NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

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(Parenthesis ( ) Indicate Revenue Decreases)

* Scored relative to March 2000 revenue estimates; amount of back payment receipts is uncertain due to

timing of collections from identified tribes and pueblos; see text for details.

Duplicates/Conflicts with/Companion to/Relates to

SOURCES OF INFORMATION

LFC Files

Gaming Control Board

SUMMARY

Synopsis of Bill

The resolution expresses the intention of the Legislature that the proposed state-tribal gaming compact submitted to the Committee on the Compacts on March 27, 2000, under the provisions of the Compact Negotiation Act, be approved.

Significant Issues

There are gaming tribes and pueblos currently operating in New Mexico which are not specifically identified in SJR 1 (see Table 1). As noted in SJR 1, under the Compact Negotiation Act, the Governor is authorized to execute additional identical compacts with other tribes and pueblos without submitting the compacts for legislative approval.

FISCAL IMPLICATIONS

A summary of the fiscal impacts discussed in the following sections is shown on Table 2.

Revenue Sharing

LFC estimates net win on gaming machines at tribal casino operations in calendar year 2000 at approximately $350 million. Net win is then assumed to escalate by 10% in calendar year 2001. The analysis assumes one new casino of small-to-medium size will open next year. Both state and tribal regulatory fees are deducted to obtain "adjusted net win" before applying the revenue sharing percentage. State and tribal regulatory fees escalate by 5% annually. Late fees would be assessed after 10 days on a daily basis of 10% annual interest.

This analysis assumes a full year of revenues beginning in FY01. Under the proposal, all revenue sharing payments would be made to the state. The revenue sharing rate would be 7.75% of net win for most casinos. If calendar year net win is less than $12 million for any given gaming tribe, then the first $4 million in net win would be subject to 3% revenue sharing, while the 7.75% revenue sharing rate would apply to the residual.

The estimate of revenue sharing if all tribes signed compacts with these terms and with full compliance would be approximately $27.4 million in FY01 and $30.6 million in FY02. For those tribes identified in SJR 1, the estimated fiscal impact of the identified tribes signing compacts with these terms and completely complying would be approximately $19.8 million in FY01 and $22.1 million in FY02.

As noted in SJR 1, under the Compact Negotiation Act, the Governor is authorized to execute additional identical compacts with other tribes and pueblos without submitting the compacts for legislative approval.

Reduction In/Elimination Of Revenue Sharing

Under the proposed compact, revenue sharing would be eliminated if the state:

1. Allows gaming machines except at tracks and clubs;

2. Increases the $4,000 jackpot that club machines may pay out or permits non-members to play at clubs;

3. Permits more than 300 gaming machines at any racetrack unless the track offers more live race days than other tracks;

4. Permits more than 2,100 machines at all tracks;

5. Permits more than 600 machines at a track within 125 miles of the tribal casino or more than 700 machines at any track.

A reduction in revenue sharing payments would automatically occur under certain circumstances. A summary of the payment obligation reductions in shown in Table 3. The reductions are based on the number of machines at a given race track and the distance of the track from each gaming facility as well as hourly operations for tracks within 125 miles of a tribal gaming operation.

State Regulatory Costs

Regulatory costs would initially be assessed at $100,000 per gaming tribe, then would escalate at 5% per year. Gaming tribes that have paid prior year regulatory fees based on terms of the existing compacts would be eligible to carry forward credits against their regulatory cost liability. The LFC assumes 12 year maximum annual credit carry-forward for four tribes and 6 year maximum annual credit carry-forward for two tribes. Total state regulatory fee liability is estimated at a gross of $1.1 million in FY01 and $1.3 million in FY02. After adjusting for potential credits, net state regulatory fees are estimated at $0.5 million in FY01 and $0.7 million in FY02 based on complete participation of all gaming tribes and full compliance. Under SJR 1, state regulatory costs net of credits is estimated around $0.3 million in FY01 and $0.5 million in FY02.

Back Payments

LFC staff has forecast total liability under the 1997 state-tribal gaming compacts using estimates of net win at each of the tribal gaming facilities. Payments to the state by gaming tribes are currently about $6.0 million per quarter. A total of $66.8 million has been paid to the state through January 2000. After updating for the January 2000 estimated liability and January 2000 payments, an estimated $68.4 million of back payments is estimated as still owing. This amount includes estimates of both revenue sharing and regulatory fees.

Preliminary estimates indicate that for the tribes identified in SJR 1 the amount of revenue sharing payable to the state is approximately $18.5 million. The Governor may not execute the compact until the State Gaming Representative, in consultation with the State Treasurer, certifies that the tribe or pueblo has:

1. Paid in full any amount owed under the 1997 revenue sharing agreement or

2. Paid at least half of the amount owed and entered into a binding agreement to pay the balance over time at an annual interest rate of 8.75%.

Thus, receipt of back payments depends on each tribe's historical payments relative to liability and decisions about entering into a payment agreement.

March 2000 Revenue Estimate

The revenue estimate in the March 2000 update forecast and long-term forecast calls for tribal gaming revenue to the state of $15 million in both FY01 and FY02.

AW/gm

Attachments