BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2414
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          Date of Hearing:   April 21, 2010

                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
                                   Joe Coto, Chair
                AB 2414 (John A. Perez) - As Amended:  April 15, 2010
          
          SUBJECT  :   Horse racing: thoroughbred racing: Breeder's Cup:  
          wagering deduction.

           SUMMARY  :   The intent of this bill is to encourage Breeders' Cup  
          to designate California as the permanent host state for the  
          Breeders' Cup World Championship horse racing event.   
          Specifically,  this bill  : 

          1)Authorizes a thoroughbred association hosting Breeders' Cup  
            races, upon filing a written notice with the California Horse  
            Racing Board (CHRB), to deduct from the total amount handled  
            in the pari-mutuel pool for any type of wager made during the  
            days on which Breeders' Cup races are held, an amount of not  
            less than 10% nor more than 25%.  Requires the written notice  
            to include the written agreement of the thoroughbred  
            association and the horsemen's organization.  
           
          2)Requires for every year that the organization operating the  
            Breeders' Cup Championship series chooses to conduct the  
            series of races in California, the statewide marketing  
            organization shall enter into an agreement, in consultation  
            and cooperation with the California Tourism Commission and  
            with the organization that operates the Breeders' Cup to  
            sponsor and promote the event.  AB 2414 requires the agreement  
            to provide for assistance with a minimum value of $2,000,000  
            annually to promote the Breeders' Cup World Championship  
            series.
           
          3)Declares the Legislature's intent to later amend this bill to  
            provide that a percentage of the takeout that is attributable  
            to the Breeders' Cup races that otherwise would not have been  
            generated absent the Breeders' Cup races occurring in this  
            state, be eligible to be made available to support the  
            statewide marketing organization and the state horse racing  
            industry. 

           EXISTING LAW  :

          1)Provides that CHRB regulate the various forms of horse racing  








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            authorized in this state.

          2)Authorizes a thoroughbred association or fair, subject to  
            approval by the California Horse Racing Board, to deduct from  
            the pari-mutuel pool for any type of wager, a specified  
            percentage for the meeting of the thoroughbred association or  
            fair that accepts the wager.

          3)Permits racing associations, fairs, and the organization  
            responsible for contracting with racing associations and fairs  
            with respect to the conduct of racing meetings, to form a  
            private, statewide marketing organization to market and  
            promote thoroughbred and fair horse racing, and to obtain,  
            provide, or defray the cost of workers' compensation coverage  
            for stable employees and jockeys of thoroughbred trainers.  

          4)Authorizes California Thoroughbred owners to deduct a portion  
            of their purse pools to participate in the "national  
            marketing" association, the National Thoroughbred Racing  
            Association (NTRA). Extends the sunset date from January 1,  
            2008 to January 1, 2011 in existing law, which allows any  
            racing association or fair that conducts thoroughbred racing  
            to pay to the owners' organization a certain portion of the  
            purses for a national marketing program, as specified.

          5)Authorizes racing associations, fairs, and the organization  
            representing thoroughbred owners' to form a private statewide  
            marketing organization to market and promote thoroughbred and  
            fair horse racing.  Provides that the private statewide  
            marketing organization shall remain in effect only until  
            January 1, 2011. 

          6)Authorizes a thoroughbred association or fair to file a  
            written notice with CHRB to alter the amount deducted (the  
            takeout) from the total amount wagered (the handle) on horse  
            races.  The takeout shall be not less than 10 percent or more  
            than 25 percent of the handle.
           
          FISCAL EFFECT  :   Unknown.

           COMMENTS  : 

          According to the author, the Breeders' Cup Championship series  
          of races is the preeminent series of horse races recognized  
          throughout the world.  From the inaugural running in Hollywood  








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          Park 26 years ago, the Breeders' Cup World Championship has a  
          rich and vibrant tradition in California, having been run here  
          eight times.  The Breeders' Cup World Championship races were  
          conducted in California in 2008 and 2009 by Oak Tree Racing  
          Association at Santa Anita Park located in Los Angeles County.   
          In 2009, more than 96,000 fans attended the event while being  
          broadcast to over 130 countries. 

