PRINTER'S NO. 1021
No. 777 Session of 2003
INTRODUCED BY PETRONE, DeWEESE, SHANER, RUFFING, LAUGHLIN,
FRANKEL, CAPPELLI, CORRIGAN, THOMAS, TRAVAGLIO, BEBKO-JONES,
PALLONE, HORSEY, SAYLOR, DERMODY, PRESTON, MELIO, TANGRETTI,
HARHAI, GOODMAN, SAINATO, PISTELLA, LaGROTTA, McCALL, COSTA,
GERGELY, SOLOBAY, JAMES, FABRIZIO, YOUNGBLOOD, WALKO,
LESCOVITZ, ROONEY, DALEY, BELFANTI AND SANTONI,
MARCH 13, 2003
REFERRED TO COMMITTEE ON FINANCE, MARCH 13, 2003
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
17 states with approved gaming devices at licensed racetrack
1 facilities.
2 (4) This act establishes a racetrack video lottery
3 system to be operated by the State Lottery and sustains and
4 improves this Commonwealth's horse racing industry.
5 The General Assembly of the Commonwealth of Pennsylvania
6 hereby enacts as follows:
7 Section 1. Short title.
8 This act shall be known and may be cited as the Horse Racing
9 Industry Improvement Act.
10 Section 2. Definitions.
11 The following words and phrases when used in this act shall
12 have the meanings given to them in this section unless the
13 context clearly indicates otherwise:
14 "Applicant." A licensed corporation which applies for a
15 racetrack video lottery license under this act.
16 "Associated equipment." Any equipment or mechanical,
17 electromechanical or electronic contrivance, component or
18 machine used in connection with gaming, including links which
19 connect to progressive slot machines, equipment which affects
20 the proper reporting of gross revenue, computerized systems for
21 monitoring gaming devices and devices for weighing or counting
22 money.
23 "Department." The Department of Revenue of the Commonwealth.
24 "Division." The Division of the State Lottery.
25 "Fund." The State Lottery Fund.
26 "Gross income." The total amount of cash, vouchers or tokens
27 inserted into the racetrack video lottery machines operated by a
28 licensee, minus the total value of coins and tokens won by a
29 player and game credits which are cleared from the video lottery
30 terminals in exchange for winning redemption tickets.
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1 "Licensed corporation." A corporation that has obtained a
2 license from either the State Horse Racing Commission or the
3 State Harness Racing Commission to conduct thoroughbred or
4 harness horse race meetings respectively with pari-mutuel
5 wagering.
6 "Licensee." A licensed corporation that has obtained a
7 racetrack video lottery license from the Division of the State
8 Lottery under this act.
9 "Net revenue." Gross revenue less the racetrack video
10 lottery tax imposed under section 10.
11 "Racetrack." The physical facility where a licensed
12 corporation conducts thoroughbred or harness race meetings
13 respectively with pari-mutuel wagering.
14 "Racetrack video lottery license" or "license." A license
15 authorizing a licensed corporation to place and operate
16 racetrack video lottery machines at its racetrack pursuant to
17 this act.
18 "Racetrack video lottery machine." A machine in which coins,
19 credits or tokens are deposited in order to play any game of
20 chance in which the results, including options available to the
21 player, randomly and immediately are determined by the machine.
22 The machine may use spinning wheels or video displays or both,
23 and may or may not dispense coins or tokens directly to winning
24 players. A machine shall be considered a racetrack video lottery
25 machine notwithstanding the use of an electronic credit system
26 making the deposit of bills, coins or tokens unnecessary. The
27 term includes, but is not limited to, a device commonly referred
28 to as a "slot machine."
29 "Secretary." The Secretary of Revenue of the Commonwealth.
30 Section 3. Racetrack video lottery system.
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1 A racetrack video lottery system is hereby established and
2 shall be administered by the division in accordance with this
3 act.
4 Section 4. Division of the State Lottery powers.
5 (a) General powers.--
6 (1) The division shall establish, administer and ensure
7 the integrity of racetrack video lottery machines and shall
8 have jurisdiction over the location and operation of
9 racetrack video lottery machines.
10 (2) The secretary shall employ an executive director,
11 deputies, secretaries, officers and representatives as it may
12 deem necessary, who shall serve at the secretary's pleasure.
13 The secretary shall also employ other employees as the
14 secretary sees fit and whose duties and compensation shall be
15 prescribed by the secretary.
