IAN W. GEE Boise County Prosecuting Attorney

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1 IAN W. GEE Boise County Prosecuting Attorney Deputy Prosecuting Attorney Jay F. Rosenthal Victim Witness Coordinator Fleda Wright May 30, 2014 TO: FR: RE: Board of County Commissioners Ian W. Gee, Boise County Prosecutor Gaming Road Map QUESTION PRESENTED: What legal changes and political processes would be required for Boise County, or other government entities in the State of Idaho, to legalize limited gambling in special jurisdictions (i.e. designated commercial zones or historical gaming districts)? DEFINITIONS: Idaho law defines gambling as risking any money, credit, deposit or other thing of value for gain contingent in whole or in part upon lot, chance, the operation of a gambling device or the happening or outcome of an event, including a sporting event, the operation of casino gambling including, but not limited to, blackjack, craps, roulette, poker, 1 bacarrat [baccarat] or keno. 2 HISTORICAL BACKGROUND: Throughout the history of the State of Idaho, gambling has been legal, outlawed and then legalized again in limited forms. Gambling is a recognized part of the history of Boise County, especially Idaho City. As a mining boom town in the 1860 s, gambling was an active part of the city s culture. Despite changes in the law and social movements, gambling, both legally and illegally in various forms, continued throughout Boise County. Following World War II, slot machines notoriously came to Idaho and Boise County. The City of Crouch was formed and manipulated its city limits to accommodate gambling. According to some locals, the City of Horseshoe Bend has its own history of active card gaming through the years, including recent history. In 1954 the Idaho State Legislature made slot machines illegal. As a result, Cactus Pete Piersanti moved his slot machine operation south and created Jackpot, Nevada, one mile south of the Idaho border. In 1988 federal law recognized the 1 In a recent Ada County court ruling, State v. Kasper CRMD , the court found that No Limit Texas Hold Em poker was a game of skill and, in the facts in that case, was not gambling in violation of I.C given the exceptions provided therein. 2 See I.C ; this statutory definition of gambling does not include: (1) Bona fide contests of skill, speed, strength or endurance in which awards are made only to entrants or the owners of entrants; or (2) Bona fide business transactions which are valid under the law of contracts; or (3) Games that award only additional play; or (4) Merchant promotional contests and drawings conducted incidentally to bona fide non-gaming business operations, if prizes are awarded without consideration being charged to participants; or (5) Other acts or transactions now or hereafter expressly authorized by law. 1

2 right of Indian tribes to have limited, regulated gaming on their own land. In 2002, Idaho voters passed Proposition 1 that clarified Idaho tribes right to have video gaming machines within the borders of the State of Idaho. In 1989, the State of Idaho entered the gambling business with the introduction of the Idaho State Lottery. Since its inception, the State of Idaho has generated over $640 million for public education and the permanent building fund. CURRENT LAW: Article III, Section 20 of the Idaho State Constitution currently prohibits gambling and declares it to be contrary to public policy. However, Article III does include certain exceptions that the Idaho Legislature and people of the State of Idaho have deemed not to be contrary public policy (i.e. Idaho state lottery, pari-mutuel betting and bingo/raffles operated by qualified charities). In addition to these Constitutional exceptions, Idaho also allows tribal gaming under negotiated gaming compacts negotiated with federally recognized tribes under the Indian Gaming Regulation Act. The general gambling prohibition declared in the Idaho State Constitution is enforced under specific Idaho statutes, namely Idaho Code et. seq.. These statutes define gambling ( ) and declare the activity of gambling, outside of its defined exceptions, to be a misdemeanor crime ( ). Idaho Code also declares it to be a misdemeanor crime to engage in betting bookmaking/pool selling ( ) or to own or operate a slot machine, subject to an exception for antique slot machines ( ). LEGAL ROAD MAP TO AMEND THE LAW: In order to amend the current state of the law, the Idaho State Constitution would need to be amended. Amendments to the Idaho State Constitution are governed by Article XX. 3 The Idaho Constitution does not allow for amending the Constitution through citizen initiative. An amendment can only be achieved by the initial action of the Idaho State Legislature. Either house of the Legislature can propose an amendment to the State Constitution. If the amendment is agreed to by supermajority or two-thirds (2/3) of