HB 630-FN-A - AS INTRODUCED

2015 SESSION

15-0022

08/04

HOUSE BILL 630-FN-A

AN ACT establishing the New Hampshire video lottery.

SPONSORS: Rep. D. McGuire, Merr 21; Rep. Emerick, Rock 21; Rep. L. Ober, Hills 37; Rep. Baldasaro, Rock 5; Sen. Avard, Dist 12

COMMITTEE: Ways and Means

ANALYSIS

This bill:

I. Allows video lottery machines in establishments with a liquor license in the state pursuant to an application process.

II. Distributes proceeds of video lottery machines to the education trust fund.

III. Requires the lottery commission to regulate, license, and enforce the provisions for video lottery.

IV. Offsets property tax calculation by the amount deposited into the education trust fund from video lottery profits.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

15-0022

08/04

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Fifteen

AN ACT establishing the New Hampshire video lottery.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 New Chapter; Video Lottery Machines. Amend RSA by inserting after chapter 284-A the following new chapter:

CHAPTER 284-B

VIDEO LOTTERY MACHINES

284-B:1 Definitions. In this chapter:

I. “Applicant” means any person who applies to the lottery commission for a license, certification, registration, or qualification under this chapter.

II. “Associated equipment” means any equipment or mechanical, electromechanical, or electronic contrivance, component, or machine used in connection with video lottery machines, including linking devices, replacement parts, or equipment which affects the proper reporting of gross revenue.

III. “Cash” means United States currency and coin or foreign currency and coin that have been exchanged for its equivalent in United States currency and coin.

IV. “Cash equivalent” means:

(a) Travelers checks; or

(b) Certified checks, cashier’s checks, and money orders.

V. “Gaming” means the operation of video lottery machines.

VI. “Central computer system” means a central monitor and control system provided and monitored by the lottery commission to which video lottery terminals communicate for purposes of information retrieval, retrieval of the win and loss determination from video lottery machines, and programs to activate and disable video lottery machines.

VII. “Licensee” means any individual or entity required to be licensed pursuant to this chapter.

VIII. “Lottery commission” or “commission” means the New Hampshire lottery commission established pursuant to RSA 284:21-a.

IX. “Net machine income” means all cash or other consideration utilized to play a video lottery machine at a gaming location, less all cash or other consideration paid to players of video lottery machines as winnings. Noncashable promotional credits shall be excluded from the calculation.

X. “Progressive jackpot” means a prize that increases over time or as video lottery machines that are linked to a progressive system are played. Upon conditions established by the lottery commission, a progressive jackpot may be paid by annuity.

XI. “Progressive system” means one or more video lottery machines linked to one or more common progressive jackpots.

XII. “Technology provider” means any person or entity which designs, manufactures, builds or rebuilds, programs, installs, modifies, distributes, or supplies video lottery machines for sale or lease to the gaming licensees, and which are for use by a gaming licensee for conducting video lottery games in accordance with this chapter.

XIII. “Token” means the coin or coupon, which is not legal tender, sold by a cashier in a face amount equal to the cash paid by a player for the sole purpose of playing a video lottery machine at the gaming location or paid to a player of a video lottery machine, which can be exchanged for cash at the gaming location.

XIV. “Video lottery” means any lottery conducted with a video lottery machine or linked video lottery machines with a progressive jackpot or progressive system.

XV. “Video lottery machine” means an electronic, mechanical, or computerized machine which, upon the insertion of bills, coins, tokens, or any representative of value is available to be played where, by chance or skill, or both, the player may receive cash, cash equivalents, or tokens. Video lottery machines include, but are not limited to, slot machines, video poker machines, and other lottery machines. A machine shall be considered a video lottery machine notwithstanding the use of an electronic credit system making the deposit of bills, coins, or tokens unnecessary. Video lottery machines shall not include any redemption slot machines and redemption poker machines as defined in RSA 647:2 or video poker machines or other similar machines used for amusement purposes only.

