2014 -- H 8294 SUBSTITUTE A AS AMENDED

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LC005867/SUB A/2

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

____________

A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT -- AUTHORIZING STATE-

OPERATED CASINO GAMING AT NEWPORT GRAND SUBJECT TO STATEWIDE AND

LOCAL VOTER APPROVAL

     Introduced By: Representatives Abney, and Martin

     Date Introduced: June 05, 2014

     Referred To: House Judiciary

     (by request)

It is enacted by the General Assembly as follows:

     SECTION 1. Sections 42-61.2-2.2 and 42-61.2-7 of the General Laws in Chapter 42-61.2

entitled "Video Lottery Terminal" are hereby amended to read as follows:

     42-61.2-2.2. State authorized to operate casino gaming at Newport Grand. -- (a)

State-operated casino gaming shall be authorized at the facility of the licensed video lottery

terminal retailer known as "Newport Grand" located in the town city of Newport; provided, that :

     (1) That the requirements of Article VI, Section 22 of the Rhode Island Constitution are

met with respect to said facility at the general election next to be held after enactment of this

section. in November of 2014; and

     (2) That the proposed amendment to the Rhode Island Constitution requiring that prior to

a change in location where casino gaming is permitted in any city or town, there must be a

referendum in said city or town and approval by the majority of those electors voting in said

referendum on said proposed change in location in said city or town, is also approved statewide at

the statewide general election to be held in November of 2014.

      (b) With respect to the Newport Grand facility, the authorization of this section 2.2 shall

be effective upon:

      (1) The certification by the secretary of state that the qualified voters of the state have

approved the expansion of gambling at such facility to include casino gaming and also approved

the amendment to the Rhode Island Constitution regarding a change in the location of where

casino gaming is permitted in any city or town; and

      (2) The certification by the board of canvassers of the city of Newport that the qualified

electors of the city of Newport have approved the expansion of gambling at such facility to

include casino gaming.

      (c) The general assembly finds that:

      (1) The operation of casino gaming at Newport Grand will play a critical role in the

economy of the state and enhance local revenues;

      (2) Pursuant to Article VI, Section 15 of the Rhode Island Constitution and the specific

powers, authorities and safeguards set forth in subsection (c) herein in connection with the

operation of casino gaming, the state shall have full operational control over the specified

location, subject to the restrictions of Article VI, Section 22 of the Rhode Island Constitution, at

which casino gaming shall be conducted;

      (3) It is in the best interest of the state to have the authorization to operate casino gaming

as specified at Newport Grand;

      (4) Pursuant to the provisions of subdivision 42-61.2-2.1(b)(4), and by action of the

governor, an extensive analysis and evaluation of competitive casino-gaming operations was

completed, which concluded that the viability of Newport Grand as a video lottery terminal

facility is threatened by the location of casino gaming in Southeast Massachusetts.

      (5) The legislature shall, by enactment of comprehensive legislation during the 2012

session, determine the terms and conditions pursuant to which casino gaming would be operated

in the state if it is authorized as set forth herein.

      (d) Notwithstanding the provisions of any other law and pursuant to Article VI, Section

15 of the Rhode Island Constitution, the state is authorized, subject to the restrictions of Article

VI, Section 22 of the Rhode Island Constitution, to operate, conduct and control casino gaming at

Newport Grand subject to subsection (a) above. In furtherance thereof, the state, through the

division of state lottery and/or the department of business regulation, shall have full operational

control to operate the foregoing facilities, the authority to make all decisions about all aspects of

the functioning of the business enterprise, including, without limitation, the power and authority

to:

      (1) Determine the number, type, placement and arrangement of casino-gaming games,

tables and sites within the facility;

      (2) Establish with respect to casino gaming one or more systems for linking, tracking,

deposit and reporting of receipts, audits, annual reports, prohibitive conduct and other such

matters determined from time to time;

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      (3) Collect all receipts from casino gaming, require that Newport Grand collect casino-

gaming gross receipts in trust for the state through the division of state lottery, deposit such

receipts into an account or accounts of its choice, allocate such receipts according to law, and

otherwise maintain custody and control over all casino-gaming receipts and funds;

      (4) Hold and exercise sufficient powers over Newport Grand's accounting and finances

to allow for adequate oversight and verification of the financial aspects of casino gaming at the

facility, including, without limitation:

      (i) The right to require Newport Grand to maintain an annual balance sheet, profit and

loss, and any other necessary information or reports; and

      (ii) The authority and power to conduct periodic compliance or special or focused audits

of the information or reports provided, as well as the premises with the facility containing records

of casino gaming or in which the business of Newport Grand's casino-gaming operations are

conducted;