the members of both the Idaho State Senate and the Idaho House of Representatives, the proposed amendment goes to the people of the State of Idaho on the next general election ballot. Of note is the plain language that requires the two-thirds (2/3) vote to be of the membership, not merely those present. Thus, it would take a minimum of 24 votes in the Senate (35 total members) and 47 votes in the House (70 total members). In sum, a minimum of 71 of the 105 Legislators would have to vote in favor of the proposed amendment and its submission to the voters. If passed in the Legislature, the amendment is submitted to the voters as a ballot question 4 at the next general election. The ballot question is accompanied by proponent and opponent arguments. The amendment becomes part of the Constitution if it is approved by a simple majority of the voters. If such amendment were approved, the Legislature would be required to amend the criminal code accordingly. 3 Article XX, Section 1. How amendments may be proposed. Any amendment or amendments to this Constitution may be proposed in either branch of the Legislature, and if the same shall be agreed to by two-thirds of all the members of each of the two houses, voting separately, such proposed amendment or amendments shall, with the yeas and nays thereon, be entered on their journals, and it shall be the duty of the Legislature to submit such amendment or amendments to the electors of the State at the next general election, and cause the same to be published without delay at least three times in every newspaper qualified to publish legal notices as provided by law. Said publication shall provide the arguments proposing and opposing said amendment or amendments as provided by law, and if a majority of the electors shall ratify the same, such amendment or amendments shall become a part of this Constitution. 4 Sample Ballot Question: Shall there be an amendment to Article III, Section 20 of the Idaho Constitution to provide for local voters in the cities of Idaho City, Horseshoe Bend, Crouch and Placerville to approve limited gaming in designated commercial districts of these cities whereby the use of slot machines, roulette, craps, and card games of blackjack and poker, with maximum single bets up to $100 during limited business hours, in facilities licensed and regulated by a State Gaming Commission would be deemed legal activity. 2

3 DECISION TO SEEK AMENDMENT OF THE LAW: As this Board has already articulated, the decision of whether or not to engage in the process of seeking amendment of Article III, Section 20 of the State Constitution should begin with the voters. Different voices from around Boise County have expressed interest in the issue of legalizing limited gambling. Others have, or likely will, oppose such an idea. There are arguments for both: 1. Arguments in Opposition: a. Negative Personal/Social Impacts. Casino gambling can negatively impact the lives of people, especially low income families, through compulsive or gambling addictions creating negative social impacts (i.e. increased social welfare services because limited family money not available for life needs, increased crime/theft due to addictive gamblers seeking to support habit). b. Regressive Tax. Because many of the customers of gaming casinos are middle to low income wage earners, the tax they pay for playing, albeit voluntarily, is still a regressive tax. The state, county, cities and school districts should not be funded from a regressive tax against middle and low income citizens. c. Undue Impact on County Services/Infrastructure. Increased traffic and demand on County infrastructure (roads) and services (law enforcement) are hidden costs of legalized gambling. More people and traffic means more traffic and criminal citations that would increase the work of the Sheriff s office, Prosecutor s office and court system. d. Change of Community Character. Gaming would dramatically change the character and attitude of the towns that approve it. Increased traffic, visitors and pace would alter the slow, relaxed atmosphere of historical Boise County towns. Business activity would increase some property values and low income residents would be displaced by development. e. Moral Decline. Gaming will degrade County morals. The illusion of easy money is contradictory to the work ethic and discipline needed for the next generation to succeed. Gambling is contrary to the Biblical precept of good financial stewardship. Profiting from the financial loss of others is never a good business model. f. Idaho has Enough. Casino gambling is already available in Idaho through the State and the Indian tribes. The citizens of Idaho already have the choice to engage in gambling if they want. More opportunities for gambling are not needed. Expansion could also hurt the market that the Indian tribes rely upon. 3

