HomeMy WebLinkAboutHouse of Representatives Committee on Regulated Services Analysis
STORAGE NAME: h1453s1.rs
DATE: March 17, 1999
HOUSE OF REPRESENTATIVES
COMMITTEE ON
REGULATED SERVICES
ANALYSIS
BILL #: CS/HB 1453
RELATING TO: Video Lottery
SPONSOR(S): Committee on Regulated Services and Representative Bitner
COMPANION BILL(S): SB 2176 by Senator Silver
ORIGINATING COMMITTEE(S)/COMMITTEE(S) OF REFERENCE:
(1) REGULATED SERVICES YEAS 8 NAYS 0
(2) GOVERNMENTAL RULES & REGULATIONS
(3) FINANCE & TAXATION
(4) GENERAL GOVERNMENT APPROPRIATIONS
(5)
I. SUMMARY:
General prohibitions and limited exceptions on gambling are provided in the State Constitution and the Florida
Statutes. The State Constitution prohibits lotteries [the award of a prize by chance for consideration] except for state
operated lotteries and authorized pari-mutuel pools. Chapter 849, F.S., prohibits gambling and gambling houses but
provides exceptions for bingo, charitable drawings, penny ante games, and card rooms.
This bill provides for the establishment and operation by the Department of the Lottery of video lottery terminals
[VL Ts] at licensed pari-mutuel facilities. VL Ts are interactive gaming devices offering a wide variety of game options
[traditional line-up games such as three cherries in a row, video bingo, video keno, traditional card games such as
black jack and poker, etc.] at which a player places a bet for the chance to be awarded credits which can either be
redeemed for cash or be replayed as additional bets. VL T games include games involving chance, elements of
chance and skill and also includes progressive games in which a jackpot grows as it is being played and is often
played on a network of terminals linked together by a central computer.
The bill allocates 28.5% of the net terminal income [cash in less cash out] to the Public Education Capital Outlay and
Debt Service Trust Fund [PECO]; 9.5% to the Department of Elderly Affairs [DEA]; 2% to the Department of the
Lottery for administration; 8% shared contributions by all pari-mutuels to the Video Lottery Purse Trust Fund; .25% to
the Department of Children and Family Services for the establishment and administration of treatment programs for
problem gambling; direct contributions of 6% to purses for live performances at harness tracks; 6% to purses for live
performances at jai alai frontons; and 6% to purses for live performances at greyhound tracks. Further, the bill allows
the video lottery retailer to retain 51.75% of the net terminal income if the permitholder is a thoroughbred track;
51.75% for Ocala Breeders' Sale; and 45.75% of the net terminal income for other permitholders. The retained
income of 51.75% in the case of the thoroughbred tracks and the sales facility would be subject to contract
negotiation for purse and award distributions with the horsemen. In addition to these allotments, the bill provides
additional funds for pari-mutuel purses, breeders and stallion awards, player compensation, and amends intertrack
and simulcast regulations.
The Consensus Revenue Estimating Conference estimated net revenue for FY 1999-2000, which is a partial year of
operation, to the PECO TF of $159.5 million and $297.3 million for FY 2000-2001. However, when the negative
impacts to other tax revenue sources are backed out, the net positive revenue to the state is estimated to be $145.8
for FY 1999-2000 and $271.8 for FY 2000-2001. These estimates anticipate facilities to be 50% operational in the
first year, 65% operational in the second year, 85% the third year and fully operational in the fourth year. Revenues
are expected to increase substantially as more facilities become completely operational and knowledge of the
availability of this form of wagering is disseminated. These calculations were based on a 38% allocation of net
terminal income to PECO. The CS/HB 1453 reduced that allocation to 28.5% to PECO and 9.5% to the Department
of Elderly Affairs. Consequently, the net positive revenue to those funds would be $119.6 million for PECO and $39.9
million to DEA for FY 1999-2000 and $223.0 million for PECO and $74.3 million to DEA for FY 2000-2001.
The bill would take effect upon becoming a law, conditioned upon the passage of companion measures establishing
trust funds and providing a public records exemption.