      (5) Monitor all casino-gaming operations and have the power to terminate or suspend

any casino-gaming activities in the event of an integrity concern or other threat to the public trust,

and in furtherance thereof, require the licensed video lottery retailer to provide a specified area or

areas from which to conduct such monitoring activities;

      (6) Define and limit the rules of play and odds of authorized casino-gaming games,

including, without limitation, the minimum and maximum wagers for each casino-gaming game;

      (7) Have approval rights over matters relating to the employment of individuals to be

involved, directly or indirectly, with the operation of casino gaming at Newport Grand;

      (8) Establish compulsive gambling treatment programs;

      (9) Promulgate, or propose for promulgation, any legislative, interpretive and procedural

rules necessary for the successful implementation, administration and enforcement of this

chapter; and

      (10) Hold all other powers necessary and proper to fully effectively execute and

administer the provisions of this chapter for its purpose of allowing the state to operate a casino-

gaming facility through a licensed video lottery retailer hosting said casino gaming on behalf of

the state of Rhode Island.

      (e) Subject to subsection (a) above, the state, through the division of state lottery and/or

the department of business regulation, may expand Newport Grand's existing video lottery license

issued, or issue Newport Grand a new casino-gaming license, to permit casino gaming to the

extent authorized by this act.

      (f) Subject to subsection (a) above, all rules and regulations shall be promulgated by the

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state, through the division of state lottery and the department of business regulation, in

accordance with the authority conferred upon the general assembly pursuant to Article VI,

Section 15 of the Rhode Island Constitution. In accord therewith, subject to subsection (a) above,

the state, through the division of state lottery and/or the department of business regulation, shall

have authority to issue such regulations as it deems appropriate pertaining to control, operation

and management of casino gaming as specifically set forth in subsections (b), (c) and (d).

     (g) Any referendum in the city of Newport regarding casino gaming in said city as

provided for in subsection (a) of this section shall become effective only upon the approval of an

amendment to the Rhode Island Constitution requiring that, prior to a change in location where

casino gaming is permitted in any city or town, there must be a referendum in said city or town

and the approval of the majority of those electors voting in said referendum on said proposed

change in location in said city or town.

     42-61.2-7. Division of revenue. [Effective June 30, 2011.] -- (a) Notwithstanding the

provisions of section 42-61-15, the allocation of net terminal income derived from video lottery

games is as follows:

      (1) For deposit in the general fund and to the state lottery division fund for

administrative purposes: Net terminal income not otherwise disbursed in accordance with

subdivisions (a)(2) -- (a)(6) herein;

      (i) Except for the fiscal year ending June 30, 2008, nineteen one hundredths of one

percent (0.19%) up to a maximum of twenty million dollars ($20,000,000) shall be equally

allocated to the distressed communities as defined in section 45-13-12 provided that no eligible

community shall receive more than twenty-five percent (25%) of that community's currently

enacted municipal budget as its share under this specific subsection. Distributions made under

this specific subsection are supplemental to all other distributions made under any portion of

general laws section 45-13-12. For the fiscal year ending June 30, 2008 distributions by

community shall be identical to the distributions made in the fiscal year ending June 30, 2007 and

shall be made from general appropriations. For the fiscal year ending June 30, 2009, the total

state distribution shall be the same total amount distributed in the fiscal year ending June 30,

2008 and shall be made from general appropriations. For the fiscal year ending June 30, 2010, the

total state distribution shall be the same total amount distributed in the fiscal year ending June 30,

2009 and shall be made from general appropriations, provided however that $784,458 of the total

appropriation shall be distributed equally to each qualifying distressed community. For each of

the fiscal years ending June 30, 2011, June 30, 2012, and June 30, 2013 seven hundred eighty-

four thousand four hundred fifty-eight dollars ($784,458) of the total appropriation shall be

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distributed equally to each qualifying distressed community.

      (ii) Five one hundredths of one percent (0.05%) up to a maximum of five million dollars

($5,000,000) shall be appropriated to property tax relief to fully fund the provisions of section 44-

33-2.1. The maximum credit defined in subdivision 44-33-9(2) shall increase to the maximum

amount to the nearest five dollar ($5.00) increment within the allocation until a maximum credit

of five hundred dollars ($500) is obtained. In no event shall the exemption in any fiscal year be

less than the prior fiscal year.

      (iii) One and twenty-two one hundredths of one percent (1.22%) to fund section 44-34.1-

1, entitled "Motor Vehicle and Trailer Excise Tax Elimination Act of 1998", to the maximum

amount to the nearest two hundred fifty dollar ($250) increment within the allocation. In no event

shall the exemption in any fiscal year be less than the prior fiscal year.

