Legislature(1999 - 2000)
02/01/2000 01:08 PM House TRA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE TRANSPORTATION STANDING COMMITTEE February 1, 2000 1:08 p.m. MEMBERS PRESENT Representative Andrew Halcro, Chairman Representative Beverly Masek Representative Bill Hudson Representative John Cowdery Representative Allen Kemplen Representative Albert Kookesh Representative Vic Kohring MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL NO. 243 "An Act relating to taxes on motor fuel used in or on boats and watercraft; and providing for an effective date." - MOVED CSHB 243(TRA) OUT OF COMMITTEE HOUSE BILL NO. 182 "An Act relating to charitable gaming and to gaming on state ferries; and providing for an effective date." - HEARD AND HELD PREVIOUS ACTION BILL: HB 243 SHORT TITLE: MARINE FUEL TAX FOR HARBOR MAINTENANCE Jrn-Date Jrn-Page Action 5/15/99 1445 (H) READ THE FIRST TIME - REFERRAL(S) 5/15/99 1445 (H) TRA, FIN 1/27/00 (H) TRA AT 1:00 PM CAPITOL 17 1/27/00 (H) Heard & Held 1/27/00 (H) MINUTE(TRA) 2/01/00 (H) TRA AT 1:00 PM CAPITOL 17 BILL: HB 182 SHORT TITLE: CHARITABLE GAMING & GAMING ON FERRIES Jrn-Date Jrn-Page Action 4/08/99 690 (H) READ THE FIRST TIME - REFERRAL(S) 4/08/99 690 (H) TRA, JUD, FIN 2/01/00 (H) TRA AT 1:00 PM CAPITOL 17 WITNESS REGISTER PATRICK HARMAN, Staff to Representative Pete Kott Alaska State Legislature Capitol Building, Room 118 Juneau, Alaska 99801 POSITION STATEMENT: Presented sponsor statement on behalf of Representative Pete Kott for HB 182. GERALD LUCKHAUPT, Attorney Legislative Legal and Research Services Legislative Affairs Agency 129 6th Street, Room 329 Juneau, Alaska 99801 POSITION STATEMENT: Testified on HB 182. TERRY MARTIN, Former-Representative PO Box 102381 Anchorage, Alaska 99510-2381 POSITION STATEMENT: Testified on HB 182. LARRY PERSILY, Deputy Commissioner Office of the Commissioner Department of Revenue PO Box 110405 Juneau, Alaska 99811-0405 POSITION STATEMENT: Testified on behalf of the Department of Revenue on HB 182. ACTION NARRATIVE TAPE 00-6, SIDE A Number 0001 CHAIRMAN ANDREW HALCRO called the House Transportation Standing Committee meeting to order at 1:08 p.m. Members present at the call to order were Representatives Halcro, Masek, Hudson, Kemplen, Kookesh and Kohring. Representative Cowdery arrived as the meeting was in progress. HB 243 - MARINE FUEL TAX FOR HARBOR MAINTENANCE CHAIRMAN HALCRO announced the first order of business as House Bill 243, "An Act relating to taxes on motor fuel used in or on boats and watercraft; and providing for an effective date." There is a proposed committee substitute. REPRESENTATIVE VIC KOHRING made a motion to adopt the proposed committee substitute for HB 243, version 1-LS074\K, Kurtz, 2/1/00. There being no objection, Version K was before the committee. CHAIRMAN HALCRO explained the proposed committee substitute incorporates the issues discussed on Thursday [January 27, 2000] related to the definition of a qualified municipality. The proposed committee substitute does not incorporate the issues of limiting the tax, a sliding scale, or collecting the rebate because the Department of Revenue thought that those issues would be best left to the purview of the House Finance Committee. CHAIRMAN HALCRO explained the changes were made to Section 3, subparagraphs (A) and (B) [page 2]. The changes define the qualifying municipality as one that has assumed responsibility for its harbor, and has adopted a local ordinance dedicating the funds to its harbor for maintenance and operation. Number 0227 REPRESENTATIVE BEVERLY MASEK asked whether the changes apply to Section 4, of the proposed committee substitute, as well. CHAIRMAN HALCRO replied "Yes." Number 0282 REPRESENTATIVE ALBERT KOOKESH asked whether the proposed committee substitute would harm in any way the areas that would normally receive money. CHAIRMAN HALCRO replied no. It simply addresses the municipalities who have chosen to accept responsibility and take title for their port or harbor. The other communities who have not accepted that responsibility would still get a benefit through the Department of Transportation & Public Facilities. Number 0336 REPRESENTATIVE BILL HUDSON stated, for the record, that this is not a dedication of funds; it is strictly an indication of the intent of the legislature. CHAIRMAN HALCRO noted that the Department of Revenue is very concerned about the dedication of the revenues, which is why they prefer to deal with that issue in the House Finance Committee. Number 0377 REPRESENTATIVE MASEK made a motion to move CSHB 243, version 1-LS074\K, Kurtz, 2/1/00, out of committee with individual recommendations and attached fiscal note; she asked unanimous consent. REPRESENTATIVE KOHRING stated he would like to see the bill go one step further of eliminating the tax altogether and going to a user-fee system. The