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CARDROOMS
In 1996, s. 849.086, F.S., was created to authorize the play of certain games and wagering on such
games by participants, if played in facilities licensed by the state as "cardrooms." Only persons
holding a valid and active pari-mutuel permit are eligible for cardroom licenses and such card rooms
may only be operated at a licensed pari-mutuel facility. The cardroom operator may choose to offer
any game or combination of games that are authorized under s. 849.085, F.S., the penny-ante game
statute. These games are: poker, pinochle, bridge, rummy, canasta, hearts, dominoes, and mah-
jongg and that no games may be played as banking games. Banking games are games in which the
cardroom operator or his employee is a participant in the game, pays winners, and collects money
from losers. There is a $10 pot limit which is the same as allowed in penny-ante games.
Cardroom operators are required to provide dealers for each game conducted at the cardroom which
is of the type which normally requires a dealer. The cardroom operator or his or her employees may
not, however, participate in any game, except as a non-playing dealer. No electronic or mechanical
devices may be used in playing any game. Only cards or game equipment and chips furnished by the
cardroom operator may be used in playing and wagering on such games.
The Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering is given
the authority and responsibility for licensing and regulating cardroom activities in the state. The
division is given rule-making and enforcement authority, including the power of suspension,
revocation or denial of licenses and permits for violations of this section. It also is given the authority
to suspend, revoke, or deny a cardroom license if the licensee's pari-mutuel permit or license is
suspended or revoked. Criminal penalties are also provided for violations of this section. Cardrooms
are authorized to be operated within two hours prior to the post time of the first live event conducted
at the facility on which wagers are accepted to within two hours after the conclusion of the last live
event on which wagers are accepted. A permitholder can operate a cardroom on a dark day within its
live meet when it is engaging in simulcasting or intertrack wagering, but may do so no more than one
day per week. The hours of cardroom operation on dark days are the same as is authorized for live
days.
Various percentages of the gross receipts from cardroom operations are allocated to supplemental
greyhound purses and jai alai awards, supplemental thoroughbred purses and breeders awards.
Additionally, each cardroom must pay to the state 10% of its gross receipts and an admissions tax.
The total tax due the state is payable to the Division of Pari-Mutuel Wagering monthly with one half of
the revenues deposited into the General Revenue Fund and the other half into the Pari-Mutuel
Wagering Trust Fund. Twenty-five percent of the funds deposited into the Pari-mutuel Wagering
Trust Fund are disbursed to the municipalities or counties in which the cardrooms are located.
For FY 1997-1998 cardroom operation gross revenue was $5,450,034 which generated $652,593 in
tax and fee revenue for the state.
INDIAN GAMING IN FLORIDA
The federal Indian Gaming Regulatory Act of 1988 [IGRA] established the National Indian Gaming
Commission to regulate gaming on the lands of recognized tribes. IGRA classifies gaming in three
categories. Class I gaming includes traditional tribal or ceremonial games. Class II includes bingo
and games similar to bingo, including bingo operated with electronic and technological aides, and
card games explicitly authorized or which are not explicitly prohibited by the State. Banking card
games where the player plays against the house and slot machines are not Class II games. Class III
gaming includes all other gaming. All tribes are permitted Class I gaming. Class II gaming is
permitted only to the extent that the State permits such gaming for any purpose, that such gaming is
not prohibited by Federal law and the tribal government adopts an ordinance approved by the
Chairman of the Commission. Indians are permitted to operate Class III gaming activities, including
casino gaming, only if the state in which the tribe is located permits such gaming for any purpose by
anyone in the state. Thus, Indians could request that the state negotiate a Tribal-State compact
allowing them to conduct casino operations on Indian lands if the state were to allow casinos to be
operated in the state.
There are five operating Indian gaming facilities on Indian lands in Florida. The Seminole Tribe of
Florida operates facilities on reservation lands in Tampa, Hollywood, Immokalee and Brighton offering
video gaming machines, poker and high stakes bingo. The Seminoles also have reservation lands in
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Video lottery gaming is restricted to pari-mutuel facilities [2 horse tracks & 2 dog tracks] in West
Virginia, population approximately 1.5 million, with each track allocated a maximum number of
terminals for a total allocation of 3,455 terminals. Approval must be granted through a local option
election before a track may offer video lottery gaming. Operation of video lottery gaming is generally
restricted to days when live racing is conducted and/or on televised racing days. This restriction does
not apply to any track approved for video lottery gaming prior to November 1993. Video lottery
terminals offer a wide variety of games, e.g., video keno, poker, blackjack and video slots. Persons
under the age of 18 or persons who are visibly intoxicated may not play video lottery.