      (iv) Except for the fiscal year ending June 30, 2008, ten one hundredths of one percent

(0.10%) to a maximum of ten million dollars ($10,000,000) for supplemental distribution to

communities not included in paragraph (a)(1)(i) above distributed proportionately on the basis of

general revenue sharing distributed for that fiscal year. For the fiscal year ending June 30, 2008

distributions by community shall be identical to the distributions made in the fiscal year ending

June 30, 2007 and shall be made from general appropriations. For the fiscal year ending June 30,

2009, no funding shall be disbursed. For the fiscal year ending June 30, 2010 and thereafter,

funding shall be determined by appropriation.

      (2) To the licensed video lottery retailer:

      (a) (i) Prior to the effective date of the NGJA Master Contract, Newport Jai Ali twenty-

six percent (26%) minus three hundred eighty four thousand nine hundred ninety-six dollars

($384,996);

      (ii) On and after the effective date of the NGJA Master Contract, to the licensed video

lottery retailer who is a party to the NGJA Master Contract, all sums due and payable under said

Master Contract minus three hundred eighty four thousand nine hundred ninety-six dollars

($384,996).

      (iii) Effective July 1, 2013 the rate of net terminal income payable to Newport Grand,

LLC under the Newport Grand Master Contract shall increase by two and one quarter percent

(2.25%) points. The increase herein shall sunset and expire on June 30, 2015 and the rate in effect

as of June 30, 2013 shall be reinstated.

      (b) (i) Prior to the effective date of the UTGR Master Contract, to the present licensed

video lottery retailer at Lincoln Park which is not a party to the UTGR Master Contract, twenty-

eight and eighty-five one hundredths percent (28.85%) minus seven hundred sixty-seven

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thousand six hundred eighty-seven dollars ($767,687);

      (ii) On and after the effective date of the UTGR Master Contract, to the licensed video

lottery retailer who is a party to the UTGR Master Contract, all sums due and payable under said

Master Contract minus seven hundred sixty-seven thousand six hundred eighty-seven dollars

($767,687).

      (3) (i) To the technology providers who are not a party to the GTECH Master Contract

as set forth and referenced in Public Law 2003, Chapter 32, seven percent (7%) of the net

terminal income of the provider's terminals; in addition thereto, technology providers who

provide premium or licensed proprietary content or those games that have unique characteristics

such as 3D graphics, unique math/game play features or merchandising elements to video lottery

terminals may receive incremental compensation, either in the form of a daily fee or as an

increased percentage, if all of the following criteria are met:

      (A) A licensed video lottery retailer has requested the placement of premium or licensed

proprietary content at its licensed video lottery facility;

      (B) The division of lottery has determined in its sole discretion that the request is likely

to increase net terminal income or is otherwise important to preserve or enhance the

competiveness of the licensed video lottery retailer;

      (C) After approval of the request by the division of lottery, the total number of premium

or licensed propriety content video lottery terminals does not exceed ten percent (10%) of the

total number of video lottery terminals authorized at the respective licensed video lottery retailer;

and

      (D) All incremental costs are shared between the division and the respective licensed

video lottery retailer based upon their proportionate allocation of net terminal income. The

division of lottery is hereby authorized to amend agreements with the licensed video lottery

retailers, or the technology providers, as applicable, to effect the intent herein.

      (ii) To contractors who are a party to the Master Contract as set forth and referenced in

Public Law 2003, Chapter 32, all sums due and payable under said Master Contract;

      (iii) Notwithstanding paragraphs (i) and (ii) above, there shall be subtracted

proportionately from the payments to technology providers the sum of six hundred twenty-eight

thousand seven hundred thirty-seven dollars ($628,737);

      (4) (A) To the city of Newport one and one hundredth percent (1.01%) of net terminal

income of authorized machines at Newport Grand, except that:

      (i) Effective November 9, 2009 until June 30, 2013, the allocation shall be one and two

tenths percent (1.2%) of net terminal income of authorized machines at Newport Grand for each

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week the facility operates video lottery games on a twenty-four (24) hour basis for all eligible

hours authorized, and

      (ii) Effective July 1, 2013 2015, provided that both:

     (I) The the referendum measure authorized by Section 1 of Chapters 24 and 25 of the

Public Laws of 2012 is approved statewide and in the City of Newport, authorizing casino

gaming at Newport Grand is approved statewide and by the city of Newport at the statewide

general election to be held in November of 2014; and

     (II) The proposed amendment to the Rhode Island Constitution requiring that prior to a

change in location where casino gaming is permitted in any city or town, there must be a

referendum in said city or town and approval by the majority of those electors voting in said

referendum on said proposed change in location in said city or town, is approved statewide at the

statewide general election to be held in November of 2014, then the allocation shall be one and

forty-five hundredths percent (1.45%) of net terminal income of authorized video lottery

terminals at Newport Grand; and .

