the preparation of this Note. State revenue from the simulcasting of horse and dog racing are estimated at $182,000 annually. Racing Commission expenses would include a part time auditor for the Greenbrier Casino. This money is not part of the Lottery Fund. The Lottery changes in the bill are all in recognition of the substantial impact revenue caused by the advent of casino facilities in other states and the additional proliferation of these venues in the coming years. Inroads by the western Pennsylvania casinos into the customer base enjoyed by Mountaineer Casino Racetrack and Resort and Wheeling Island Hotel Casino Racetrack are well documented and have resulted in annual state revenues from that activity from the peak year of 2007 of approximately $357,988,000 to 2010’s state revenue of $274,829,000. The West Virginia Lottery estimates that that total will decline to $196,691,000, which is another 23% decrease ($78,138.000 ) by FY 2014 unless actions are taken to bolster the revenue base. The usage of video lottery terminals that can accept $50 and $100 bills are a customer convenience change. The Lottery has no way to gauge what the state income increase would be. This change does not affect how any games are played; a person who now inserts five $20’s to buy $100 worth of game credits would only insert one bill for the same results should the bill pass. And, the casinos would have slightly fewer bills to handle each day in their count rooms. The removal of the $5 bet ceiling may increase state revenues, but there is no way to estimate the change since West Virginia is somewhat unique in having a bet limit. Over the last four fiscal years, the surplus administrative money from racetrack video lottery gaming has averaged $9,336,725. Although the results of FY 2010 would seem to indicate the availability of $100 million over the ten year cycle of the program, our revenue estimates indicate a decline. We have no other experiences that allow us to estimate how much the expected decline would be slowed or arrested by modernization of the gaming floors, especially at Mountaineer Casino Racetrack and Resort and Wheeling Island Hotel Casino Racetrack. We know that new competition will come from as many as eleven new casinos in Ohio alone. We have listed the transfers to the “modernization” fund as “Estimated Total Cost – Other,” rather than as a revenue decrease to the State Lottery Fund because it has not been included in the Governor’s revenue estimates. The reserving of 2½% of gross terminal income at the Greenbrier Casino will decrease the distributions to several recipients of video lottery revenue at the state level and in Greenbrier County as the following chart illustrates: FY 2011 * MODERNIZATION FUND DIFFERENCE Total Table Games $ 5,998,214 $ 5,998,214 $ - Total Video Lottery $ 4,207,274 $ 4,207,274 $ - Total Interest $ 619 $ 619 $ - Total State Share $ 3,314,702 $ 3,314,702 $ - Lottery Administrative Expenses 15% $ 497,112 $ 497,112 $ - Modernization Fund $ 82,852 $ 82,852 Net Gross Receipts/Terminal Income $ 2,817,589 $ 2,734,737 $ (82,852) General Revenue Fund 64% $ 1,803,257 $ 1,750,232 $ (53,025) Debt Reduction Fund 19% $ 535,342 $ 519,600 $ (15,742) Tourism Promotion Fund 3% $ 84,528 $ 82,042 $ (2,486) Greenbrier County 4% $ 112,704 $ 109,389 $ (3,314) White Sulphur Spring 2.5% $ 70,440 $ 68,368 $ (2,071) Municipalities within Greenbrier County 2.5% $ 70,440 $ 68,368 $ (2,071) All Other Counties 2.5% $ 70,440 $ 68,368 $ (2,071) All Other Municipalities 2.5% $ 70,440 $ 68,368 $ (2,071) Total Historic Resort Hotel Fund $ 2,817,589 $ 2,734,737 $ (82,852) * Annualized estimate based on actual revenue through February 28, 2011

Memorandum

The simulcast privilege in section 19-23-12d of the bill is administered by the West Virginia Racing Commission. Racing Commission Director Jon Amores approves the $182,000 and $25,000 estimates. Those revenues and expenses are not part of the State Lottery Fund.

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