Legislature(2003 - 2004)
02/05/2004 01:35 PM Senate L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
WORK SESSION
February 5, 2004
1:35 p.m.
TAPE(S) 04-5, 6
MEMBERS PRESENT
Senator Con Bunde, Chair
Senator Ralph Seekins, Vice Chair
Senator Gary Stevens
Senator Hollis French
MEMBERS ABSENT
Senator Bettye Davis
COMMITTEE CALENDAR
^WORKSESSION - Pulltab Regulations
WITNESS REGISTER
Mr. Larry Meyers, Deputy Director
Tax Division
Department of Revenue
PO Box 110400
Juneau, AK 99811-0400
Mr. Jack Powers
Pulltab Operator
Anchorage AK
Mr. Mac Meiners
Juneau Gun Club
Juneau AK
Mr. Dennis Smith, President
Board of Directors
Kenai Peninsula Oilers
Mr. Wayne Stevens, Executive Director
Kodiak Chamber of Commerce
Kodiak AK
Mr. Jeff Prather, Supervisor,
Gaming Group
Tax Division
Department of Revenue
PO Box 110400
Juneau, AK 99811-0400
Dr. Sven Haakenson, Director
Alutiiq Museum
Kodiak AK
Ms. Julie Kangan, Chairman
Gold Cache Bingo of Anchorage
Anchorage AK
Mr. David Sanden
Hidden Treasures
Juneau AK
Mr. Jerry Lewis, President
Alaska Bingo Supply
Anchorage AK
Mr. Steven Bochording, General Manager
Gold Cache Bingo
Kodiak AK
Mr. John Regan
Spenard Lions
Anchorage AK
Mr. Robert Loescher
Tlingit-Haida Central Council
Juneau AK
Mr. Dave Lambert
Fairbanks Operator
Fairbanks AK
ACTION NARRATIVE
TAPE 04-5, SIDE A
^WORKSESSION ON PULLTAB REGULATIONS
CHAIR CON BUNDE called the Senate Labor and Commerce Standing
Committee work session to order at 1:35 p.m. Present were
Senator Stevens, French, Seekins and Chair Bunde. Senator Davis
was excused. The first order of business to come before the
committee was a work session on pulltab regulations. He noted
that this committee had passed a bill last session that
increased taxes and that was still being considered in the other
body; another bill might be introduced that would discuss
establishment of a gaming commission.
He recapped that the members of the Subcommittee on Charitable
Gaming were Senator Hollis French and Senator Ralph Seekins who
addressed many issues including accountability, oversight,
financial return to charities, the definition of charities and
the question of limiting participation to geographic areas.
MR. LARRY MEYERS, Deputy Director, Tax Division, Department of
Revenue (DOR), explained that the subcommittee report before
them discusses a permittee/vendor gaming relationship in which
the permittee delivers the games to the vendor and receives a
check for 70 percent of ideal net in return. The vendor then
becomes the owner of the games, but doesn't have to do any
accounting. In this instance, the permittee would be guaranteed
a certain percentage at the time the game is played. He thought
that the committee should deliberate on what percentage the
permittee receives and if it should be received up front.
CHAIR BUNDE asked if he could recommend a percentage.
MR. MEYERS replied that 30 percent is the current statutory
minimum; but the division has heard of instances where rents
were inflated by three times the going rate and is concerned
about the detection of possible fraudulent gaming expenses.
CHAIR BUNDE asked how many new people would have to be hired to
conduct audits.
MR. MEYERS replied that there are two auditors for approximately
1,000 permittees and 27 operators and he felt that staff would
have to be tripled to do an adequate job.
CHAIR BUNDE suggested instituting a licensing requirement for
all employees of pulltab operations to pay for the audits.
MR. MEYERS added that generally an appeals forum goes along with
an audit situation.
SENATOR GARY STEVENS asked how the triple rent situation was
exposed and if the operator could be relied on to report what
the going rate for rent is.
MR. MEYERS responded that the state hired appraisers to
determine the market value of the rents in that instance and had
eventually settled with two parties over that issue.
CHAIR BUNDE noted a suggestion that the multiple beneficiary
permittees (MBPs) be required to pay 30 percent up front, but he
didn't know if that would be productive.