     (iii) If, effective July 1, 2015, the conditions established in subsections (4)(A)(ii)(I and II)

are met, and the following conditions in subsections (4)(A)(iii)(I through III) are met:

     (I) NGJA or its successor has made an investment of no less than forty million dollars

($40,000,000) exclusive of acquisition costs within three (3) years, and a certificate of completion

and final approval from the city building inspector has been issued for the facility upgraded

through this investment; and

     (II) The number of video lottery terminals in operation is no fewer than those in operation

as of January 1, 2014; and

     (III) Table gaming has commenced in Newport;

     Then in such event the allocation shall be the greater of one million dollars ($1,000,000),

or one and forty-five hundredths percent (1.45%) of net terminal income of authorized video

lottery terminals at Newport Grand, except that for six (6) consecutive full fiscal years

immediately thereafter, the allocation shall be the greater of one million five hundred thousand

dollars ($1,500,000), or one and forty-five hundredths percent (1.45%) of net terminal income of

authorized video lottery terminals at Newport Grand. Such minimum distribution shall be

distributed in twelve (12) equal payments during the fiscal year.

      (B) To the town of Lincoln one and twenty-six hundredths percent (1.26%) of net

terminal income of authorized machines at Twin River except that,

      (i) Effective November 9, 2009 until June 30, 2013, the allocation shall be one and forty-

five hundredths percent (1.45%) of net terminal income of authorized machines at Twin River for

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each week video lottery games are offered on a twenty-four (24) hour basis for all eligible hours

authorized, and

      (ii) Effective July 1, 2013, provided that the referendum measure authorized by Article

25, Chapter 151, Section 4 of the Public Laws of 2011 is approved statewide and in the Town of

Lincoln, the allocation shall be one and forty-five hundredths percent (1.45%) of net terminal

income of authorized video lottery terminals at Twin River; and

      (5) To the Narragansett Indian Tribe, seventeen hundredths of one percent (0.17%) of net

terminal income of authorized machines at Lincoln Park up to a maximum of ten million dollars

($10,000,000) per year, which shall be paid to the Narragansett Indian Tribe for the account of a

Tribal Development Fund to be used for the purpose of encouraging and promoting: home

ownership and improvement, elderly housing, adult vocational training; health and social

services; childcare; natural resource protection; and economic development consistent with state

law. Provided, however, such distribution shall terminate upon the opening of any gaming facility

in which the Narragansett Indians are entitled to any payments or other incentives; and provided

further, any monies distributed hereunder shall not be used for, or spent on previously contracted

debts; and

      (6) Unclaimed prizes and credits shall remit to the general fund of the state; and

      (7) Payments into the state's general fund specified in subdivisions (a)(1) and (a)(6) shall

be made on an estimated monthly basis. Payment shall be made on the tenth day following the

close of the month except for the last month when payment shall be on the last business day.

      (b) Notwithstanding the above, the amounts payable by the Division to UTGR related to

the Marketing Program shall be paid on a frequency agreed by the Division, but no less

frequently than annually.

      (c) Notwithstanding anything in this chapter 61.2 of this title 42 to the contrary, the

Director is authorized to fund the Marketing Program as described above in regard to the First

Amendment to the UTGR Master Contract.

      (d) Notwithstanding the above, the amounts payable by the Division to Newport Grand

related to the Marketing Program shall be paid on a frequency agreed by the Division, but no less

frequently than annually.

      (e) Notwithstanding anything in this chapter 61.2 of this title 42 to the contrary, the

Director is authorized to fund the Marketing Program as described above in regard to the First

Amendment to the Newport Grand Master Contract.

      (f) Notwithstanding the provisions of section 42-61-15, the allocation of Net Table Game

Revenue derived from Table Games at Twin River is as follows:

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      (1) For deposit into the state lottery fund for administrative purposes and then the

balance remaining into the general fund:

      (i) Sixteen percent (16%) of Net Table Game Revenue, except as provided in subsection

(f)(1)(ii);

      (ii) An additional two percent (2%) of Net Table Game Revenue generated at Twin

River shall be allocated starting from the commencement of Table Game activities by such Table

Game Retailer, and ending, with respect to such Table Game Retailer, on the first date that such

Table Game Retailer's net terminal income for a full State fiscal year is less than such Table

Game Retailer's net terminal income for the prior State fiscal year, at which point this additional

allocation to the State shall no longer apply to such Table Game Retailer.

