SPECIAL DAILY
GAMING UPDATE
Tuesday, December 14, 2004
Pa. Gaming Control Board Convenes
for Inaugural Meeting
HARRISBURG (Dec. 14, 2004). Pennsylvania’s
Gaming Control Board has begun setting the course
for legalized gaming in the Commonwealth, and its
first official acts ran the gamut from its chairman
accepting service of a lawsuit challenging the
board’s enabling statute to a measure allowing the
board’s chair to negotiate for office space.
To use the hyperlinks within this document…
Throughout this document, you will see words
highlighted by boxes.
Those are “hyperlinks” to
documents distributed at the Gaming Control Board
meeting or other helpful documents regarding gaming in
Pennsylvania. You need only click on the highlighted
word(s) to retrieve the underlying document.
The board, which includes seven voting
members and four ex officio members, convened in
the auditorium of the Pennsylvania State Museum in
Harrisburg this morning before an audience
estimated at 150.
News reports indicated that, just before the
meeting began, a sheriff’s deputy served board
chairman Thomas “Tad” Decker with a complaint
in one of several lawsuits challenging parts of
Pennsylvania’s gaming statute. Mr. Decker declined
to identify the plaintiff in that lawsuit, and the board
did not discuss it during its public session.
The board’s formal meeting began with
Pennsylvania Secretary of the Commonwealth
Pedro A. Cortes swearing in board members.
Mr. Decker announced that the board’s highest
priority would be its integrity and the integrity of
the persons who will participate in Pennsylvania’s
gaming industry.
Board hears about applicable laws
With that introduction, the board’s first order
of business was to hear a summary of the laws
applicable to the board as a state agency from Susan
Hensel, special assistant in Pennsylvania’s
Department of Revenue (a copy of the
PowerPoint® presentation Ms. Hensel used is
attached). Those laws include the following:
• The Adverse Interest Act, which precludes
board members from having an adverse or personal
interest in contracts with the board;
• The Right-to-Know Law, which provides
Pennsylvania residents with access to public records
and sets forth procedures to seek access to public
records;
• The Procurement Code, under which the
Department of General Services will act as
purchasing agent for the board;
• The Ethics Act, which prohibits board
members from engaging in conduct that constitutes
a conflict of interest and requires filing of
statements of financial interest; and
• The “Open Meeting” or “Sunshine” Act, which
requires that official actions of the board be taken at
a public meeting. Public notice of such meetings is
required and written minutes must be kept.
• The Lobbying Disclosure Act, which requires
disclosure of certain gifts made by lobbyists or
given to board members. [Note: the Pennsylvania
Supreme Court’s 2002 decision in Gmerek v. State
Ethics Commission that the General Assembly could
not regulate certain lobbying activities of lawyers
has rendered inoperative the Lobbying Disclosure
Act.]
Board adopts code of conduct
The board voted unanimously to adopt the
Ethics Act as its official code of conduct and to
conduct its meetings in accordance with the
Sunshine Act. The board’s meetings will be
recorded stenographically and the transcripts will be
posted to the Board’s website (which you can find
at www.pgcb.state.pa.us). Board member Kenneth
T. McCabe proposed that the board adopt a
requirement that all board members report all
SPECIAL DAILY
GAMING UPDATE
December 14, 2004
contact by lobbyists.
proposal.
The board tabled the
The board unanimously voted to enter into an
interim interagency agreement with the Department
of Revenue by which the Department of Revenue
will provide the board with executive, legal and
technological support on an interim basis until the
board develops its own capabilities. Mr. Haines also
suggested that the application software currently
used by the Pennsylvania Horse Racing
Commission could be customized for use by the
board without significant expense.
Chairman Decker then sought board approval
for him to obtain emergency procurement authority
to procure office space within Harrisburg for the
board. The board passed the motion unanimously.