16 (b) Specific powers.--The division shall have the following
17 specific powers and duties:
18 (1) Investigate, evaluate and decide upon applications
19 for all racetrack video lottery licenses provided for in this
20 act.
21 (2) Issue licenses pursuant to the provisions of section
22 6.
23 (3) Promulgate regulations as the division deems
24 necessary to carry out the policy and purposes of this act
25 and to enhance the credibility and integrity of racetrack
26 video lottery machines in this Commonwealth. Notwithstanding
27 any other provision of law to the contrary and in order to
28 facilitate the prompt implementation of this act, regulations
29 promulgated by the division during the first year of its
30 existence shall not be subject to notice of proposed
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1 rulemaking pursuant to section 204 of the act of July 31,
2 1968 (P.L.769, No.240), referred to as the Commonwealth
3 Documents Law. Regulations adopted after the one-year period
4 shall be promulgated, adopted and published as provided by
5 law.
6 (4) The division or designated officers, employees or
7 agents of the secretary shall have the power to administer
8 oaths, examine witnesses and may issue subpoenas to compel
9 attendance of witnesses and production of all relevant and
10 material reports, books, papers, documents and other evidence
11 relating to the administration and enforcement of this act.
12 (5) Levy and collect an annual fee from each licensee of
13 $150 per racetrack video lottery machine in operation as of
14 September 1 of each calendar year beginning with September 1
15 after the effective date of this act. This fee shall be
16 deposited into the fund. The annual fee of $150 per machine
17 shall be used to cover the administrative cost of the
18 racetrack video lottery system. If the amount collected does
19 not cover the administrative cost in any given year, the
20 department may increase the amount to cover the increased
21 cost. The increased amount shall be published as a notice in
22 the Pennsylvanian Bulletin.
23 (6) Provide for the assessment and collection of fines
24 and penalties for violations of this act. All fines and
25 penalties shall be credited for deposit to the fund.
26 (7) Revoke or suspend any license provided for in this
27 act if the division finds by a preponderance of the evidence
28 that a licensee under this act, its officers, employees or
29 agents do not comply with the provisions of this act or the
30 rules and regulations of the division and that it would be in
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1 the public interest, convenience or necessity to revoke or
2 suspend the license. None of the licenses provided for in
3 this act shall be transferable or assignable in any manner.
4 (8) Restrict access to confidential information obtained
5 under this act and ensure that the confidentiality of
6 information is maintained and protected.
7 (9) Prescribe financial reporting and internal control
8 requirements for the operations of licensees that relate to
9 racetrack video lottery machines.
10 (10) Prescribe the manner in which gross revenue must be
11 computed and reported by the licensee that relate to
12 racetrack video lottery machines.
13 (11) Require audits of the financial statements of the
14 operations of licensees that relate to racetrack video
15 lottery machines.
16 (12) Require periodic financial reports from licensees
17 consistent with standards and intervals prescribed by the
18 division.
19 (13) Prescribe the procedures to be followed by
20 licensees for cash transactions affecting racetrack video
21 lottery machines.
22 (14) Prescribe criteria and conditions for the operation
23 of the racetrack video lottery system.
24 (15) Enforce the prescribed hours for the operation of
25 racetrack video lottery machines, so that licensees may
26 operate racetrack video lottery machines on any day, except
27 Christmas day, between the hours of 10 a.m. on one day until
28 2 a.m. the next day.
29 (16) Prohibit the offering of free alcohol or free malt
30 or free brewed beverages to patrons operating or using
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1 racetrack video lottery machines.
2 (17) Prohibit wagering by persons under 21 years of age
3 on racetrack video lottery machines.
4 (18) Establish procedures for the inspection and
5 certification of each racetrack video lottery machine prior
6 to being placed into use at the racetrack by a licensee to
7 insure that no racetrack video lottery machine may be set to
8 pay out less than 85% of all wagers on an average annual
9 basis unless specifically approved otherwise by the division.
10 (19) Prescribe any rule or regulation necessary to
11 administer the provisions of this act.
12 Section 5. Advisory committee.
13 (a) Establishment.--There is hereby established an advisory
14 committee within the department, to be known as the Racetrack
15 Video Lottery Advisory Committee. The committee shall assist the
16 department in developing and discussing proposed regulation,
17 final regulation or policy guidance and to provide continuing
18 advice on implementing and administering the provisions of this
19 act.
