PRINTER'S NO. 2630
No. 2001 Session of 2001
INTRODUCED BY PETRONE, TULLI, LUCYK, M. WRIGHT, SOLOBAY, J. TAYLOR, J. WILLIAMS, WASHINGTON, DeWEESE, MELIO, LaGROTTA, TRELLO, TRICH, LESCOVITZ, STEELMAN, ROONEY, SANTONI, CORRIGAN, COLAFELLA, PRESTON, TANGRETTI, CALTAGIRONE, DeLUCA, JAMES, PALLONE, HARHAI, RUFFING, LAUGHLIN, DALEY, BEBKO- JONES, WALKO, COSTA, READSHAW, WOJNAROSKI, BELFANTI, SHANER, C. WILLIAMS, FRANKEL, ROBERTS, HORSEY, YOUNGBLOOD, PISTELLA, DERMODY, G. WRIGHT AND LEVDANSKY, OCTOBER 9, 2001
REFERRED TO COMMITTEE ON FINANCE, OCTOBER 9, 2001
AN ACT 1 Authorizing a video lottery system at certain racetracks; 2 providing for disbursements of revenues; imposing duties on 3 the Division of the State Lottery; establishing an advisory 4 committee; imposing a video lottery tax; and making an 5 appropriation. 6 The General Assembly finds as follows: 7 (1) The Commonwealth's horse racing industry is 8 responsible for the preservation of 500,000 acres of open 9 space land, which is devoted to the breeding, training, 10 feeding and care of 30,000 horses Statewide. 11 (2) This industry is also responsible for the creation 12 of more than 35,000 jobs, of which 10,000 are in agriculture. 13 Each year the racing industry contributes at least 14 $750,000,000 to the value of goods and services and 15 $576,000,000 in personal income. 16 (3) The industry is adversely affected by neighboring
1 states with approved gaming devices at licensed racetrack 2 facilities. 3 (4) This act establishes a racetrack video lottery 4 system to be operated by the State Lottery and sustains and 5 improves this Commonwealth's horse racing industry. 6 The General Assembly of the Commonwealth of Pennsylvania 7 hereby enacts as follows: 8 Section 1. Short title. 9 This act shall be known and may be cited as the Horse Racing 10 Industry Improvement Act. 11 Section 2. Definitions. 12 The following words and phrases when used in this act shall 13 have the meanings given to them in this section unless the 14 context clearly indicates otherwise: 15 "Applicant." A licensed corporation which applies for a 16 racetrack video lottery license under this act. 17 "Associated equipment." Any equipment or mechanical, 18 electromechanical or electronic contrivance, component or 19 machine used in connection with gaming, including links which 20 connect to progressive slot machines, equipment which affects 21 the proper reporting of gross revenue, computerized systems for 22 monitoring gaming devices and devices for weighing or counting 23 money. 24 "Department." The Department of Revenue of the Commonwealth. 25 "Division." The Division of the State Lottery. 26 "Fund." The State Lottery Fund. 27 "Gross income." The total amount of cash, vouchers or tokens 28 inserted into the racetrack video lottery machines operated by a 29 licensee, minus the total value of coins and tokens won by a 30 player and game credits which are cleared from the video lottery 20010H2001B2630 - 2 -
1 terminals in exchange for winning redemption tickets. 2 "Licensed corporation." A corporation that has obtained a 3 license from either the State Horse Racing Commission or the 4 State Harness Racing Commission to conduct thoroughbred or 5 harness horse race meetings respectively with pari-mutuel 6 wagering. 7 "Licensee." A licensed corporation that has obtained a 8 racetrack video lottery license from the Division of the State 9 Lottery under this act. 10 "Racetrack." The physical facility where a licensed 11 corporation conducts thoroughbred or harness race meetings 12 respectively with pari-mutuel wagering. 13 "Racetrack video lottery license" or "license." A license 14 authorizing a licensed corporation to place and operate 15 racetrack video lottery machines at its racetrack pursuant to 16 this act. 17 "Racetrack video lottery machine." A machine in which coins, 18 credits or tokens are deposited in order to play any game of 19 chance in which the results, including options available to the 20 player, randomly and immediately are determined by the machine. 21 The machine may use spinning wheels or video displays or both, 22 and may or may not dispense coins or tokens directly to winning 23 players. A machine shall be considered a racetrack video lottery 24 machine notwithstanding the use of an electronic credit system 25 making the deposit of bills, coins or tokens unnecessary. The 26 term includes, but is not limited to, a device commonly referred 27 to as a "slot machine." 28 "Secretary." The Secretary of Revenue of the Commonwealth. 29 Section 3. Racetrack video lottery system. 30 A racetrack video lottery system is hereby established and 20010H2001B2630 - 3 -