MR. MEYERS replied that the MBP permits are "a different animal"
than operators and vendors. An MBP is a co-op with two to six
members who band together with the idea of seeking economies of
scale and efficiencies. "It's not set up to do that [pay
themselves a minimum]."
SENATOR FRENCH asked how the 30 percent payout happens in a
typical transaction using a $100 pulltab for an example.
MR. MEYERS replied that a $1,000 game pays out $800 in prizes,
about 78 percent. That would leave $200, the ideal net; 30
percent of that ($60) would go right into the hands of the
permittee in this example. It would be an up front transaction.
The permittee vendor would get 70 percent ($140), but he would
have to pay the taxes and other expenses. Under the scenario
before them [subcommittee report], who should pay the expenses
would have to be worked out, but he would like to see the
expenses stay in the hands of the operators.
CHAIR BUNDE said the vendor should want some economies in their
operation, because they get 70 percent and if their expenses go
up, their profits go down.
MR. MEYERS agreed with that statement.
SENATOR SEEKINS asked who pays for the cost of the game.
MR. MEYERS replied that the operator (who gets 70 percent) would
in this instance. He reiterated that any proposed legislation
would have to carefully state what expenses the parties would be
responsible for paying. The cleanest accounting would be to say
that the permittee would get 30 percent of the ideal net, which
is the value of the game less the prizes.
CHAIR BUNDE said he wanted to limit the committee's current
discussion to the 30 percent of the ideal net proposal.
MR. JACK POWERS, Anchorage operator, informed the committee that
operators are already bonded and, from his experience dealing
with various locations and about 25 permittees, said, "It would
take one heck of a bank roll to be paying up front."
CHAIR BUNDE asked if the state didn't require a bond, could that
money be used to make the up front payments.
MR. POWERS said he would have to think about that, but he
thought they should really be addressing the 14 MBPs that are
bigger operations as well as the 27 operators.
SENATOR SEEKINS inserted that this summer he heard that very few
licensees would challenge their operator if they thought
something wasn't right, because they would be quickly booted out
while five more [licensees] were waiting to come in to work with
that operator.
MR. POWERS replied that he had never experienced that situation
with his non-profits and maybe Senator Seekins was referring to
a few isolated cases.
SENATOR SEEKINS made his point saying if he made a claim on Mr.
Powers' bond, he didn't think they would be friends any more.
CHAIR BUNDE asked Mac Meiners what he thought.
MR. MAC MEINERS, Juneau Gun Club, said he is also the designated
member of the Juneau Ski Club and the United Fishermen of
Alaska. He stated that he has vendor relationships with those
entities and explained that there are four distinct groups of
permittees: the vendor relationships, the MBPs, the fraternal
organizations and the operators - and they are all different.
CHAIR BUNDE said the committee wasn't focused on increasing
taxes to the state, but rather on whether the American Cancer
Society should have to compete for space on the shelf with the
Nome Chamber of Commerce.
MR. MEINERS said in his instance, he is hired to generate
revenue for his group and, "The harder you work, the more you
get."
His groups do the 70/30 split and pay all the expenses including
games, city sales tax, wages, if any, and other expenses that go
with gaming. Their records are submitted to the state for review
and if they don't have the 30 percent minimum to give to the
group, he isn't gaming any longer. However, he thought that he
remitted closer to 40 percent to the group.
CHAIR BUNDE said the 30 percent minimum might not apply to him,
because he is hired by a group of organizations. If he wanted to
pay himself an exorbitant salary, it's incumbent upon the
permittees to keep that from happening.
MR. MEINERS agreed. He explained further that:
The clubs I started with when I started gaming had
nothing. So, to come out and say you have to put a 30
percent limit on your operation would not let clubs
that have zero get started. You would actually be
limiting them.
He felt that a person should be able to game anywhere if the
rules are met and the game is played properly and suggested
maybe using an area registration.
SENATOR HOLLIS FRENCH asked how a new player would not be able
to get into the gaming industry under the 30 percent up front
idea.
MR. MEINERS replied using the United Fishermen of Alaska (UFA),
which had no money when it started, as an example. UFA
qualified as a 501 (c)(3) and he explained that:
The Juneau Gun Club had more prize limitations than it
could handle. Remember, you're only good for $1
million and an operator is only good for $500,000. I
had a little over $1 million - I think I had
$1,350,000 or $1,400,000. So, that means there's
enough room for two permittees. So, the Gun Club in
the goodness of their heart - to keep their location -
allowed the United Fishermen of Alaska use their
gaming equipment, which is legal.