284-B:2 Rulemaking.

I. The lottery commission shall adopt rules under RSA 541-A relative to:

(a) Conducting hearings pertaining to civil violations, rules, and penalties required under this chapter.

(b) Establishing standards for the licensing, renewal, suspension, and revocation of licenses for gaming licensees and technology providers consistent with this chapter.

(c) Ensuring that all licensees update the lottery commission with regard to any change in ownership or material change in information or data regarding the licensee that the commission determines is necessary and appropriate.

(d) Prescribing the manner and procedure of all hearings conducted by the lottery commission or any hearing examiner, including special rules of evidence applicable thereto and notices thereof.

(e) Prescribing the method of collection of payments of taxes, fees, and penalties.

(f) Defining and limiting the areas of operation, the rules of authorized games, odds, and devices permitted, and the method of operation of such games and devices.

(g) Prescribing grounds and procedures for the issuing of sanctions, including but not limited to, the revocation or suspension of licenses.

(h) Governing the manufacture, distribution, sale, storage, transportation, and servicing of video lottery machines and associated equipment.

(i) Governing the gaming-related advertising of gaming licensees and their employees and agents, with the view toward assuring that such advertisements are in no way deceptive or excessive.

(j) Establishing the application and approval process for selecting the provider of the central computer system consistent with the request for purchases process under RSA 21-I.

(k) The development and use of a logo and brand for the New Hampshire video lottery.

II. The lottery commission shall adopt rules identical to the International Association of Gaming Regulators relative to technical standards for approval of video lottery machines, including mechanical and electrical reliability and security against tampering, as deemed necessary to protect the public from fraud or deception and to insure the integrity of the operation.

III. The lottery commission shall adopt rules pursuant to paragraph I no later than June 1, 2016.

284-B:3 Video Lottery Licenses.

I. The commission shall license, as agents to operate video lottery machines, those persons who, in its opinion, will best serve the public convenience.

II. For purposes of this section the term “person” shall mean and include an individual, partnership, association, organization, club, company, corporation, trust, estate, society, joint stock company, receiver, trustee, assignee, referee, or any other person acting in a fiduciary or representative capacity, whether appointed by a court or otherwise, and any combination of individuals.

III. All applicants shall first obtain an on-premise liquor license under RSA 178.

IV. The one-time application fee shall be $1,000.

V. Before issuing a license to any person, the commission shall consider with respect to the person:

(a) Financial responsibility and the security of the business or activity in which the person is engaged.

(b) Accessibility of the place of business or activity to the public.

(c) Sufficiency of existing licenses to serve public convenience.

(d) Whether the place of business or activity is predominantly frequented by persons under the age of 21 years.

VI. The commission may suspend or revoke, after notice and hearing, any license issued pursuant to this chapter. The license may, however, be temporarily suspended by the commission without prior notice, pending any prosecution, investigation, or hearing. A license may be suspended or revoked by the commission for just cause, including one or more of the following reasons:

(a) Conviction of any criminal offense.

(b) Failure to file any return or report, to keep records, or to pay any tax.

(c) A material change, since issuance of the license, with respect to any of the matters required to be considered by the commission under paragraph VII.

VII. The license fee shall be $900 per video lottery machine annually. A licensee shall operate no more than 6 video lottery machines.

VIII. Any suspension or revocation of a liquor license shall automatically result in suspension of the license under this chapter.

284-B:4 Central Computer System.

I. The lottery commission shall provide and operate a central computer system into which all licensed video lottery machines shall be connected.

II. The central computer system shall be capable of:

(a) Continuously monitoring, retrieving, and auditing the operations, financial data, and program information of all video lottery machines;

(b) Allowing the lottery commission to account for all money inserted in and payouts made from any video lottery machine;

(c) Disabling from operation or play any video lottery machine as the lottery commission deems necessary to carry out the provisions of this chapter;

(d) Supporting and monitoring a progressive jackpot system capable of operating one or more progressive jackpots; and

(e) Providing any other function that the lottery commission considers necessary.

