Creates 4-yr pilot project to allow slot machines in hotels in areas designated resort by the counties. Creates HI gaming control commission. Reserves    % of state gaming fund for administration &    % for problem gambler services; of remainder, 75% to education, 25% to long-term care.

A BILL FOR AN ACT

SECTION 1. The legislature finds that competition to attract tourists to locations all over the world has increased dramatically and Hawaii's tourism industry must take innovative steps to keep pace. In addition, in order to maintain much needed social programs, guarantee quality education, and expand economic growth, the State should address these needs by enacting limited gaming throughout the islands in certain resort area hotels.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

§   -1 Legislative intent. This chapter is intended to benefit the people of the State of Hawaii by creating a new revenue source, slot machine gaming in certain resort area hotels that will enhance investment, development, and tourism in Hawaii. This can be successful only if public confidence and trust in the credibility and integrity of the gaming operations and the regulatory process is maintained. Thus, this chapter strictly regulates the facilities, persons, associations, and practices related to slot machine operations.

§   -2 Slot machine gaming authorized. Slot machine gaming and a system of wagering incorporated thereof, as defined in this chapter, are authorized to the extent that they are carried out in accordance with this chapter.

§   -3 Definitions. As used in this chapter, unless the context requires otherwise:

"Commission" means the Hawaii gaming control commission.

"Department" means the department of business, economic development, and tourism.

"Executive director" means the executive director of the commission.

"Gross receipts" means the total of:

Gross receipts do not include counterfeit money or tokens, coins of other countries which are received in a slot machine, cash taken in fraudulent acts perpetrated against a licensee for which the licensee is not reimbursed, and cash received as entry fees for contests or tournaments in which patrons compete for prizes.

"Hotel" has the same meaning as the term is defined in section 445-90 and as defined by the various county ordinances; provided that, to be considered a hotel for the purpose of this chapter, an establishment must have a minimum of          guest rooms.

"Individual" means a natural person.

"Person" includes an individual, association, partnership, estate, trust, limited liability company, corporation, or other legal entity.

"Resort area" means land designated for resort use pursuant to county authority under section 46-4.

"Resort area hotel" means a hotel located in a resort area.

"Slot machine gaming" means the operation of slot machine games licensed under this chapter, that is authorized by the commission as a wagering device.

"Slot machine license" means a license to operate slot machine gaming under this chapter.

"Supplier's license" means a license to furnish any equipment, devices, or supplies to a licensed slot machine gaming operation permitted under this chapter.

§   -4 Hawaii gaming control commission. (a) There is established the Hawaii gaming control commission which shall be a body corporate and a public instrumentality of the State, for the purpose of implementing this chapter. The commission shall be placed within the department for administrative purposes.

(b) The commission shall consist of five members to be appointed by the governor with the advice and consent of the senate under section 26-34. Of the five members, two shall be appointed from a list of nominees submitted by the president of the senate, and two shall be appointed from a list of nominees submitted by the speaker of the house of representatives. All appointments to the commission shall be made within sixty days of the effective date of this Act. The members shall elect one from among them to be the chairperson. Each member shall have reasonable knowledge of the practice, procedure, and principles of slot machine gaming. Each member shall either be a resident of Hawaii or shall certify that the member will become a resident of Hawaii before taking office. At least one member shall be experienced in law enforcement and criminal investigation, at least one member shall be a certified public accountant experienced in accounting and auditing, and at least one member shall be an attorney licensed to practice law in Hawaii.

(c) No person shall be appointed a member or continue to be a member of the commission if:

(d) The term of office of a commission member shall be four years, except that the terms of office of the initial members appointed shall be staggered, with one member serving one year, one member serving two years, one member serving three years, and two members serving four years. No member shall serve more than two consecutive terms. Vacancies in the commission shall be filled for the unexpired term in like manner as the original appointments.

(e) The governor may remove or suspend any member of the commission after due notice and public hearing. The president of the senate or the speaker of the house of representatives may request that the governor remove or suspend a member of the commission nominated by either the president of the senate or speaker of the house of representatives.

(f) Members shall:

(g) Officers of the commission, including the chairperson, shall be selected by the members. The commission, subject to chapter 92, shall hold at least one meeting in each quarter of the State's fiscal year. Special meetings may be called by the chairperson or any three members upon seventy-two hours written notice to each member. Three members shall constitute a quorum, and a majority vote of the members present shall be required for any final determination by the commission. The commission shall keep a complete and accurate record of all its meetings.