SENATOR FRENCH apologized for interrupting and asked which
gaming equipment he was referring to.
MR. MEINERS replied the cash registers and a scale to measure
the pulltabs.
CHAIR BUNDE asked what the scale was used for.
MR. MEINERS replied:
In a vendor relationship, when I drop the game by the
bar, it's theirs. I relieve myself of all
responsibility. I don't micromanage them. It's their
responsibility to get their money out of the game. So,
at times when you think there's impropriety, you can
weigh the pulltabs and that will tell you if anybody
is dipping into the jar or not - or you can use a
camera to watch your operations. That is done.
CHAIR BUNDE asked, "So, when you drop them by the bar, you get
paid at that time and then if they sell them or not, it's on
their head."
MR. MEINERS said that was right.
CHAIR BUNDE asked him if he was basically remitting the 30
percent right now.
MR. MEINERS replied yes, but the bar gives him the money when he
gives them the game.
MR. WAYNE STEVENS, Executive Director, Kodiak Chamber of
Commerce, said they are a MBP operating at a bar in Kodiak. He
encouraged the committee to look at the current language
allowing landlords to charge "up to 20 percent of the ideal net"
and thought tightening up "fair market value" would help reduce
operating costs. He testified that a good auditing program and a
gaming task force could be valuable in designing effective
oversight of the gaming industry.
MR. DAVE LAMBERT, owner of seven operations in Fairbanks, said
he has over 700 games out. As an operator, he receives a minimum
of 30 percent, but the cost of operating is going up. He said
every year his rents go up by 3 percent and last year the
minimum wage was increased, as well. He informed them that his
games cost about $15,000 a piece and that paying 30 percent up
front would be about $5,000 and that's just not possible for
him.
SENATOR FRENCH asked what he is paying per square foot for his
rental space.
MR. LAMBERT replied that it varies; he is paying $1,400 for one
900 sq. ft. place and he is paying almost $2,000 for another
place that is a lot smaller. However, the $2,000 place returns
three times the revenue the other place returns.
MR. JACK POWERS commented again that he gave a minimum of 30
percent at the end of the year to his non-profits and last year
one of them got about $1,400,000 - but he pointed out that he
had all year to come up with it.
TAPE 04-5, SIDE B
MR. POWERS stated that if he had to pay $1,400,000 in advance,
he would have to close his doors. He felt that comparing a bar
operating pulltabs with a bingo hall operation was comparing
apples and oranges.
CHAIR BUNDE corrected him saying that he didn't think the whole
yearly amount would be required up front, but rather a fee per
game. He asked if he bought a year's supply at a time.
MR. POWERS explained that he buys about a month's worth of games
at a time and that up front payments would be $300,000 for any
given month.
CHAIR BUNDE changed the discussion to the question of proximity
and the fact that charitable gaming can raise money statewide
for a particular community or entity. He asked if there were
questions or comments from the committee.
SENATOR SEEKINS said while he was working on this issue in the
interim, he ran into some people who liked the idea that they
could work with an operator who had locations in different
towns.
He would run twenty different licensees in Juneau, the
same twenty some place in Anchorage and the same
twenty some place in Fairbanks.
Other times, we had some indication that people either
in a small population or in one [town] where there was
a sales tax on the pulltab, that they would prefer to
operate someplace where there was either a larger
population to benefit their smaller population or in a
population where they didn't have to pay sales tax to
get a higher net.... So, the discussion was dependent
upon where you were from.
Folks in some of the smaller entities that were trying
to get into an operator situation couldn't because
those slots were filled with people from other
communities and made it very difficult for them to
enter into a pulltab relationship and wanted the
foreign entities, so to speak, to be gone.
In some cases we found that there were actual
municipalities that were involved and it was alluded
to that some of these municipalities had a leg up
because they could appropriate the money to go in and
help set up a pulltab parlor someplace so that they
could supplement their municipal income by having
something up front to go in and get going with - where
a smaller non-profit that was just trying to get into
the game could not do that. They were somewhat
hampered by not being able to go with themselves; so
they had to go find a vendor relationship or try to
find an operator relationship. And, again, if it was a
permittee from some other location that was there
blocking their ability, there was some concern that
that's not right and he ought to go back to wherever
and do his gaming there. So, it kind of came down to
where you were from and how you were benefiting as the
discussion went along.