20 (b) Membership.--The advisory committee shall consist of the
21 following members:
22 (1) the Secretary of Agriculture or his designee;
23 (2) the chairperson of the State Horse Racing
24 Commission;
25 (3) the chairperson of the State Harness Racing
26 Commission; and
27 (4) five members appointed by the Governor with the
28 advice and consent of the Senate who shall be representative
29 of the interests affected by the provisions of this act. The
30 Secretary of Revenue shall serve as an ex officio member of
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1 the committee.
2 (c) Terms.--The Governor shall appoint the initial members
3 of the committee under subsection (b)(4) within 60 days of the
4 effective date of this act. The members appointed by the
5 Governor shall serve three-year terms, except that the initial
6 appointees shall have staggered terms so that one member shall
7 be appointed for a one-year term, two members shall be appointed
8 for a two-year term and two members shall be appointed for a
9 three-year term.
10 (d) Chairperson.--A chairperson shall be chosen by a
11 majority vote of the committee members present at a regularly
12 scheduled meeting. A person employed by the Commonwealth may not
13 chair the committee.
14 (e) Expenses.--Members of the committee shall be reimbursed
15 for their travel expenses to attend committee meetings.
16 Employees of the Commonwealth shall only be entitled to the
17 compensation and expenses they receive as public employees.
18 (f) Support.--The department shall provide the appropriate
19 administrative and technical support needed by the committee in
20 order to accomplish its objectives.
21 Section 6. Issuance of racetrack video lottery licenses.
22 (a) Authorization.--The division may issue a racetrack video
23 lottery license to a licensed corporation that desires to
24 operate racetrack video lottery machines at its racetrack if
25 that licensed corporation makes application to the division and
26 meets all of the following:
27 (1) The licensed corporation maintains its license to
28 conduct racing in good standing with the appropriate
29 commission.
30 (2) The licensed corporation continues to provide for
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1 live horse racing as provided for in the act of December 17,
2 1981 (P.L.435, No.135), known as the Race Horse Industry
3 Reform Act.
4 (3) The licensed corporation has a written live racing
5 agreement with a horsemen's organization representing a
6 majority of owners and trainers at the racetrack where the
7 licensed corporation conducts racing dates.
8 (4) Provides evidence satisfactory to the division that
9 a local option election was conducted under section 9 and
10 resulted in an affirmative vote for the county and licensed
11 corporation.
12 (5) The licensed corporation abides by all of the
13 provisions and regulations of this act.
14 (b) Limitation.--The division may determine the number of
15 racetrack video lottery machines that may be operated by a
16 licensee, provided that the number does not exceed 2,500 at any
17 one racetrack.
18 (c) Restriction.--No applicant that has been convicted in
19 any jurisdiction of a felony, crime of moral turpitude or
20 gambling offense may be issued a racetrack video lottery license
21 under this act.
22 (d) Suspension.--The division shall suspend the racetrack
23 video lottery license of any licensee who fails to satisfy the
24 requirements of subsection (a)(2) and (3) during the term of the
25 racetrack video lottery license until those requirements are
26 satisfied.
27 Section 7. Application.
28 (a) General rule.--Any licensed corporation which meets the
29 requirements of section 6 that desires to install racetrack
30 video lottery machines and operate or alter the number of or
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1 location of racetrack video lottery machines within its
2 racetrack must file an application form with the division.
3 (b) Form.--The division shall develop an application form
4 that collects such information as deemed necessary by the
5 division.
6 Section 8. Accounting controls and audits.
7 (a) Approval.--A licensed corporation which desires to
8 install and operate racetrack video lottery machines at its
9 racetrack must first obtain approval of its internal control
10 systems and audits from the division.
11 (b) Minimum requirements.--At a minimum, the internal
12 controls and audits shall consist of:
13 (1) The safeguarding of its assets and revenues,
14 especially the recording of cash and evidences of
15 indebtedness related to the racetrack video lottery machines.
16 (2) The provision of reliable records, accounts and
17 reports of transactions, operations and events, including
18 reports to the division that relate to the racetrack video
19 lottery machines.
20 (3) The ensuring that each racetrack video lottery
21 machine within each racetrack facility is directly connected
22 to the racetrack's central computerized system and can
23 provide details of all transactions, including, but not
24 limited to, coin in, coin out, jackpots, machine door
25 openings and power failures.
26 (4) A procedure whereby assets that relate to racetrack
27 video lottery machine operations are safeguarded.
28 (5) Financial records that relate to racetrack video
29 lottery machine operations are accurate and reliable.
30 (6) Transactions that relate to racetrack video lottery
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1 machine operations are performed only in accordance with the
2 management's general or specific authorization.