Mike Walsh, special assistant to the Governor,
discussed with the board human-resources issues,
and proposed that the board use the existing SAP
computer platform to manage its payroll, leave,
benefits and procurement needs during its start-up
(a copy of the PowerPoint® presentation Mr. Walsh
used is attached). Mr. Walsh briefly described the
standard pay classification and schedule currently
used by Pennsylvania agencies under the
Governor’s direct jurisdiction, but he reiterated that
the board was not bound by that classification
system and could develop its own.
The board discussed the issue of salaries, and
generally suggested that it would likely establish
slightly higher salaries in order to be competitive
and attract talent from other parts of the
government. The board unanimously agreed to
adopt as an interim measure the existing system of
work hours, holidays, leave and benefits described
by Mr. Walsh and to adopt the SAP platform to
manage personnel issues.
Board considers “start up tasks”
Lynn Stelle, a consultant to the Pennsylvania
Department of Revenue, then outlined key “start
up” tasks for the board, including adoption of an
organizational chart and staff hiring; approval of
budgets for the board, the Department of Revenue
and the Pennsylvania State Police; and procurement
of a central control computer system (a copy of the
PowerPoint® presentation Mr. Stelle used is
attached).
Mr. Stelle also outlined a proposed timeline.
Under that timeline, in the first quarter of 2005, the
board would approve regulations and forms for
manufacturer- and supplier-licensing applications
and for slots licenses.
In the second quarter, the board would provide
a 60-day comment period to political subdivisions
for which slots are proposed, complete certain
background investigations and issue the first
manufacturer and supplier licenses.
In the third quarter, the board would develop a
lab to test and certify slot machines, install and test
the Department of Revenue’s central control
computer system, issue occupation permits to
gaming employees and grant a conditional slots
license to permit a temporary gaming facility to
open.
Mr. Stelle noted that this timeline is
hypothetical, conditioned upon issuance of
regulations and completion of background
investigations, and that it could be subject to change
due to pending litigation regarding Pennsylvania’s
gaming legislation.
Curt Haines, deputy secretary for information
technology in the Department of Revenue, then
addressed the board regarding interim informationtechnology infrastructure support provided by the
Department of Revenue (a copy of the
PowerPoint® presentation Mr. Haines used is
attached). He explained that the Department of
Revenue has made use of existing Commonwealth
contracts to procure computers for the board, to
provide Internet access, to secure e-mail, and to
obtain other telephone and technology support for
the board.
Diversity plan tabled for later
consideration
Chairman Decker noted that, under the gaming
statute, the board was required to adopt a diversity
plan by January. He sought a motion to adopt a
diversity plan that had been distributed to board
members (according to some sources, it was
distributed to board members yesterday). The
board tabled the motion in order to allow members
a greater opportunity to review the plan. At the end
of the day, it appeared the board would take up the
diversity plan tomorrow.
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SPECIAL DAILY
GAMING UPDATE
December 14, 2004
Lynn Stelle returned to the podium to lay out a
hypothetical organizational chart (a copy of the
PowerPoint® presentation Mr. Stelle used is
attached). He explained that the positions on the
organizational chart were drawn from the
experience of other states that allow gaming, and he
said they reflect a redundant “belt-and-suspenders”
approach. Mr. Stelle told board members that the
final staff is not likely to be as “robust” as the
organizational chart suggests. Board members
sought more background information about the
organizational structures used in other states. They
then noted their preference that, before the
Pennsylvania structure is established, the board
appoint its chief counsel and executive director so
that those persons could take part in staffing and
organization.
The staffing plan Mr. Stell suggested provides
for 69 employees during FY 04-05 (the current
fiscal year), 88 employees during FY 05-06 and 148
employees at the start of FY 06-07.
criteria for eligible candidates (e.g., professional
qualifications).
Pennsylvania Treasurer Barbara Hafer then
requested and received assurances from Mr. Decker
that board members would be able to recommend
candidates to the search firms. Board member
Mary DiGiacomo Colins (a judge of the
Philadelphia County Court of Common Pleas)
advised the board that Diversified Search, Inc., in
addition to being a Pennsylvania-based firm, was
also a woman-owned business.