beneficiaries would then pay directly for the different services offered by a harbor, as opposed to a tax being applied to everybody across the board, especially since many might not benefit. Number 0506 REPRESENTATIVE MASEK stated, to Representative Kohring, that his comments on moving the bill to a user-fee [system] is way out of line. It would require a lot of changes to a system that is already in place. Number 0559 REPRESENTATIVE HUDSON asked Chairman Halcro whether there is a revised fiscal note. CHAIRMAN HALCRO replied no. The Department of Revenue wants to work with the House Finance Committee in determining the final outcome in relation to the issues of collection and reimbursement before submitting a fiscal note. CHAIRMAN HALCRO stated, in response to Representative Kohring's comments, that this tax along with the motor fuel tax is as close to a user fee as possible. The problem with eliminating the marine fuel tax altogether is because for some ports and harbors it's hard to generate revenues. In addition, under the concept of assuming responsibility and relieving the state's liability, he thinks, that those communities should be the beneficiary of the revenue. CHAIRMAN HALCRO stated, there being no objection to the motion, CSHB 243(TRA) so moved from the House Transportation Standing Committee. HB 182 - CHARITABLE GAMING & GAMING ON FERRIES CHAIRMAN HALCRO announced the next order of business as House Bill 182, "An Act relating to charitable gaming and to gaming on state ferries; and providing for an effective date." Number 0691 PATRICK HARMAN, Staff to Representative Pete Kott, came before the committee to present the sponsor statement. He will limit his comments to the issues as they relate to transportation. He read the following: HB 182 also allows machines to be used on vessels of the Alaska marine highway. It allows the Commissioner of Revenue to adopt the necessary regulations for use of electronic machines on vessels of the Alaska marine highway. Revenues generated from this use may go to the general fund and may be appropriated for funding the Alaska marine highway. HB 182 does not require the Alaska Marine Highway System to install electronic gaming machines, it would only permit or allow their existence. There are several benefits for permitting electronic gaming machines on our ferries. Primarily, it would be increased revenue, mostly from out-of-state passengers. And, the ferry system presently allows video games, but adult entertainment is minimal. MR. HARMAN explained that he recently road the M/V Kennicott from Seward to Juneau, a 2-day trip. During that time the cafeteria was only open during meal hours and the bar was only open for a few hours. He probably would have enjoyed putting a few dollars into a video game. Number 0827 CHAIRMAN HALCRO announced that he would like to limit the debate to the transportation aspects of the bill. It has two further committees of referral - Judiciary and Finance - where the other issues can be discussed. Number 0858 REPRESENTATIVE ALLEN KEMPLEN asked Mr. Harman whether the state allows gambling in any of its public facilities. MR. HARMAN replied, no, but he can't say that with authority. He remarked that recently there was a football pool for the Super Bowl game floating around the capitol. Number 0891 CHAIRMAN HALCRO stated, in relation to the payout schedule in the bill, 30 percent would go to the permittee; 30 percent would go to the vendor; 20 percent would go to the state; and 20 percent would go to the city and borough. In light of the fact that a ferry moves from port-to-port, he wondered who would benefit from the 20 percent that would go to a city and borough. In other words: If a ferry is going from Sitka to Juneau, who would get that 20 percent, Sitka or Juneau? MR. HARMAN replied that issue is not addressed in the bill as currently drafted. Obviously, a ferry is transient while at sea, but when tied to a dock that ferry may or may not operate its gaming machines. He remarked that he would be inclined to let the state keep the revenue. CHAIRMAN HALCRO stated the term "vendor" is defined in the bill as where the machine is located. He asked Mr. Harman whether a bar owner would receive 30 percent of the payout if there was a video poker machine in the bar. MR. HARMAN replied, "That's correct." CHAIRMAN HALCRO stated in this case the ferry system is the vendor because they are providing a place for the machines; the people to use them; and the overhead associated with them. He said: "Let's be honest. People aren't going to take the ferry to use -- to play video gaming. They're going to play video gaming because they're on the ferry." He asked Mr. Harman whether the 30 percent should then go back to the state. MR. HARMAN replied that's what he believes. The ferry system could also be the permittee [and get that portion of