WEST virginia legislature

2016 First Extraordinary session

Introduced

Senate Bill 1007

By Senators Walters, Trump and Gaunch

[Introduced May 24, 2016]

A BILL to amend and reenact §29-22B-503, §29-22B-504, §29-22B-1101 and §29-22B-1408 of the Code of West Virginia, 1931, as amended, all relating to limited video lottery terminals at retail locations; allowing a person to be both a limited video operator and retailer; increasing number of limited video lottery terminals allowed at retail locations; requiring Lottery Commission to conduct bid only open to current permit holders prior to September 1, 2016, for permits expiring June 30, 2021; establishing procedure for bid process; and setting commission’s share of net terminal income at fifty-four percent effective July 1, 2016, provided that the average daily gross terminal income per terminal is greater than $140 per day.

Be it enacted by the Legislature of West Virginia:

That §29-22B-503, §29-22B-504, §29-22B-1101 and §29-22B-1408 of the Code of West Virginia, 1931, as amended, be amended and reenacted, all to read as follows:

ARTICLE 22B. LIMITED VIDEO LOTTERY.

Part 5. Requirements and Qualifications for licensure.

§29-22B-503.  Additional qualifications for an applicant for an operator’s license.

(a) No operator’s license or license renewal may be granted unless the Lottery Commission has determined that, in addition to the general requirements set forth in section five hundred two of this article, the applicant satisfies all of the following qualifications:

(1) (A) If the applicant is an individual, the applicant has been a citizen of the United States and a resident of this state for the four-year period immediately preceding the application; or

(B) If the applicant is a corporation, partnership or other business entity, the chief executive officer and the majority of the officers, directors, members and partners, to the extent each of these groups exists with respect to a particular business organization, both in number and percentage of ownership interest, have been citizens of the United States and residents of this state for the four-year period immediately preceding the application.

(2) The applicant has demonstrated the training, education, business ability and experience necessary to establish, operate and maintain the business for which the license application is made;

(3) The applicant has secured any necessary financing for the business for which the license application is made, and the financing: (A) Is from a source that meets the qualifications of this section; and (B) is adequate to support the successful performance of the duties and responsibilities of the licensee.  A licensee shall request commission approval of any change in financing or leasing arrangements at least thirty days before the effective date of the change;

(4) The applicant has disclosed all financing or refinancing arrangements for the purchase, lease or other acquisition of video lottery terminals and associated equipment in the degree of detail requested by the Lottery Commission;

(5) The applicant has filed with the Lottery Commission a copy of any current or proposed agreement between the applicant and any manufacturer for the sale, lease or other assignment to the operator of video lottery terminals, the electronic computer components of the terminals, the random number generators of the terminals, or the cabinets in which they are housed; and

(6) The applicant does not hold any other license under this article, article 19-23-1, et seq. twenty-three, chapter nineteen of this code, or articles twenty-two, twenty-two-a or twenty-five of this chapter, except that an applicant may also be licensed as a service technician or limited video lottery retailer, or both.

(b) (1) A person or a member of his or her immediate family who has an ownership interest in a business entity that submits an application for an operator’s license may not: (A) Submit an application for another operator’s license as an individual; (B) serve as an officer, director, member or partner of a business entity that submits an application for another operator’s license; or (C) have an ownership interest in any other business entity that submits an application for an operator’s license.

(2) Business entities that have common owners or common officers, directors, members or partners may not hold more than one operator’s license.

§29-22B-504. Additional qualifications for an applicant for a limited video lottery retailer’s license.

No limited video lottery retailer’s license or license renewal may be granted unless the Lottery Commission has determined that, in addition to the general requirements set forth in section five hundred two of this article, the applicant satisfies all of the following qualifications:

(1) (A) If the applicant is an individual, the applicant has been a citizen of the United States and a resident of this state for the four-year period immediately preceding the application;

(B) If the applicant is a corporation, partnership or other business entity, the chief executive officer and the majority of the officers, directors, members and partners (to the extent each of these groups exists with respect to a particular business organization), both in number and percentage of ownership interest, have been citizens of the United States and residents of this state for the four-year period immediately preceding the application;

(2) The applicant has disclosed to the Lottery Commission the identity of each person who has control of the applicant, as control is described in section five hundred seven of this article;