          The author maintains the intent of this bill is to encourage the  
          organization operating the Breeders' Cup Championship series to  
          make California the permanent home of the Breeders' Cup  
          Championship series and it is the intent of the Legislature,  
          through the enactment of this bill, to provide substantial  
          support towards that end. 

          The Los Angeles Economic Development Commission, having studied  
          the impact of the Breeders' Cup Championship series being held  
          in California the last two years, has concluded that the events  
          have brought an additional sixty million dollars ($60,000,000)  
          in economic impact to the State of California and Los Angeles  
          region each year, through added tourism and other economic  
          impact, and created over 500 direct and indirect jobs.  

          The author states, the Legislature and the Governor of  
          California recognize the importance of the horse racing industry  
          to this state, including the 50,000 jobs associated with the  
          industry, and have taken significant steps to support the  
          industry, evidenced most recently by the forty million dollars  
          ($40,000,000) in license fee relief provided in SB 16xx  
          (Ashburn), Chapter 12, Statutes of 2009-10 Second Extraordinary  
          Session.
           
          The author states that having the Breeders' Cup Championship  
          races held annually in California will benefit California's  
          horse racing industry and the State of California by stimulating  
          the economy and tourism.  "We have thousands of horses,  
          thousands of employees, and tens of thousands of fans that  
          depend on a healthy California horse racing industry, this bill  
          will be a tool to get this struggling industry back on-track  
          allowing it to be enjoyed for generations to come.
           
          Background  :

           Breeders' Cup  :  The Breeders' Cup World Championship is an  
          annual series of Grade I thoroughbred horse races.  The event is  








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          a year-end championship for North American thoroughbred racing,  
          which attracts top horses from other parts of the world,  
          especially Europe. The Breeders' Cup is considered to be the  
          richest two days in the United States for total purses paid to  
          horse owners.  The attendance at the Breeders's Cup ranks fifth  
          in North America and usually surpasses the attendance of all  
          other stakes races.  The daily attendance of the Breeders' Cup  
          typically only trails the Kentucky Derby, the Preakness Stakes  
          and the Kentucky Oaks.


          It was reported in March 2010, that the Breeders' Cup board is  
          looking at a permanent host location for the World Championships  
          as a potential option as part of the organization's ongoing  
          strategic planning initiative.  Although Breeders' Cup officials  
          have said that the organization has considered designating Santa  
          Anita Park in Arcadia as a permanent host site for the next five  
          years beginning in 2011, the organization is also considering a  
          three-track rotation that includes Oak Tree Racing Association  
          at Santa Anita Park, Churchill Downs in Kentucky, and Belmont  
          Park in New York.  


          It has been reported that the Breeders' Cup board is scheduled  
          to conduct a "host-site discussion" during its meeting on April  
          22, 2010.


          California's racetracks meet the criteria of permanent host  
          location by providing a major media market, ability to  
          accommodate big crowds, good weather, and generating increased  
          revenue through attendance and pari-mutuel handle.  Another  
          potential benefit to the World Championships being held in  
          California would be that Oak Tree Racing Association is a  
          non-profit organization which provides many business and  
          financial advantages over competing racetracks.


          In a related matter, Kentucky Governor Beshear recently signed  
          legislation that would rescind a tax break in 2010 for Churchill  
          Downs and the Breeders' Cup if that racetrack is not designated  
          as a host site for the 2011 or 2012 Breeders' Cup.  It would  
          require, however, the tax to be paid if Breeders' Cup  has not  
          selected  Churchill Downs as a host site in the next two years by  
          November 4, 2010.  In the past, various State legislatures have  








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          forgiven pari-mutuel taxes for the Breeders' Cup events.  The  
          Kentucky legislation is the first that would make the tax  
          contingent on another development.

