HomeMy WebLinkAbout2004-01-10 Strategic Issues Committee Minutes � STRATEGIC ISSUES COMMITTEE
� 7ANUARY 10, 2004
Minutes
Council Attendance: Tremble, Allen, Cashwell, Greene, Palmer, D'Errico,
Farrington, Gratwick
Staff Attendance: Barrett, Heitmann
Others: ]ohn Miller, Dusty Fisher
1. Executive Session — Legal Issue — City's Legal Rights and Obligations in
Regard to Agreements with Capital Seven and the Potential Assignment of
These Agreements to a Third Parry.
The Committee came out of Executive Session and went into an open
Workshop setting at 4:55 p.m.
2. Workshop — Governor's Proposed Gaming Legislation
The Baldacci Administration has submitted proposed legislation regulating the
��` operation of racinos in Maine. A copy of that legislation was separately
provided to the Council. A public hearing has been held on the proposal on
]anuary 8th, and a work session is scheduled for]anuary 14, 2004. Council
reviewed the major provisions of this legislation to determine what role/
position the City should take as this legislation moves through the process.
Barrett summarized the Governor's proposal which is to establish a Gaming
Control Board that would be responsible for licensing and regulating slot
machines in Maine. The Board would be associated with the State Police,
would be comprised of five members, four of which need to have experience
or training in finance, economics, law accounting, law enforcement, computer
science or gaming; members would have three year terms with a two-term
limit; membership would be confirmed by the Senate. The Board would have
broad regulatory powers. A central computer system would be required
which would be under the Board's control that would have continuous on-line
monitoring of all slot machines. The Board would be required to establish a
number of rules, set up application forms, fingerprinting requirements for
folks associated with gaming, methods of collection of taxes, fees and
penalties, location and hours of operations would be established by rule,
types of machines permitted, methods of operating and servicing machines
and equipment, procedures, forms and methods of management control
' including organizational structure, minimum security standards, involved
oversight, at least minimum procedures for the exercise of control over
internal fiscal affairs of operators, distributors, gaming service vendors and �+!
non-gaming service vendors. Barrett said an interesting distinction in the law
for the City to consider is between gambling service vendors and non-
gambling service vendors as there are licensing requirements that fall upon
both. The Board would establish procedures for annual audits of operators,
distributors and gambling service vendors, and they would keep a list of
excluded persons who would not be permitted on gaming or gambling
premises. The list would be open for individuals to voluntarily put themselves
on the list. There would be rules and regulations for the distribution/
consumption of alcoholic beverages and tobacco products.
Regarding licensing and registration, the person receiving the license must be
an operator of a commercial track located at or within a five mile radius of a
commercial track and operation in 2002, must receive municipal approval in a
local referendum held after December 31, 2002 and.before December 31,
2003. The only municipality meeting this requirement is the City of Bangor.
The individual with the gaming license must continue to operate the
commercial track. There is now a requirement that to have gaming one must
have a commercial track operation and that would have to be continued
during the period that gambling continued on the premises. Gratwick said
that Bangor is unique to the state, the only location in the state. Barrett said
there cannot be a similar operation within 100 miles of Bangor. �
Barrett said that non-gambling service vendors are required �o be licensed. If
services provided to a gambling operator receive $10,000 per year that
vendor has to be licensed to do business with the gambling operator. It
covers any goods or services other than gambling, service�and slot machine
distribution by a slot machine distributor, provided to an operator licensed
under this Chapter or at a gambling facility including but not limited to hotels,
concessions, restaurants, or food services. Barrett said it is a potential issue
to the Bangor business community. It could affect fuel oil, electric, water and
sewer, waste disposal, food vendors.
Gratwick referred to page 20 (d) — gambling, non-gambling vendor would be
required to purchase a $2,000 license. A vendor who sells goods or services.
There are gambling related vendors (slot distributors) and non-gambling
vendors.
Employees of slot operators, distributors and vending services vendors would
have to be licensed. Non-gambling service employee would only have to be
licensed if the employee spent most of his/her working at the facility. The
Board could also waive licensing of employees if it were demonstrated to be
in the public interest not to license all of them. �
,
determination of the minimum gross slot machine income necessary to
. maintain the harness horse racing industry. It shall not be more than 3,000,
total of 1,500 per location. The operator must submit every contract they
enter into for services, the slot machines may only be located on the
premises (not defined) of a commercial track. The allocation of funds is 25%
as outlined in the referendum but the proposed legislation adds a
compensation percentage to be determined by the board. The compensation
percentage will be composed of: 1) an amount sufficient to compensate the
state for administrative, regulatory and economic costs including lost lottery
revenue caused by gaming activities and 2) high stakes beano and OTB
operators may petition the state for any lost revenue they may experience
from the operation. It is a very large unknown.