The payout rate is 91-92% but may go up to 95% with commission approval. The maximum wager
per game may not exceed $2 and there is no limit on the maximum prize payout per game. The state
receives 30% of the net terminal revenue and the racetrack receives 47% with various other
percentages distributed to purses, to the county where the facility is located, to a pension plan for
track employees, breeders awards, tourism and veterans memorial programs. In 1997, VL T games
generated approximately $30 million for the Lottery. With the addition of the fourth track beginning
video lottery gaming in late 1997, 1998 net terminal revenue increased to approximately $130 million
and net revenue to the state increased to $38.8 million.
Rhode Island
Video lottery games are authorized in the State of Rhode Island, population 1 million, at the two pari-
mutuel facilities which were in operation on June 30, 1992 [one jai alai and one greyhound track].
Players must be at least 18 years of age and visibly intoxicated persons are prohibited from operating
VL Ts. The track is required to conspicuously post the name and telephone number of a professional
recognized council on problem gambling. Currently, 1,628 VL Ts are in operation offering various card
and reel games and video keno. VL Ts may be operated, with Lottery Commission approval, even if
the track is not conducting a pari-mutuel wagering event. The maximum wager allowed is $10 and
the maximum prize payout is $25,000.
For FY 1997-98, $64.3 million in tax revenue was generated as a result of the state receiving 46% of
the net terminal income. The track receives 31 % of the net terminal income and the remainder is
distributed in various allocations to owners of dog kennels, technology providers, and to the city
where the track is licensed.
Delaware
Video lottery games are authorized in the State of Delaware, population 750,000, at the state's three
licensed pari-mutuel facilities. Each track is authorized to install up to 2,000 VL Ts. A full line of VL T
gaming is offered including variations of poker, blackjack, bingo and line-up games. Each track must
reimburse the state for the costs of VL T equipment and a proportionate share of the cost of the
central computer system. Persons under the age of 21 or persons who are visibly intoxicated are not
allowed to operate VL Ts. Video lottery machines may not be operated on Christmas, Easter, or
between the hours of 2:00 a.m. and 1 :00 p.m. on Sundays, or between the hours of 2:00 a.m. and
8:00 a.m. on any day other than Sunday. All advertising, marketing and promotional materials,
related to the video lottery must be submitted for review and approval prior to use.
One of the three pari-mutuel facilities is located near the Pennsylvania border within close proximity to
two major population centers, Wilmington and Newark. A Delaware Lottery spokesman indicated that
as much as two-thirds of the state's total revenue was generated by out-of-state players. Payout odds
are 87%-95% and approximately 27.4% of the net terminal revenue [based on a sliding scale] is
earmarked for the state with 1 % or $100,000 of those funds dedicated to treatment of compulsive
gambling. Remaining revenue is distributed as purses, to breeders programs, to organizations for
disabled or retired jockeys, and as commissions to agents. For FY 1997-98, VL Ts generated nearly
$90 million in state revenue.
COMPULSIVE GAMBLING
The Department of the Lottery contributes $100,000 annually towards the funding of a toll-free
telephone counseling hotline. Individuals with gambling addictions may seek the services of private
practicing mental health or counseling professionals through their insurance benefits or personal
income. Individuals without such resources may seek church or lay counseling, or may seek services
from public mental health centers and be served based upon relative need and available resources.
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Video lottery terminal vendors [suppliers of the terminals] are required to submit a training program
for the service and maintenance of terminals and equipment for approval by the department. The bill
specifies training program, qualification and certification criteria, including background investigations
for employees, provides for revocation of certification and authorizes the department to adopt rules to
further that purpose. No person can be licensed as a video lottery terminal vendor if the person has
an interest in a video lottery retailer [pari-mutuel permitholder] or a business relationship with a video
lottery retailer other than as a vendor or lessor of terminals.
AGE RESTRICTIONS
No person under the age of 18 is allowed to play video lottery games and video lottery retailers are
required to post a clear and conspicuous sign at the pari-mutuel facility which states the prohibition.
Any person, including the VL T retailer, who violates this prohibition commits a second degree
misdemeanor.