the payout], as well as the state's portion. And, in the lack of a municipality having jurisdiction, they could also get the municipality's portion. Number 1082 REPRESENTATIVE JOHN COWDERY remarked that he has been to places like Las Vegas. He wondered who would deliver the free cocktails and provide change. MR. HARMAN replied he can't answer that question. Number 1120 REPRESENTATIVE HUDSON stated he sees this bill as a clean-up of the existing charitable gaming laws, except for Section 19.65.045, "Revenues to general fund; appropriation for Alaska Marine Highway System," [Section 32, of the bill]. He doesn't believe that the changes in the early portion of the bill have to do with the Marine Highway System. The only portion of the bill that involves them is the authorization - for the very first time - to place video lottery machines [on the vessels] and for the proceeds to go into the general fund. REPRESENTATIVE HUDSON further stated there are already bars on every one of the vessels; there is already space for these types of video machines. The question is, Do they violate the effective operation of the vessels? The answer is, "No." The social question, of whether or not this is this the right thing to do, is based on individual judgement. Number 1269 REPRESENTATIVE KOOKESH noted that the M/V Le Conte and Aurora do not have bars; they would not have a place set aside for these machines. He further noted that when they had a bar and went into Angoon - a dry community - they would have to close it for that period of time. He also stated it seems that the current regulations are set up so that gaming is allowed for everybody. In other words, if the state only allows video lottery machines on the ferries, other charitable organizations may say that's not fair. He further pointed out that anything allowed in the state for gaming purposes is allowed under Indian gaming compact laws. He cited a compact negotiated by the state with the village of Klawock as an example. Number 1341 REPRESENTATIVE HUDSON commented that Representative Kookesh is absolutely right. He would like to see this restricted to the main line vessels rather than the feeder vessels, which haul a lot of school children, and to the summer season with the possibility of removing them in the winter. That way, the rich outsiders who travel to the state via the ferries can help underwrite some of the operating costs, as well as help to keep it out of some of the villages. Number 1385 REPRESENTATIVE KOOKESH wondered whether the bill would impact the cruise ships while in Alaskan waters, and their ability to use their gaming machines. Right now, when the cruise ships are in Alaskan waters, they are not allowed to use their machines because gambling is not allowed in the state. REPRESENTATIVE HUDSON stated he remembers when the cruise ships allowed gambling right up to the dock. He doesn't remember, however, whether it was a statute or lawsuit that stopped them. He suggested looking into that further. Number 1457 REPRESENTATIVE KEMPLEN referred to Section 38, of the bill, and noted that it repeals AS 05.15.690(25) and 05.15.690(34). He asked Mr. Harman to explain what exactly is being repealed. MR. HARMAN deferred the question to the bill drafter [Gerald Luckhaupt, Attorney, Legislative Legal Counsel, Legislative Legal and Research Services, Legislative Affairs Agency]. REPRESENTATIVE KOOKESH asked Chairman Halcro whether he intends for the bill to go to a committee to deal with the legal aspects. CHAIRMAN HALCRO replied he agrees that the House Judiciary Committee should look at the legal aspects. The question is, Should the state allow video lottery machines on the ferries? The question is not, What are the impacts on the rules that govern them? Number 1540 REPRESENTATIVE COWDERY stated this is an interesting issue because he and others who have sat at this table have criticized the subsidy given to the ferry system. He sees this as an opportunity to help the fiscal crunch. He supports the transportation portion of the bill. REPRESENTATIVE KOOKESH stated he agrees with everything that Representative Cowdery just said, except for the part about the state subsidizing the Marine Highway System. He said, "It's not any different than the money we use to plow the roads in Anchorage." CHAIRMAN HALCRO pointed out that is why he brought up the issue of payout. He would like Mr. Doll [Robert J. Doll, General Manager Ferry Operations, Southeast Region, Department of Transportation & Public Facilities] to have as much money as possible to pay for the fast ferries. Number 1632 GERALD LUCKHAUPT, Attorney, Legislative Legal and Research Services, Legislative Affairs Agency, came before the committee at the request of the chairman. In response to committee discussion, he noted that the sections in the bill to amend Title 5 do not have anything to do