      (2) To UTGR, Net Table Game Revenue not otherwise disbursed pursuant to above

subsection (f)(1); provided, however, on the first date that such Table Game Retailer's net

terminal income for a full State fiscal year is less than such Table Game Retailer's net terminal

income for the prior State fiscal year, as set forth in subsection (f)(1)(ii) above, one percent (1%)

of this Net Table Game Revenue shall be allocated to the town of Lincoln for four (4) consecutive

State fiscal years.

      (g) Notwithstanding the provisions of section 42-61-15, the allocation of Net Table

Game Revenue derived from Table Games at Newport Grand is as follows:

      (1) For deposit into the state lottery fund for administrative purposes and then the

balance remaining into the general fund: eighteen percent (18%) of Net Table Game Revenue.

      (2) To Newport Grand LLC, Net Table Game Revenue not otherwise disbursed pursuant

to above subsection (g)(1) provided, however, on the first date that such Table Game Retailer's

net terminal income for a full State fiscal year is less than such Table Game Retailer's net

terminal income for the prior State fiscal year, one percent (1%) of this Net Table Game Revenue

shall be allocated to the city of Newport for four (4) consecutive State fiscal years.

     SECTION 2. Chapter 322 of the 2005 Public Laws entitled "An Act Enabling the

Division of Lotteries to enter into a Master Video Lottery Terminal Contract with UTGR, Inc.

and to enter into a Master Video Lottery Terminal Contract with Newport Grand Jai Alai, LLC.",

as amended, is hereby further amended by adding thereto the following section:

     Section 4.1 Authorized amendment of NGJA master contract.

     (a) Notwithstanding any provisions of the general laws or regulations adopted thereunder

to the contrary, including, but not limited to, the provisions of Chapter 2 of Title 37 and Chapter

61 of Title 42 of the General Laws, and the provisions of section 42-61.2-7, the division is hereby

expressly authorized and empowered to enter into an amendment to the master contract with

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NGJA or its successor containing the following terms and purposes and such terms as deemed

necessary and appropriate by the division, all of which shall be set forth in more particular detail

in said amendment.

     (b) Under the terms of any amendments to the master contract authorized under this act,

NGJA or its successor shall agree that during the term it shall undertake, among others, the

following obligations:

     (1) NGJA or its successor will invest, in the aggregate, within three (3) years following

the effective date of the amended master contract in accordance with a schedule set forth in the

amended master contract (but subject to an extension of the original three (3) year period as set

forth in Section 4.1(c) below), at least forty million dollars ($40,000,000) of total project costs,

exclusive of acquisition costs, but including "hard" and allowable "soft" costs (the "Newport

Grand investment requirement"), in connection with: (i) additions, renovations and/or

improvements to Newport Grand and to appurtenant real or personal property, including without

limitation, improvements and renovations consisting of an entertainment facility, which shall

include a music venue, spa, restaurant, gaming, and other appropriate customer amenities; and (ii)

performing NGJA or its successor's obligations regarding investment requirements under the

amended master contract ("Newport Grand investment requirement assets"). "Hard costs" shall

mean all costs that in accordance with United States generally accepted accounting principles

("GAAP") are appropriately chargeable to the capital accounts of NGJA or its successor or would

be so chargeable either with an election by NGJA or its successor or but for the election of NGJA

or its successor to expense the amount of the item, and "soft costs" shall mean all other costs

appropriately chargeable to the investment requirement which are not hard costs in accordance

with GAAP. In determining whether the investment requirement has been satisfied, soft costs in

excess of two million five hundred thousand dollars ($2,500,000) shall be excluded. Provided

further, that none of the expenditures in this subsection shall qualify as eligible expenditures for

purposes of any credit, including historic tax credits as provided in chapter 44-33.2 and enterprise

zone credits as provided in chapter 42-64.3.

     (2) On or before the dates set forth in the amended master contract and in all events on

that date which is 90 days after the third anniversary of the effective date of the amended master

contract (as such original three (3) year period may have been extended as set forth in Section

4.1(c) below), NGJA or its successor shall submit to the division NGJA's certification, certified

by a certified public accounting firm acceptable to the division and using procedures approved by

the division not inconsistent with GAAP, providing its professional opinion, on behalf of itself

and its applicable NGJA or its successor business affiliates as to the aggregate amounts expended,

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allocated between "hard" and allowable "soft" costs in respect of the investment requirement, so

as to enable the division to measure NGJA or its successor's investment requirement assets and to

confirm NGJA or its successor's compliance with its obligation under Section 4.1(b)(1) hereof.