ZONING
The bill provides that the installation, operation or use of a video lottery terminal on any property
where pari-mutuel operations were or would have been lawful under a county or municipal zoning
ordinance as of July 1, 1997, does not change the character or use of the property and cannot be
prohibited by local ordinance.
DISBURSEMENTS OF REVENUE
Net Terminal Income
Subsection (8) of s. 24.1121, Florida Statutes, is created in Section 8 of the bill and among other
requirements allocates net terminal income from video lottery games as follows:
. 28.5% to the Public Education Capital Outlay and Debt Service TF [PECO];
. 9.5% to the Department of Elderly Affairs;
. 2% to the DOL's Video Lottery Administration TF for administration;
. 8% to the DBPR's Video Lottery Purse TF; distribution formula for additional purse payments at
pari-mutuel facilities from this trust fund is established in Section 18 of this bill;
. .25% to the Department of Children and Family Services for the establishment and administration
of treatment programs for gambling addiction;
. 6% to purses for live performances at harness tracks;
. 6% to purses for live performances at jai alai tracks; and
. 6% to purses for live performances at greyhound tracks.
. To be retained by the video lottery retailer:
51.75% if a thoroughbred permit to be distributed as follows:
3.3% as breeders' & stallion awards; .25% to Jockey Guild Health & Welfare Trust; and
96.45% per written agreement between thoroughbred track and FHBPA;
45.75% if other than thoroughbred permit; and
51.75% if OBS:
3.3% for Florida breeders & stallion awards; and
96.7% distributed as provided by contract between FTBA and OBS.
Video Lottery Purse Trust Fund Revenue
Section 18 of the bill creates s. 550.26315, F .S., concerning administration of the Video Lottery Purse
Trust Fund and specifies that:
. 58% of the proceeds be transferred to the Video Lottery Thoroughbred Trust Fund in the DSPR;
. 42% of the proceeds to pari-mutuel permitholders to be distributed as purses, as follows:
8% to holders of valid harness racing perrnits;
_ Requires 6.6% of this 8% and 6.6% of the 6% direct purse contribution from net terminal
income to harness tracks to be distributed for breeders and stallion awards and stakes.
7% to holders of valid jai alai permits; and
27% to holders of valid greyhound racing permits.
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In testimony before the committee, Representatives from the Attorney General's Office expressed
their belief that approval of video lottery gaming, as proposed in this legislation, will legitimize the
operation of similar electronic gaming operations which are presently conducted on Indian
reservations in the state.
COMPULSIVE GAMBLING
The bill appropriates ~ of 1 percent of a video lottery retailer's net terminal income to the Department
of Children and Family Services and requires the Alcohol, Drug Abuse and Mental Health Program
Office to establish a program for public education, awareness and training, for the treatment and
prevention of problem or compulsive gambling, including assistance programs for affected family
members. Studies to identify at-risk adults and children are required. The bill requires the
establishment of a toll-free hotline for crisis counseling and referral services and requires video lottery
retailers to post signs with the statement, "IF YOU OR SOMEONE YOU KNOW HAS A GAMBLING
PROBLEM, HELP IS AVAILABLE" and the toll-free telephone number. Video lottery retailers are also
required to print the same message and telephone number on all racing programs. For FY 1999-
2000, the Consensus Revenue Estimating Conference anticipates this percentage would generate
approximately $1 million and approximately $2 million for FY 2000-2001.
C. APPLICATION OF PRINCIPLES:
1 . Less Government:
a. Does the bill create, increase or reduce, either directly or indirectly:
(1) any authority to make rules or adjudicate disputes?
The bill provides for the establishment and operation of video lottery terminals by the
Department of the Lottery at licensed pari-mutuel facilities in the state. Implementation
of these provisions will necessarily entail significant rulemaking activity at the
Department of the Lottery and by the Division of Pari-Mutuel Wagering, Department of
Business and Professional Regulation.
The bill appropriates revenue to the Department of Children and Family Services for the
establishment of a program for public education, awareness, and training regarding
problem and compulsive gambling and the treatment and prevention of problem and
compulsive gambling which may also require the adoption of rules.
(2) any new responsibilities, obligations or work for other governmental or private
organizations or individuals?