III. The central computer system shall employ a widely accepted gaming industry communications protocol, as approved by the Gaming Standards Association, to facilitate the ability of video lottery machine manufacturers to communicate with the central computer system.

IV.(a) Except as provided in subparagraph (b), the lottery commission shall not allow a gaming licensee to have access to, or obtain information from, the central computer system.

(b) If the access does not in any way affect the integrity or security of the central computer system, the lottery commission may allow a gaming licensee to have access to the central computer system that allows the licensee to obtain information pertinent to the legitimate operation of its video lottery machines.

284-B:5 Technology Provider Licensee Applications. A technology provider licensee applicant shall obtain a technology provider license from the lottery commission, as follows:

I. An applicant shall complete and sign an application on forms and in a manner prescribed by the lottery commission.

II. The applicant shall include information regarding:

(a) The applicant’s criminal history background including authorization for a criminal background and records check, and an attested disclosure of all arrests and citations for nontraffic offenses;

(b) Civil judgments;

(c) Financial affairs using a multi-jurisdictional personal history disclosure form;

(d) The full name, address, date of birth, and other personal identifying information of the applicant and all key employees; and

(e) If the applicant is a corporation or other form of business enterprise, the same information shall be provided with respect to each partner, trustee, officer, director, and any shareholder or other holder who owns more than 10 percent of the legal or beneficial interests of such entity.

III. If the applicant or any owner has held or holds a technology provider, manufacturer, or supplier’s license in a jurisdiction where video lottery machine activities are permitted, the applicant shall so state and may produce either a letter of reference from the gaming or lottery enforcement or control agency in such jurisdiction which sets forth the experience of that agency with the applicant, the applicant’s associates, and gaming operation, or a statement under oath that the applicant is or was during the period the activities were conducted in good standing with the agency.

IV.(a) Upon receipt of a complete application from a technology provider applicant the lottery commission shall request that the attorney general conduct a background review, and the attorney general shall conduct a background review of each technology provider applicant and any of its owners and key employees. The review may be conducted through any appropriate state or federal law enforcement system and may seek information as to the subject’s financial, criminal, or business background, or any other information which the attorney general, in his or her sole discretion, may find relevant to the subject’s fitness to be associated with the distribution of video lottery machines, or associated equipment in New Hampshire, including, but not limited to, the subject’s character, personal associations, and the extent to which the subject is properly doing business in the manner in which it purports to operate. The attorney general shall take into consideration as evidence of fitness a letter of reference or sworn statement of good standing.

(b) The attorney general shall report the results of the review to the lottery commission within a reasonable time not to exceed 120 days unless a request for additional time has been granted by the lottery commission for good cause. Whenever the attorney general conducts such a review, the attorney general shall notify the lottery commission whether or not in his or her opinion such person is fit to be associated with the distribution of video lottery machines in this state. Notwithstanding any other law to the contrary, the information provided to the attorney general and the results of any such review shall be confidential and shall not be subject to disclosure or to public inspection, except that the attorney general, in the attorney general’s sole discretion, shall determine the extent to which and the manner in which said results may be reported to the lottery commission or other state agency or official and, if reported, whether such results are to retain their confidential character.

(c) The attorney general may conduct a background review of the background of the technology provider applicant or licensee, or any person or entity upon whom the technology provider applicant or licensee relies for financial support.

V. In any review conducted pursuant to paragraph IV, the attorney general or any duly authorized member of the attorney general’s staff may require by subpoena or otherwise the attendance of witnesses and the production of such correspondence, documents, books, and papers as he or she deems advisable, and for purposes of this section, may administer oaths and take the testimony of witnesses.

VI.(a) The lottery commission shall charge the technology provider applicant an application fee of $10,000 which shall be used to defray the cost of processing the application. If the cost of processing the application exceeds $10,000, the applicant shall pay the difference.