(h) Before assuming the duties of office, each member of the commission shall take an oath that the member shall faithfully execute the duties of office according to the laws of the State and shall file and maintain with the director a bond in the sum of $25,000 with good and sufficient sureties. The cost of any bond for any member of the commission under this section shall be considered a part of the necessary expenses of the commission.

(i) The commission shall appoint a person to serve as the executive director of the commission subject to the commission's supervision. The executive director shall hold office at the will of the commission, shall be exempt from chapters 76 and 89, and shall devote full time to the duties of the office and shall not hold any other office or employment. The executive director shall receive an annual salary at an amount set by the commission. The executive director shall be reimbursed for expenses actually and necessarily incurred in the performance of the executive director's duties.

(j) Except as otherwise provided by law, the executive director may hire assistants, other officers, and employees, who shall be exempt from chapters 76 and 89 who shall serve at the will of the executive director, and appoint committees and consultants necessary for the efficient operation of slot machine gaming; provided that no person shall be hired or appointed under this subsection who is:

(k) The salaries of employees shall be set by the executive director.

(l) Notwithstanding subsection (i), the commission may perform the functions of the executive director and may exercise the powers granted to the executive director until           , and shall not be required to appoint an executive director before that date.

(m) The commission shall adopt rules in accordance with chapter 91, establishing a code of ethics for its employees which shall include, but not be limited to, restrictions on which employees shall be prohibited from participating in or wagering on slot machines subject to the jurisdiction of the commission. The code of ethics shall be separate from and in addition to any standards of conduct set forth pursuant to chapter 84.

§   -5 Staff. (a) The executive director shall keep records of all proceedings of the commission and shall preserve all records, books, documents, and other papers belonging to the commission or entrusted to its care relating to slot machine gaming.

(b) The commission may employ any personnel, including personnel with law enforcement authority, that may be necessary to carry out its duties related to slot machine gaming.

§   -6 Powers of the commission. The commission shall have all powers necessary and proper to fully and effectively supervise a four-year pilot project of slot machine gaming under this chapter, including, but not limited to, the following:

§   -7 Slot machine gaming authorized in resort area hotels only. Slot machine gaming shall be permitted only in hotels located in areas designated for resort use by the counties under authority of section 46-4.

§   -8 Application for slot machine gaming license. (a) A qualified person may apply to the commission for a slot machine gaming license to conduct slot machine gaming; provided that the commission shall issue a maximum of one slot machine gaming license for each county. The application shall be made on forms provided by the commission and shall contain any information that the commission prescribes, including but not limited to:

Information provided on the application shall be used as the basis for a thorough background investigation, which the commission shall conduct with respect to each applicant. An incomplete application shall be cause for denial of a license by the commission. The commission shall make applications available within sixty days of its appointment. The commission shall act on any application submitted to it within ninety days of the date of submission.

(b) Each applicant shall be subject to the criminal history record check under section    -10. Each applicant shall disclose the identity of every person having a greater than one per cent direct or indirect pecuniary interest in the slot machine gaming operation with respect to which the license is sought. If the disclosed person is a trust, the application shall disclose the names and addresses of the beneficiaries; if a corporation, the names and addresses of all stockholders and directors; if a partnership, the names and addresses of all partners, both general and limited.

(c) An application fee of $50,000 shall be paid at the time of filing to defray the costs associated with the background investigation conducted by the commission, and the search and classification of fingerprints obtained by the commission with regard to the application. If the costs of the investigation exceed $50,000, the applicant shall pay the additional amount to the commission. If the costs of the investigation are less than $50,000, the applicant shall receive a refund of the remaining amount. All information, records, interviews, reports, statements, memoranda, or other data supplied to or used by the commission in the course of its review or investigation of an application for a license shall be privileged, strictly confidential, and shall be used only for the purpose of evaluating an applicant. The information, records, interviews, reports, statements, memoranda, or other data shall not be admissible as evidence, nor discoverable in any action of any kind in any court or before any tribunal, commission, agency, or person, except for any action deemed necessary by the commission.

(d) An applicant shall be ineligible to receive an operator's license if:

§   -9 Criteria for award of a slot machine gaming license. (a) The commission shall issue a license to operate slot machine gaming to applicants who meet all of the following criteria:

(b) The commission may revoke the license if the licensee fails to begin regular slot machine gaming within twelve months of receipt of the commission's approval of the application upon a finding by the commission that license revocation is in the best interest of the State.

(c) The commission shall establish a process to facilitate and expedite the approval of the necessary licenses.

§   -10 Criminal history record checks. (a) The commission shall develop procedures for obtaining verifiable information regarding the criminal history of persons who the commission is authorized to investigate. These procedures shall include a criminal history record check to determine suitability for employment.

