Date Requested:March 11, 2013
Time Requested:10:02 AM
Agency: Lottery Commission
CBD Number: Version: Bill Number: Resolution Number:
2013R2344 Introduced SB492
CBD Subject: GAMING FACILITY AT HISTORIC RESORT
FUND(S)
General Revenue, State Debt Reduction, Tourism Promotion, Historic Resort Hotel, Historic Resort Hotel Human Resource Benefit, Rural Resort Community, Rural Resort Community Human Resource Benefit
Sources of Revenue
General Fund,Special Fund
Legislation creates:
A New Fund

Fiscal Note Summary

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

    This measure may potentially raise revenues of state government, however does not limit the number of facilities that may qualify for licensure as a limited gaming facility. With no defined quota, there is no certainty in how multiple locations may affect current racetrack and limited gaming facility revenue streams, nor does it guarantee that sustainable revenue streams can be generated or maintained for the State.
    
    Though the estimates in the Fiscal Note Detail reflect new revenue to the state, this measure will actually cost the Lottery an estimated $150,232.31 per limited gaming facility in the first full year of implementation because the measure will not provide enough revenue to cover the Lottery’s operating expenses. Locations that meet the qualification requirements to be designated as a rural resort community will not be locations that can facilitate the patron volume necessary to generate enough gaming revenues to support the administrative costs of regulation expended by the Lottery. Therefore, this measure will actually cost the State money when Lottery administrative expenses (cost of employees, office locations in new facilities, etc.) exceed expected revenues.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2013
Increase/Decrease
(use"-")
2014
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 1,119,691 3,767,203
Personal Services 0 208,229 595,316
Current Expenses 0 66,085 50,920
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 845,377 3,120,966
2. Estimated Total Revenues 0 531,233 2,485,282
3. Explanation of above estimates (including long-range effect):
    Lacking any other model of comparison, the above estimates were generated from a review of the Historic Resort Hotel revenues, and are based on a July 1, 2013 effective date. However, due to differences in the requirements of the law between the historic resort hotel and a rural resort community, the historic resort hotel revenues used may not be comparable.
    
    Furthermore, the Lottery will operate at a deficit in these gaming areas as administrative costs will exceed the State's share of gaming revenue to cover costs of Lottery regulation. In order for a licensed racetrack or limited gaming facility to be profitable to the State, there must be a high volume of patrons wagering in the casino on a regular basis. Without a consistent high-volume patron base, the gaming revenue generated at the facility will be insufficient to cover the Lottery's administrative costs of regulation. Therefore, the Lottery will operate at an estimated $150,000 deficit per limited gaming facility located in a rural resort community annually.
    
    As this proposal removes the limitation on the number of limited gaming facilities that may be licensed in the State, the administrative costs of regulating multiple facilities (at an estimated annual deficit of $150,000) could potentially be substantial enough to significantly impact Lottery's operation, and in turn, its ability to generate revenue for the State. Ultimately if the proposal is not profitable to the Lottery then it is not profitable for the State.
    


Memorandum
Person submitting Fiscal Note:
Danielle Boyd
Email Address:
dboyd@wvlottery.com
    There are a number of vague areas, technical defects, and special issues identified in this proposal, three (3) of which are described below.
    
    The first of these issues, and arguably the most significant, is the proposed repeal of the local option election. While section 36, article VI of the State Constitution only expressly requires local option elections to authorize bingo games and raffles within a county, this requirement is implied by the language of section 29-22A-2(d) of the Racetrack Video Lottery Act which acknowledges a public interest in video lottery operations. The law further provides that this identified public interest represents an exception to the general statutory policy [of the State Constitution] regarding lotteries. This implication is subsequently reinforced by the express requirement for a local option election in all three laws relating to casino gaming [Racetrack Video Lottery Act, Racetrack Table Games Act, and the Authorized Gaming Facility Act]. Therefore, eliminating the local option election requirement may present constitutional issues.
    
    Second, there are several areas of vagueness in the definition of rural resort community. The definition only requires a "planned" community with an overall project cost of $80 million dollars at the time of application. This does not require the community to be in existence prior to the law’s implementation nor does it give the Lottery a mechanism to require that licensure be contingent on "plans" presented at the time of application are implemented as warranted. Along the same lines, there is no requirement that the population specifications be maintained post application date. Additionally, the proposal does not define "adequate economic base" in the requirement of subsection 6(A) so there is no set evaluation standard for determining if the county has an adequate economic base from any source other than tourism.
    
    Finally, there are several inconsistencies in the standards and legal requirements for historic resort hotels and rural resort communities that may be problematic. Foremost, there are no limitations on who may gamble in a rural resort community gaming facility, however the strict standards imposed on the historic resort hotel were not amended. Also noteworthy is that a hotel at a rural resort community gaming facility is only required to have 150 rooms whereas a historic resort hotel must have 500. Moreover, a historic resort hotel was required to be in existence at the time the law was passed, and as discussed above, a rural resort community may be "planned". Such inconsistencies could pose regulatory challenges and impede the Lottery’s ability to apply uniform compliance standards.