(b) Upon approval of a technology provider licensee, the lottery commission shall charge an initial license fee of $10,000. Licenses shall expire after 5 years. The lottery commission shall charge a fee of $10,000 to renew a license to a technology provider licensee provided, however, such person seeking renewal of its license shall pay all costs incurred by the attorney general to conduct an investigation with regard to such application to renew the technology provider’s license.

284-B:6 Exclusion of Minors.

I. No person under 21 years of age shall play a video lottery machine authorized by this chapter. Each violation of this paragraph shall be punishable by a fine of no more than $2,400 and shall be payable by such person who violates this section.

II. No gaming licensee shall knowingly permit any person under 21 years of age to play or participate in any aspect of the play of a video lottery machine. Each violation of this paragraph shall be punishable by a fine of no more than $20,000 and shall be payable by the gaming licensee.

III. Video lottery machines shall be located out of the view of minors in a room where minors are not allowed to enter.

284-B:7 Distribution of Net Machine Income.

I. Sixty-seven percent of the net machine income generated by video lottery machines shall be paid into the education trust fund established in RSA 198:39.

II. A gaming licensee shall deliver the amounts payable to the lottery commission as provided in paragraph I in immediately available funds of the United States on the first day of the month. At the time payment is delivered, the gaming licensee shall provide a written accounting of net machine income generated from the video lottery machines by the gaming licensee on an aggregate basis and the calculation of amounts due to the state separately for distribution pursuant to paragraph I and the balance of net machine income retained by the gaming licensee. The gaming licensee shall pay a penalty of $1,000 for each day that payment or the accounting is not delivered on time to the state or a penalty of 5 percent of the payment, whichever is less.

284-B:8 Declaration of Limited Exemption from Operation of Provisions of 15 U.S.C. sections 1171-1178. Pursuant to section 2 of an act of Congress of the United States entitled “An Act to Prohibit Transportation of Gambling Devices in Interstate and Foreign Commerce,” designated as 15 U.S.C. sections 1171-1178, the state of New Hampshire, acting by and through the duly elected and qualified members of its legislature, does hereby, in accordance with and in compliance with the provisions of that section 2 of that act of Congress, declare and proclaim that it is in the state’s best interest to benefit from limiting gambling device revenues but prevent the proliferation of gambling devices by limiting approved facility locations and therefore that section 2 of that act of Congress shall not apply to any gambling device in this state where the transportation of such a device is specifically authorized by and done in compliance with the provisions of this chapter and any rules adopted pursuant to it, and that any such gambling device transported in compliance with state law and rules shall be exempt from the provisions of that act of Congress.

284-B:9 Legal Shipment of Gaming Devices into New Hampshire. All shipments into this state of gaming devices, the registering, recording, and labeling of which has been duly made by the manufacturer or dealer in accordance with sections 3 and 4 of an Act of Congress of the United States entitled “An Act to Prohibit Transportation of Gambling Devices in Interstate and Foreign Commerce,” designated as 15 U.S.C. sections 1171-1172, shall be deemed legal shipments into this state.

2 New Section; Lottery Commission; Administration of Video Lottery. Amend RSA 284 by inserting after section 21-v the following new section:

284:21-w Administration of Video Lottery. The lottery commission shall administer and enforce the provisions of RSA 284-B.

3 New Subparagraph; Gambling Offenses; Minors. Amend RSA 647:2, I by inserting after subparagraph (c) the following new subparagraph:

(d) Violates any provision of RSA 284-B.

4 License Proceeds to Lottery Commission. Amend RSA 284:21-j, I to read as follows:

I. The state treasurer shall credit all moneys received from the lottery commission and all moneys received from the racing and charitable gaming commission under RSA 284, RSA 284-B:7, RSA 287-D, and RSA 287-E, and interest received on such moneys, to a special fund from which the treasurer shall pay all expenses of the commission incident to the administration of this subdivision and all administration and enforcement expenses of the racing and charitable gaming commission under RSA 284, RSA 284-B, RSA 287-D, and RSA 287-E. Any balance left in such fund after such expenses are paid shall be deposited in the education trust fund established under RSA 198:39.

