BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



           ------------------------------------------------------------ 
          |SENATE RULES COMMITTEE            |                  AB 2215|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
          |(916) 651-1520         Fax: (916) |                         |
          |327-4478                          |                         |
           ------------------------------------------------------------ 
           
                                         
                                 THIRD READING


          Bill No:  AB 2215
          Author:   Fuentes (D)
          Amended:  8/5/10 in Senate
          Vote:     21

           
           SENATE GOVERNMENTAL ORG. COMMITTEE  :  8-0, 6/29/10
          AYES:  Wright, Harman, Calderon, Florez, Negrete McLeod,  
            Padilla, Price, Yee
          NO VOTE RECORDED:  Denham, Oropeza, Wyland

           SENATE APPROPRIATIONS COMMITTEE  :  9-0, 8/2/10
          AYES: Kehoe, Alquist, Ashburn, Corbett, Emmerson, Price,  
            Wolk, Wyland, Yee
          NO VOTE RECORDED: Leno, Walters

           ASSEMBLY FLOOR  :  73-0, 6/2/10 - See last page for vote


           SUBJECT  :    Horse racing:  advance deposit wagering:   
          minisatellite 
                      wagering facilities

           SOURCE  :     Author


           DIGEST  :    This bill makes various substantives changes to  
          the California Horse Racing law pertaining to advance  
          deposit wager and minisatellite facilities.

           ANALYSIS  :    

           Existing law  
                                                           CONTINUED





                                                               AB 2215
                                                                Page  
          2


          1. Provides for the California Horse Racing Board (CHRB)  
             which regulates the various forms of horse racing  
             authorized in this state.

          2. Authorizes and defines "Advance Deposit Wagering" (ADW)  
             as a form of pari-mutuel wagering in which a person  
             establishes an account with a board-approved betting  
             system or wagering hub where the account owner provides  
             wagering instructions authorizing the entity holding the  
             account to place wagers on the owner's behalf.

          3. Provides that a racing association, a fair, or a  
             satellite wagering facility may enter into an agreement  
             with an ADW provider to accept and facilitate the  
             placement of any wager from a patron at its facility  
             that a California resident could make through that ADW  
             provider, as defined.

          4. Authorizes the CHRB to permit licensed racing  
             associations and fairs to operate satellite-wagering  
             facilities on their grounds, as specified.

          5. Provides that the CHRB may approve an additional 15  
             mini-satellite wagering sites (total of 45) in the  
             northern, central, and southern racing zones, as  
             defined.

          This bill:

          1.  Requires the CHRB to develop and adopt rules to license  
             and regulate advance deposit wagering activity that  
             takes place within a minisatellite wagering facility and  
             also permits the CHRB to recover any costs associated  
             with the licensing or regulation.   

          2. Makes a conforming change to authorize a minisatellite  
             wagering facility to enter into an agreement with an ADW  
             provider to accept and facilitate the placement of any  
             wager at its facility that a California resident could  
             make through that ADW provider.

           Advance Deposit Wagering  .  The California horse racing  
          industry entered into a new era in 2002 with the advent of  

                                                           CONTINUED





                                                               AB 2215
                                                                Page  
          3

          ADW (AB 471 [Hertzberg], Chapter 198, Statutes of 2001),  
          which allows customers to deposit funds into an account in  
          order to wager online and over the telephone.  These wagers  
          are commingled into pools at the host track where the races  
          are run, and within the pari-mutuel wagering system  
          regulated by the CHRB.
           
          ADW was authorized at a time when California racetracks  
          were beginning to experience declining attendance and  
          handle figures.  The industry believed that making the  
          product easier to access not only would expose and market  
          horse racing to potential customers, but also make it more  
          convenient for the existing patrons to wager more often.   
          In general, industry stakeholders agree that ADW has become  
          an important element to the financial stability of  
          California's horse racing industry.  

          Currently, the CHRB has approved three companies  
          (Youbet.com, TVG, and XpressBet) to provide ADW services to  
          California customers.  ADW constitutes about $600 million  
          in handle for the horse racing business.  It has become an  
          important segment of the industry; in fact, it is the only  
          segment that has been growing. 

           Wagering at Satellite or Minisatellite Facilities  .  In  
          2007, AB 241 (Price) was enacted to authorize the creation  
          of 15 additional "mini-satellites" in each racing zone.   
          The stated intent of AB 241 was to make the sport of horse  
          racing more accessible to potential California bettors and  
          to increase the handle - the amount wagered on horse races.