For purposes of this section, "criminal history record check" means an investigation based on fingerprints obtained by a law enforcement officer and other identifying information by means of:

(b) The commission shall not request a criminal history record check of any person unless that person:

(c) The commission may hire or approve an applicant provisionally prior to the completion of the criminal history record check if, at all times prior to receipt of the criminal history record check, the individual is under the direct supervision of someone whose criminal history record check has been completed.

(d) The commission may refuse to employ or approve, or may terminate employment or approval of any person if:

§   -11 Bond of licensee. Before a slot machine gaming license is issued, the licensee shall file a bond in the sum of $200,000 with the department. The bond shall be used to guarantee that the licensee faithfully makes the payments, keeps books and records, makes reports, and conducts slot machine gaming in conformity with this chapter and the rules adopted by the commission. The bond shall not be canceled by a surety on less than thirty days notice in writing to the commission. If a bond is canceled and the licensee fails to file a new bond with the commission in the required amount, on or before the effective date of cancellation, the licensee's license shall be revoked. The total and aggregate liability of the surety on the bond shall be limited to the amount specified in the bond.

§   -12 Supplier’s licenses. (a) No person shall furnish any equipment, devices, or supplies to a licensed slot machine gaming operation under this chapter unless the person has first obtained a supplier's license pursuant to this section. The commission may issue a supplier's license to any person, firm, or corporation that pays a nonrefundable application fee as set by the commission, upon a determination by the commission that the applicant is eligible for a supplier's license, and upon payment by the applicant of a $5,000 license fee. Supplier's licenses shall be renewable annually upon payment of the $5,000 annual license fee and a determination by the commission that the licensee continues to meet all of the requirements of this chapter.

(b) The holder of a supplier's license may sell or lease, or contract to sell or lease, slot machine gaming equipment and supplies to any licensee involved in the ownership or management of slot machine gaming.

(c) Slot machine gaming supplies and equipment shall not be distributed unless supplies and equipment conform to standards adopted by rules of the commission.

(d) A person shall be subject to the criminal history record check under section    -10 and shall be ineligible to receive a supplier's license if:

(e) A supplier shall:

(f) Any person who knowingly makes a false statement on an application is guilty of a petty misdemeanor.

(g) Any slot machine gaming equipment, devices, or supplies provided by any licensed supplier may either be repaired on the site or be removed from the site to a place owned by the holder of an operator's license for repair. Any supplier's equipment, devices, and supplies that are used by any person in an unauthorized gaming operation shall be forfeited to the county.

§   -13 Annual report. The commission shall file a written annual report with the governor and the legislature on or before sixty days following the close of each fiscal year and any additional reports that the governor or the legislature may request. The annual report shall include a statement of receipts and disbursements related to slot machine gaming pursuant to this chapter, actions taken by the commission, and any additional information and recommendations that the commission may deem valuable or which the governor or the legislature may request.

§   -14 Hearings by the commission. (a) Upon order of the commission, a commission member or hearings officer designated by the commission may conduct any hearing provided for under this chapter related to slot machine gaming, or by commission rule, and may recommend findings and decisions to the commission. The commission member or hearings officer conducting the hearing shall have all powers and rights granted to the commission in this chapter. The record made at the time of the hearing shall be reviewed by the commission, or a majority thereof, and the findings and decision of the majority of the commission shall constitute the order of the commission in that case.

(b) Any party aggrieved by an action of the commission denying, suspending, revoking, restricting, or refusing to renew a license under this chapter may request a hearing before the commission. A request for a hearing must be made to the commission in writing within five days after service of notice of the action of the commission. Notice of the actions of the commission shall be served either by personal delivery or by certified mail, postage prepaid, to the aggrieved party. Notice served by certified mail shall be deemed complete on the business day following the date of the mailing. The commission shall conduct all requested hearings promptly and in reasonable order.

§   -15 Conduct of slot machine gaming. Casino gaming may be conducted by a licensee, subject to the following standards:

§   -16 Collection of amounts owing under credit agreements. Notwithstanding any other law to the contrary, a licensee who extends credit to a slot machine gaming patron shall be expressly authorized to institute a cause of action to collect any amounts due and owning under the extension of credit, as well as the operator's costs, expenses, and reasonable attorney's fees incurred in collection.

§   -17 Wagering tax; rate. A tax shall be imposed on the gross receipts received from slot machine gaming authorized under this chapter at the rate of ten per cent.