CHAIR BUNDE asked, as a general rule, did people from smaller
communities think that permittees from bigger communities ought
to stay out, but the smaller communities wanted to be able to go
into the bigger communities.
SENATOR SEEKINS said they ran into that thinking, also.
SENATOR FRENCH said a preliminary report from the gaming
activity for Juneau-Douglas and Auke Bay, Alaska, tabulates how
much money each of the organizations collected and what sort of
permit they hold, etc., but it didn't indicate where the games
were played.
MR. JEFF PRATHER, Supervisor, Gaming Group, Department of
Revenue, explained that the report is just a summary of the
activity of permittees that are located in Juneau and wouldn't
indicate where the games were being played.
SENATOR FRENCH said he assumed the smallest communities in the
state where pulltabs were played were Kenai and Nome.
MR. PRATHER replied that pulltabs are played in some smaller
Bush communities, also.
SENATOR FRENCH asked where those are tabulated in the
department's annual report.
MR. PRATHER replied that one could look under Native villages.
SENATOR FRENCH noted that the report just says who has a permit,
but doesn't show where it is played.
MR. PRATHER responded that he gave the subcommittee a list of
all the permit holders who were gaming outside of their own
locality this past summer and he would be glad to provide that
list to him.
CHAIR BUNDE asked him how many people are in his division.
MR. PRATHER replied seven people.
SENATOR GARY STEVENS asked if Alaska is the only state that
allows groups to have gambling operations outside of their
immediate vicinity.
MR. PRATHER didn't know the answer, but he did know that in
Alaska, only municipalities are prohibited from gaming outside
of their own location.
CHAIR BUNDE asked how Nenana gets to sell ice pool tickets in
Juneau.
MR. PRATHER replied that those tickets are sponsored by an
organization other than the city.
SENATOR STEVENS said that the Koniag Corporation from Kodiak has
reached a point where half of the membership lives outside of
Kodiak and asked Dr. Sven Haakenson to comment on that.
DR. SVEN HAAKENSON, Director, Alutiiq Museum in Kodiak, asked if
he was referring to regional proximity or geographic.
CHAIR BUNDE responded that those terms have probably been used
interchangeably, but the question being discussed is what
action, if any, the Legislature should take regarding permits
issued for an organization in one area being played in another.
DR. HAAKENSON revealed that the Alutiiq Museum is a permittee of
an MBP permit. Without that support, the Museum, which runs
ongoing cultural programs that benefit the entire community,
wouldn't be able to operate.
CHAIR BUNDE pointed out that they wouldn't be able to operate
based on a donation to the City of Kodiak, but that doesn't mean
that other entities couldn't generate funds.
MS. JULIE KANAGAN, Chair, Board of Directors, Gold Cache Bingo
of Anchorage, said she represents the Kodiak Union of Native
Associations that is a part owner of the MBP Gold Cache Bingo
Operation in Anchorage. Currently, six permits are used by Gold
Cache Bingo; a manager was hired and reports to the board
monthly. She expressed their desire to keep the pulltab
operation in Anchorage, because it has been that way for more
than 15 years already and the revenues are used to benefit youth
and cultural programs. She added that the permittees are paid on
a monthly basis.
CHAIR BUNDE asked her how she would feel if another community
like Juneau started gaming in Kodiak and if she had any
suggestions that would resolve the issue.
MS. KANAGAN replied if Juneau wanted to come to Kodiak, that
risk would be Juneau's decision.
MR. STEVENS inserted that for a number of years a Juneau permit
was operating in Kodiak and no one tried to run them off.
SENATOR FRENCH observed that the only permit he sees [in the
division's report] being operated in Kodiak is a National
Multiple Sclerosis Society permit at the Breakers Bar. He asked
if there was a market for pulltabs in Kodiak.
MR. STEVENS replied that the City of Kodiak has passed
legislation that does not allow "operators" to do their pulltab
operations in Kodiak. All Kodiak gaming activities are MBP,
vendor permit or directed gaming. "There are no operators in
Kodiak and there are pulltabs in a number of places around the
community...."
