restricted and nonrestricted gaming in nevada · 2013. 8. 23. · establishments diminishes the...

RESTRICTED AND NONRESTRICTED GAMING IN NEVADA MARCH 20, 2013

Creation of Distinction Between Restricted and Nonrestricted

Gaming Licenses

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1967: Senate Bill 471 (Taxation)

Established flat fee per slot machine in lieu of gross revenue fee (became NRS 463.373).

Flat fee applied to “operation of not more than 15 slot machines and no other game or gaming device.’

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1967 – Nevada Gaming Commission

Regulation 4.030 separates licenses into restricted and nonrestricted

Restricted license allowed: “… only in an establishment wherein the operation of machines is incidental to the primary business of the licensee”

Language of Regulation 4.030 unchanged to this day

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1981 – Senate Bill 527 (Judiciary)

Statutorily creates the restricted and nonrestricted licensure dichotomy

Restricted license or operation: “… not more than 15 slot machines and no other game or gaming device at the establishment”

Nonrestricted license or operation: “… 16 or more slot machines or a license for or operation of any number of slot machines together with any other game, gaming device, race book or sports pool at one establishment ”

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1985 – Assembly Bill 653 (Stone)

Limited (substantively) license to operate 15 or fewer slot machines:

A license to operate 15 or fewer slot machines at an establishment in which the operation of slot machines is incidental to the primary business conducted at the establishment may only be granted to the operator of the primary business or to a licensed operator of a slot machine route.

(NRS 463.161 – unchanged to this day)

“Operator of a slot machine route” limited by definition to placement of machines at three or more locations

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1989 – Senate Bill 301 (Judiciary)

Amended definition of “restricted license” (not more than 15 slot machines and no other game or gaming device) to add:

… in which the operation of slot machines is incidental to the primary businesses of the establishment. (NRS 463.0189 – unchanged to this day)

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1990 – Nevada Gaming Commission

Adopted Regulation 3.015 – determination of whether a location is suitable for a restricted license

Determination of whether “incidental to the primary business at a particular location” involved factors including floor space, investment, time, revenue, financing, marketing and public perception

“Unless the Commission determines otherwise,” “incidental” to business licensed to sell alcoholic beverages, other than just beer and wine, by the drink, convenience stores (no more than seven slots) and grocery or drug stores with 10,000 square feet

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Limitations on Nonrestricted Licensure: Gaming Enterprise Districts and Resort Hotels

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1989: Assembly Bill 845 (Callister et al.)

The legislative declaration reflected the dual goals of protecting the attractiveness of the industry to visitors and investors…

1. The legislature hereby finds and declares that:

… (d) The issuance of a nonrestricted license to an establishment that is not equal in standards to existing establishments diminishes the attraction of the gaming industry to visitors and investors

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1989: Assembly Bill 845

… and protecting the quality of life of Nevada’s residents:

(e) The issuance of a nonrestricted license to an establishment that, because of its location, unduly impacts the neighborhood, flow of traffic, public services and use of natural resources, diminishes the quality of life of Nevada’s residents

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1989: Assembly Bill 845

Allowed local governments in Clark County to create districts suitable for a nonrestricted operation, denoted “gaming enterprise districts”

Prohibited the Nevada Gaming Commission from approving a nonrestricted license for an establishment in Clark County unless the establishment was located in a gaming enterprise district (NRS 463.308)

Allowed a person to petition the local government to have a proposed location designated a gaming enterprise district

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1991: Senate Bill 535 (Judiciary)

Defines “resort hotels” and prohibits the Nevada Gaming Commission from approving a nonrestricted license, other than for the operation of a race book or sports pool, for an establishment in Clark or Washoe County, unless the establishment is a resort hotel (NRS 463.1605)

Allows a county, city or town to require resort hotels to meet standards in addition to these as a condition of licensure by county, city or town (NRS 463.1605)

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1991: Senate Bill 535

“Resort hotels” defined as hotels with: 1. More than 200 rooms available for

sleeping accommodations. 2. At least one bar with permanent seating

capacity for more than 30 patrons that serves alcoholic beverages sold by the drink for consumption on the premises.

3. At least one restaurant with permanent seating capacity for more than 60 patrons that is open to the public 24 hours each day and 7 days each week.

4. A gaming area within the building or group of buildings. (NRS 463.01865).

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1997: Senate Bill 208 (James et al.)