with the authorization of the Marine Highway System to conduct video lottery gaming on their ferries. That authorization, as observed by Representative Hudson, starts in Section 29; the meat is in Section 32. He further noted, in response to committee discussion, that the [payout] percentages found in the bill apply to Title 5 - charitable gaming. The [revenues from] gaming conducted on the state ferries would go to the general fund. That language can be found on page 23, lines 5-10. MR. LUCKHAUPT explained, in response to committee discussion, that the state sort of looked the other way in regards to gaming on cruise ships while in state waters and while in port. It was not until the Hickel Administration that the attorney general's office issued an opinion saying that activity was illegal. The cruise ship industry then came to the legislature for authorization and was given a 6- to 8-month window - the end of the legislative session to January 1 of the following year. The cruise ship industry then approached Congress and [U.S.] Representative [Donald E.] Young was able to attach a rider to a budget bill that exempted them from federal law. That exemption allows them to conduct gaming in state waters only if the state allows it. According to his understanding, the cruise ship industry, right now, is conducting gaming in state waters but not while in port and so many miles outside of port. MR. LUCKHAUPT further explained, in response to committee discussion, that Congress passed the Indian Gaming Regulatory Act [IGRA] a number of years ago which allows Indian tribes to conduct gaming on Indian lands. He noted that three types of gaming were created under that statute, Class I, Class II and Class III. Class I are traditional types of games such as horse racing. Class II are games such as poker and lotteries. Class III are the type of games found in casinos. Under the Act, an Indian tribe cannot conduct gaming in a state that does not allow Class III type of gaming. He noted that there was a court case in which an argument was won on the grounds that since a state allowed for Monte Carlo nights gambling should be allowed on Indian lands. That argument has failed, however, in the states of California and Idaho in the Ninth Circuit Court of Appeals. As a result of that decision, the Alaska State Legislature repealed Monte Carlo nights during the negotiations with the village of Klawock due to the fact that it could conceivably authorize full-scale casino gaming on Indian lands by Indian tribes. Right now, however, that is not allowed. He explained the problem for the state under the IGRA is the definition of Indian lands. The Act doesn't use a traditional definition which includes reservations and the like. The Act uses a term that includes any land held in-trust by the U.S. government for any tribe or individual. He noted that is not a problem down South where there are traditional reservations, but it is a problem in Alaska. He cited Juneau as an example where the traditional Native site is located downtown, and conceivably a casino could be built at that location. MR. LUCKHAUPT further stated, in response to committee discussion, that the bill does two separate things. It authorizes charitable organizations to conduct video lottery gaming as part of their authorized activities under their permit, and it authorizes the Department of Transportation & Public Facilities to conduct video lottery gaming on ferries. That authority operates independently of Title 5; it is derived under Title 19. The bill also repeals labor and political organizations from the definition of charitable organization [Section 38]. As a result, they would no longer qualify to conduct charitable gaming. Number 2064 CHAIRMAN HALCRO asked Mr. Luckhaupt whether it would be possible to create a different payout, whereby the state would get more [of the revenues] for providing the location and the people. MR. LUCKHAUPT replied, as the bill is currently written, the state would receive 100 percent of the revenues - less the prizes awarded - from the gaming that occurs on state ferries. Those revenues would go to the general fund. Mr. Harman's earlier testimony was incorrect. The payout percentages in Title 5 would not apply to the Department of Transportation & Public Facilities; they would only apply to charitable organizations, and the state would not be considered a charitable organization under the bill. Number 2115 REPRESENTATIVE MASEK asked Mr. Luckhaupt whether all of the revenues would go to the state rather than the charities. The bill is not clear. MR. LUCKHAUPT replied 100 percent of the revenues conducted on the state ferries would go to the general fund. That language can be found on page 23, lines 5-10, of the proposed committee substitute. The state would not be considered a charitable organization, and its