1 shall be administered by the division in accordance with this 2 act. 3 Section 4. Division of the State Lottery powers. 4 (a) General powers.-- 5 (1) The division shall establish, administer and ensure 6 the integrity of racetrack video lottery machines and shall 7 have jurisdiction over the location and operation of 8 racetrack video lottery machines. 9 (2) The secretary shall employ an executive director, 10 deputies, secretaries, officers and representatives as it may 11 deem necessary, who shall serve at the secretary's pleasure. 12 The secretary shall also employ other employees as the 13 secretary sees fit and whose duties and compensation shall be 14 prescribed by the secretary. 15 (b) Specific powers.--The division shall have the following 16 specific powers and duties: 17 (1) Investigate, evaluate and decide upon applications 18 for all racetrack video lottery licenses provided for in this 19 act. 20 (2) Issue licenses pursuant to the provisions of section 21 6. 22 (3) Promulgate regulations as the division deems 23 necessary to carry out the policy and purposes of this act 24 and to enhance the credibility and integrity of racetrack 25 video lottery machines in this Commonwealth. Notwithstanding 26 any other provision of law to the contrary and in order to 27 facilitate the prompt implementation of this act, regulations 28 promulgated by the division during the first year of its 29 existence shall not be subject to notice of proposed 30 rulemaking pursuant to section 204 of the act of July 31, 20010H2001B2630 - 4 -
1 1968 (P.L.769, No.240), referred to as the Commonwealth 2 Documents Law. Regulations adopted after the one-year period 3 shall be promulgated, adopted and published as provided by 4 law. 5 (4) The division or designated officers, employees or 6 agents of the secretary shall have the power to administer 7 oaths, examine witnesses and may issue subpoenas to compel 8 attendance of witnesses and production of all relevant and 9 material reports, books, papers, documents and other evidence 10 relating to the administration and enforcement of this act. 11 (5) Levy and collect an annual fee from each licensee of 12 $150 per racetrack video lottery machine in operation as of 13 September 1 of each calendar year beginning with September 1 14 after the effective date of this act. This fee shall be 15 deposited into the fund. The annual fee of $150 per machine 16 shall be used to cover the administrative cost of the 17 racetrack video lottery system. If the amount collected does 18 not cover the administrative cost in any given year, the 19 department may increase the amount to cover the increased 20 cost. The increased amount shall be published as a notice in 21 the Pennsylvanian Bulletin. 22 (6) Provide for the assessment and collection of fines 23 and penalties for violations of this act. All fines and 24 penalties shall be credited for deposit to the fund. 25 (7) Revoke or suspend any license provided for in this 26 act if the division finds by a preponderance of the evidence 27 that a licensee under this act, its officers, employees or 28 agents do not comply with the provisions of this act or the 29 rules and regulations of the division and that it would be in 30 the public interest, convenience or necessity to revoke or 20010H2001B2630 - 5 -
1 suspend the license. None of the licenses provided for in 2 this act shall be transferable or assignable in any manner. 3 (8) Restrict access to confidential information obtained 4 under this act and ensure that the confidentiality of 5 information is maintained and protected. 6 (9) Prescribe financial reporting and internal control 7 requirements for the operations of licensees that relate to 8 racetrack video lottery machines. 9 (10) Prescribe the manner in which gross revenue must be 10 computed and reported by the licensee that relate to 11 racetrack video lottery machines. 12 (11) Require audits of the financial statements of the 13 operations of licensees that relate to racetrack video 14 lottery machines. 15 (12) Require periodic financial reports from licensees 16 consistent with standards and intervals prescribed by the 17 division. 18 (13) Prescribe the procedures to be followed by 19 licensees for cash transactions affecting racetrack video 20 lottery machines. 21 (14) Prescribe criteria and conditions for the operation 22 of the racetrack video lottery system. 23 (15) Enforce the prescribed hours for the operation of 24 racetrack video lottery machines, so that licensees may 25 operate racetrack video lottery machines on any day, except 26 Christmas day, between the hours of 10 a.m. on one day until 27 2 a.m. the next day. 28 (16) Prohibit the offering of free alcohol or free malt 29 or free brewed beverages to patrons operating or using 30 racetrack video lottery machines. 20010H2001B2630 - 6 -
1 (17) Prohibit wagering by persons under 21 years of age 2 on racetrack video lottery machines. 3 (18) Establish procedures for the inspection and 4 certification of each racetrack video lottery machine prior 5 to being placed into use at the racetrack by a licensee to 6 insure that no racetrack video lottery machine may be set to 7 pay out less than 85% of all wagers on an average annual 8 basis unless specifically approved otherwise by the division. 9 (19) Prescribe any rule or regulation necessary to 10 administer the provisions of this act. 11 Section 5. Advisory committee. 12 (a) Establishment.--There is hereby established an advisory 13 committee within the department, to be known as the Racetrack 14 Video Lottery Advisory Committee. The committee shall assist the 15 department in developing and discussing proposed regulation, 16 final regulation or policy guidance and to provide continuing 17 advice on implementing and administering the provisions of this 18 act. 19 (b) Membership.--The advisory committee shall consist of the 20 following members: 21 (1) the Secretary of Agriculture or his designee; 22 (2) the chairperson of the State Horse Racing 23 Commission; 24 (3) the chairperson of the State Harness Racing 25 Commission; and 26 (4) five members appointed by the Governor with the 27 advice and consent of the Senate who shall be representative 28 of the interests affected by the provisions of this act. The 29 Secretary of Revenue shall serve as an ex officio member of 30 the committee. 20010H2001B2630 - 7 -