The legislative declarations again reflect the dual purposes of protecting residential neighborhoods of Clark County and benefiting the gaming industry through the concentration of growth of gaming in areas where it is most appropriate:

Although the continued growth and success of gaming is essential to the welfare of Clark County and this state, the growth of gaming in a planned and predictable manner is necessary for the safety, integrity and tranquility of the residential neighborhoods of Clark County.

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1997: Senate Bill 208

The declarations conclude with an expression of the intent of the legislation:

By concentrating the growth of gaming in those areas where it is most appropriate, the gaming industry and residential neighborhoods will both benefit enormously as those areas best suited for gaming, such as the Las Vegas Strip, will continue to grow and flourish, and those areas best suited for residential living, whether existing or planned for the future, will continue to provide the scenic beauty and safe environment that is essential for enhancing the quality of life of families and children.

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1997: Senate Bill 208

The legislation:

Designates the Las Vegas Boulevard gaming corridor (NRS 463.3076) and the rural Clark County gaming zone (NRS 463.3078)

Prescribes a different (higher) standard for designating a location as a gaming enterprise district if it is in an area not within the Las Vegas Boulevard gaming corridor or the rural Clark County gaming zone

Eliminated certain areas previously designated as GEDs unless certain conditions are met

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Regulatory Activity Concerning Restricted Licensure

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1999: Nevada Gaming Commission

Regulation 3.015 amended: 1. Standards for walls segregating gaming area in grocery stores and drug

stores

2. No ATMs adjacent to slot machines

3. Limited licensure to listed businesses, subject to waiver by the Commission

4. Person may request determination that a different type of establishment is suitable

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1999: Nevada Gaming Commission

The listed businesses were: 1. Bar, tavern, saloon or the like (alcoholic beverages other than just

beer and wine, by the drink)

2. Convenience store

3. Grocery store

4. Drug store

Unless Commission determines otherwise, presumed to be incidental at any of these establishments, provided that no more than seven slot machines are operated at a convenience store

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2011: Nevada Gaming Commission

Regulation 3.015 amended:

List of factors to determine “incidental” expanded

Eliminated presumption: 1. Listed entities (bar, convenience store, etc.) are only businesses suitable

2. Convenience store limited to seven slot machines; liquor store limited to four slot machines

Still subject to waiver by Commission, application to allow different type of establishment

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2011: Nevada Gaming Commission

Additional factors:

What other amenities are offered to customers?

New standards for bar, tavern or saloon; must have:

1. Permanent physical bar 2. Minimum square footage and seating capacity 3. Contract or service agreement with liquor distributor 4. Restaurant, as defined in regulation

“Grandfather” clause for existing licensees C 22

Erosion of Limitations on Restricted Licensure:

The Kiosk Issue

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NRS 463.245

NRS 463.245 prohibits two licenses at one establishment, with exceptions, including:

3. A person who has been issued a license to operate a sports pool or race book at an establishment may be issued a license to operate a sports pool or race book at another establishment if the second establishment is operated by a person who has been issued a nonrestricted license.

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Regulatory History

How did the issue arise? 1. Kiosks are approved as “associated equipment” (not “gaming devices,”

which affect the result of a wager by determining win or loss)

2. Location in establishments with 15 or fewer slot machines approved administratively, or pursuant to administrative approval of a marketing plan

3. In addition to communication with central book, new kiosks allow patrons to establish accounts, place wagers and withdraw money from their accounts

4. Application to share revenue with tavern comes before Nevada Gaming Commission on September 22, 2011

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September 22, 2011 Nevada Gaming Commission Hearing

What are the capabilities of the kiosks?

Commissioner Alamo: So recapping; go in, preload an account, get ID’d, verified, bet, take some winnings, and never ever set foot in a nonrestricted licensee’s building, infrastructure, or an actual sports and race book or Leroy’s main hub or one of their manned satellite race and sports books; correct? Mr. Scherer: That is correct. (page 90 of transcript of hearing)

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September 22, 2011 Nevada Gaming Commission Hearing

Doesn’t that violate NRS 463.245, prohibiting a sports pool or race book in a restricted location?

Chairman Bernhard: But I don’t know how you get around that definition or how you fit within that exception, because if we approve a sports book operation, or sports pool operation, at a restricted location, there will be a nonrestricted licensee and a restricted licensee, that would violate, in my mind, at least at this point, that one license per location rule. (p. 111, referring to NRS 463.245)

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September 22, 2011 Nevada Gaming Commission Hearing

Has the Legislature reviewed this? Should it?