          Currently, there are 34 satellite wagering facilities in  
          California located at live race tracks, fairgrounds and  
          Indian casinos. Furthermore, 64 additional wagering  
          facilities are authorized  -  44 mini-satellite facilities  
          (one has been established already inside the Commerce  
          Casino, a Southern California Card Club) and all fairs that  
          currently are not operating satellite wagering facilities  
          may do so either on or off the fairgrounds (within the  
          boundaries of the fair district).  Currently, no satellite  
          wagering facility can be established within a 20 mile  
          radius of an existing satellite wagering facility or  
          racetrack without the consent of the existing wagering  
          facility.

                                                           CONTINUED





                                                               AB 2215
                                                                Page  
          4


          California's first and only minisatellite facility to date  
          opened in July 2009 at the Commerce Casino, a southern  
          California Card Club.  The facility is currently averaging  
          more than $80,000 in horse racing wagers per day.   It is  
          unclear why there has not been a broader interest in these  
          facilities.  Some speculate that the two percent commission  
          that is retained by the minisatellite is not enticing  
          enough for business owners.
           
          Overall though, California's simulcasting network has seen  
          a steady decline in the last decade since the approval of  
          ADW.  That drop-off has been accelerated with the  
          recession.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee analysis:

                          Fiscal Impact (in thousands)

           Major Provisions                     2010-11     2011-12     
           2012-13          Fund
           Admin expenses                      --unknown, less than  
          $50 annually--    General


           SUPPORT  :   (Verified  8/5/10)

          Thoroughbred Owners of California


           ARGUMENTS IN SUPPORT  :    The author's office notes that ADW  
          has operated in California since 2002 and has proven to be  
          an efficient and accountable system employing current  
          technologies to process wagers on horse racing in  
          California.  Unfortunately, former customers of  
          California's simulcast network prefer to stay home to  
          conduct their daily wagering.  California's racing industry  
          believed that AB 241 (Price) of 2007, which authorized 45  
          minisatellites, would help reverse the customer shift but  
          to date various obstacles - mostly financial - have proven  
          otherwise.  

                                                           CONTINUED





                                                               AB 2215
                                                                Page  
          5


          One of the challenges the industry faces relative to the  
          implementation of minisatellites in various venues (e.g.,  
          sports bars, restaurants, and card clubs) is the ability to  
          process wagers in an economically efficient manner because  
          these facilities generally produce lower wagering figures  
          than established "brick and mortar" facilities.   
          Minisatellite facilities though must bear the same fixed  
          costs associated with the traditional simulcast model.  In  
          essence, the cost to facilitate a wager is the same no  
          matter where the wager takes place.  Due to this  
          inequality, the State's minisatellite system has been slow  
          to develop.
           
          This bill intends to establish another distribution method  
          for wagering on horse racing by allowing minisatellite  
          facilities, to access the current ADW infrastructure.     
          Proponents believe this bill helps make the operation of  
          minisatellites more viable from a financial perspective  
          while allowing California's racing industry to market their  
          product to new and existing patrons.   This bill also is  
          expected to make satellite wagering more attractive to the  
          customer while reducing the migration of daily wagering  
          from brick and mortar locations to Internet wagering.


           ASSEMBLY FLOOR  : 
          AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall, Bill  
            Berryhill, Blakeslee, Block, Blumenfield, Bradford,  
            Brownley, Buchanan, Caballero, Charles Calderon, Carter,  
            Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,  
            DeVore, Emmerson, Evans, Feuer, Fletcher, Fong, Fuentes,  
            Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore,  
            Hagman, Hall, Harkey, Hayashi, Hernandez, Hill, Huber,  
            Huffman, Jeffries, Jones, Knight, Logue, Bonnie  
            Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,  
            Niello, Nielsen, Norby, V. Manuel Perez, Portantino,  
            Salas, Saldana, Silva, Skinner, Smyth, Solorio, Swanson,  
            Torlakson, Torres, Torrico, Tran, Villines, John A. Perez
          NO VOTE RECORDED: Tom Berryhill, Eng, Lieu, Ruskin, Audra  
            Strickland, Yamada, Vacancy


          TSM:do  8/5/10   Senate Floor Analyses 

                                                           CONTINUED





                                                               AB 2215
                                                                Page  
          6


                         SUPPORT/OPPOSITION:  SEE ABOVE

                                ****  END  ****









































                                                           CONTINUED