3 (7) Transactions that relate to racetrack video lottery
4 machine operations are recorded adequately to permit proper
5 and timely reporting of gaming revenue and of fees and taxes
6 and to maintain accountability for assets.
7 (8) Access to assets that relate to racetrack video
8 lottery machine operations is permitted only in accordance
9 with management's specific authorization.
10 (9) Recorded accountability for assets that relate to
11 racetrack video lottery machine operations is compared with
12 actual assets at reasonable intervals and appropriate action
13 is taken with respect to any discrepancies.
14 (10) Functions, duties and responsibilities that relate
15 to racetrack video lottery machine operations are
16 appropriately segregated and performed in accordance with
17 sound practices by competent, qualified personnel.
18 (c) Internal control.--A licensed corporation which seeks to
19 operate racetrack video lottery machines at its racetrack shall
20 describe, in the manner the division may approve or require, its
21 administrative and accounting procedures that relate to
22 racetrack video lottery machine operations in detail in a
23 written system of internal control and shall submit a copy of
24 its written racetrack video lottery system to the division. Each
25 written video lottery system shall include:
26 (1) An organizational chart depicting appropriate
27 segregation of functions and responsibilities.
28 (2) A description of the duties and responsibilities of
29 each position shown on the organizational chart.
30 (3) A detailed narrative description of the
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1 administrative and accounting procedures designed to satisfy
2 the requirements of subsection (a).
3 (4) A written statement signed by the chief financial
4 officer of the licensed corporation and the chief executive
5 officer of the licensed corporation attesting that the system
6 satisfies the requirements of this section.
7 (5) Any other item that the division may require.
8 Section 9. Local option election.
9 (a) Condition of application submission.--A licensed
10 corporation that desires to submit an application to the
11 division for a racetrack video lottery license must first obtain
12 an affirmative vote from a ballot question in accordance with
13 this section.
14 (b) Procedure.--
15 (1) The placement of racetrack video lottery machines in
16 the facility of a licensed corporation shall be submitted as
17 a ballot question to the qualified electors of the county in
18 which the facility is located upon petition signed by at
19 least 500 qualified electors of the county, and filed with
20 the county election board by the licensed corporation in
21 accordance with the act of June 3, 1937 (P.L.1333, No.320),
22 known as the Pennsylvania Election Code.
23 (2) The question shall be placed upon the ballot of that
24 county for the next regularly scheduled election as a "yes"
25 or "no" question in the following form:
26 Do you favor the Division of the State Lottery
27 issuing a license for the operation of racetrack
28 video lottery machines, commonly referred to as "slot
29 machines," within this county at the (name of the
30 racetrack owned by the licensed corporation that
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1 submitted the petition) where pari-mutuel wagering is
2 authorized under Pennsylvania law?
3 (3) The results of the ballot question shall be
4 certified by the county election board to the licensed
5 corporation that submitted the petition.
6 (c) Certification to be submitted with application.--An
7 application to the division for a license shall not be deemed
8 complete and may not be approved by the division unless the
9 certification from the respective county election board
10 identified in subsection (b) is included with the application
11 and the result of the ballot question is in the affirmative.
12 (d) Effect of affirmative vote.--If the majority of
13 qualified electors voting in the county in which a ballot
14 question was presented in accordance with this section vote in
15 the affirmative, then no similar ballot question for that
16 licensed corporation or any other licensed corporation may be
17 presented in that county for a period of five years from the
18 date of the election, unless a petition of qualified electors in
19 that county is filed after the election with the county board of
20 elections, which petition contains at least 5% of the signatures
21 of the qualified electors in that county.
22 (e) Effect of negative vote.--If the majority of qualified
23 electors voting in the county in which a ballot question was
24 presented in accordance with this section vote in the negative,
25 then no similar ballot question for that licensed corporation or
26 any other licensed corporation may be presented in that county
27 for a period of two years from the date of the election.
28 Section 10. Racetrack video lottery tax and distributions of
29 tax.
30 (a) Imposition of tax.--Each racetrack video lottery
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1 licensee shall pay a tax in the amount of 50% of the gross
2 revenue arising from the operation of the racetrack video
3 lottery machines.
4 (b) Payment and credit.--The tax imposed by this section
5 shall be paid by the licensee through the department for credit
6 to the State Lottery Fund monthly on or before the 20th day of
7 the month next succeeding the month in which the tax accrues.