1 (c) Terms.--The Governor shall appoint the initial members 2 of the committee under subsection (b)(4) within 60 days of the 3 effective date of this act. The members appointed by the 4 Governor shall serve three-year terms, except that the initial 5 appointees shall have staggered terms so that one member shall 6 be appointed for a one-year term, two members shall be appointed 7 for a two-year term and two members shall be appointed for a 8 three-year term. 9 (d) Chairperson.--A chairperson shall be chosen by a 10 majority vote of the committee members present at a regularly 11 scheduled meeting. A person employed by the Commonwealth may not 12 chair the committee. 13 (e) Expenses.--Members of the committee shall be reimbursed 14 for their travel expenses to attend committee meetings. 15 Employees of the Commonwealth shall only be entitled to the 16 compensation and expenses they receive as public employees. 17 (f) Support.--The department shall provide the appropriate 18 administrative and technical support needed by the committee in 19 order to accomplish its objectives. 20 Section 6. Issuance of racetrack video lottery licenses. 21 (a) Authorization.--The division may issue a racetrack video 22 lottery license to a licensed corporation that desires to 23 operate racetrack video lottery machines at its racetrack if 24 that licensed corporation makes application to the division and 25 meets all of the following: 26 (1) The licensed corporation maintains its license to 27 conduct racing in good standing with the appropriate 28 commission. 29 (2) The licensed corporation continues to provide for 30 live horse racing as provided for in the act of December 17, 20010H2001B2630 - 8 -
1 1981 (P.L.435, No.135), known as the Race Horse Industry 2 Reform Act. 3 (3) The licensed corporation has a written live racing 4 agreement with a horsemen's organization representing a 5 majority of owners and trainers at the racetrack where the 6 licensed corporation conducts racing dates. 7 (4) Provides evidence satisfactory to the division that 8 a local option election was conducted under section 9 and 9 resulted in an affirmative vote for the county and licensed 10 corporation. 11 (5) The licensed corporation abides by all of the 12 provisions and regulations of this act. 13 (b) Limitation.--The division may determine the number of 14 racetrack video lottery machines that may be operated by a 15 licensee, provided that the number does not exceed 2,000 at any 16 one racetrack. 17 (c) Restriction.--No applicant that has been convicted in 18 any jurisdiction of a felony, crime of moral turpitude or 19 gambling offense may be issued a racetrack video lottery license 20 under this act. 21 (d) Suspension.--The division shall suspend the racetrack 22 video lottery license of any licensee who fails to satisfy the 23 requirements of subsection (a)(2) and (3) during the term of the 24 racetrack video lottery license until those requirements are 25 satisfied. 26 Section 7. Application. 27 (a) General rule.--Any licensed corporation which meets the 28 requirements of section 6 that desires to install racetrack 29 video lottery machines and operate or alter the number of or 30 location of racetrack video lottery machines within its 20010H2001B2630 - 9 -
1 racetrack must file an application form with the division. 2 (b) Form.--The division shall develop an application form 3 that collects such information as deemed necessary by the 4 division. 5 Section 8. Accounting controls and audits. 6 (a) Approval.--A licensed corporation which desires to 7 install and operate racetrack video lottery machines at its 8 racetrack must first obtain approval of its internal control 9 systems and audits from the division. 10 (b) Minimum requirements.--At a minimum, the internal 11 controls and audits shall consist of: 12 (1) The safeguarding of its assets and revenues, 13 especially the recording of cash and evidences of 14 indebtedness related to the racetrack video lottery machines. 15 (2) The provision of reliable records, accounts and 16 reports of transactions, operations and events, including 17 reports to the division that relate to the racetrack video 18 lottery machines. 19 (3) The ensuring that each racetrack video lottery 20 machine within each racetrack facility is directly connected 21 to the racetrack's central computerized system and can 22 provide details of all transactions, including, but not 23 limited to, coin in, coin out, jackpots, machine door 24 openings and power failures. 25 (4) A procedure whereby assets that relate to racetrack 26 video lottery machine operations are safeguarded. 27 (5) Financial records that relate to racetrack video 28 lottery machine operations are accurate and reliable. 29 (6) Transactions that relate to racetrack video lottery 30 machine operations are performed only in accordance with the 20010H2001B2630 - 10 -