NGJA or its successor shall pay all costs of obtaining and preparing the professional opinion

obtained from the certified public accounting firm required by this subsection; and

     (c) The amended master contract shall also provide, without limitation, that the division

shall be entitled to, among other things, terminate the amended master contract if NGJA or its

successor fails to fulfill the aggregate investment requirement pursuant to Section 4.1(b)(1)

hereof prior to that date which is three (3) years from the effective date of the amended master

contract, unless such failure is attributable to: (i) the failure to receive the necessary local

approvals in connection with the improvements, construction and other activities referenced in

Section 4.1(b)(1), notwithstanding the use of NGJA or its successor's commercially reasonable

efforts to obtain such approval; (ii) delays attendant to any litigation brought by any third-party

contesting in any way the construction of the improvements and having the effect of delaying the

expenditure of the investment requirement and which litigation is ultimately resolved in a manner

allowing the expenditure of the investment requirement to proceed; or (iii) the occurrence of one

or more force majeure events beyond the control of NGJA or its successor. The aforesaid original

three (3) year period shall be extended by the number of days delay occurring as a result of any

one or more of the events described in clauses (i), (ii) or (iii) of the preceding sentence.

     (d) The amended master contract shall also provide that, following completion of the

investment requirement, NGJA or its successor shall maintain Newport Grand in a first class

manner pursuant to regulations adopted by the division and approved by the permanent joint

committee on state lottery.

     SECTION 3. Chapter 323 of the 2005 Public Laws entitled "An Act Enabling the

Division of Lotteries to enter into a Master Video Lottery Terminal Contract with UTGR, Inc.

and to enter into a Master Video Lottery Terminal Contract with Newport Grand Jai Alai, LLC.",

as amended, is hereby further amended by adding thereto the following section:

     Section 4.1 Authorized amendment of NGJA master contract.

     (a) Notwithstanding any provisions of the general laws or regulations adopted thereunder

to the contrary, including, but not limited to, the provisions of Chapter 2 of Title 37 and Chapter

61 of Title 42 of the General Laws, and the provisions of section 42-61.2-7, the division is hereby

expressly authorized and empowered to enter into an amendment to the master contract with

NGJA or its successor containing the following terms and purposes and such terms as deemed

necessary and appropriate by the division, all of which shall be set forth in more particular detail

LC005867/SUB A/2 - Page 11 of 17

in said amendment.

     (b) Under the terms of any amendments to the master contract authorized under this act,

NGJA or its successor shall agree that during the term it shall undertake, among others, the

following obligations:

     (1) NGJA or its successor will invest, in the aggregate, within three (3) years following

the effective date of the amended master contract in accordance with a schedule set forth in the

amended master contract (but subject to an extension of the original three (3) year period as set

forth in Section 4.1(c) below), at least forty million dollars ($40,000,000) of total project costs,

exclusive of acquisition costs, but including "hard" and allowable "soft" costs (the "Newport

Grand investment requirement"), in connection with: (i) additions, renovations and/or

improvements to Newport Grand and to appurtenant real or personal property, including without

limitation, improvements and renovations consisting of an entertainment facility, which shall

include a music venue, spa, restaurant, gaming, and other appropriate customer amenities; and (ii)

performing NGJA or its successor's obligations regarding investment requirements under the

amended master contract ("Newport Grand investment requirement assets"). "Hard costs" shall

mean all costs that in accordance with United States generally accepted accounting principles

("GAAP") are appropriately chargeable to the capital accounts of NGJA or its successor or would

be so chargeable either with an election by NGJA or its successor or but for the election of NGJA

or its successor to expense the amount of the item, and "soft costs" shall mean all other costs

appropriately chargeable to the investment requirement which are not hard costs in accordance

with GAAP. In determining whether the investment requirement has been satisfied, soft costs in

excess of two million five hundred thousand dollars ($2,500,000) shall be excluded. Provided

further, that none of the expenditures in this subsection shall qualify as eligible expenditures for

purposes of any credit, including historic tax credits as provided in chapter 44-33.2 and enterprise

zone credits as provided in chapter 42-64.3.

     (2) On or before the dates set forth in the amended master contract and in all events on

that date which is 90 days after the third anniversary of the effective date of the amended master

contract (as such original three (3) year period may have been extended as set forth in Section

4.1(c) below), NGJA or its successor shall submit to the division NGJA's certification, certified

by a certified public accounting firm acceptable to the division and using procedures approved by

the division not inconsistent with GAAP, providing its professional opinion, on behalf of itself

and its applicable NGJA or its successor business affiliates as to the aggregate amounts expended,

allocated between "hard" and allowable "soft" costs in respect of the investment requirement, so

as to enable the division to measure NGJA or its successor's investment requirement assets and to

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confirm NGJA or its successor's compliance with its obligation under Section 4.1(b)(1) hereof.

