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HOUSE OF REPRESENTATIVES
DEMOCRATIC COMMITTEE

BILL ANALYSIS
BILL NO: SB0711 PN1586 SPONSOR: Senator Earll
COMMITTEE: Conference Committee
DATE: January 6, 2010

Summary of Conference Committee Report on Senate Bill 711

REFORM PROVISIONS:

Political contributions:

The legislative intent section of the act is amended to address the recent Pennsylvania
Supreme Court case holding the prohibition on political contributions inapplicable to
certain applicants/licensees. The section is amended to clarify that it is the intent of the
General Assembly to prohibit ALL campaign contributions from applicants, licensees and
other entities involved in gaming.

Penalties are increased over those in prior law to provide that a licensed gaming entity,
any person with a controlling interest in a licensed gaming entity, a subsidiary of a
licensed gaming entity, or any officer, director, or management level employee of a
licensed gaming entity who would make a prohibited political contribution for a second
time within a five-year period would be required to pay a fine equal to an amount not
less than two times the average single day’s gross terminal and gross table game
revenue. The minimum penalty for an illegal political contribution is increased.

Felony ban imposed:

Lifetime ban: Any individual convicted of a felony offense in any jurisdiction is

prohibited for life from being licensed as a principal (owner) or as a key employee (top
management).

Fifteen year ban: Any individual convicted of misdemeanor gambling offense in any
jurisdiction is prohibited for being licensed as a principal or key employee.

The board would also be prohibited from issuing a gaming employee permit or a license
(other than a principal or key employee license) to an individual convicted in any
jurisdiction for a felony offense or a misdemeanor gambling offense within 15 years.

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Disclosure of information:

All applicants for a license or permit to disclose all arrests and citations issued for non-
traffic summary offenses. In addition, all applicants must include in their applications all
convictions that were expunged, overturned, pardoned or for which an order or ARD was
issued. The PGCB would be required to consider such information as part of its review of
an applicant’s suitability for licensure.

Employment Prohibitions/Restrictions:

Gaming Control Board:

Members of the board would be prohibited from holding outside employment if the salary
or compensation exceeded 15% of the member’s gross annual salary.

Employees of the board, independent contractors and their employees whose duties
involve the regulation of gaming would be prohibited from accepting employment with
an applicant or licensed entity for 2 years following termination of employment or the
contract with the board.

Other regulators:

Employees of the Department of Revenue, the Office of Attorney General, and the State
Police whose job duties involve the regulation of gaming would also be subject to the
employment prohibitions/restrictions.

Powers and duties of PGCB:

The gaming control board would be prohibited from hiring an individual to serve as ED,
chief counsel, director of the Bureau of Investigation and Enforcement, and director of
the Office of Enforcement Counsel before receiving the Pennsylvania State Police
background investigation report.

The gaming control board would be given the authority to appoint a trustee to supervise
the operations of a suspended or revoked slot machine licensee or principal.

The gaming control board would be required to convene at least one public input hearing
before approving or renewing a slot machine license, awarding a table game operation
certificate, and before approving the structural redesign of a licensed facility in
Philadelphia.

Bureau of Investigations and Pennsylvania State Police:

Requires that the positions of executive director of the PGCB, the director of the Bureau
of Investigations, the Chief Counsel of the PGCB, or the Office of Enforcement Counsel
shall submit to a background investigation to be conducted by the Pennsylvania State
Police before the board takes final action in filling the positions.

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Requires the PGCB to adopt regulations and procedures necessary to ensure that the
Bureau of Investigations and Enforcement (BIE) is a distinct entity and to prevent
commingling of the investigatory and prosecutorial functions of the Bureau of
Investigations and Enforcement under the newly added section 1516.1 (relating to
prosecutorial and adjudicatory functions).
Outlines and expands upon the following: criminal offenses; criminal penalties and fines;
PGCB-imposed administrative sanctions; aiding and abetting; continuing offenses; and
property subject to seizure, confiscation, destruction or forfeiture. Section 1518.1 is also
added and requires a slot machine licensee or a person acting on behalf of a slot
machine licensee to file a report of any suspicious transaction with the BIE. The BIE shall
maintain a record of all reports for a period of five years and shall make the reports
available to any federal or state law enforcement agency upon written request and
without necessity of subpoena.
Additional authority is granted to the chief enforcement counsel who may petition the
Commonwealth Court for authorization to review or obtain information in the possession
of an agency in this Commonwealth by asserting that the BIE believes the agency has in
its possession information material to an investigation or inquiry being conducted by the
BIE pursuant to this part, and that disclosure or release is in the best interest in the
Commonwealth.

Ex parte communications:

The ex parte communications provisions of current law are clarified to provide a process
to govern the disclosure of such communications between board members and certain
employees of the board.

Specific information submitted by an applicant for a license would be made confidential,

including personal, financial, proprietary, security information, and nonpublic
information.