Board considers centralized technology
James Maida, president of Gaming Laboratories
International, then gave the board a detailed
historical overview of the types of technology
deployed in gaming states (a copy of the
PowerPoint® presentation Mr. Maida used is
attached). He also described to board members the
state-of-the-art technology known as Central
Control Systems (CCS), a central system under the
control of a state in which accounting data, security
exception reports and software verification can be
initiated. Pennsylvania’s gaming statute requires
implementation of such a system.
Mr. Maida, at Chairman Decker’s request, then
explained the benefits of allowing a local system to
operate alongside a central system. He pointed out
that casino operators would be receiving the same
data as is being transmitted to the CCS, but that
they would be able to process that data to produce
specific business information that is of importance
to them but likely not to the Commonwealth (e.g., to
identify machines that are more profitable than
others, to implement promotional programs, etc.).
Mr. Maida also emphasized the benefits in
Pennsylvania’s Gaming Control Act, which allows
for an “open protocol” to enable maximum
flexibility for operators to determine which types of
machines to use and to adapt more efficiently to
technological advances.
Deputy Secretary Haines summarized the status
of procurement of a CCS, and he emphasized that,
although the Gaming Control Act did not require
strict compliance with the Commonwealth’s
Procurement Code, the department nevertheless
chose to embark on a “competitive” procurement (a
copy of the PowerPoint® presentation Mr. Haines
used is attached). Specifically, Mr. Haines noted that
Board members question budget
perception
The staffing plan represents a significant
portion of the overall budget, which would appear
to be out of balance sometime in the next fiscal year
based upon currently appropriated funds (and prior
to the generation of licensee revenues).
As a result, some board members questioned
whether to pull the proposed budget from the
board’s website to avoid the perception that the
board would not be able to function as intended,
both from an administrative and enforcement
perspective. The board unanimously decided to
clarify that the budget posted on the board’s
website was merely a draft, and that it would be
would be subject to further discussion and
amendment.
Chairman Decker moved for the board to
embark on an “emergency procurement” to hire
Pennsylvania-based, national search firms –
Diversified Search, Inc., and Coleman Legal Search
Associates – to begin the process of recommending
names to the board for the positions of executive
director and chief counsel. Board member Jeffrey
W. Coy and Mr. McCabe asked several questions
regarding the scope of the work anticipated, as well
as what role the board would have in defining the
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SPECIAL DAILY
GAMING UPDATE
December 14, 2004
the process began with an August 2004 “request for
information” that enabled interested vendors to
submit proposals to implement a CCS. That
request outlined several, specific criteria that the
Department of Revenue would consider mandatory
in its evaluation of the proposals. The department
received those proposals in September 2004. Since
that time, it has reviewed the proposals and
requested follow-up responses from the vendors
with a focus on cost and minority/women
participation. The department is still reviewing the
updated proposals, and it anticipates selecting a
vendor by the end of January, after which the
department will begin contract negotiations with
that vendor. The department’s goal is to have a
contract in place well in advance of the
commencement of gaming operations in
Pennsylvania.
Deputy Secretary Haines noted that the
Gaming Control Act mandates that the board
establish a process or a facility to test and certify
slot machines prior to deployment, and he noted
that many jurisdictions contract this responsibility
out to third-party vendors. Mr. Haines further
noted that the statute permits the board to accept
testing and certification standards from other
gaming jurisdictions prior to the establishment of its
own standards/processes, but these interim
standards/processes may not continue beyond July
2007, by which time the board must have in place
an independent slot machine testing and
certification facility.
Chairman Decker moved to hire unnamed
outside counsel to advise the board regarding the
pending litigation that names the board as a party.
The board adopted the motion unanimously.
Mr. McCabe further clarified that the board
would be free to adopt additional rules, beyond the
Ethics Act, that would apply to board members and
staff. Chairman Decker concurred.
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***
The board reconvenes tomorrow morning
to consider another full agenda. K&L will
provide full coverage of that meeting by way of
another special daily gaming update.
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