The July 20 meeting of the Gaming Advisory Council, the first since the Legislature adjourned, was largely an orientation meeting for three new members and an opportunity to begin setting the issues agenda for the coming biennium.
New to the council were HD 10 Rep. Mark Blasdel of Somers; Mark Kennedy, President of the Montana Council on Problem Gambling and former city councilman, Billings, and Robert McAnally of Poplar, an attorney and vice president for academics at Fort Peck Community College. Rep. Blasdel represents the Montana House, Kennedy the public and McAnally, the tribes.
Attorney General Mike McGrath, who appointed Kennedy and McAnally, was on hand to welcome the new members. He thanked the council members for their hard work over the past six years of his term, then acknowledged their effectiveness in considering difficult issues and helping shape rules and legislation. He encouraged them to keep up the good work.
"We're far beyond where we thought we'd be seven or eight years ago," McGrath said. "The new members will be equally productive (as current ones). I appreciate what you've done and what you'll do."
The council voted in John Tooke of Miles City, representing the gaming business, as chairman. Pam Kennedy, Kalispell mayor and representative of local government, was elected vice chair.
Shauna Helfert, Liquor Division administrator, briefed the council on recent alcohol beverage statutory changes. Liquor law is of interest to the council since obtaining a liquor license is a prerequisite to acquiring a gaming license.
Helfert noted the Legislature had passed SB127 which brings state law into compliance with a 2005 U.S. Supreme Court decision (Granholm v. Heald) that declared state's must treat in-state and out-of-state producers of beer and wine the same when it comes to distribution.
HB113 was also passed in response to a District Court ruling which found that Montana's requirement that liquor license holders be state residents was unconstitutional. Out-of-state residents can now own liquor licenses and Helfert said about 10 applications have been received and some have been approved.
Another new law, HB300, prohibits the state from revoking a liquor license that was obtained when the applicant relied in good faith on statements made by government officials. This was a response to two Great Falls cases where the Department of Revenue had moved to revoke licenses that had been issued based on a flawed survey by Cascade County.
Another important bill to clean up the liquor license lottery system passed the last legislature, Helfert said. HB633 clarified how licenses from under-quota areas can be moved or "floated" into under-quota areas and closed some loopholes that had been abused.
Now, Helfert explained, applicants must submit a $100,000 letter of credit, may apply for only one in each year and, if successfully drawn, must put the license to work within the year. And under the new law, licenses that "float" from an over-quota area to an under-quota area via lottery will not have gaming privileges.
Another significant bill, SB296, effectively doubled the number of available "cabaret" restaurant beer and wine licenses for growing cities (see complete report on cabaret license lotteries on page 7 in this edition). Now 124 new cabaret licenses will be issued by early August.
Chairman Tooke, who also serves on the state board of horse racing, reported on several pieces of legislation that were passed in the hope of resurrecting the waning sport in the state.
HB333 allows for pari mutuel betting on bronc riding and wild horse racing and was meant primarily to help the Bucking Horse Sale in Miles City. Tooke said this year's event was able to formulate rules and implement a betting system for the bronc event, but that rules for wild horse racing would be more complex and implementation would have to wait for next year.
HB390 allows for telephone account wagering for horse and dog racing with hubs outside the state.
HB616 combined two legal activities, fantasy sports leagues and para mutuel simulcast wagering, into one. Tooke said this activity would be "difficult to organize but there is substantial interest," especially from gaming machine route operators who see it as a potential traffic draw.
"Serious business people are taking a serious approach," Tooke said, "but the rules writing process is staggering." He also noted pari mutuel wagering on fantasy leagues is allowed nowhere else in the country.
Next up was Andy Huff, the Governor's chief negotiator of tribal gaming compacts. He told the council that a new compact was in place with both the Northern Cheyenne and Ft. Belknap tribes which allowed both to offer $2,000 maximum payouts for Class III video poker and keno machines and authorized the tribes to run 400 machines each.
He said negotiations with the Crow were "going well" but that apparently the Confederated Salish and Kootenai Tribes (CS&KT) of the Flathead reservation and the Blackfeet were content to run Class II gaming only (bingo and the slot-like bingo machines such as "Rocket Bingo") which requires no compact with the state.
Huff said the Governor's office was "open anytime to restarting negotiations" with CS&KT or the Blackfeet. Tribal and non-tribal operators on the Flathead reservation had to cease Class III gaming last November when negotiations went nowhere and the compact expired.
At that juncture McAnally said, from his perspective the federal Indian Gaming Regulatory Act was inherently unfair to tribes, noting, "I represent everyone involved in gaming on reservations, not just the tribes."
Gene Huntington, administrator of the Gambling Control Division, said the council might want to consider taking up the issue of internet gambling once again. Several years ago the council assisted the division in getting a statutory prohibition on internet gambling (excepting pari mutuel, lottery and tribal wagering), but subsequently Congress had passed a law allowing states to operate intrastate--as opposed to interstate--internet gambling.
Huntington said some are speculating that Congress may do more in this area. Some states, particularly Nevada, are moving on the intrastate front but the key impediment, Huntington said, is the federal requirement that age verification techniques be proven and that the geographical origin of a bet must be determined.
He said there could be tax, licensing and other regulatory matters that would need attending. Theoretically, Montana could allow intrastate internet poker tournaments or raffles that could soon resemble big lotteries, he said.
Chairman Tooke said he favored keeping gamblers in licensed gambling venues where at least gambling could be taxed and regulated, especially credit gambling which is the internet gambling Achilles heal. "We need to be on top of this before the horse gets out of the barn," he said.