Current and former gaming control board members and their employees, independent
contractors and their employees and members and employees of the Pennsylvania State
Police, the Department of Revenue and the Office of Attorney General would be
prohibited from publicly disclosing confidential information.

The unlawful disclosure of confidential information would be a misdemeanor or the 3rd

degree.

Diversity:

Diversity provisions are expanded to ensure that contracts and subcontracts awarded for
construction, renovation and reconstruction of a licensed facility, and that professional
services rendered to licensed entities contain provisions that promote t he participation
of divers groups and afford equal access to employment opportunities and professional
service contractual opportunities.

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Requires slot machine licenses to report to the board each quarter all activities
undertaken in support of their facility’s diversity plan and requires that the PGCB
conduct annual reviews of each slot machine licensee’s activities.

Reports:

Requires the board to include table game information in their annual report to the
General Assembly, including gross table game revenue, number and win by type of
game at each facility, and all taxes, fees, fines and revenues collected.

Requires DCED to submit an annual report of all distributions from the Pennsylvania
Gaming Economic Development and Tourism Fund. Requires municipalities that
received money from the fund pursuant to an Economic Development Capital Budget
Itemization Act to submit an annual report of expenditures and payments each year.

The Commissioner of the Pennsylvania State Police shall submit an annual report by
March 1 of each year that summarizes law enforcement activities at each licensed
facility during the previous calendar year to the Senate and House Appropriations
Committees and the Senate Community, Economic and Recreational Development
Committee and the House Gaming Oversight Committee.

TABLE GAME PROVISIONS:

Authorizes the conduct of table games in the Commonwealth.

License Fees:

A Category 1 and Category 2 slot machine licensed facility must pay a $16.5 Million
licensing fee for the privilege of conducting table game operations at its licensed facility.
If the fee is not paid in full on or before June 1, 2010, the PGCB shall impose a penalty
and may grant the certificate holder an additional 6 months to pay all sums due. If a
Category 1 or Category 2 slot machine licensee files their petition for a table game
operation certificate AFTER June 1, 2010, the fee increases to $24.75 Million.

A Category 3 slot machine licensed facility must pay a $7.5 Million licensing fee for the
privilege of conducting table game operations at its licensed facility. If the fee is not
paid in full on or before June 1, 2010, the PGCB shall impose a penalty and may grant the
certificate holder an additional 6 months to pay all sums due. If awarded a table game
operation certificate, this fee includes authorization to add an additional 100 slot
machines. If a Category 3 slot machine licensee files their petition for a table game
operation certificate AFTER June 1, 2010, the fee increases to $11.25 Million.

If a Category 1 or Category 3 slot machine license would be issued after June 1, 2010,
the holder of the Category 1 slot machine license would be required to pay an

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authorization fee of $16.5 million; the holder of a Category 3 slot machine license issued
after June 1, 2010, would pay a $7.5 million authorization fee.

Tax rate:

For a period of 2 years following the start of table games at a licensed facility the tax
rate is 14% of gross table game revenue generated at that licensed facility. 2 years
after the start of table games at a licensed facility the tax rate is 12% of gross table
game revenue for that licensed facility.

The tax rate on gross table game revenue derived from table games played on a fully
automated gaming table is an additional 34% of gross table game revenue derived from
play on these tables (48% total for the first 2 years and 46% total thereafter). A fully
automated gaming table is a gaming table on which a table game is played without the
required interaction of a gaming employee.

Deposit of Table Game Funds:

All fees, fines, penalties and taxes related to table games shall be deposited into the
General Fund for use by the Commonwealth until the Secretary of the Budget certifies
that the balance in the Rainy Day Fund has reached $750 Million at which time all such
funds shall be deposited into the Property Tax Relief Fund.

Local share:

In addition to the tax paid on gross table game revenue, each licensed facility will pay a
2% local share assessment (1% county share; 1% municipal share) which is distributed
according to Section 1363A.

Number of gaming tables:

Category 1 and Category 2 licensed facilities may be initially authorized to place 250
gaming tables on the licensed facility’s gaming floor, no more than 30% of which can be
non-banking game at any one time. A non-banking game is a table game in which the
players compete amongst each other rather than against the house. After 6 months, a
Cat 1 or Cat 2 slot machine licensee that holds a table game operation certificate can
seek board permission to increase the number of gaming tables at its licensed facility.

Category 3 licensed facilities may be authorized to place 50 gaming tables on the

licensed facility’s gaming floor, no more than 15 of which can be non-banking at any one
time.

Table game tournaments:

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All licensed facilities can conduct table game tournaments whenever they want provided
they don’t exceed the maximum permissible number of non-banking gaming tables
authorized at their facility.

In addition, Cat 1 and Cat 2 licensed facilities may obtain authorization from the board to
increase the number of gaming tables for tournament play. One day each month, a Cat
3 licensed facility may obtain authorization from the board for an additional 15 gaming
tables for tournament play.

Slot machine licenses:

The PGCB would be required to accept additional applications for the currently available
Category 3 slot machine license.