1 management's general or specific authorization. 2 (7) Transactions that relate to racetrack video lottery 3 machine operations are recorded adequately to permit proper 4 and timely reporting of gaming revenue and of fees and taxes 5 and to maintain accountability for assets. 6 (8) Access to assets that relate to racetrack video 7 lottery machine operations is permitted only in accordance 8 with management's specific authorization. 9 (9) Recorded accountability for assets that relate to 10 racetrack video lottery machine operations is compared with 11 actual assets at reasonable intervals and appropriate action 12 is taken with respect to any discrepancies. 13 (10) Functions, duties and responsibilities that relate 14 to racetrack video lottery machine operations are 15 appropriately segregated and performed in accordance with 16 sound practices by competent, qualified personnel. 17 (c) Internal control.--A licensed corporation which seeks to 18 operate racetrack video lottery machines at its racetrack shall 19 describe, in the manner the division may approve or require, its 20 administrative and accounting procedures that relate to 21 racetrack video lottery machine operations in detail in a 22 written system of internal control and shall submit a copy of 23 its written racetrack video lottery system to the division. Each 24 written video lottery system shall include: 25 (1) An organizational chart depicting appropriate 26 segregation of functions and responsibilities. 27 (2) A description of the duties and responsibilities of 28 each position shown on the organizational chart. 29 (3) A detailed narrative description of the 30 administrative and accounting procedures designed to satisfy 20010H2001B2630 - 11 -
1 the requirements of subsection (a). 2 (4) A written statement signed by the chief financial 3 officer of the licensed corporation and the chief executive 4 officer of the licensed corporation attesting that the system 5 satisfies the requirements of this section. 6 (5) Any other item that the division may require. 7 Section 9. Local option election. 8 (a) Condition of application submission.--A licensed 9 corporation that desires to submit an application to the 10 division for a racetrack video lottery license must first obtain 11 an affirmative vote from a ballot question in accordance with 12 this section. 13 (b) Procedure.-- 14 (1) The placement of racetrack video lottery machines in 15 the facility of a licensed corporation shall be submitted as 16 a ballot question to the qualified electors of the county in 17 which the facility is located upon petition signed by at 18 least 500 qualified electors of the county, and filed with 19 the county election board by the licensed corporation in 20 accordance with the act of June 3, 1937 (P.L.1333, No.320), 21 known as the Pennsylvania Election Code. 22 (2) The question shall be placed upon the ballot of that 23 county for the next regularly scheduled election as a "yes" 24 or "no" question in the following form: 25 Do you favor the Division of the State Lottery 26 issuing a license for the operation of racetrack 27 video lottery machines, commonly referred to as "slot 28 machines," within this county at the (name of the 29 racetrack owned by the licensed corporation that 30 submitted the petition) where pari-mutuel wagering is 20010H2001B2630 - 12 -
1 authorized under Pennsylvania law? 2 (3) The results of the ballot question shall be 3 certified by the county election board to the licensed 4 corporation that submitted the petition. 5 (c) Certification to be submitted with application.--An 6 application to the division for a license shall not be deemed 7 complete and may not be approved by the division unless the 8 certification from the respective county election board 9 identified in subsection (b) is included with the application 10 and the result of the ballot question is in the affirmative. 11 (d) Effect of affirmative vote.--If the majority of 12 qualified electors voting in the county in which a ballot 13 question was presented in accordance with this section vote in 14 the affirmative, then no similar ballot question for that 15 licensed corporation or any other licensed corporation may be 16 presented in that county for a period of five years from the 17 date of the election, unless a petition of qualified electors in 18 that county is filed after the election with the county board of 19 elections, which petition contains at least 5% of the signatures 20 of the qualified electors in that county. 21 (e) Effect of negative vote.--If the majority of qualified 22 electors voting in the county in which a ballot question was 23 presented in accordance with this section vote in the negative, 24 then no similar ballot question for that licensed corporation or 25 any other licensed corporation may be presented in that county 26 for a period of two years from the date of the election. 27 Section 10. Allocation of gross revenue to pari-mutuel purses. 28 A racetrack video lottery licensee shall use at least 40% of 29 the gross revenue arising from the operation of the racetrack 30 video lottery machines to increase the purses of pari-mutuel 20010H2001B2630 - 13 -