MR. DAVID SANDEN said he is the primary member in charge of the
MBP Hidden Treasures, a group of three local Juneau groups. He
said:
On the proximity issue specifically, we game only in
Juneau, but we're finding that increasingly more
difficult through the double taxation burden.
However, we have hesitated to enter any other markets
because we feel that we use 100 percent of our money
in Juneau and we feel like it's kind of ethical to
raise it in Juneau. But I do understand the problems
with groups that have a larger statewide purpose than
our groups do and also groups from very small and
rural communities that, frankly, need a medi-vac
airplane and they have to go raise money in Anchorage.
MR. SANDEN said 2003 census data indicates that Anchorage and
Mat-Su have 53 percent of Alaska's population; Fairbanks, Denali
and Yukon-Koyukuk have 15 percent; Kenai Peninsula, Kodiak,
Valdez and Cordova have 12 percent; Southeast Alaska has 11
percent; Southwest Alaska has 6 percent and the Northwest Arctic
has 3 percent. He pointed out:
There were some errors, in our opinion, made when the
charitable gaming statutes were created. Gaming has
sort of been regulated and dealt with through
taxation. That's because it's gambling and gambling is
a vice. Like all vices, gambling seems - all vices pay
a large tax burden. In the State of Alaska it's a
proportionately small tax burden. However, we're the
only state in the union that allows individual
municipalities to tax gaming in addition to the state.
He explained that throughout the United States the larger entity
[federal government] would tax the ideal net of the "big fish"
and distribute that money based on where proceeds are raised by
location.
MR. SANDEN said that Hidden Treasures proposes, and has proposed
for years, that everyone has to report by location. He
backtracked noting that the indirect negative social
consequences of gambling cost cities money and the only
practical mechanism to provide funds to deal with those
consequences is through the tax code. He proposed that whatever
tax rate gets decided upon in SB 102 that the money gets split
with the municipalities proportionately. Regulating how proceeds
are spent - no matter who raises them - can be decided by the
Legislature. He added, regarding giving 30 percent to the
operators:
I think the ultimate test there would be for the
Department of Revenue to run those numbers by a banker
and, if a banker would give that operator a loan to
front the money for his games, then it's feasible; if
not, it's not feasible. That's pretty much it.
CHAIR BUNDE thanked him and said he wanted get a few more
comments.
MR. STEVENS asked the members to consider that 30 percent of the
ideal net leaves the community where the gaming activity took
place, but the other 70 percent already stays there.
CHAIR BUNDE remarked that the negative social impact stays in
the community as well.
MR. JERRY LEWIS, President, Alaska Bingo Supply, said he
distributes in Anchorage and sells statewide, but he didn't want
to comment on the proximity issue.
MR. JOHN REGAN, Spenard Lions, felt if an outside organization
(Kodiak, for instance) took all the money they made in another
community (Anchorage) out of that community, that is doing a
disservice to the organizations in Anchorage. "Perhaps a
percentage should be spent in the community where the money is
raised by that permittee holder."
CHAIR BUNDE asked him to comment on the increased economic
activity gaming brings to the economy of a community.
MR. REGAN said his organization turns around and uses the money
they make for people who need the help.
CHAIR BUNDE said he understood his point and moved the
discussion to the definition of a permittee. He asked Senator
Seekins to comment on whether the definition should be narrowed
to those who are really doing charitable work or continue to
include those who work for community advancement.
SENATOR SEEKINS responded that he, personally, felt that the
door has been opened way too far.
Anyone with an IRS non-profit status that has 20
members and has been in existence for 3 years can
apply for a permit....
I have a problem when a membership organization that
is going to pursue a particular agenda and try and
develop a certain segment of the community competes in
the charitable gaming industry for pulltabs. I don't
have a problem and no one seems to object to different
organizations being able to do raffle permits.
I had comments from people who said, you know, we're a
group that supports a particular youth sport for our
children. We have a team, we have 20 families, we run
a permit because we don't want to have to pay out of
our pocket for our kids to play hockey or to ski or to
play baseball or whatever sport you want to fill in.
Under the current situation they can get there. In
some respects, I don't particularly think that those
folks should be competing for dollars from the so-
called charitable gaming industry so that they don't
have to pay for the recreational activities of their
own children....
SENATOR SEEKINS reiterated that many of these choices are based
on personal preference but, in general, most people he talked to
thought the interpretation of a charity for purposes of
charitable gaming may have gone too far and certain licenses
should be restricted to absolutely identified raffle-type games
and the pulltabs should be reserved for true charities.
