The Senate Committee on Judiciary was called to order by Chairman Mark A. James, at 9:25 a.m., on Wednesday, April 28, 1999, in Room 2149 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Mark A. James, Chairman

Senator Jon C. Porter, Vice Chairman

Senator Mike McGinness

Senator Maurice Washington

Senator Valerie Wiener

Senator Terry Care

COMMITTEE MEMBERS ABSENT:

Senator Dina Titus (Excused)

STAFF MEMBERS PRESENT:

Janice McClure, Committee Secretary

OTHERS PRESENT:

James F. Mulhall Jr., Lobbyist, Nevada Resort Association, stated A.B. 651 deals with tax, regulatory, and marketing issues. He said based on recommendations from the Senate Committee on Judiciary and the Assembly Committee on Judiciary the Nevada Resort Association worked out a compromise regarding the marketing issues with the Nevada Gaming Manufacturers Association which is embodied in the first reprint of A.B. 651.

John A. Godfrey, Lobbyist, Nevada Resort Association, read verbatim from his written testimony submitted as Exhibit C. Chairman James asked why inter-casino-linked systems were not previously required to be licensed.

Mr. Godfrey replied the first inter-casino-linked system was "Megabucks" which was produced in the mid-1980s and at that time there was not a category for "Megabucks" other than associated equipment. He stated also at that time the State Gaming Control Board and the Nevada Gaming Commission did a very extensive formal review of Megabucks, the issue was placed on an agenda, and was approved as associated equipment with 24 conditions attached to the approval. He indicated therefore there was a formal approval process with respect to the first inter-casino-linked system. Mr. Godfrey continued over the years the approval has become less formal and has moved into the administrative realm. He said most of the inter-casino-linked systems have gaming devices which have been approved by the State Gaming Control Board and the Nevada Gaming Commission, so the review is focused on the links connecting the systems. He said the Nevada Resort Association believes it is time to put the inter-casino-linked systems in a formal approval process just as all other separate gaming operations are approved in the State of Nevada.

Senator Wiener, referencing page 4, lines 31 through 35, of A.B. 651, asked if the rate of progression and the metering issue can be changed once established as shared information.

Mr. Godfrey responded in the original version of the bill there was some language that would have required approval for changes in the rate of progression, and these regulations to be adopted would not require a formal approval for a change in the rate of progression. He continued when the system is approved the rate of progression will be disclosed; the regulation will set a minimal rate of progression; and the regulations would provide for a notice or some other administrative procedure so that any changes in the rate of progression could be made rather quickly.

Senator Wiener asked if the notice and information sharing would be with the State Gaming Control Board or the Nevada Gaming Commission and the licensees. Mr. Godfrey replied it would be shared on a confidential basis so the third parties would not have access to the information.

Samuel P. McMullen, Lobbyist, International Game Technology (IGT), said he negotiated with the Nevada Gaming Manufacturers Association on the provisions of A.B. 651 and the manufacturers association supports this bill in its current form. Mr. McMullen stated the manufacturers association wanted to maintain as much flexibility as possible in the manner of sale or disposition of the machines whether by lease or otherwise. He continued the tax issue in sections 9, 10 and 11 of A.B. 651 was a bargaining point prior to the legislation. Mr. McMullen added he feels the tax issue will end up being a matter of some sort of bargaining whereby it will be specifically identified and remitted on an identifiable basis.

Senator Care asked why the Legislature is the proper venue for settling gaming differences as opposed to a courtroom. Mr. Mulhall said the bill addresses tax policy and regulatory policy and those types of policy issues are always resolved at the Legislature. Mr. Mulhall stated the market-concern issue seemed to be a debate of concern with the Nevada Resort Association because of the growing market concentration which was worked out through discussions with the Nevada Gaming Manufacturers Association.

Senator Care asked if IGT, being 94 percent of the gaming market, would change with the passage of A.B. 651. Mr. Mulhall replied no, IGT will still be 94 percent of the gaming market. Mr. Mulhall added that during discussions with the Nevada Gaming Manufacturers Association, commitments were made to take a fresh look at the marketing issues.

Mr. Godfrey pointed out multiple licensing criteria is an area the State Gaming Control Board and the Nevada Gaming Commission will evaluate in adopting multiple-licensing regulations.

Mr. Mulhall stated in terms of legislative input, A.B. 651 is a far different bill than what was originally drafted. Mr. McMullen said the issues identified that were more appropriately business-to-business, customer-to-supplier, had been adequately addressed outside A.B. 651 and are not a part of the bill.

Senator Wiener asked how many companies make up the Nevada Gaming Manufacturers Association. Mr. McMullen replied 13 companies that are gaming manufacturers. He said three of those companies are publicly traded companies showing earnings and profits last year and five of those companies are competing in the inter-casino-linked system arena. Mr. McMullen stated the technology for the inter-casino-linked system is not owned by IGT in terms of Megabucks.

Senator Porter said he appreciated hearing the marketing and contractual issues have been worked out among the appropriate entities.

Senator McGinness, in referring to the language in section 9, subsection 4, of A.B. 651, asked if the rate is aggregated when there are revenues from several different casinos.

Mr. Godfrey responded that issue is going to have to be worked out. He said many of the systems are based upon "coin-in" whereby the operator takes a percentage of the money actually played into the machines and the accountants then translate how that monetary figure equals gross revenue upon which the licensee pays fees and taxes. Mr. Godfrey stated even though different locations may have the same contract, the proportionate share of gross revenue fees could vary slightly from location to location.

Senator McGinness asked if all of that revenue would be subject to audit by the Nevada Gaming Commission. Mr. Godfrey replied yes, but it is not intended to have the State Gaming Control Board necessarily audit the operators of inter-casino-linked systems with respect to the casinos’ remission of proportionate shares of fees and taxes.

Mr. McMullen clarified the tax rate would apply as it applies to a particular casino. He said it is not aggregated across the system, it is per licensed location as the revenue is currently collected.

Dennis K. Neilander, Board Member, State Gaming Control Board, emphasized the State Gaming Control Board is neutral on A.B. 651. He said the bill still requires the licensee to be 100 percent liable for the tax and that is something the board supports because it does not want to audit beyond the top licensees.

Senator Wiener asked what affiliated licensee is and would an affiliated licensee be privy to the confidential information. Mr. Neilander responded an "affiliated licensee" is a subsidiary either controlled by or under common control with the licensee. He pointed out the confidentiality issue would apply to the affiliated licensee as well as the licensee.

There being no further testimony, Chairman James closed the hearing on A.B. 651 and announced that the sponsor of A.B. 666 had requested the bill be heard at a later hearing.

There being no further business, Chairman James adjourned the meeting at 10:10 a.m.

RESPECTFULLY SUBMITTED:

Janice McClure,

Committee Secretary

APPROVED BY:

Senator Mark A. James, Chairman

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