NGJA or its successor shall pay all costs of obtaining and preparing the professional opinion

obtained from the certified public accounting firm required by this subsection; and

     (c) The amended master contract shall also provide, without limitation, that the division

shall be entitled to, among other things, terminate the amended master contract if NGJA or its

successor fails to fulfill the aggregate investment requirement pursuant to Section 4.1(b)(1)

hereof prior to that date which is three (3) years from the effective date of the amended master

contract, unless such failure is attributable to: (i) the failure to receive the necessary local

approvals in connection with the improvements, construction and other activities referenced in

Section 4.1(b)(1), notwithstanding the use of NGJA or its successor's commercially reasonable

efforts to obtain such approval; (ii) delays attendant to any litigation brought by any third-party

contesting in any way the construction of the improvements and having the effect of delaying the

expenditure of the investment requirement and which litigation is ultimately resolved in a manner

allowing the expenditure of the investment requirement to proceed; or (iii) the occurrence of one

or more force majeure events beyond the control of NGJA or its successor. The aforesaid original

three (3) year period shall be extended by the number of days delay occurring as a result of any

one or more of the events described in clauses (i), (ii) or (iii) of the preceding sentence.

     (d) The amended master contract shall also provide that, following completion of the

investment requirement, NGJA or its successor shall maintain Newport Grand in a first class

manner pursuant to regulations adopted by the division and approved by the permanent joint

committee on state lottery.

     SECTION 4. Findings of fact.

     WHEREAS, revenues generated from state-operated gaming in Rhode Island constitute

the third largest source of revenue to the state, behind only revenue generated from income taxes

and sales and use taxes; and

     WHEREAS, the issue of gaming and gambling has traditionally been accorded

tremendous weight by the people of Rhode Island, such that in 1994 the voters amended the

Constitution of Rhode Island to provide that no state operated gaming or gambling could be

established in the state and in any municipality of the state without the express approval of voters

both statewide and in the municipality where the proposed establishment or expansion of such

gaming or gambling were proposed; and

     WHEREAS, it is important that such proposals to establish or expand state-operated

gaming or gambling in the state be presented to the voters in a manner that is clear and

transparent to the voters; and

LC005867/SUB A/2 - Page 13 of 17

     WHEREAS, brevity, accuracy, consistency, and conciseness are all aspects of clarity and

transparency; and

     WHEREAS, under current practice, while voters outside the host or proposed host

community for a gaming facility vote on one question whether to approve or reject the proposed

establishment or expansion of state-operated gaming, voters in the municipality where such

establishment or expansion of state-operated gaming is proposed vote on the same question twice,

once on the statewide ballot and once on the local referendum ballot; and

     WHEREAS, the General Assembly believes that it would be in the furtherance of clarity

and transparency for all persons voting on any question of state-operated gaming or gambling to

vote on the same form of ballot and on one question; and

     WHEREAS, having all voters vote on the same form of ballot would provide clarity and

transparency; and

     WHEREAS, having all voters vote on the same form of ballot containing the question

pertaining to state-operated gaming or gambling would continue to meet the requirements of

Article 6, Section 22 of the Constitution of Rhode Island, because it would constitute both a

statewide referendum and a referendum in the municipality in which the proposed gambling

would be allowed, and the local board of canvassers from the host community would still need to

certify the results of the proposed question to the secretary of state; and

     WHEREAS, the proposed use of the same form of ballot containing the question

pertaining to state-operated gaming or gambling would not in any way reduce or diminish the

constitutional requirements that there be no establishment or expansion of state-operated gaming

or gambling without the approval of a majority of the electors voting in a statewide referendum

and by the majority of those electors voting in a referendum on the same question in the

municipality where the proposed gambling or gaming would be allowed;

     THEREFORE, the General Assembly proposes to amend § 41-9-4 of the General Laws to

provide that all voters vote on the same form of ballot containing any referendum question

pertaining to state-operated gaming or gambling, and that the local board of canvassers of any

host municipality where state-operated gaming or gambling is proposed to be established or

expanded would certify to the Secretary of State the local results on such question, and that there

would be no establishment or expansion of gaming except as provided for in Section 22 of Article

6 of the Constitution of Rhode Island.

     SECTION 5. Section 41-9-4 of the General Laws in Chapter 41-9 entitled "Establishment

and Extension of Gambling Activities and Other Facilities" is hereby amended to read as follows:

     41-9-4. Town and state election on establishment of facility. -- (a) Before a gambling

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facility shall be established in any town or city, the town council of the town or the city council of

the city shall comply with the following procedure:

      (1) Upon receipt of a resolution from the town council of the town or the city council of

the city, for a referendum to establish a gambling facility and/or activity, the general assembly

shall determine, by passage of an act, whether to allow a referendum on the establishment of the

gambling facility and/or activity.