authority to conduct gaming would not arise from Title 5. Number 2187 REPRESENTATIVE MASEK asked Mr. Luckhaupt to discuss the repealers in the bill. MR. LUCKHAUPT replied the repealers would remove political and labor organizations from the authorized list of permitted charities to conduct charitable gaming in the state. Number 2226 REPRESENTATIVE HUDSON asked Mr. Luckhaupt whether the bill affects the cruise ships. MR. LUCKHAUPT replied no. The bill does not do anything to the cruise ships. As he stated earlier, they have an exemption from federal law; they can only conduct gaming in certain areas of the Inside Passage. REPRESENTATIVE HUDSON asked Mr. Luckhaupt whether there would be restrictions on the Marine Highway System in Seattle and Bellingham, for example, where gambling is not authorized. MR. LUCKHAUPT replied this authority would only apply in state waters. CHAIRMAN HALCRO opened the meeting up to public testimony. Number 2297 TERRY MARTIN, testified via teleconference from Anchorage as a former state representative. He first remarked that the LIO [Legislative Information Office] was not properly notified of the hearing today. It seems that there is a rush to get the bill out of the committee. FORMER-REPRESENTATIVE MARTIN further stated that Representative Kookesh is actually right. This type of gaming would oppose the Indian Gaming Regulatory Act thereby allowing gambling all over the state, not just on the ferries. In addition, it's unbelievable that the state would allow "gambling," not "gaming," when a few years ago the public absolutely opposed it. The only difference between gambling and gaming, he stated, are the letters "bl." He also noted that the legislature opposed gambling on state ferries a few years ago for many of the reasons discussed today. He also remarked that in most states their history of gambling began with an innocent saying that, "We're just going to have historical gambling up the Mississippi [River] or down the Missouri [River] or down the Colorado [River]." After that, it spread all over. FORMER-REPRESENTATIVE MARTIN further stated that, when Senator Ted Stevens amended the U.S. Coast Guard Act to allow gambling on the cruise ships, it was made very clear the state would not be able to access any of those revenues. FORMER-REPRESENTATIVE MARTIN further stated, in conclusion, that the question before the House Transportation Committee is very important because history shows gambling starts in most states on ships. He reiterated it would be a disservice to the people of the state to move the bill out of the committee today, especially given that there was little notification of the bill being on today's agenda. Number 2485 CHAIRMAN HALCRO stated, to Representative Martin, that he takes exception to the idea that a lobbyist...[TAPE CHANGE] TAPE 00-6, SIDE B Number 0001 CHAIRMAN HALCRO continued. As the new chairman of the House Transportation Committee, he made a decision to clear the calendar and give every bill a fair hearing. Number 0019 LARRY PERSILY, Deputy Commissioner, Office of the Commissioner, Department of Revenue, came before the committee to testify. He pointed out that because of a communication problem with the Governor's office the department is not able to provide a fiscal note today. They will present a fiscal note and an analysis of the bill to the committee by Thursday. MR. PERSILY further stated the Department of Revenue is opposed to the expansion of charitable gaming in that they are responsible for overseeing those regulations. The department feels that the bill would significantly change the state's role from regulating to owning, maintaining, and using these types of machines as a source of revenue. He explained that the department currently regulates the industry - a $300-million industry - with six people. Those six people make sure that the charities get their legal minimum guaranteed under statute. He noted that their concerns will be addressed in the fiscal note, which will be high because they would have to buy and maintain the machines, as well as maintain a connection to the ferries via a state mainframe computer system for monitoring purposes. The department is not convinced, therefore, that the state's share of 20 percent would cover those costs. MR. PERSILY further stated that the Department of Law is working with the Department of Revenue as this issue relates to the IGRA and equal protection. The Department of Revenue feels that the bill could open up full-gaming on tribal lands. The department also feels that the bill could allow these types of machines on the premises of existing pull-tab and bingo operations, bars and liquor stores. The department's not sure whether that would apply to future licensees, however. In addition, the bill would not limit charitable gaming to 26 U.S.C. 501(c)(3) (Internal Revenue