SENATOR FRENCH agreed saying that he felt the most good the
Legislature could do for truly charitable organizations is to
open the field up for people who are doing the most good and
restrict those organizations that are doing less good. He really
couldn't see why the Alaska Democrats and the Alaska Republicans
needed to be considered charitable organizations.
MR. DENNIS SMITH, Kenai Peninsula Oilers, prefaced his remarks
by saying that he runs an amateur baseball organization that
consists of NCAA eligible players that come up for the summer.
The Oilers use the MBP and return 40 percent to the permittee
for its use. His organization felt that defining charities would
be like opening Pandora's Box. He referenced riverboat gambling
in the central Midwest where the thought was to have tourists
gambling on the boats; but once the laws were written,
essentially a pontoon raft with a walkway along the waterway
would be eligible to be a casino. He said:
We like to think we create jobs for our community; we
offer scholarships to students and members of the
community; we have a growing source of summer
entertainment at a very minimal cost to the community.
This is something that we sought out as a revenue
source over two decades ago.... I think you're going
to have a very difficult time trying to pin down what
constitutes a charity without seeing further loopholes
or aggravations in the future.
CHAIR BUNDE said that maybe the definition of charitable
gambling needs to be changed to non-profit or just fund-raising
gambling.
SENATOR FRENCH asked Mr. Smith how much his net proceeds are per
year.
MR. SMITH answered the return is currently 40 percent or about
$241,000.
MR. STEVEN BORCHORDING, General Manager, Gold Cache Bingo in
Anchorage, said defining what is charitable gaming and what
isn't would be significantly problematic. He said:
I don't at this time need to go to Easter Seals and
get a pair of crutches for my son. However, I like to
take my son to the baseball games in Anchorage and
they are very inexpensive entertainment. He can watch
kids who someday might be major league players. Is
that charitable or not? I don't know. Is that
bettering the community? I would think so. The fact
that I hear not letting kids play sports concerns me,
because I have a son and I would love for him to be
able to play sports. If I can afford it great, and if
I can't I would love to have somebody help if I could.
And how is that not bettering the community? He could
be off doing something else, which we hear about all
the time. So, what is the definition of a charity and
what isn't?
MR. BORCHORDING said that both pulltabs and raffles are
gambling; someone is wagering money to win something. He thought
it is more important to make sure that the permittees are
actually used properly and that a lot of today's discussion is
already in place.
CHAIR BUNDE mentioned that he heard that his organization
returned more than the required 30 percent.
MR. BORCHORDING agreed saying that in 2001 it returned 57
percent; in 2002 it returned 54 percent; and in 2003 it returned
53 percent (using pulltabs).
CHAIR BUNDE asked if he attributed those returns to being an
MBP.
TAPE 04-6, SIDE A
3:10 p.m.
MR. BORCHORDING replied no and that it had more to do with
building the business.
CHAIR BUNDE asked him if he was hired by his organizations.
MR. BORCHORDING replied that a board of directors hired him
under contract with certain parameters and fiduciary
responsibilities.
SENATOR SEEKINS said he had just talked with Red Boucher,
founder of the Fairbanks Goldpanners Baseball Team, about all
the good players who had played for them. Pulltabs were not used
for revenue back then. While on the board of directors for the
Alaska Goldpanners, Senator Seekins said he founded the North
Pole Knicks and became the commissioner of the Alaska Baseball
League. He used to hire kids to work in his dealership.
Kids don't work in the summer now; they work at the
ballpark mowing the grass, because they have pulltab
revenue. They don't have to have community involvement
as much as they used to have. So, there's been a
culture change....
He continued saying that pulltabs are an alternative, easier,
less confrontational way to raise money. Other organizations
started using pulltabs to raise money and there is an ever-
increasing number of permittees. "Are we just going to let it
grow and see where it ends or should there be some constraint as
to what a true charity is?"
MR. BORCHORDING responded that he talked to some groups who are
technically charitable even under the senator's definition
(including one who runs Alaskan Independent Blind, Inc.) and the
fact is that knocking on doors and telephone calls are not
creating the kind of revenue they used to. This [pulltabs] fills
the gap without having to ask the government for money.