      (2) Upon passage of an act to allow a single referendum which shall be considered both a

statewide and a local referendum in accordance with Section 22 of Article 6 of the Constitution of

Rhode Island for the establishment of the gambling facility and/or activity, the town council of

the town or the city council of the city shall pose, by adopting a resolution to be placed on the

ballot at the next general election to there shall be submitted to the qualified electors of the town

or city and to the qualified electors of the state, the following question: "Shall a gambling facility

and/or activity be established in the town (or city) of __________________?"

      (b) The question shall be submitted by the local board of canvassers to the electors of the

town or city where the facility or activity is to be located, and the results of the election shall be

certified to the secretary of state.

      (c)(b) The question shall be submitted by the secretary of state to the qualified electors of

the state at the same general election and the secretary of state shall certify the statewide election

results, and the local board of canvassers of the city or town where the establishment of a

gambling facility or activity is proposed, is authorized and directed to certify the local election

results of the electors voting in the city or town on the referendum question, to the secretary of

state.

      (d)(c) The affirmative vote of the subject town or city and the electors of the state shall

be necessary for the approval of the question, and if consent be thus given, all rules and

regulations shall be promulgated in accordance with the authority conferred upon the general

assembly in R.I. Const., Art. VI, Sec. XV.

     SECTION 6. Pursuant to Article VI, section 22 of the Rhode Island Constitution, the

following question shall be submitted by the secretary of state to the qualified electors of the state

at the statewide general election to be held in November of 2014, and such statewide ballot shall

itself be considered to be both a state and local referendum proposed pursuant to Article 6,

Section 22 of the Rhode Island Constitution, and the secretary of state shall certify the statewide

election results, and the local board of canvassers of the city of Newport is authorized and

directed to certify the local election results of the electors voting in the city of Newport on the

referendum question, to the secretary of state.

LC005867/SUB A/2 - Page 15 of 17

     "Shall an act be approved which would authorize the facility known as 'Newport Grand'

in the city of Newport to add state-operated casino gaming, such as table games, to the types of

gambling it offers only and exclusively at the facility located at 150 Admiral Kalbfus Road,

Newport?"

     SECTION 7. Unless otherwise amended by this act, the terms, conditions, provisions,

and definitions of chapters 322 and 323 of the public laws of 2005 and chapter 16 of the public

laws of 2010 are hereby incorporated herein by reference and shall remain in full force and effect.

     SECTION 8. The question, to be submitted to the qualified electors relating to the

expansion of gaming at Newport Grand, shall appear on the ballots as the first referendum

question. The question to be submitted to the qualified electors relating to the amendment to the

Rhode Island Constitution regarding the location of casino gaming in a municipality shall appear

on the ballots as the second referendum question.

     SECTION 9. This act shall take effect upon passage. Provided, the provisions of Section

1 of this act shall remain in effect only if the question submitted to the voters at the general

election to be held in November of 2014 relating to the expansion of gaming at Newport Grand is

approved by a majority of the electors voting both statewide and in the city of Newport, and if the

amendment to the Rhode Island Constitution regarding the location of casino gaming in a

municipality submitted to the voters in the same election is approved by a majority to the electors

voting statewide. In the event either or both questions does not receive sufficient voter approval

to take effect, then the provisions of Section 1 of this act shall be repealed upon the certification

by the Secretary of State of the results of said votes.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT -- AUTHORIZING STATE-

OPERATED CASINO GAMING AT NEWPORT GRAND SUBJECT TO STATEWIDE AND

LOCAL VOTER APPROVAL

***

     This act would authorize a voter referendum on the approval of state-operated casino

gaming at the Newport Grand facility. Such referendum would take place at the statewide general

election to be held in November of 2014. Such expansion could only take place if, in addition to

state and local voter approval of the referendum, there was also statewide voter approval of a

constitutional amendment dealing with changes in the location of where casino gaming is

permitted in any city or town. The act would also amend the allocation of net terminal income of

authorized video lottery terminals at Newport Grand, if both measures pass.

     This act would take effect upon passage. Provided, the provisions of Section 1 of this act

would remain in effect only if the question submitted to the voters at the general election to be

held in November of 2014 relating to the expansion of gaming at Newport Grand is approved by

a majority of the electors voting both statewide and in the city of Newport, and if the amendment

to the Rhode Island Constitution regarding the location of casino gaming in a municipality

submitted to the voters in the same election, is approved by a majority of the electors voting

statewide. In the event either or both questions does not receive sufficient voter approval to take

effect, then the provisions of Section 1 of this act would be repealed upon the certification by the

Secretary of State of the results of said votes.

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