Article 1 - Racino

Section 1 [Prohibition Near Racino] prohibits "detached facilities" on the premises of a racetrack that is a location contract holder for gaming machine play.  A detached facility is an automated teller machine.

Section 2 [Commission Powers and Duties] adds duties for the Racing Commission, including ensuring security and licensing employees and vendors involved in the conduct of gaming machines at a racetrack.  This section requires the commission to be reimbursed by the racetrack for its costs for the added duties. This section requires the commission to review procedures of the racetrack to ensure proper disbursements from a new equine industry improvement fund established in Section 3.

Section 3 [Equine Industry Improvement Fund] requires the Racing Commission to establish an equine industry improvement fund and requires that funds the commission receives from gaming be deposited in the fund.  Money in the fund is applied as follows: to purse supplements (amount unstated), a breeder’s fund (20 percent), and an equine industry enhancement fund (five percent). This section specifies further details about distribution of the funds.

Section 4 [Lottery Contract Holder; Minimum Racing Days] sets a minimum number of days of live racing required for racetrack licensees that hold location contracts for gaming.  Licensees authorized to conduct live racing for more than one breed (currently, Canterbury Park) are required to conduct thoroughbred and quarter horse racing.  This section requires the licensee to offer the equivalent of at least two quarter horse races for each racing day, but allows the licensee and the organization representing the majority of certain quarter horse owners to agree to a different number of live races to be offered.  A licensee that willfully fails to offer the required races is subject to disciplinary action. 

Section 5 [Lottery Gaming Machines; In-Lieu Fee] exempts adjusted gross revenue from gaming machines from sales tax, and establishes an in-lieu fee to be transmitted by the Racing Commission to the Commissioner of Revenue who deposits the money in the state treasury. The in-lieu fee is calculated as follows:

• 25 percent for the first $150 million of adjusted gross revenue;
• 30 percent of adjusted gross revenue between $150 million and $200 million; and
• 40 percent of adjusted gross revenue over $200 million.

Section. 6 [Exclusions] permits the State Lottery and location contract holders to possess a gambling device.  “Gambling device,” as amended later in the bill, includes gaming machines.

Section 7 [Restrictions] makes it legal for a manufacturer to sell, lease, or rent a gambling device to the State Lottery.

Section 8 [Adjusted Gross Gaming Machine Revenue] defines “adjusted gross gaming machine revenue” as all money received by the lottery for gaming machine plays, other than promotional plays, less prizes paid for gaming machine games.

Section 9 [Gaming Machine] defines “gaming machine” to mean “any electronic device which, upon insertion of money, coin, token, voucher, electronic card, or other consideration, allows the play of a game, authorized by the director of the lottery, the outcome of which is determined entirely or partly by chance."  A gaming machine may award a player a prize in the form of money, tokens, prize slips, or other authorized consideration. 

Section 10 [Gaming Machine Area] defines "gaming machine area" to mean an area within ten feet of a gaming machine.

Section 11 [Gaming Machine Game] defines “gaming machine game” to mean a game operated by a gaming machine as authorized by the lottery director.

Section 12 [Gaming Machine Play] defines “gaming machine play” as an electronic record that proves participation in a gaming machine game.

Section 13 [Lottery Procurement Contract] extends the definition of “lottery procurement contract” to include contracts to provide and maintain gaming machines, and to provide computer hardware and software for monitoring gaming machine plays.

Section 14 [Lottery Operations] exempts location contract payments to racetracks from limits on lottery operations expenses.

Section 15 [Restrictions] is a conforming amendment to allow the lottery director to install or operate gaming machines that may be operated by coin or currency.

Section 16 [Gaming Machines]

Subdivision 1 [Location Contract], paragraph (a), allows the lottery director to enter into contracts to provide locations for gaming machines.  This section exempts location contracts from state procurement requirements. The lottery director may enter into a location contract only with a holder of a class A racing licenses.  (Under current law, class A licenses are held by owners and operators of a racetrack on which paramutuel betting is conducted.  Class A licenses are held by the owners and operators of Canterbury Park and Running Aces Harness Park.) This section voids a location contract if the racetrack does not meet one of the following conditions:

• Has hosted at least 75 days of live racing during the previous year; or
• Has not been approved, unless approval is pending, for at least 75 days of live racing during the present year;

For a racetrack that is authorized to conduct racing for only one breed of horse, the live racing requirement is 50 days.

Paragraph (b) sets conditions under which the lottery director may cancel, suspend, or refuse to renew a location contract.  This section makes a cancellation, suspension, or refusal to renew a location contract a contested case under the Administrative Procedure Act.

