FISCAL NOTE



FUND(S):

Excess Lottery Revenue Fund

Sources of Revenue:

Special Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


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


In the original implementation of the Limited Video Lottery Act, the Legislature limited the number of operating video lottery terminals to no more than 9,000. The Act controlled the acquisition of video lottery terminals by requiring the purchase of ten-year "permits" for the priviledge of owning video lottery terminals in the State. The initial 10-year permits expire June 30, 2011. SB 667 would reduce the number of permits for the ten year period beginning July 1, 2011 from 9,000 to 7,500.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2010
Increase/Decrease
(use"-")
2011
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 -920,000
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 -22,540,000


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


Not all 9,000 video lottery terminals have operated at any one time. To determine how many video lottery terminals will be in the calculation using the new 7,500 maximum number, 5% of that amount (375) were deducted to arrive at an active number of 7,125. $7,125 was subtracted from the current average installed VLTs to arrive at an "installed" reduction of 875 VLTs. In turn, that number was multiplied by $143.81, which is the average daily per-machine revenue, to get the system-wide daily loss. That number is multiplied by 365 to calculate the annual loss of revenue: $45,929,318.75, which we rounded to $46 million. The state's share of revenue is 51%. This consists of 2% of revenue to the Lottery Commission for administrative expenses related to limited video lottery, plus 49% for the Excess Lottery Revenue Fund.[100% - 2% = 98% X 50% = 49%] The 49% share is divided by statute among among several purposes including debt service on several revenue bond issues. 2% of revenue = -$920,000 for the Lottery Commission Admin Account 49% of revenue = -$22,540,000 for the Excess Lottery Revenue Fund Revenue from the 10-year permit rebidding process will be realized in fiscal year 2011. The minimum per-terminal bid amount has not yet been set by the Commission.



Memorandum


The calculation of the fiscal loss is a purely mathmatical exercise. It may be said that there is a particular demand for video lottery gaming and that reducing the number of machines and probably locations as well will result in more play at the locations that are left. It is also prudent to say that earnings per locations now vary widely. If there are fewer locations in the next ten years, the current locations with lower sales will likely be the locations that will not have video lottery terminals in the next ten-year cycle. It is possible that similar revenue will result from fewer machines. The West Virginia Lottery advocates leaving the ceiling number at 9,000 and allowing the Lottery Commission to propose initially a lower number of terminals for bid - perhaps 7,500. That way, the Lottery Commission can respond to lower revenues by bidding additional video alottery terminal permits without returning to the Legislature for a law change.



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