4 2. Arguments in Support: a. Significant Economic Impact. The economic decline resulting from the loss of the timber industry and its local jobs has never been fully replaced in Boise County. The gaming industry has a documented track record of making significant and positive impacts on employment and economic opportunity. 5 Local businesses would benefit from consistent (i.e. not seasonal) customer traffic. b. Substantial Government/School District Fiscal Impact. As a result of declining Idaho endowment land revenue, Boise County school districts have suffered financially. Local education is increasingly being funded by special levies. Boise County faces annual uncertainty of the appropriation of federal SRS funds, which are largely used to fund county roads. As demonstrated in South Dakota and Colorado, limited gaming revenues represent a substantial and steady source of funding local government, infrastructure and school districts. 6 c. Tax Relief. In order to address the declining federal funding from SRS, a recent proposal from the Idaho Association of Counties (IAC) was to approach the Legislature to increase the levy limit and tax Idaho taxpayers more. Tax revenue from gaming represents a revenue source alternative to raising taxes on already strapped taxpayers. This would allow governments to avoid increasing tax rates. Further, tax revenue realized from gaming is a source of voluntary revenue, as a use tax, it is similar to tax revenue realized from the Idaho State lottery, cigarette and liquor users. Further, by offering limited gaming in Idaho, there is the opportunity to recapture tax dollars that are currently leaving the state, in some cases just one mile across the state border. d. Existing Gaming Exceptions. The gaming revenue opportunity should be available to other communities. The state and tribal governments have exclusively owned the market on an industry that has an admitted positive fiscal impact. In 2002, Idaho voters passed Proposition 1 that clarified Idaho tribes right to have video gaming machines within the borders of the State of Idaho. In support of Proposition 1, it was argued that Indian tribes should have limited, regulated gaming on their own land to provide jobs and to generate vitally-needed revenues for education, health care, housing, clean water supplies, roads and other basic services for tribal members and 5 According to the Colorado Gaming Industry, the casino gaming industry provides over 27,000 direct and indirect jobs to Colorado citizens, and annual employment surveys continue to reflect that the casino industry consistently pays higher wages than similar jobs in the metro-denver or Colorado Springs areas. In addition to above-average wages, casino employees receive competitive fringe benefits in the areas of tuition reimbursement, transportation and meals, retirement and pension plans, health and life insurance, and exceptional promotional opportunities. (see In Idaho, according to a University of Idaho article Indian Tribes in Idaho: Opportunities and Challenges in the Times of Self Determination (citing a 2002 study by Peterson and DiNoto), in 2001 the Indian tribes were contributing to Idaho s economy with 7,400 jobs (4,500 gaming-related), $159 million in wages and earnings ($84 million gaming-related), $478 million in sales ($250 million gaming-related), $17 million in property and sales taxes ($11 million gaming-related), and $6 million in state income tax payments. Their combined activities significantly impact local and state economies. Total Indian gaming and non-gaming businesses create more jobs and economic activity than about half of the 44 counties in Idaho. These businesses are among the largest employers in their regions in terms of economic impacts. 6 Colorado FY2010 Distributions from Limited Gaming Revenues: City of Black Hawk $7,180,228, City of Central City $806,228, Cripple Creek $1,687,784, Gilpin County $9,583,747, Teller County $2,025,341, State Community College System $5,377,859 [Note: State agencies, special education funds and general fund received a total of $81.6 million] South Dakota FY 2013 Distributions from Limited Gaming Revenues: City of Deadwood $6,800,000, Lawrence County $824,312, Pro-rata share to other non-gaming municipalities in Lawrence County $369,612, Pro-rata share to school districts in Lawrence County $369,612 [Note: State agencies and general fund received a total of $8.4 million] 4