Paragraph (c) sets tiered compensation to the racetrack as follows:

• 60 percent of the first $150 million of annual adjusted gross gaming machine revenue;
• 55 percent of annual adjusted gross gaming machine revenue between $150 million and $200 million; and
• 45 percent of annual adjusted gross gaming machine revenue in excess of $200 million.

Paragraph (d) requires a licensee to pay one percent of the compensation it receives to the city and one percent to the county in which the licensee conducts racing.

Subdivision 2 [Operation], paragraph (a), requires that gaming machines at racetracks be operated and controlled by the lottery director.

Paragraph (b) requires that gaming machines are owned by the lottery director, and delineates responsibilities of the lottery director and the holder of a location contract.

Paragraph (c) requires that gaming machines be maintained by the lottery or its vendor.

Paragraph (d) requires a central communication system, located at the lottery office, that monitors activities on gaming machines.

Paragraph (e) requires the lottery director to supervise the security arrangements for gaming machines and to implement procedures.

Paragraph (f) requires that advertising and promotional material produced by the racetrack relating to the gaming machines be approved by the director.

Paragraph (g) allows the lottery director to implement controls for gaming machines.

Paragraph (h) requires a location contract holder to make reasonable efforts to prevent drinking or possession of intoxicating beverages in gaming machine areas.  This section precludes the location contract holder from serving intoxicating beverages in a gaming machine area.  A location contract holder is exempt from this prohibition if a tribal casino within ten miles allows alcohol consumption in a gaming machine area.

Subdivision 3 [Specifications] requires that gaming machines be capable of being linked electronically to a central communications system to provide certain auditing program information.

Subdivision 4 [Games] directs the lottery director to specify games that may be placed on a gaming machine.  Gaming machines may conduct parimutuel wagering and display horse races.

Subdivision 5 [Examination of Machines] requires that the lottery director examine prototypes of gaming machines and requires that the cost of examination be paid by the manufacturer of the machines.  This section permits the director to contract for the examination of gaming machines.

Subdivision 6 [Testing of Machines] permits the lottery director to require working models of gaming machines to be transported to certain locations for testing, examination, and analysis, at the manufacturer's expense.

Subdivision 7 [Prizes] requires players to be bound by applicable rules and game procedures.  The player acknowledges that a determination of winning a prize is subject to certain rules and game procedures, and validation tests.  This section precludes a person under 18 years of age from claiming a prize from operation of a gaming machine.  This section exempts a gaming machine prize from the requirement of withholding of delinquent state taxes or other debts.  This withholding requirement is in current law and applies to lottery prizes. 

Subdivision 8 [Prohibitions] sets an 18-year age limit for playing a game on a gaming machine.  Precludes the lottery director, lottery employees, and certain family members from playing a game on a gaming machine or receiving a prize.  This section precludes consumption and possession of intoxicating beverages within a gaming machine area.

Subdivision 9 [Compulsive Gambling Notice] requires the lottery director to post the telephone number of the state-sponsored compulsive gambling program, and establishes a responsible gambling plan with annual reporting to the Legislature.

Subdivision 10 [Local Licenses] precludes political subdivisions from requiring a license to operate a gaming machine; restricting or regulating the placement of gaming machines; or imposing a tax on the business of operating gaming machines.

Section 17 [Lottery Budget] requires the lottery director to submit a budget for the operation and control of gaming machines to the Commissioner of Management and Budget.  This section allows the lottery director to expend amounts necessary to operate and control gaming machines without being subject to budget plan processes and limits on operating expenses in current law for the operation of the lottery.  This section exempts the amounts spent by the lottery director to operate and control gaming machines in fiscal years 2013 and 2014 from the limit for operation of the lottery. 

Section 22 [Repealer] repeals limits on the number of tables allowed at a card club and at tournaments and on limits on wagers at card clubs.

Article 2 - Education

Section 1 [Racino Revenue], subdivision 1 [Allocation] requires the Commissioner of Revenue to deposit the amount it receives from gaming machine revenue in a special account as provided later in this bill.

Subdivision 2 [Education]  establishes a special account in the state treasury consisting of revenue generated by the in-lieu fee on gaming machine revenue and earned interest.  Money in the account may not be spent unless appropriated and is dedicated, in priority order, to: (1) increase aids and credits to school districts to not more than 90 percent; and (2) restore all or a portion of the net aid reduction and to reduce the property tax revenue recognition shift.

Subdivision 3 [Bonding] provides that revenue in the special account be used to make payments on outstanding state bonds, after the education aid shifts are satisfied.

Article 3 - Miscellaneous

Section 1 [Severability; Savings] declares that if any provision of this act is invalid, all other provisions remain valid.

Section 2 [Effective Date] this act is effective the day following final enactment.

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