Rich Miller, executive director of the Gaming Industry Association of Montana, said he thought this will be a "hot button issue" for the council. "There is interest there in every form of gambling" from other jurisdictions, he said. "Poker, keno, bingo... Problem gambling is our big concern."
The Montana Council on Problem Gambling's Mark Kennedy said, "This is one of the National Council on Problem Gambling's top three greatest areas of concern. It needs to be controlled, taxed, regulated."
Huntington said raffles may also require council consideration, especially since a bill to legalize intrastate internet raffles was introduced--but failed--in the last legislature.
He noted when the state effectively took jurisdiction of all gambling in 1989, they left responsibility for raffles with county governments which, sometimes, are ill-equipped to regulate them. He noted some raffles have sold so few tickets they were unable to actually provide the prize.
Tooke wondered if perhaps raffles shouldn't also fall under state jurisdiction and Ronda Wiggers, lobbyist for the Montana Coin Machine Operators Association, suggested local raffles could be licensed by local government, but that big state-wide raffles might be best regulated by the state.
Pam Kennedy said she thought the item ought to remain on the council's menu for the foreseeable future.
On the subject of problem gambling, Mark Kennedy reported that the past June saw record payments to providers of problem gambling treatment, up about 30 percent from one year ago. He attributed the increase to more awareness of the services and to expanded services being offered, including family counseling.
"In 2000, we had nine providers, 110 groups and 210 participants. In 2007 for the same period we have 34 providers, 816 groups and 1,772 participants," Kennedy said.
He also acknowledged that the MCPG had looked into public funding, but has decided private funding is "the right path. But we need to find other sources of funding" and the group is more closely looking at the potential of grants.
Tooke said he thought problem gambling must remain the number one concern of business groups and that the council "needs to continue to look at this, needs to always face this."
Huntington directed discussion toward the status of the decade-long effort to implement automated reporting and accounting processes for the state's 17,300 operating gaming machines.
"It's coming to an end," he said, noting that for the reporting period ending June 31, several route and location operators responsible for over 2,000 machines had begun reporting, successfully, via the internet. He also said a second accounting system had been approved by the division.
He said locations that had signed the multi-game agreements over the last several years were now obligated to begin reporting electronically or remove the multi-game systems from their establishments. He said they have until January 1 to do so, but that as long as the division was busy bringing machines on board, they wouldn't press for rapid compliance.
He said those who will need to come on-line will have available a short training session and a 90-day reporting period to get up to speed.
Huntington also noted the new database required to accommodate automated reporting was projected to cost $1.5 million, but actually came in closer to $1 million. The system is also integrated with the Department of Revenue's GenTax system and the state internet system that has been developed to allow on-line licensing for, as an example, hunting and fishing licensure.
Electronic permitting of gambling machines has been a major objective of the state and business owners for years and so far the concept seems to be working well, Huntington reported.
Tooke said the automated system "should be good for everybody" while council member Steve Morris, who represents business, said his dealing with state personnel on all related matters "has been just tremendous."
During the "public" portion of the meeting, GIA's Miller said one of his members requested the council take up a failed bingo bill in light of proposed amendments.
He added that people in the gaming businesses are aging and more deaths and divorces are occurring. He suggested the council study whether a streamlined process could be developed for simply removing a party's name from a license. As the matter stands now, to remove a name triggers the equivalent of a complete license application process, including re-investigations of those already listed and already investigated.
Blaine Bowman, representing gaming machine manufacturer Spielo, said the impact printers currently required in gaming machines under Montana law were becoming obsolete. He said only one manufacturer of the devices, Ithica, remains in the business. The impact printers rely on carbonless duplicating paper to print two copies of every transaction and duplicate audit tapes.
All other manufacturers in other jurisdictions are going to thermal printers, he said, but didn't know how that technology could meet the state's requirements for duplicate audit tapes. "I don't know where we go on this," he said.
Sandy Jones, a licensee from Missoula, noted the carbonless paper rolls are expensive and often of poor quality or defective. The paper suppliers blame manufacturers or the printers for poor reproduction, she said, while printer manufacturers will blame paper quality problems. "This needs to be dealt with," she said.
Tooke said the council might start "taking the steps to get over this."
Morris said he thought the council might want to consider local zoning issues that keep surfacing related to business location, and even restrictions on the number of machines. The issue has come up most recently in Billings, Whitefish and Missoula, it was reported.
Huntington noted state law says localities have no jurisdiction over gambling regulation, with the exception of zoning, but that some zoning regulations may amount to gaming regulation beyond simply location.
Miller said cities can zone "where gambling can be, but not how gambling can be," which is clearly exclusively within state jurisdiction.
Kalispell Mayor Pam Kennedy cautioned the council to "tread lightly" when considering it relationships with local governments and Mark Kennedy, a former Billings City Councilman, noted that municipal government had asked him to work with the council on zoning issues.
Huntington agreed to have division staff work up a background paper on the subject for the next meeting.
Finally, Tooke said he thought the new law allowing any retailer to sell up to three antique gambling devices–defined as "at least 25 years old"–a year "is a real Pandora's Box. We've got poker and keno machines all over this state that are nearing 25 years old."
Huntington noted a question had recently arisen as to whether a "reproduction" slot machine with some old parts was a bona fide antique.
Tooke said the law may require more refinement with improved definitions as problems become apparent.
With that, the council agreed to consider in the future: internet gambling, thermal printers, antique gaming devices, zoning issues, raffles (and how that might relate to the internet) and a streamlined process for removing individuals from licenses.
The Council agreed to conduct it's next meeting Nov. 2 in Helena.
Source: The Montana Tavern Times, August, 2007, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701.