Code) charities. Currently, an organization does not have to be a 501(c)(3) recognized charity to reap the proceeds from charitable gaming. He lastly mentioned the department feels that such an expansion would mix one addictive behavior - gambling - with another addictive behavior - drinking. Number 0196 REPRESENTATIVE COWDERY stated he has been to a few communities in rural Alaska during the fishing season and has noticed two inches of used pull-tabs on the floor in places like bingo parlors and town halls. He wondered whether those revenues are going to a charity and whether or not they would be wiped out under the bill. MR. PERSILY replied the department feels that video gaming would be more attractive to patrons than pull-tabs. REPRESENTATIVE COWDERY asked Mr. Persily whether pull-tabs would come under the purview of being a charitable organization in relation to his testimony. MR. PERSILY replied an organization has to be a charity according to state law to hold a charitable gaming permit; it doesn't have to fit the more restrictive IRS definition of a charitable organization. REPRESENTATIVE COWDERY asked Mr. Persily whether Emmonak, Mountain Village, or Kotlik, where this type of activity takes place, are based under a charity. MR. PERSILY replied only a charity can operate a game. A charity can hire an operator, but there has to be a charity at the end of the line. REPRESENTATIVE KOOKESH pointed out that an organization in any part of the state has to show a charitable license to a vendor in order to buy a box of pull-tabs. REPRESENTATIVE COWDERY said he wasn't concerned about what an organization is suppose to do; he was wondering whether the villages that he mentioned earlier are in fact charities and whether they have gone through the procedure mentioned. REPRESENTATIVE KOOKESH replied they have to. The non-profit organizations in his village cannot buy a box of pull-tabs unless they have a license from the state. Furthermore, he resents the fact that Representative Cowdery wants to check only those villages. REPRESENTATIVE COWDERY said he just named the villages that he has been to. He has doubts that they are conforming to the law. Number 0372 REPRESENTATIVE HUDSON asked Mr. Persily whether the Governor supports the portion of the bill that allows for gaming devices in the bars on the ferries. MR. PERSILY replied, according to his understanding, the Governor opposes any expansion of charitable gaming in the state at this time. He would, however, go back and specifically ask him whether there is an exception for state ferries. REPRESENTATIVE HUDSON stated he would also like to know whether the Governor supports or opposes any of the amendments to Title 5 in the bill. He specifically referred to the amendment(s) that would replace pull-tabs. He would also like to know the Governor's position on repealing political parties and labor unions as charitable organizations. MR. PERSILY replied he would return with an answer to the question regarding political organizations and labor unions, but according to the department's understanding, the bill would not replace pull-tabs; it would allow any site that has pull-tabs on its premise to add a video lottery machine. He cited $216 million as the most recent figure for pull-tab gross receipts. Number 0512 REPRESENTATIVE KEMPLEN asked Mr. Persily whether the Department of Revenue thinks that the Marine Highway System would incur significant costs to allow this to happen. MR. PERSILY explained his earlier testimony indicated that the Department of Revenue, not the Marine Highway System, would incur significant costs because it would be responsible for buying and maintaining the machines. The department would also be responsible for maintaining the communication links, and responding to service calls within a 24-hour period. Those are the types of fiscal issues the department is looking at. Number 0571 CHAIRMAN HALCRO noted that HB 182 was notified and posted by the Chief Clerk's office on Thursday, January 27, 2000, and that is has been in the system since that time. The committee aide, Kevin Hand, has officially met all of the notification requirements by the clerk's office, contrary to earlier testimony. He did not want anyone to think the committee aide was doing anything but a good job. CHAIRMAN HALCRO closed the meeting to public testimony. CHAIRMAN HALCRO announced that the bill would be held over for further consideration in order to look at Representative Hudson's suggestion of limiting video gaming machines to the main lines and to a particular season. He also wants to give consideration to the Departments of Law and Revenue and their look into the possibility of this being a slippery slope. ADJOURNMENT There being no further business before the committee, Chairman Halcro adjourned the House Transportation Standing Committee meeting at 2:11 p.m.