The bill provides for the establishment and operation by the Department of the Lottery of
VL Ts at qualifying pari-mutuel facilities. The Department of Business and Professional
Regulation, Division of Pari-Mutuel Wagering is charged with the administration and
distribution of funds from the Video Lottery Purse Trust Fund and the Video Lottery
Thoroughbred Trust Fund.
To the extent the introduction of VL T gaming at qualifying pari-mutuel facilities
generates significant increased attendance, the counties with pari-mutuel facilities may
experience increased cost for infrastructure maintenance and improvements.
Additionally, to the extent the inclusion of video lottery gaming increases either the type
or frequency of crime in the areas surrounding pari-mutuel facilities, local law
enforcement agencies may experience increased costs.
(3) any entitlement to a government service or benefit?
N/A
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4. Individual Freedom:
a. Does the bill increase the allowable options of individuals or private
organizations/associations to conduct their own affairs?
Yes, the bill affords the state's ailing pari-mutuel industry the ability to offer an additional
gaming product which has the potential to greatly increase income for the pari-mutuel facility.
Additionally, the bill affords an opportunity to Florida citizens, and visitors to the state, to
engage in an additional type of entertainment at locations throughout the state but which is
presently only available on cruises, on Indian reservations or out of state.
b. Does the bill prohibit, or create new government interference with, any presently lawful
activity?
N/A
5. Familv Empowerment:
a. If the bill purports to provide services to families or children:
(1) Who evaluates the family's needs?
N/A
(2) Who makes the decisions?
N/A
(3) Are private alternatives permitted?
N/A
(4) Are families required to participate in a program?
N/A
(5) Are families penalized for not participating in a program?
N/A
b. Does the bill directly affect the legal rights and obligations between family members?
N/A
c. If the bill creates or changes a program providing services to families or children, in which of
the following does the bill vest control of the program, either through direct participation or
appointment authority:
(1) parents and guardians?
N/A
(2) service providers?
N/A
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Section 5. Amends s. 24.1055, F.S., and provides that no person under the age of 18 may playa
video lottery game as authorized by this chapter and requires retailers to post signage on each
terminal which contains specific language conceming that prohibition. This section also subjects any
person under the age of 18 or any video lottery retailer who violates this section to a second degree
misdemeanor.
Section 6. Amends s. 24.108, F .S., to change the reference from "act" to "chapter" to reflect the
expanded authority of the Department of the Lottery's Division of Security to video lottery operations.
Section 7. Amends s. 24.111, F.S., to change reference from "act" to "chapter" to reflect expanded
authority to allow DOL to enter into contracts for the purchase, lease, or lease-purchase of necessary
goods and services.
Section 8. Creates s. 24.1121, F.S., which provides for the operation of video lottery games at pari-
mutuel facilities meeting specified criteria.
Subsection (1) requires pari-mutuel facilities to conduct a full schedule of live racing or games or be
authorized to conduct intertrack wagering of horseraces in order to offer video lottery games. In the
case of a greyhound track or jai alai facility, the permitholder would be authorized to offer video lottery
games if the permitholder also conducted, during the prior fiscal year, no fewer than 80 percent of the
number of performances and no fewer than 80 percent of the number of live races or games which
the same permitholder conducted during FY 1997-1998. These requirements may be waived in the
event of a natural disaster or other events which are not under the control of the permitholder. In the
event the permitholder fails to conduct the specified number of races or games, the permitholder is
required to suspend video lottery operation within 30 days of written notice from the Department of
the Lottery [DOL]. The department is authorized to assess an administrative fine not to exceed
$5,000 per video lottery terminal, per day, for a permitholder's failure to suspend operation. Video
lottery retailers are required to post a bond, in an amount to be determined by the department, which
is sufficient to cover the retailer's tax liability.
Subsection (2) requires a pari-mutuel permitholder to notify the DOL prior to operating video lottery
games.
Subsection (3) grants overall control of the video lottery system at a pari-mutuel facility to the DOL
and also requires each terminal to be linked, directly or indirectly, to a computer system under the
control of the department.
Subsection (4) requires the DOL to establish, by rule, the method by which cash receipts will be
electronically validated and redeemed.
Subsection (5) prohibits a person under the age of 18 from playing a video lottery game authorized by
this chapter. This prohibition is also found in the amendment to s. 24.1055, F .S., found in Section 5
of the bill.