8 (c) Distribution.--The division shall distribute moneys from
9 the fund together with the interest earned thereon at least once
10 annually on September 1, 2003, and each September 1 thereafter
11 to the State Treasurer for deposit in the following manner:
12 (1) Five percent shall be distributed among the counties
13 hosting a racetrack which operates racetrack video lottery
14 machines based upon the licensed corporation's percentage of
15 contribution to the State Lottery Fund. If a racetrack is
16 located in two or more counties, the amount available shall
17 be distributed on a pro rata basis determined by the
18 percentage of acreage located in each county to the total
19 acreage in all counties occupied by the racetrack. The county
20 or counties shall allocate 1% for tourist promotion and for
21 the support of museums located in the county.
22 (2) One percent shall be distributed among the
23 municipalities hosting a racetrack which operates racetrack
24 video lottery machines based upon the licensed corporation's
25 percentage of contribution to the State Lottery Fund. If the
26 racetrack is located in two or more municipalities, the
27 amount available shall be distributed on a pro rata basis
28 determined by the percentage of acreage located in each
29 municipality to the total acreage in all municipalities
30 occupied by the racetrack.
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1 (3) One percent shall be distributed equally among the
2 school districts situated within a county hosting a racetrack
3 which operates racetrack video lottery machines based upon
4 the licensed corporation's percentage of contribution to the
5 fund.
6 (4) One percent shall be transferred to the Breeder's
7 Fund. These moneys shall be distributed in accordance with a
8 formula promulgated by the Secretary of Agriculture in
9 consultation with the State Horse Racing Commission.
10 (5) One percent shall be transferred to the Sire Stakes
11 Fund. These moneys shall be distributed in accordance with a
12 formula promulgated by the Secretary of Agriculture in
13 consultation with the State Harness Racing Commission.
14 (6) The balance shall remain in the State Lottery Fund.
15 (d) Tax reconciliation.--If the amount of tax required to be
16 reported and paid pursuant to this section is later determined
17 to be greater or less than the amount actually reported and paid
18 by the licensed corporation, the division shall:
19 (1) assess and collect the additional tax determined to
20 be due with interest thereon until paid; or
21 (2) provide for a refund of any overpayment, with
22 interest thereon, to the licensed corporation.
23 Section 11. Allocation of net revenue of racetrack video
24 lottery licensee.
25 (a) General rule.--A racetrack video lottery licensee shall
26 use at least 40% of the net revenue arising from the operation
27 of the racetrack video lottery machines to increase the purses
28 of pari-mutuel wagering. Of that amount, $250,000 shall be paid
29 to the throroughbred jockeys' or standardbred drivers'
30 organization at the racetrack for health insurance, life
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1 insurance or other benefits to active and disabled thoroughbred
2 jockeys or standardbred drivers in accordance with the rules of
3 that organization for eligibility for such benefits.
4 (b) Barn sprinkler systems.--A portion of the net revenue
5 shall be used to install sprinkler systems to the barns housing
6 the racehorses, within five years from the effective date of
7 this act.
8 Section 12. Declaration of exemption from Federal laws
9 prohibiting gambling devices.
10 (a) Declaration.--Pursuant to section 2 of the act of
11 January 2, 1951 (64 Stat. 1135, 15 U.S.C. § 1172), the
12 Commonwealth declares that it is exempt from section 1134 of
13 that act.
14 (b) Legal shipments.--All shipments of racetrack video
15 lottery machines into this Commonwealth, the registering,
16 recording and labeling of which has been effected by the
17 supplier of the racetrack video lottery machines, in accordance
18 with sections 5 and 7 of the act of January 2, 1951 (64 Stat.
19 1135, 15 U.S.C. §§ 1175 and 1177), shall be deemed legal
20 shipments of gambling devices into this Commonwealth.
21 Section 13. Annual report.
22 The division shall, within 18 months of the effective date of
23 this act and each year thereafter, submit a report to the
24 Governor and General Assembly, which reports on the general
25 operation of the division under this act and all taxes, fees,
26 fines and other revenues collected and disbursed. The number and
27 result of hearings conducted under this act and any other
28 information that the division deems necessary or appropriate.
29 Section 14. Appropriation.
30 The sum of $1,500,000, or as much thereof as may be
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1 necessary, is hereby appropriated to the Department of Revenue
2 for the establishment of the racetrack video lottery system
3 within the Division of the State Lottery. The department shall
4 reimburse the General Fund from the revenue generated within the
5 first year of the operations of racetrack video lottery
6 machines.
7 Section 15. Effective date.
8 This act shall take effect in 60 days.
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