Legislature(1995 - 1996)
04/20/1995 01:40 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL 286 "An Act providing an exemption from gambling and certain alcoholic beverage laws for gambling conducted by cruise ships for their ticketed passengers in the offshore water of the state; relating to promotions on board cruise ships; defining 'cruise ship'; providing for exemption procedures for certain cruise ships before they can conduct gambling in the offshore water of the state; providing an exemption from the coin-operated device tax for cruise ships exempted from the gambling laws; and providing for an effective date." REPRESENTATIVE WILLIAM WILLIAMS testified in support of HB 286. He stated that HB 286 would give the State authorization to offer an exemption from gambling statutes to cruise ships. The exemption would allow cruise ships to operate their casinos in Alaskan waters. He added that casino gambling aboard cruise ships is an amenity needed to keep Alaska on par with other cruise destinations. While gambling is not the main attraction of cruises, it is an accepted and expected part of the experience. Representative Williams added that the communities of Alaska would not be negatively affected by the legislation. Casino operations would be prohibited within three miles of a vessel's port of call. While in port the casino would remain closed, therefore removing the opportunity for non- ticketed people to participate in the activities. 2 Representative Williams concluded that the legislation would support the tourism industry and would raise State revenues. He urged Committee members' support the legislation. TOM DOW, VICE PRESIDENT, PRINCESS TOURS, testified in support of HB 286. The legislation would allow gambling aboard cruise ships within Alaskan waters for ticketed cruise passengers. Cruise ships would be required to pay a fee to the State for an exemption prior to conducting gambling under the legislation. Mr. Dow added that his company believes that there are no public policy reasons to prohibit the activity. There is public support to allow it to continue and with the provision of an exemption fee, there would be a simple method for the State to thus secure revenues from cruise lines who wish to continue to offer the entertainment option to their passengers. He added, there is little administrative expense or burden placed on the State for the collection of the revenues. Representative Brown asked if the fees recommended in this year's legislation were the same as those in the original legislation last year. Mr. Dow replied that the fees reflect what was passed last year from Committee and that those fees should generate $600 thousand dollars this year and more in the following year. Representative Brown referenced Section #6 and asked why the exception was necessary: This prohibition does not apply to on-shore excursions that are sold on board a cruise ship. Mr. Dow commented, last year an amendment was offered to the legislation. The legislation was directed at prohibiting or restricting promotions to gift shops. The language in the bill specifically excluded the sale of shore excursion products on board. Therefore, more narrowly defined the disclosure requirement to the area of gift shop promotional lectures. He pointed out, that practice has been applied frequently in the Caribbean areas although not a common practice in Alaska. Operators have attempted to do this over the years, although the Princess Line has never supported it. He understood the practice was not legal as informed by the Attorney General's office. Because the last year's legislation that was vetoed contained the exemption for shore excursion activities, that area was then readdressed. He added that it is common practice for cruise ship lines to offer shore excursion activities to passengers. The practice is a convenience for the passengers and to the vendors providing the service. Mr. Dow suggested that the 3 information could be disclosed on the shore excursion brochures. Representative Brown referenced correspondence from a local vendor who felt that the inclusion of the sentence in Section #6 would be detrimental to small and local vendors. Mr. Dow responded that the cruise lines has a responsible role to guarantee that activities that involve equipment and transportation are safe. He emphasized that the current system works for the greater benefit of most of the customers, passengers and vendors who are operating. Representative Martin voiced concern with "opening the door" to gambling in the State of Alaska. Mr. Dow responded that gambling would be available only to the passengers on the cruise ships. Representative Martin emphasized that the State of Alaska prohibits gambling. He asked if the legislation could proliferate gambling in the State. Mr. Dow explained that this precedence has been established in other states who share a gambling prohibition. The unique quality of Alaska as opposed to other coastal states, is that in Alaska, the cruise pattern tends to "hug" the inside passage. By some definitions, the cruise ship would be within the state territorial waters at all times. Representative Martin reemphasized that the cruise lines would be opening gambling for profit purposes as opposed to charitable donations. He asked the type of gambling available aboard the ships. Mr. Dow explained the various forms available to the cruise line passengers. Representative Martin voiced resistance to video gambling and credit card gambling. He felt that once the legislation moves through the Legislature, it would open up gambling possibilities throughout the State. Representative Brown referenced a memo from the Department of Revenue addressing the legalization of slot machines in the proposed legislation. Mr. Dow stated that current information from the Department indicates that there may be another section of State law that prohibits other coin operated devices. He stated that it could require an amendment. Mr. Dow added that it would be possible to pass the exemptive legislation and narrowly define what is involved without opening the State of Alaska to gambling. Representative Martin asked if Mr. Dow would object to an amendment indicating that proceeds from the gambling would not be allowed for political campaigning. Mr. Dow stated that there was no intention that the cruise operators would be using the proceeds to fund any outside activities. 