§   -18 The state gaming fund; disposition of taxes collected. (a) There is established within the state treasury the state gaming fund, into which shall be deposited all fees, taxes, and fines collected under this chapter, which shall be used for:

(b) The remaining amount shall be deposited quarterly into the general fund; provided that of the remaining amount, the following percentages shall be set aside for the uses indicated:

§   -19 Legislative oversight. (a) Beginning with the fiscal year beginning on July 1, 2003, the auditor shall conduct a biennial financial and social assessment of slot machine gaming. In conducting the assessment, the auditor shall identify the financial impacts of slot machine gaming on the state economy and the social impacts of slot machine gaming upon the community. The auditor shall submit a report of findings and recommendations to the legislature prior to the convening of the next regular session after the biennial assessment is completed.

(b) Beginning with the fiscal year beginning on July 1, 2002, the auditor shall conduct a program and financial audit of the Hawaii gaming control commission."

SECTION 3. Chapter 712, Hawaii Revised Statutes, is amended by adding a new section to part III to be appropriately designated and to read as follows:

"§712-     Slot machines; allowed. Any other law to the contrary notwithstanding, the operation of slot machine gaming in the State under chapter       shall be permitted."

SECTION 4. Section 712-1220, Hawaii Revised Statutes, is amended by:

1. Amending the definition of "advance gambling activity" to read:

"(1) "Advance gambling activity". A person "advances gambling activity" if he engages in conduct that materially aids any form of gambling activity. Conduct of this nature includes but is not limited to conduct directed toward the creation or establishment of the particular game, contest, scheme, device, or activity involved, toward the acquisition or maintenance of premises, paraphernalia, equipment, or apparatus therefor, excluding slot machines, toward the solicitation or inducement of persons to participate therein, toward the actual conduct of the playing phases thereof, toward the arrangement of any of its financial or recording phases, or toward any other phase of its operation. A person advances gambling activity if, having substantial proprietary control or other authoritative control over premises being used with his knowledge for purposes of gambling activity, he permits that activity to occur or continue or makes no effort to prevent its occurrence or continuation. A person advances gambling activity if he plays or participates in any form of gambling activity."

2. By amending the definition of "contest of chance" to read:

"(3) "Contest of chance" means any contest, game, gaming scheme, or gaming device, excluding slot machines, in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein."

3. By amending the definition of "gambling" to read:

"(4) "Gambling". A person engages in gambling if he stakes or risks something of value upon the outcome of a contest of chance, excluding slot machines, or a future contingent event not under his control or influence, upon an agreement or understanding that he or someone else will receive something of value in the event of a certain outcome. Gambling does not include bona fide business transactions valid under the law of contracts, including but not limited to contracts for the purchase or sale at a future date of securities or commodities, and agreements to compensate for loss caused by the happening of chance, including but not limited to contracts of indemnity or guaranty and life, health, or accident insurance."

4. By amending the definition of "gambling device" to read:

"(5) "Gambling device" means any device, machine, paraphernalia, or equipment, excluding slot machines, that is used or usable in the playing phases of any gambling activity, whether that activity consists of gambling between persons or gambling by a person involving the playing of a machine. However, lottery tickets and other items used in the playing phases of lottery schemes are not gambling devices within this definition."

SECTION 5. Section 36-27, Hawaii Revised Statutes, is amended to read as follows:

"§36-27 Transfers from special funds for central service expenses. [Except as provided in this section, and notwithstanding any other law to the contrary, from] From time to time, the director of finance, for the purpose of defraying the prorated estimate of central service expenses of government in relation to all special funds, except the:

shall deduct five per cent of all receipts of all other special funds, which deduction shall be transferred to the general fund of the State and become general realizations of the State. All officers of the State and other persons having power to allocate or disburse any special funds shall cooperate with the director in effecting these transfers. To determine the proper revenue base upon which the central service assessment is to be calculated, the director shall adopt rules pursuant to chapter 91 for the purpose of suspending or limiting the application of the central service assessment of any fund. No later than twenty days prior to the convening of each regular session of the legislature, the director shall report all central service assessments made during the preceding fiscal year."

SECTION 6. Section 36-30, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Each special fund, except the:

shall be responsible for its pro rata share of the administrative expenses incurred by the department responsible for the operations supported by the special fund concerned."

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect on July 1, 2001 and shall be repealed on June 30, 2005; provided that section 712-1220, Hawaii Revised Statutes, as amended in section 4, section 36-27, Hawaii Revised Statutes, as amended in section 5, and section 36-30, Hawaii Revised Statutes, as amended in section 6, shall be repealed and reenacted in the form in which they read on June 30, 2001.