Subsection (6) allows operation of video lottery even if permitholder is not conducting a pari-mutuel
event.
Subsection (7) requires payout of a minimum of 88 percent and no more than 94 percent of play.
Allows, however, the payout of a lesser amount if the department determines that the minimum
payout is not financially viable at that location and if the Public Education Capital Outlay and Debt
Service Trust Fund will not be adversely impacted.
Subsection (8) allocates net terminal income from video lottery games as follows:
. 28.5% to the Public Education Capital Outlay and Debt Service Trust Fund [PECO];
. 9.5% to the Department of the Elderly;
. 2% to Department of the Lottery for administration;
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~ be protected against manipulation to affect the probability of winning;
~ have mechanism for accepting coins, etc., in exchange for game credits which mechanism is
designed to prevent players from obtaining credits by tampering;
~ be capable of suspending play, as a result of tampering, until reset at the direction of the
department; and
~ be capable of being linked to the department's central computer for purposes of auditing the
operation, financial data and program information.
Section 12. Creates s. 24.1125, F.S., to require video lottery terminal vendors to submit a training
program for the service and maintenance of terminals and equipment for approval by the department.
This section specifies training program, qualification and certification criteria, including background
investigations on each employee, provides for revocation of certification and authorizes the
department to adopt rules.
Section 13. Amends s. 24.117, F.S., to provide that anyone who knowingly permits a minor to use a
video lottery terminal commits a first degree misdemeanor.
Section 14. Amends s. 24.118, F.S., to change reference from "act" to "chapter" to reflect expanded
authority and applicability concerning breaches of confidentiality with intent to defraud. A first degree
felony is provided for knowingly and willingly disclosing confidential information.
Section 15. Amends s. 24.120, F.S., to change reference from "act" to "chapter" to reflect expanded
authority to the DOL's Administrative Trust Fund.
Section 16. Amends s. 24.122, F.S., to exempt prizes and the installation, rental, or use of any
video lottery terminal from state and local taxes and further provides that all matters relating to
operation of VL Ts are preempted to the state.
Section 17. Amends s. 212.02(24), F.S., to specify that the definition for "coin-operated amusement
machine" does not include a video lottery terminal approved pursuant to Chapter 24.
Section 18. Creates s. 550.26315, F.S., concerning administration of the Video Lottery Purse Trust
Fund and specifies that:
~ 58% of the proceeds be transferred to the Video Lottery Thoroughbred Trust Fund;
~ 42% of the proceeds to pari-mutuel permitholders to be distributed as purses, as follows:
8% to holders of valid harness racing permits;
requires 6.6% of this 8% and 6.6% of the 6% direct purse contribution from net terminal
income to harness tracks to be distributed for breeders and stallion awards and stakes.
7% to holders of valid jai alai permits; and
27% to holders of valid greyhound racing permits. 10% of these distributions and 10% of the
6% direct purse contribution for net terminal income shall be distributed as additional purses
on live races to Florida-bred greyhounds.
Requires these percentages to be determined by dividing the amounts paid in purses by the
permitholder during FY 1997-1998 by the amount of purses paid by all such permitholders
statewide during the same period.
The bill requires that all proceeds distributed under this section are in addition to and supplement
other funds set forth for use as purses, awards and player compensation. The department is
authorized to adopt rules to provide for the equitable distribution of funds for purses, awards and
player compensation.
Section 19. Creates s. 550.26325, F.S., concerning distribution of funds from the Video Lottery
Thoroughbred Trust Fund, and specifies that:
~ 6.6% of proceeds go to thoroughbred breeders' and stallion awards and allows the deduction of
an administration fee by the Breeders' Association;
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Section 26. Requires the Alcohol, Drug Abuse and Mental Health Program Office in the Department
of Children and Family Services to establish a program for public education, awareness and training
for the treatment and prevention of problem or compulsive gambling. The section also requires the
maintenance of a toll-free problem gambling telephone number to provide crisis counseling and
requires at-risk studies and in-service training.
Section 27. Amends s. 24.1126, F.S., to require video lottery retailers to post signs with the
statement, "IF YOU OR SOMEONE YOU KNOW HAS A GAMBLING PROBLEM, HELP IS
AVAILABLE" together with the toll-free telephone number. This section also requires the same
message and telephone number to be printed on all racing programs.