(3) The applicant holds either: (A) A valid license issued under article 60-7-1, et seq., seven, chapter sixty of this code to operate a private club; (B) a valid Class A license issued under article 11-16-1, et seq., sixteen, chapter eleven of this code to operate a business where nonintoxicating beer is sold for consumption on the premises; or (C) both licenses;

(4) The applicant has demonstrated the training, education, business ability and experience necessary to establish, operate and maintain the business for which the license application is made;

(5) The applicant has secured any necessary financing for the business for which the license application is made and the financing:  (A) Is from a source that meets the qualifications of this section; and (B) is adequate to support the successful performance of the duties and responsibilities of the licensee;

(6) The applicant has disclosed all financing or refinancing arrangements for placement on the applicant’s premises of video lottery terminals and associated equipment in the degree of detail requested by the Lottery Commission;

(7) The applicant has filed with the Lottery Commission a copy of any current or proposed agreement between the applicant and a licensed operator for the placement on the applicant’s premises of video lottery terminals;

(8) The applicant has filed with the Lottery Commission a copy of any current or proposed agreement between the applicant and a licensed operator or other person for the servicing and maintenance of video lottery terminals by licensed service technicians; and

(9) The applicant does not hold any other license under this article, article 19-23-1, et seq., twenty-three, chapter nineteen of this code or articles twenty-two-a or twenty-five of this chapter except that an applicant may also be licensed as a service technician or operator or both.

Part 11. Allocation and Distribution of Video Lottery Terminals.

§29-22B-1101.  Limitation on number and location of video lottery terminals.

(a) The Lottery Commission may not authorize the placement of more than nine thousand video lottery terminals in restricted access adult-only facilities in this state.

(b) No person may directly or indirectly operate more than seven and one-half percent of the number of video lottery terminals authorized in this section, which shall may only be located only in restricted access adult-only facilities.

(c) No licensed limited video lottery retailer may be authorized to have on the premises for which the license was issued more than five seven video lottery terminals except that a fraternal society or veteran’s organization that is: (A) A fraternal beneficiary society that is exempt from federal income tax under Section 501 (c) (8) of the Internal Revenue Code of 1986, as amended; (B) a domestic fraternal society that is exempt from federal income tax under Section 501(c)(10); or (C) a veteran’s organization that is exempt from federal income tax under Section 501(c)(19) of the Internal Revenue Code may be authorized to have on the premises for which the license was issued not more than ten twelve video lottery terminals.

(d) To help accommodate the change in the number of terminals authorized by the amendment to this section enacted during the first extraordinary session of the Legislature in 2016, the commission shall conduct a bid no later than September 1, 2016, for permits expiring June 30, 2021, which bid is open to current permit holders only and which shall be conducted in accordance with sections one thousand one hundred six, one thousand one hundred seven and one thousand one hundred nine of this article.

§29-22B-1408. Distribution of state’s share of gross terminal income.

(a) The state’s share of gross terminal income is calculated as follows:

(1) The commission shall deposit two percent of gross terminal income into the State Lottery Fund for the commission’s costs and expenses incurred in administering this article. From this amount, not less than $150,000 nor more than $1 million dollars per fiscal year, as determined by the commission each year, shall be transferred to the Compulsive Gambling Treatment Fund created in section nineteen, article twenty-two-a of this chapter. In the event that the percentage allotted under this subsection for the commission’s costs and expenses incurred in administering this article generates a surplus, the surplus shall be allowed to accumulate to an amount not to exceed $250,000. On a monthly basis, the director shall report to the Joint Committee on Government and Finance of the Legislature any surplus in excess of $250,000 and remit to the State Treasurer the entire amount of those surplus funds in excess of $250,000 to be deposited in the fund established in section eighteen-a, article twenty-two of this chapter: Provided, That at the close of each of the fiscal years ending June 30, 2006, 2007, 2008, 2009, 2010 and 2011, the portion of the two percent allowance for administrative expenses provided in this subdivision (1) that remains unspent for costs and expenses incurred in administering this article, not to exceed $20 million dollars in any fiscal year, shall be transferred to the Revenue Center Construction Fund created by subsection (l) of, section eighteen, article twenty-two of this chapter for the purpose of constructing a state office building.