Mr. Scherer: So I don’t think the Legislature has made a determination on that. I don’t think it’s been brought to them as to whether it violates the statute or not. (p. 128)

Commissioner Townsend: But then there is going to be the policy question, and that involves the Legislature as well as the board, as well as the public at large. That was the reason I framed it that way. (p. 153, that is, the reason he framed the motion as granting approval for two years)

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September 22, 2011 Nevada Gaming Commission Hearing

The Commission granted approval to share revenue “with a limitation that this approval will expire on the day set for the meeting of the Gaming Commission in July of 2013.” (p. 157) Why that date?

Mr. Scherer: Might I suggest July 1 of 2013? The reason I suggest that, I do think it is valuable to have a legislative session in there in case the Legislature wants to weigh in on this issue, on either side. But it would allow for the 2013 legislative session to be completed, so we would know how the Legislature feels about this issue should it come before them. (p. 153 – 154)

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September 22, 2011 Nevada Gaming Commission Hearing

We need to have a policy discussion of this issue:

Chairman Bernhard: But I do have a problem with a kiosk that I would call a full-service kiosk that does everything that you can do at a counter, a nonrestricted location, and I would not be in favor at this point, of having this approval to share revenue being treated as an approval of a device that provides full-service sports betting and race betting without us having a policy discussion, as I think Commissioner Townsend was talking about, and Chairman Lipparelli, about where a full-service kiosk can or should be located within our industry. (p.113)

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It’s Been 16 Years

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Gaming Policy Challenges

License categories blurred

Technology

Impact on employment and investment

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Historical Policy

The amount of gaming allowed was proportionate to investment

Higher obligations for nonrestricted gaming companies

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Nonrestricted Gaming Taxes & Fees

Nonrestricted Licensees Slot Machines

Annual Tax

Quarterly License Fee

Games

Annual License Fee

Quarterly License Fee

Gross Gaming Tax (monthly percentage fee)

Unredeemed Slot Machine Wagering Vouchers (unclaimed property)

Room Tax

Live Entertainment Tax

General Taxes

Local Taxes

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Restricted Gaming Taxes & Fees

Restricted Licensees Annual Tax

Quarterly License Fees

Live Entertainment Tax

General Taxes

Local Taxes

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Gross Gaming Tax $653,544,639

Restricted Licensee Gaming Taxes $13,322,039

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Room Tax

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Live Entertainment Tax (AKA CET)

$125,33,855

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Other State Taxes and Fees Paid by Gaming

Business License Fee

Cigarette Tax

Governmental Services Tax

Insurance Taxes

Liquor Tax

Modified Business Tax (MBT) – Nonfinancial

Other Tobacco Tax

Sales and Use Tax

The hotel-casino industry contributes 42 percent, or $1,295,268,152, to the state general fund.

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High Stakes Ante

200 rooms required

Additional amenities required

Higher investment in infrastructure and compliance necessary to meet state and local standards

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Industry Responsibility

Employing: 327,000 Nevadans

Insuring approximately 31% of employees covered by employer-paid health care

More than $10 million in donations to Nevada-based charities

More than 30,000 hours volunteered by gaming employees

Supporting the National Center for Responsible Gaming, the Responsible National Education Campaign, Responsible Gaming Education Week, and individual company programs and initiatives.

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Erosion of Gaming Standards

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Incidental Tests?

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Neighborhood Casino Limits?

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Level of Investment Required for Casino Gaming?

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Continued Expansion of Nonrestricted Amenities in Restricted Locations

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Erosion of State Policy and Law

Presumption

Administrative approvals

Technology ... we will, because we can

Lack of direction to regulatory bodies

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Some Are Saying…

Protectionism

Big Guys vs. Little Guys

“They” Are Doing the Same Thing

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What’s at Stake?

Number of employees: 327,000

Investment: $69.4 billion in FY 2012

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The Ask?

A clear, updated restatement of Nevada’s Gaming Policy

How much is invested, how many are employed, the amount contributed to public funds ... MATTERS

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Contact Information Lorne Malkiewich, Director of Public Policy R&R Partners lorne.malkiewich@rrpartners.com 775-291-7031

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