4 SUSAN BURKE, ATTORNEY, GROSS & BURKE, REPRESENTING PRINCESS TOURS, JUNEAU, spoke to the need for a technical amendment. The Department of Law indicated that a problem existed from the drafting, which inadvertently excluded slot machines. Ms. Burke believed that the bill as passed last year adequately covers that concern. Although, having gone through the past two years legislative work, she recommended including the amendment. Ms. Burke noted that Amendment #1 [Attachment #1] would provide clear intent that slot machines would not be included in the exemption for cruise ships. Mr. Burke responded to Representative Martin's concern that under the equal protection doctrine, by passing the bill providing an exemption from casino gambling for cruise ships would not allow anyone in the State the authority to go to court and appeal for the same rights. She stated this was not a concern. Under the equal protection analysis, to treat one class of person different from another, would require good reason for doing so. Ms. Burke added, when speaking about commercial regulations to conduct the gambling activity, there would be no chance that a court would come to the conclusion that an equal protection problem existed. (Tape Change, HFC 95-88, Side 2). Ms. Burke noted that Amendment #1 would clarify existing law, adding new language AS 05.15.250. The effect would establish the fact of cruise ship exemption, and that any prohibitions resulting from lack of authorization listed would not apply to the cruise ships. Representative Martin voiced concern that the legislation would bring gambling to the State in order to generate more revenues. Ms. Burke noted that there would be a difference between having a gambling operation located on land in which everyone had access to gambling on board a cruise ship. The activity of gambling on the cruise ship would be an activity which in actuality would not take place in Alaska, although it would in a technical sense. Representative Therriault MOVED to adopt Amendment #1. Representative Martin OBJECTED for purposes of discussion. DENNIS POSHARD, DIRECTOR, DIVISION OF CHARITABLE GAMING, DEPARTMENT OF REVENUE, noted that the position paper distributed to Committee members resulted from a discussion with the Department of Law. However, he felt that the amendment was not needed because of Section 2(d) which would 5 address the concern. The area of a potential problem results from the regulations which were adopted in accordance with Title 43, the taxing provisions for coin operated devices. The basis for the particular regulation which makes Class 2 and Class 3 coin operated devices illegal, was the criminal and civil statutes which prohibit slot machines and coin operated devices. Mr. Poshard added, from discussions with Legislative Legal Counsel, the Department of Revenue's concern with the proposed legislation has been alleviated. Mr. Poshard commented that the main intent of the position paper was to address the relationship between the cruise ship gambling bill and the negotiations which are taking place with Klawock Native group involving a contract to conduct Class 3 gaming activities. Representative Martin asked for further information regarding the Native American court cases and the gambling concern. Mr. Poshard stated that there are several cases existing although he could not speculate on the relationship between those cases and the proposed legislation. Federal law requires entering into negotiations in good faith with any recognized Indian tribes as lands that could conduct gaming. Representative Martin asked if the State could prohibit a group of people from gambling. Mr. Poshard explained that the only basis for allowing the gaming to take place on Indian lands is through the Indian Gaming Regulatory Act which is federal law. No other states which have gambling prohibitions, have also permitted other types of gambling following the agreement with an Indian tribe on reservation land. A roll call was taken on the MOTION to adopt Amendment #1. IN FAVOR: Grussendorf, Kelly, Kohring, Therriault, Brown, Foster, Hanley OPPOSED: Martin Representatives Mulder, Navarre and Parnell were not present for the vote. The MOTION PASSED (7-1). Representative Grussendorf why the number 300 passengers qualified a boat as a "cruise" ship thus permitting gambling. Ms. Burke stated that it was the intent of the legislation to limit the gambling to the larger vessels which offer a big range of entertainment services. 6 Establishing that number would eliminate a small boat claiming status in order to offer gambling. She remarked that the language would close any possible loop holes. JERRY LUCKHAUPT, ATTORNEY, LEGAL COUNSEL, DIVISION OF LEGAL SERVICES, stated that the operator of the cruise ship would have to apply for the exemption as specified in Section 2 of the legislation. The definition would exclude anyone who is not eligible to obtain an exemption. Each ship would have to apply for an exemption separately and each ship could loose their exemption separately. Representative Therriault MOVED to report CS HB 286 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CS HB 286 (FIN) was reported out of Committee with "no recommendations" and with a fiscal note by the Department of Revenue dated 4/06/95.