Miller and Fisher said the OTB's are supporting the percentage revenue
stream. The OTB operators did not feel the current legislation was workable
for them. Tremble asked if just the state could get (oss lottery revenues or
can OTB's as well. Barrett said he thinks it goes just to the state. All of the
numbers relating to gross slot revenue (10%) are always based on after
payback. 3% is of the total gross slot revenue is 10% of what is bet. 25% of
the revenues will go to the state as specified in the law. Barrett referred to
page 24, compensation percentage, which would compensate the state for all
administrative, regulatory, and economic costs including loss lottery revenue.
, At the moment, it is an unspecified amount. The Board would create a
formula by rule to be used to determine the percentage for the state. The
OTB and high stakes bi.ngo folks would have to make a claim based on their
own analysis, which is not easy to do. The operator keeps 75% less and out
of that 75% he pays all of his expenses and operating costs. The City, on a
sliding scale, receives between 3- 6°/a of gross slot revenue. Should the state
increase its percentage, for every 1% of increase the State receives, the
City's percentages goes down by 1/3 of a percent. Miller said his percentage
amount is divided among the five OTB'ers.
- Cashwell felt it in the City's best interest to become intimately involved in all
discussions at the state level in the form a lobbyist. Barrett and Heitmann
had checked into this per Cashwell's suggestion last week. Barrett said there
are two options available. One group is Maine Tomorrow who in turn
recommended others. Maine Tomorrow estimates $150/hour. Gratwick
. strongly supported the lobbyist support as well as supporting staff and
legislature involvement on Bangor's behalf. Allen strongly suggested that the
Council meet with Representative Blanchette. Barrett said a workshop
session is scheduled for the legislature on January 14th in Augusta.
Barrett talked about what extent the City should become involved in working
� with the state administration and legislature on the proposed legislation.
In order to receive an operator, distribution, gambling service vendor, non- �
gambling service vendor or employee license, the following standards: the
application has to be completed truthfully, sufficient financial assets and
responsibility to meet financial obligations, the operator has to have sufficient
financial resources to also operate the track. No false statements can be
made on the application. The operator must have sufficient knowledge and
experience in the business of operating slot machines to do so effectively and
to be in compliance with all the State requirements. Barrett said it seems to
imply that in order to obtain a gambling license one also has to be licensed as
a commercial track operator. If the City wanted to be the license holder of
the harness racing license it would pose a problem if you wanted a separate
licensee for the gambling license that may not be permitted. If the City
wanted to hold both licenses, it might be difficult to meet that standard of
having sufficient knowledge in the business of operating slot machines.
Palmer agreed with Barrett that it would be worthwhile to check with the
creators to see if what their intent is and to possibly clarify the issues.
Gratwick indicated that Capital 7 was not experienced with racing tracks prior
to getting into the gaming business. Barrett said the proposed legislation is a
dramatic difFerence from what has been the practice in the past.
Continuing on with the standards required, the operator would need to show
they had no license elsewhere or an adverse action against a gaming related �
license. If any group is a business, they must be an organized company in
Maine. The key individuals of the licensee must be citizens or permanent
residents in the United States and cannot hold more than one class of license.
Must be of good moral character, not have been convicted of a crime
punishable by one year or more or imprisonment, have no civil violations
regarding misappropriation of funds, not violated in Maine or elsewhere the
gaming laws in effect in the jurisdiction, not a fugitive, drug addict or drug
dependent person, illegal alien or dishonorably discharged from the military
forces. Must be current on all taxes to Maine, other states and the IRS. If
the company is the applicant, all of these requirements apply to key
individuals of the company, directors, officers, partners, shareholders,
creditors, owners and associates. If the City were to apply, it would apply to
key departments directors, Council members, creditors which would include
all agencies that have lent money the City of Bangor; i.e. bond holders.
Annually each slot machine will be charged $50, a slot distributor $200,000,
an operator $200,000, a non-gambling vendor $2,000, gambling employees
$250 and non-gambling employees $50. The application is good for one year
with a one-year renewal, non-transferable. The minimum payback on slots is
set a 90%. The limitation on the number of slots indicates that the Board
shall determine the maximum number of slots to be allowed based on a �
� Fisher said if the Council is going to make a recommendation to the
legislative committee it needs to be ready on Monday for Senator Gagnon.
Regarding reimbursements to the OTB's, Fisher said many feel it sets a
dangerous precedent. The OTB's have contributed $7-9M to the tracks over
the last ten years. With the money now going to the tracks, it is to the
detriment of the OTB's and the proposed legislation should protect it. Barrett
said no one objects to vigorous state regulation of gambling. His largest
concern with the legislation is potentially unintentionally consequences where
the state may not be aware of the City's particular circumstances or some of
the impacts that might fall on local vendors and businesses.
Tremble suggested getting together with Representative Blanchette to have
her put the City's suggestions on the table.
Cashwell made a motion to authorize City staff to engage as soon as possible
an appropriate lobbyist to look out for Bangor's interest in conjunction with
every other avenue needed. The motion was seconded.
i