(2) Gross profits are determined by deducting the percentage described in subdivision (1) of this subsection from gross terminal income.

            (3) The commission shall receive thirty percent of gross profits as defined in subdivision (2) of this subsection except as otherwise provided in this subdivision. On June 1, 2002, the commission shall calculate the aggregate average daily gross terminal income for all operating video lottery terminals during the preceding three month period. Thereafter, the commission shall make the calculation on the first day of the month preceding the months of October, January, April and July of each year. So long as the aggregate average gross terminal income per day for the operating video lottery terminals does not exceed $60, the commission’s share of gross profits shall continue to be thirty percent for the succeeding quarter of the year beginning July 1. Beginning on July 1, 2002, and the first days of October, January, April and July in 2002 and thereafter, if the commission’s calculation of aggregate average daily gross terminal income per video lottery terminal yields an amount greater than $60, one of the following schedules apply: If the amount is greater than $60 per day but not greater than $80 per day, the commission’s share of gross profits for the ensuing quarter beginning the first day of the quarter of the year described in this subdivision shall be thirty-four percent; if the amount is greater than $80 per day but not greater than $100 per day, the commission’s share of gross profits for the ensuing quarter beginning the first day of the quarter of the year described in this subdivision shall be thirty-eight percent; if the amount is greater than $100 per day but not greater than $120 per day, the commission’s share of gross profits for the ensuing quarter beginning the first day of the quarter of the year described in this subdivision shall be forty-two percent; if the amount is greater than $120 per day but not greater than $140 per day, the commission’s share of gross profits for the ensuing quarter beginning the first day of the quarter of the year described in this subdivision shall be forty-six percent; if the amount is greater than $140 per day, the commission’s share of gross profits for the ensuing quarter beginning the first day of the quarter of the year described in this subdivision shall be fifty percent. This amount shall be known as net terminal income: Provided, That effective July 1, 2016, the commission’s share of net terminal income shall be fixed at fifty-four percent, inclusive of any administrative fees, regardless of the aggregate average daily gross terminal income per terminal: Provided, however, That if the commission’s calculation of aggregate average daily gross income per video lottery terminal yields an amount that is not greater than $140 per day, one of the following schedules apply: If the amount is greater than $60 per day but not greater than $80 per day, the commission’s share of gross profits for the ensuing quarter beginning the first day of the quarter of the year described in this subdivision shall be thirty-four percent; if the amount is greater than $80 per day but not greater than $100 per day, the commission’s share of gross profits for the ensuing quarter beginning the first day of the quarter of the year described in this subdivision shall be thirty-eight percent; if the amount is greater than $100 per day but not greater than $120 per day, the commission’s share of gross profits for the ensuing quarter beginning the first day of the quarter of the year described in this subdivision shall be forty-two percent; if the amount is greater than $120 per day but not greater than $140 per day, the commission’s share of gross profits for the ensuing quarter beginning the first day of the quarter of the year described in this subdivision shall be forty-six percent.

(b) Net terminal income shall be distributed by the commission as follows:

(1) (A) Beginning July 1, 2002, a county and the incorporated municipalities within that county shall receive two percent of the net terminal income generated by limited video lottery terminals located within the county;

(B) From this two percent of net terminal income, each municipality shall receive a share that bears the same proportion to the total two percent of net terminal income as the population of the municipality bears to the total population of the county as determined by the most recent decennial United States census of population, and the county shall receive the remaining portion of the two percent of net terminal income; and

(2) Any remaining funds shall be deposited into the State Excess Lottery Revenue Fund established in section eighteen-a, article twenty-two of this chapter.

(c) The licensed operators and limited video lottery retailers shall receive the balance of gross terminal income remaining after deduction of the state’s share as calculated pursuant to this section.

NOTE: The purpose of this bill is to allow a person to be both a limited video operator and retailer; to increase the number of limited video lottery terminals allowed at retail locations; to require the Lottery Commission to conduct a bid only open to current permit holders prior to September 1, 2016, for permits expiring June 30, 2021; to establish a procedure for the bid process; and to set the commission’s share of net terminal income at fifty-four percent effective July 1, 2016, provided that the average daily gross terminal income per terminal is greater than $140 per day.

Strike-throughs indicate language that would be stricken from a heading or the present law, and underscoring indicates new language that would be added.