5 Local Bylaws; Gaming Exception. Amend RSA 47:17, III to read as follows:

III. Disorderly Houses and Gaming. To suppress and restrain disorderly houses and houses of ill-fame, gambling houses and places, billiard tables, nine or ten pin alleys or tables and ball alleys, and all playing of cards, dice or other games of chance; to restrain and prohibit all descriptions of gaming and fraudulent devices; and to authorize the destruction and demolition of all instruments and devices used for the purpose of gaming. Establishments with valid video lottery licenses shall be exempt from this paragraph.

6 Education Trust Fund; Video Lottery Revenue. Amend RSA 198:39, I(k) to read as follows:

(k) Funds collected in accordance with RSA 284-B:7, relative to video lottery machine revenue.

(l) Any other moneys appropriated from the general fund.

7 Property Tax; Education Tax. Amend RSA 76:3 to read as follows:

76:3 Education Tax. Beginning July 1, 2005, and every fiscal year thereafter, the commissioner of the department of revenue administration shall set the education tax rate at a level sufficient to generate revenue of $363,000,000 when imposed on all persons and property taxable pursuant to RSA 76:8, except property subject to tax under RSA 82 and RSA 83-F, less any amount deposited in the education trust fund pursuant to RSA 284-B:7 relative to video lottery machine revenue. The education property tax rate shall be effective for the following fiscal year. The rate shall be set to the nearest 1/2 cent necessary to generate the revenue required in this section.

8 Entertainment; Video Lottery Permitted. Amend RSA 179:19, VI as follows:

VI. Licensees shall not allow gambling or wagering on their premises, except for video lottery machines authorized under RSA 284-B.

9 Effective Date. This act shall take effect upon its passage.

LBAO

15-0022

Revised 02/17/15

HB 630-FN-A FISCAL NOTE

AN ACT establishing the New Hampshire video lottery.

FISCAL IMPACT:

The New Hampshire Lottery Commission, Racing and Charitable Gaming Commission, Department of Revenue Administration, Department of Education, New Hampshire Liquor Commission, Department of Safety, Judicial Council, and New Hampshire Municipal Association state this bill, as introduced, will increase state revenues and expenditures by and indeterminable amount in FY 2016 and each year thereafter, and may have an indeterminable impact on local revenues in FY 2018 and each year thereafter. There will be no impact on county and local expenditures, or county revenue.

The Department of Justice and the Judicial Branch were contacted on January 13, 2015 for a fiscal note worksheet, which neither has provided as of February 9, 2015. We are not able to determine the fiscal impact this bill may have on either the Department or the Branch at this time.

METHODOLOGY:

The New Hampshire Lottery Commission states this bill would allow it to license, only establishments with a liquor license, as agents to operate video lottery machines. The Commission has made the following assumptions:

• The Commission would incur costs of approximately $250,000 in FY 2016 in preparation for the commencement of operations as drafting a request for proposal for a central computer system;

• The Commission would have administrative rules adopted by July 1, 2016 and applications for licenses would be received and processed during the year (FY 2017);

• Sales would commence on July 1, 2017 (FY 2018);

• There would be approximately 700 locations suitable for licensing;

• Each location would have an average of 5.5 terminals in operation;

• The Commission would hire five full-time employees to oversee compliance of the video lottery program;

• Four technology provider applications will be received and processed during FY 2017. Since applicant is required to pay a $10,000 application fee, and the difference if actual costs exceed $10,000, expenses associated with this review will be offset in full;

• Four technology provider licenses (five-year) will be issued in FY 2018 at $10,000 apiece; and,

• Considering two other states with video lottery machines (Oregon and South Dakota), net machine income will average $230, per machine, per day.

Based on the assumptions stated above, the Commission estimates the following revenues and expenditures associated with this bill:

FY 2016

FY 2017

FY 2018

FY 2019

Total Net Machine Income (NMI)

$0