Date Requested: March 31, 2017
Time Requested: 10:31 AM
Agency: Lottery Commission, WV
CBD Number: Version: Bill Number: Resolution Number:
2867 Comm. Sub. SB467
CBD Subject: Legal Gaming


FUND(S):

State Excess Lottery Revenue Fund

Sources of Revenue:

Special Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


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


    The Committee Substitute for SB467 includes the provisions found in the introduced versions of SB466 and SB467. Therefore, the bill has two components: 1. Fixing the state share of revenue from limited video lottery gaming at the current rate [50%]; and 2. Setting the maximum bet per limited video lottery game at $5 and removing restrictions on bill denominations accepted by bill validators on limited video lottery terminals.
    
    1. Setting the state share at 50% will not increase revenues to the state, however, it is critical to sustain revenues from limited video lottery. The current structure for determining the state share of revenue is a sliding scale based on daily aggregate average. Since 2007, the daily aggregate average has been above $140 and, therefore, the state's share of net profits has consistently been 50%. Stabilizing this revenue stream is viewed positively by bond rating agencies, and ensures the state continues to receive the same percentage of revenue from limited video lottery gaming.
    
    2. Maximum Bet/Bill Validators: This component of the bill sets maximum bet for each limited video lottery game manufactured for sale in West Virginia at $5 and removes restrictions on bill validators approved for machines in this jurisdiction. All games must be tested by an independent testing company approved by the Commission (currently Gaming Labs International) and in the Lottery's test lab before a manufacturer may offer it for sale in the state. Removing limitations on bill validators manufactured for sale in West Virginia and increasing the current $2 maximum bet requirement to $5 for games manufactured and sold in West Virginia will provide access to a larger library of approved games and equipment for the limited video lottery licensees in West Virginia.
    
     The number of games that a licensed manufacturer develops for a market is related to the level of customization required by each state‚Äôs laws and regulations as compared to industry standard. Eliminating the $2 maximum bet requirement and allowing the maximum bet to be $5 around will allow the Commission to be flexible and adapt to industry standards, and, in turn, allow manufacturers to develop and introduce new games for sale to LVL licensees in West Virginia with less customization and cost- this will also allow them to market games sold in other jurisdictions without customizing software changes.
    
    By increasing the max bet to $5, more exciting games with bonuses and higher tiered prize structures can also be developed and sold in this jurisdiction. Licensees have expressed interest in development of a game with a progressive jackpot driven by game play in locations. Players contribute to the progressive jackpot with their gameplay, and excitement grows as the jackpot grows. Larger bonuses and jackpot features that will attract business to a location and give the player a greater chance of reward.
    
     Bill Validators must also currently be customized to not accept $50 and $100 bills when manufactured for use on video lottery terminals in West Virginia. Eliminating this requirement will, again, enhance the library of games and terminals available for sale in West Virginia as well as provide more efficiency in the licensed locations where the staff spends time providing change for fifty and one hundred dollar bills. Additionally, if a location does not have sufficient cash on hand to provide smaller bills for a player who arrives with only fifty or one hundred dollar bills, then that player is unable to play in that location.
    
     Ultimately higher contributions and more exciting game libraries will enhance revenues received from limited video lottery in West Virginia, and encourage manufacturers to develop new games for sale in the market. While we believe this will enhance revenue through gameplay, too many variables exist to estimate a specific dollar value.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


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


    1. Setting state share at 50% stabilizes the revenue stream from limited video lottery gaming by fixing the state share at 50%, however, will not increase revenues currently being received by the state.
    
    2. Bill Validators/Max Bet: Ultimately higher contributions and more exciting game libraries will enhance revenues received from limited video lottery in West Virginia, and encourage manufacturers to develop new games for sale in the market. While we believe this will enhance revenue through gameplay, too many variables exist to estimate a specific dollar value.
    
     There will be no additional cost to the state.



Memorandum


    1. Fixing State Share at 50%: In the current environment, if the tax rate were to drop to 46%, it would reduce transfers to the SELRF by $1.1M per month; this amounts to a total loss of $13.2M annually. If it were to drop to 42%, it would reduce transfers by an estimated $2.2M per month; this would amount to a total loss of $26.4M annually.
    
    2. Max bet/Bill Validators: Security and safety of employees holding fifty and one hundred dollar bills in cash registers is enhanced by allowing players to deposit these bills directly into the machines. Redundant security features and physical barriers protect cash deposited in a video lottery machine, and every dollar played and won is monitored by the Lottery's central system- this provides a different level of security to the business owners and staff.



    Person submitting Fiscal Note: Danielle Boyd, Managing General Counsel
    Email Address: dboyd@wvlottery.com