Section 28. Provides that the act shall take effect upon becoming a law contingent upon the
passage of HB's 1455, 1457, 1459, 1461, or similar legislation.
III. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT:
A. FISCAL IMPACT ON STATE AGENCIES/STATE FUNDS:
1. Non-recurrina Effects:
The Department of the Lottery and, to a lesser extent, the Department of Business and
Professional Regulation, Division of Pari-Mutuel Wagering will experience costs associated with
implementation of this legislation. This cost is indeterminate at the present time.
2. Recurrina Effects:
The Department of the Lottery and, to a lesser extent, the Department of Business and
Professional Regulation, Division of Pari-Mutuel Wagering will experience the on-going costs
associated with supervision of the operation, audit and oversight of video lottery operations. To
this end, the bill allocates 2% of net terminal income to the Department of the Lottery for
administration. The Lottery Department would not actually operate the video lottery games as it
presently operates its on-line games; however, the initial costs associated with implementing the
legislation may not be adequately addressed.
The Consensus Revenue Estimating Conference met on March 12, 1999 to assess the potential
impact on state revenue with implementation of this legislation. To arrive at these estimates, per
capita sales figures, net terminal income and number of terminals from three states [West
Virginia, Rhode Island and Delaware] which offer video lottery gaming at their pari-mutuel
facilities were obtained and compared to anticipated activity in Florida. The impact of video
lottery on other lottery games and on the pari-mutuel industry was also considered. Other lottery
games were estimated to be adversely impacted by a reduction in sales of approximately 5% but
pari-mutuel handle was not expected to be adversely affected. However, the Consensus
Revenue Estimating Conference estimates that as much as 50% of the revenue spent on video
lottery will come from money which would have otherwise been spent on sales subject to the
state sales and use tax.
The estimated net revenue to the state from the operation of video lottery at existing pari-mutuel
facilities was $145.8 million for the first [partial] year and $271.8 million for FY 2000-2001. This
estimate is net of any negative impacts attributed to pari-mutuel handle, other existing lottery
games, and sales tax reductions. These estimates are also net of disbursements to the Video
Lottery Purse TF and the Thoroughbred Purse TF since these trust funds are established to
disburse money back to segments of the pari-mutuel industry.
Consensus Estimate'
Adopted: 3/12/99
FY 1999-2000
Annualized
FY 1999-2000
Cash
FY 2000-2001
Annualized
FY 2000-2001
Cash
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The following charts represent the Consensus Revenue Estimating Conference's projection,
assumptions and methodology used to arrive at the estimates of impact.
Projected Proceeds from Video Lottery I
Adooted Estimate [Uodated 3/19/99 bv EDR to reflect distributions oursuant to CSIHB 1453]
1999-2000 2000-2001 2001-2002 2002-2003
Potential Net Tenninallncome Per Capita $72.39 $76.59 $80.80 $85.25
Population (millions) 15.460 15.717 15.971 16.222
Net Tenninallncome Potential (millions) $1.119.1 $1.203.7 $1,290.5 $1.382.8
Phase-in Percentage 50% 65% 85% 100%
Net Terminal income (millions) $559.6 $782.4 $1,096.9 $1,382.8
Net Tenninat Income Per Capita $36.20 $49.78 $68.68 $85.25
Number of Terminals 12.984 17,160 22.802 27,248
Net income per tenninal $43.098 $45,597 $48,105 $50,751
Ra:;uning Impact (millions)
Net terminal income $1,119.1 $1,203.7 $1.290.5 $1.382.8
PECO (2&5%) $319.0 $343.1 $367.8 $394.1
Elderly Affairs (9.5%) $106.3 $114.4 $122.6 $131.4
Lottery Administrative Trust Fund (2%) $22.4 $24.1 $25.8 $27.7