5 communities on or near reservations. Similar arguments were used in support of the State s campaign to approve the lottery to support education. Shouldn t municipalities and counties, with significant budget restraints, be afforded the same benefit of supporting their deteriorating infrastructure and local education needs? e. Historical Preservation. Idaho City makes a concerted community effort to support their past through historical preservation and building maintenance. Preserving structures from the 19 th century takes organization and money. Limited gaming legislation adopted in South Dakota and Colorado specifically earmarks gaming tax dollars to be dedicated for ongoing historical preservation. Such a model here in Idaho would further the these efforts for future generations. f. Moral Decline is a Myth. Over the past 25 years, Idaho communities have been exposed to legalized gambling in various forms, whether online gaming, land based tribal casinos or the state lottery. In some northern and southeastern Idaho communities, casinos have been built in or near large population centers. Twin Falls is closer to the Jackpot, Nevada casinos than it is to Boise. These cities have not failed, nor have their populations been corrupted. To the contrary, the spiritual and moral fabric of these communities continues to be strong. g. Jobs and Tax Revenue from Clean Industry. As demonstrated in Colorado and South Dakota, limited gaming provides millions of dollars in economic activity and tax revenue without negatively impacting the environment. As a tourism based industry, a majority of all dollars spent and corresponding tax revenue come from outside the community. Other models of economic activity and taxation (i.e. property tax) are limited to local dollars and place burdens on local taxpayers. h. Successful State Models. Idaho and its eligible gaming communities would have the benefit of structuring limited gaming in a successful manner from the outset based upon the legislative, operational and regulatory experience of states like Colorado and South Dakota. Idaho does not need to recreate the wheel when it comes to limited gaming. PROCESS RECOMMENDATIONS: The decision of whether or not to pursue the concept of limited gaming in Idaho is ultimately one to be made by the citizens and the legislature. 1. Meet with Municipalities. Public meetings with mayors, city councils and city residents to discuss the concept should be the first step. Determining the interests of Boise County residents and the elected leadership of local municipalities is the appropriate place for the Board of County Commissioners to begin. Municipal support is fundamental, given the fact that county or statewide support is meaningless, if the proposed cities have no interest in pursuing or supporting limited gaming. Both Colorado and South Dakota legislation first required statewide voter approval for the constitutional amendment/legislation to allow limited gaming in designated cities, but the ultimate decision of whether or not to authorize limited gaming was properly left up to the residents of the designated cities. 2. Form Citizen Committee/Public Meetings with County Residents. Given that a majority of all Boise County residents live outside of the city limits of a municipality, the opinions and recommendations of County residents would be important. Input on/through a citizen committee/public meeting(s) would provide for this. 5

6 3. Meetings with Indian Tribes. In anticipation of a possible favorable advisory vote, it would be important to meet with the Indian tribes involved in gaming in Idaho (i.e. Coeur d Alene, Shoshone-Bannock, Nez Perce). Understanding their ongoing interests and collaborating for mutual benefit would be valuable. 4. Let the Voters Decide. Idaho Code specifically authorizes the Board of County Commissioners to submit a non-binding advisory question to the voters. 7 The deadline for submission of such a question, to the County Clerk, is September 5, Meetings with State Legislators. In anticipation of a possible favorable advisory vote and the ensuing intention to approach the Legislature, it would be prudent to give key Legislators a heads up on this issue before the results of a November 4 th election are final. If an advisory vote was favorable and the Board decided to approach the 2015 Legislature, identifying a Legislator willing to sponsor and lead the charge on the issue would be critical. Preparation for assisting with the drafting of the initial proposed legislation, based off of the Colorado and South Dakota amendment/statutes, would be important. 6. Reach Out to Industry Advocates. If an advisory vote was favorable and the Board decided to approach the Legislature, preparation would be important. There are a number of trade organizations, state gaming associations, and equipment manufacturers that would be an experienced, organizing resource in anticipation of the necessary legislative work to be done. 7. Prepare and Approach the Legislature. If an advisory vote was favorable and the Board decided to approach the Legislature, an organized and coordinated effort will be critical. 7 I.C ADVISORY BALLOT QUESTIONS. The Board of County Commissioners shall have the authority to place a question on the ballot, pertaining to any issue before the citizens of that county, during a primary or general election. The results of such an election shall be advisory only. 6