1 wagering. 2 Section 11. Racetrack video lottery tax and distributions of 3 tax. 4 (a) Imposition of tax.--Each racetrack video lottery 5 licensee shall pay a tax in the amount of 50% of the gross 6 revenue arising from the operation of the racetrack video 7 lottery machines. 8 (b) Payment and credit.--The tax imposed by this section 9 shall be paid by the licensee through the department for credit 10 to the State Lottery Fund monthly on or before the 20th day of 11 the month next succeeding the month in which the tax accrues. 12 (c) Distribution.--The division shall distribute moneys from 13 the fund together with the interest earned thereon at least once 14 annually on September 1, 2002, and each September 1 thereafter 15 to the State Treasurer for deposit in the following manner: 16 (1) Ten percent shall be distributed among the counties 17 hosting a racetrack which operates racetrack video lottery 18 machines for tourist promotion and for the support of museums 19 located in those counties. If a racetrack is located in two 20 or more counties, the amount available shall be distributed 21 on a pro rata basis determined by the percentage of acreage 22 located in each county to the total acreage in all counties 23 occupied by the racetrack. 24 (2) Ten percent shall be distributed among the 25 municipalities hosting a racetrack which operates racetrack 26 video lottery machines based upon the licensed corporation's 27 percentage of contribution to the State Lottery Fund. If the 28 racetrack is located in two or more municipalities, the 29 amount available shall be distributed on a pro rata basis 30 determined by the percentage of acreage located in each 20010H2001B2630 - 14 -
1 municipality to the total acreage in all municipalities 2 occupied by the racetrack. 3 (3) Ten percent shall be distributed equally among the 4 school districts hosting a racetrack which operates racetrack 5 video lottery machines based upon the licensed corporation's 6 percentage of contribution to the fund. If the racetrack is 7 located in two or more school districts, the amount available 8 shall be distributed on a pro rata basis determined by the 9 percentage of acreage located in each school district to the 10 total acreage in all school districts occupied by the 11 racetrack. 12 (4) Five percent shall be transferred to the Breeder's 13 Fund. 14 (5) Five percent shall be transferred to the Sire Stakes 15 Fund. 16 (6) The balance shall remain in the State Lottery Fund. 17 (d) Tax reconciliation.--If the amount of tax required to be 18 reported and paid pursuant to this section is later determined 19 to be greater or less than the amount actually reported and paid 20 by the licensed corporation, the division shall: 21 (1) assess and collect the additional tax determined to 22 be due with interest thereon until paid; or 23 (2) provide for a refund of any overpayment, with 24 interest thereon, to the licensed corporation. 25 Section 12. Declaration of exemption from Federal laws 26 prohibiting gambling devices. 27 (a) Declaration.--Pursuant to section 2 of the act of 28 January 2, 1951 (64 Stat. 1135, 15 U.S.C. § 1172), the 29 Commonwealth declares that it is exempt from section 1134 of 30 that act. 20010H2001B2630 - 15 -
1 (b) Legal shipments.--All shipments of racetrack video 2 lottery machines into this Commonwealth, the registering, 3 recording and labeling of which has been effected by the 4 supplier of the racetrack video lottery machines, in accordance 5 with sections 5 and 7 of the act of January 2, 1951 (64 Stat. 6 1135, 15 U.S.C. §§ 1175 and 1177), shall be deemed legal 7 shipments of gambling devices into this Commonwealth. 8 Section 13. Annual report. 9 The division shall, within 18 months of the effective date of 10 this act and each year thereafter, submit a report to the 11 Governor and General Assembly, which reports on the general 12 operation of the division under this act and all taxes, fees, 13 fines and other revenues collected and disbursed. The number and 14 result of hearings conducted under this act and any other 15 information that the division deems necessary or appropriate. 16 Section 14. Appropriation. 17 The sum of $1,500,000, or as much thereof as may be 18 necessary, is hereby appropriated to the Department of Revenue 19 for the establishment of the racetrack video lottery system 20 within the Division of the State Lottery. The department shall 21 reimburse the General Fund from the revenue generated within the 22 first year of the operations of racetrack video lottery 23 machines. 24 Section 15. Effective date. 25 This act shall take effect in 60 days. I27L72DMS/20010H2001B2630 - 16 -