An additional Category 3 slot machine license would be created after July 20, 2017, if all
available Category 3 licenses are awarded and the Category 3 licensed facilities are
conducting slot machine operations.

The PGCB is authorized to allow a Category 1 and Category 2 slot machine licensee up to
the later of 36 months or December 31, 2012, to make 1500 slot machines available for
play following the initial one period following licensure.

The amount that each slot machine licensee must maintain in the regulatory assessment
accounts established under section 1401 is reduced. For Category 1 and Category 2
licensees the amount is reduced from $5 Million to $1.5 Million and for Category 3
licensees the amount is reduced from $5 Million to $1 Million.

Prohibits a slot machine licensee who holds a table game operation certificate from
permanently removing slot machines in order to make room for gaming tables. Requires
that each slot machine licensee maintain the same number of slot machines in play as it
had in play on October 1, 2009. Permits, with board approval, 2% reductions in the
number of slot machines and also temporary reductions in the number of slot machines
for construction/renovation and for emergencies. Category 1 and Category 2 licensed
facilities may never have less than 1500 slot machines in operation and Category 3
licensed facilities may never have less than 250 slot machines in operation.

Provides a statutory framework and criteria for the PGCB to approve a requested
relocation of a licensed facility within the county where the facility was originally located.

A Category 3 slot machine licensee that holds a table game operation certificate may
operate up to 600 slot machines at its licensed facility.

Manufacturers and Suppliers:

Manufacturers and Suppliers would be required to pay the required fee and obtain a
license to manufacture or supply table game devices and associated equipment related

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to the conduct of table games. A slot machine license will not permit the manufacture or
sale of table games devices and associated equipment.

Residency Requirements:

Establishes as a goal that 85% of the table game employees of a licensed facility be
residents of the Commonwealth within 3 years of the commencement of table game
operations at the licensed facility.

Credit:

Slot machine licensees that hold a table game operation certificate may extend casino
credit to players. Credit extended must be interest free and unsecured. Credit card
advances and debit cards are prohibited.

Junkets:

Includes statutory provisions requiring the PGCB to regulate gaming junket enterprises.

Gaming Service Providers (vendors):

Includes statutory provisions requiring the PGCB to regulate gaming service providers.

MISCELLANEOUS PROVISIONS:

Temporary regulations:

The PGCB is authorized to adopt temporary regulation to facilitate the prompt

implementation of table game operations at licensed slot machine facilities.

Certain devices prohibited:

A slot machine licensee would be prohibited from installing, owning, operating, or
allowing another person to install, own, or operate, on the premises of its licensed
facility, a slot machine or table game that is played with a device that allows a player to
operate the slot machine or table game by transferring funds electronically from a debit
or credit card or through an electronic funds transfer.

Gaming Schools:

Department of Labor and Industry will develop curriculum guidelines to govern gaming
school instruction to ensure that graduates acquire skills necessary to secure
employment with a licensed entity.

Airport funds:

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Provides that all money designated from the Pennsylvania Economic Development and
Tourism Fund to the Pittsburgh airport be distributed directly to the airport.

Municipal Agreements:

If a slot machine licensee is required as a condition of slot machine licensure to make

annual payments to a municipality or municipal authority for an economic development
project, the licensee may not submit a petition seeking a table game operation
certificate until a written agreement governing the terms of the payments, including the
date, amount, and duration of the annual payments is executed between the slot
machine licensee and the municipality or municipal authority.

Clean Indoor Air Act:

Provides that the provisions of the Clean Indoor Air Act shall apply to the conduct of table
games at ALL licensed facilities in this Commonwealth.

Liquor Code

Licensed facilities are exempted from the “three strikes penalties” of the liquor code but
will be subject to higher financial penalties for any violations of the code. The prior
citation history of the slot machine licensee would be used to determine the amount of
any fine.

Transfers:

Horseman Funds: Transfers approximately $40 Million from the Race Horse
Development Fund to the General Fund for 4 consecutive years. The transfers are part
of the budget agreement.

Law Enforcement Funds: Transfers approximately $12 Million in unused funds from the
law enforcement grant funds to the General Fund. $2 Million annually is maintained for
law enforcement grants to local law enforcement. Permitted uses of these funds are
expanded to include enforcement of all laws related to illegal gambling and the
Pennsylvania State Police are permitted to apply in areas where they provide primary
law enforcement.

Compulsive and Problem Gambling: Transfers $3 Million annually from the State Gaming
Fund to the Department of Health for compulsive gambling and drug and alcohol
treatment. No less than 50% of these funds are to be made available to single county
authorities each year.

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Appropriations:

A supplemental appropriation of $2.1 Million is made to the PGCB to implement table

games.

Effective Date and Applicability:

Certain provisions relating to economic development funding in the City of Pittsburgh are
effective January 1, 2011. The remainder of the Act is effective immediately. Provisions
transferring revenue from the Race Horse Development Fund to the General Fund are
applicable beginning January 1, 2010.

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