Video Lottery Purse Trust Fund (DBPR) (8%) $89.5 $96.3 $103.2 $110.6
Gambling Addiction Program (Dept of CFS) (.25%) $2.8 $3.0 $3.2 $3.5
Retained by retailers or for purses $579.1 $622.9 $667.8 $715.7
Cash Impact (millions)
Net terminal income $419.7 $782.4 $1,096.9 $1,382.8
PECO(2&5%) $119.6 $223.0 $312.6 $394.1
Elderly Affairs (9.5%) $39.9 $74.3 $104.3 $131.4
Lottery Administrative Trust Fund (2%) $8.4 $15.6 $21.9 $27.7
Video Lottery Purse Trust Fund (DBPR) (8%) $33.6 $62.6 $87.8 $110.6
Gambling Addiction Program (Dept. of CFS) (.25%) $1.0 $2.0 $2.7 $3.5
Retained by retailers or for purses $217.2 $404.9 $567.6 $715.7
I Impact on Current Lottery Games I
. I I
1999-2000 2000-2001 2001-2002 2002-2003
Assumed cannibalization effect 5.00% 5.00% 5.00% 5.00%
Ra:;uning Impact (millions)
Ticket Sales ($56.0) ($60.2) ($64.5) ($69.1)
Educational Enhancement Trust Fund ($21.3) ($22.9) ($24.5) ($26.3)
Lottery Administrative Trust Fund ($6.7) ($7.2) ($7.7) ($8.3)
Cash Impact (millions)
Ticket Sales ($21.0) ($39.1) ($54.8) ($69.1)
Educational Enhancement Trust Fund ($8.0) ($14.9) ($20.8) ($26.3)
Lottery Administrative Trust Fund ($2.5) ($4.7) ($6.6) ($8.3)
I Impact on Pari-mutuel Wagering Tax I
. I I
1999-2000 2000-2001 2001-2002 2002-2003
Assumed cannibalization effect on handle 0.00% 0.00% 0.00% 0.00%
Ra:;uning Impact (millions)
Handle $0.0 $0.0 $0.0 $0.0
Tax (GR) (4.0%) $0.0 $0.0 $0.0 $0.0
Cash Impact (millions)
Handle $0.0 $0.0 $0.0 $0.0
Tax (GR) (4.0%) $0.0 $0.0 $0.0 $0.0
STORAGE NAME: h1453s1.rs
DATE: March 17, 1999
PAGE 21
3. Effects on Competition, Private Enterprise and Emplovment Markets:
Passage of this legislation by all accounts will result in increased employment opportunities at
and near pari-mutuel facilities offering video lottery gaming. Moreover, passage of the legislation
may delay the decline of the pari-mutuel wagering industry which directly employs over 25,000
persons and is indirectly responsible for hundreds of other employment opportunities.
D. FISCAL COMMENTS:
None.
IV. CONSEQUENCES OF ARTICLE VII. SECTION 18 OF THE FLORIDA CONSTITUTION:
A. APPLICABILITY OF THE MANDATES PROVISION:
This bill does not require counties or municipalities to spend funds or to take an action requiring the
expenditure of funds.
B. REDUCTION OF REVENUE RAISING AUTHORITY:
This bill does not reduce the authority that municipalities or counties have to raise revenues in the
aggregate.
C. REDUCTION OF STATE TAX SHARED WITH COUNTIES AND MUNICIPALITIES:
This bill does not reduce the percentage of state tax shared with counties or municipalities.
V. COMMENTS:
The operational dates specified in this legislation may not give the Department of the Lottery and the
Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering sufficient time to
adequately implement their responsibilities.
VI. AMENDMENTS OR COMMITTEE SUBSTITUTE CHANGES:
The Committee on Regulated Services considered this legislation on March 17, 1999 and passed the bill
unanimously as a committee substitute. Numerous changes made by the committee substitute, dealt with
the splits of net terminal income among the various pari-mutuel interests, primarily the thoroughbred track
owners and the horsemen, and will not be repeated here.
Other significant changes included:
. the 38% of net terminal income allocated to PECO in the original bill is reduced to 28.5%;
.. 9.5% of the net terminal income is allocated to the Department of Elderly Affairs;
.. Jai-Alai frontons who operated between 1/90 and 6/98 are made eligible for VL T's;
.. criteria for compulsive gambling treatment programs is provided;
.. Ocala Breeder's Sales is allowed to take intertrack wagering signal year-round on dogs and
thoroughbreds even when other permitholders are operating live in the same county.
VII. SIGNATURES:
COMMITTEE ON REGULATED SERVICES:
Prepared by:
Staff Director:
Paul Liepshutz
Janet Clark Morris