FISCAL NOTE

Date Requested: January 24, 2018
Time Requested: 11:43 AM
Agency: Lottery Commission, WV
CBD Number: Version: Bill Number: Resolution Number:
1954 Introduced SB357
CBD Subject: Boards and Commissions


FUND(S):

State Excess Lottery Revenue Fund

Sources of Revenue:

Special Fund

Legislation creates:

Increases Revenue From Existing Sources



Fiscal Note Summary


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


    Summarize in a clear and concise manner what impact this measure will have on costs and revenues of state government.
    
    SB357 has four separate components that will either stabilize revenues or provide more business friendly practices to increase limited video lottery revenue.
    
    The first provision allows operators to also be licensed as retailers in up to 10 locations. This will allow more locations to stay open, which will result in at least stabilization of current location revenues, or an increase in revenues from more locations remaining open.
    
    
    SB357 further authorizes the Lottery Commission to authorize $5 maximum bets for each limited video lottery game manufactured for sale in West Virginia as opposed to the current limit of $2 now. This is more aligned with industry standards. Additionally, this bill 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 West Virginia. Removing limitations on bill validators manufactured for sale in West Virginia and increasing the maximum bet requirement for games manufactured and sold in West Virginia will provide access to a larger game library and equipment for 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's laws and regulations as compared to industry standard. Changing the maximum bet requirement will allow a more flexible standard that can be adapted more closely to industry standards, and, in turn, allow manufacturers to develop and introduce new and more exciting games for sale to LVL licensees for less cost-- this will also allow them to market games sold in other jurisdictions without customized software changes. By raising this bet, 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 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 LVL terminals in WV. 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 licensed locations where the staff spends time providing change for $50 and $100 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 resulting in lost revenue.
    
    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.
    
    Finally, the bill will stabilize the state's share of revenue from gameplay by fixing the tax rate at 50%. The tax rate has been 50% since 2007, and this just provides assurance that this percentage will remain- it is not a tax increase.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2018
Increase/Decrease
(use"-")
2019
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):


    Please explain increases and decreases in personal services, current expenses, repairs and alterations, assets, other costs and revenues, including assumptions and data sources and delineation between start-up and ongoing costs. Please also include a long-range schedule of costs and revenues if fiscal impact is expected to vary in future years.
    
    There are too many variables to project the amount of revenue this bill will generate, but as stated above, it will stabilize the tax rate and is expected to increase state revenue from limited video lottery.
    
    No additional cost to the state will be incurred.



Memorandum


    Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form.
    
    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 the LVL 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