MR. JOHN REGAN, Spenard Lions, said that his club used to raise
money going door-to-door selling brooms and light bulbs.
That takes time. Volunteers have only so much time
they can give. By using money gained from gaming, we
can donate and use more of our volunteer time than if
we had to go out and raise the money other ways.... So
this has helped us help more people.
CHAIR BUNDE said the bigger question is that there are only X
amount of dollars in the non-profit gaming community and if the
Legislature "tightened it up," would the Lions Club get a bigger
share - not should they go back to selling brooms. He then asked
Mr. Loescher what he thought.
MR. ROBERT W. LOESCHER, Tlingit-Haida Community Council (THCC),
said he also represents a number of Alaska Native Brotherhood
Associations (ANB). He agreed that trying to define charitable
would be an impossible task. It might be easier to look at how
the federal government classifies gaming, which is how the
National Gambling Impact Study Commission (a 20-year report on
gambling) looked at it.
He warned that non-profit organizations need to deal with
government agencies and tax entities within some sort of legal
framework and many elect to go to non-profit status and IRS tax
code classifications (even though it takes a while).
MR. LOESCHER stated that local communities don't get the federal
and state funding that they used to and local communities have
tried to solve problems; for instance, pulltabs in Juneau pay
for the high school basketball and football teams. He urged the
committee to consider the kind of gaming it wants to enable and
what purposes the funding will go toward.
CHAIR BUNDE asked Mr. Prather if he would comment on his ideas
about the definition of charity.
MR. PRATHER commented, "Mr. Chairman, that is a minefield I
would rather not walk through."
SENATOR FRENCH said he was told that some charitable gaming
operators formed a trade association and ran a permit and used
some of the proceeds from it to defend themselves when they were
sued by the state for not turning over all the money they were
supposed to in their other operations.
MR. PRATHER replied that did take place. An operator conducted
gaming on behalf of a number of permittees, one of whom was a
trade association called the Charitable Gaming Association of
Alaska. An audit determined that the operator had underpaid his
permittees by $186,000 and one of the beneficiaries of that
should have been the Charitable Gaming Association of Alaska.
The operator hired an attorney and during the course of the
hearing it came out that all the legal fees paid to the attorney
came from the Charitable Gaming Association of Alaska (one of
the groups the money was being recovered for). That case
continued to the Supreme Court and was eventually settled before
the final decision. "That's one of the most egregious abuses
that we've seen of gaming money."
SENATOR FRENCH asked what statute would prohibit that from
happening again.
MR. PRATHER replied that particular organization is no longer in
business, but one other exists that is spending the money the
way the laws were intended for them to spend it. He explained
that the department would not object if a trade association used
its money to file a lawsuit over proposed regulations.
MR. POWERS closed with an idea he had to charge a $1 "user fee"
admission to each bingo session. He thought this fee would be
easy on the operators and MBPs and bring in a couple of million
dollars to the general fund. The money could be sent in to the
state every month.
CHAIR BUNDE said that really wasn't the focus of today's
meeting, but he would circulate any correspondence on it to the
rest of the committee. He asked if there were any more closing
comments.
MR. DAVE LAMBERT, Fairbanks, asked the committee to look at
"pooling" and better enforcement in relation to licensees'
employees.
MR. DENNIS SMITH closed saying that his organization is very
satisfied with current enforcement.
DR. HAAKENSON closed also agreeing with the status quo, but
wanting clearer definitions to deal with the next time he was
asked to speak on this issue.
MR. BORCHORDING closed saying that he hadn't raised his main
point yet, which is to do away with authorized expenses.
Set a specific amount that must be paid from each
pulltab game that is closed. If I close out 10 $1,000
games this month and I'm an operator, so to speak;
show me the check for $3,000. You're out; it's done.
If I'm a self-directed permit like I run right now, of
course, I'm going to be trying to maximize my profits.
So, I must submit a check of at least 30 percent. If
it's more than that, wonderful, my charities make more
money. It's very simple....
He agreed with Mr. Power's suggestion of a $1 fee and the need
for accountability. He supported mandated sentencing for
violations of gaming statute and for the licensee to be the
responsible party, not an employee.
CHAIR BUNDE asked anyone with more comments to submit them in
writing and said he would distribute them to the committee.
There being no further business to come before the committee, he
adjourned the meeting at 3:30 p.m.
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