           Marketing horseracing  :  The popularity of horse racing as both a  
          sport and industry has suffered of late in California, primarily  
          due to the industry's inability to expand its market share and  
          attract new customers.  Moreover, the industry has experienced  
          difficulty competing with other more popular forms of gambling,  
          such as those games offered by the state lottery, card clubs and  
          casino gambling in Nevada or on Indian reservations.

          To help address general declines in the overall industry,  
          thoroughbred racing interests from across the country formed the  
          National Thoroughbred Racing Association (NTRA) in order to  
          create a centralized structure which would promote thoroughbred  
          horse racing on a national level.  The primary objective of NTRA  
          is to develop and implement a comprehensive marketing strategy  
          featuring increased network and cable media exposure.  Funding  
          for this program comes from racing interests outside of  
          California, as well as California's thoroughbred racing  
          associations and horse owners from purses.  Last year,  
          California thoroughbred owners, through the Thoroughbred Owners  
          of California (TOC), paid approximately $400,000 to NTRA for the  
          purpose of marketing horse racing.

          Chapter 335, Statutes of 1998 (SB 27, Maddy), created a private  
          statewide marketing organization for thoroughbred and fair  
          racing that is funded by .4% of the in-state off-track handle.   
          The funds generated from this distribution are used to market  
          California horse racing on a statewide basis.  The California  
          Marketing Committee (CMC) is generally responsible for promoting  
          horse racing in the state by developing and implementing a  
          marketing plan that will increase on-track and off-track  
          attendance throughout the state.  An underlying assumption of  
          the CMC's Marketing Plan is that it is far easier to capture a  
          new fan through an on-track experience than through an off-track  
          visitation to a satellite wagering facility.  

          In 2003, the CMC received approximately $6.1 million to support  
          its marketing efforts but due to handle declines it has been  
          reduced to approximately $4 million in 2010.  Current law  
          provides that the CMC must annually submit to the CHRB a  
          statewide marketing and promotion plan for thoroughbred and fair  
          horse racing that encompasses all geographical zones in the  








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          state, including the manner in which funds were expended in the  
          implementation of the plan for the previous calendar year.   
          Additionally, the 2010 CMC Budget redirects a portion of its  
          marketing and advertising funds to enhance purses on major  
          racing days, such as the Santa Anita Handicap, Hollywood Gold  
          Cup, and Pacific Classic.  The CMC program will expire after  
          this year due to a sunset clause in the law unless there is  
          legislation to extend it.  

           California Travel and Tourism Commission  :  The California Travel  
          and Tourism Commission (CTTC) is a not-for-profit, 501(C)(6)  
          corporation formed in 1998 to work jointly with the State of  
          California's Division of Tourism to implement an annual  
          marketing plan, which promotes California as a travel  
          destination. While these two partners (CTTC and Division of  
          Tourism) are separate legal entities, they are commonly referred  
          to jointly as California Tourism. 
           
          In 2006, Governor Schwarzenegger signed AB 2592 (Leno), an  
          assessment program for the passenger car rental industry which  
          was in addition  to other levy assessments on other specified  
          businesses which benefit from travel and tourism spending.  AB  
          2592 also reduced the state's General Fund appropriation from  
          $7.3 million to $1 million.  In 2010, the major source of CTTC's  
          budget ($50 million) is directly derived from assessed  
          businesses in the travel and tourism industry in California.      


          The 37-member CTTC is composed of individuals from all 12  
          regions of California.  Twenty-four of the commissioners are  
          elected by the approximately 5,000 assessed California  
          businesses; 12 are appointed by the governor; and the 37th is  
          the California Business, Transportation and Housing Agency  
          Secretary.  A 34-member statewide Marketing Advisory Committee  
          also provides input in developing the marketing plan. Tourism is  
          California's fourth largest employer and fifth largest  
          contributor to the gross state product.

           Prior/related legislation  :  SB 517 (Florez), Chapter 636,  
          Statutes of 2009.  Allows a Thoroughbred association or fair,  
          subject to CHRB, to alter the amount deducted from horse racing  
          wagering.  Allows the distribution of funds from the amount  
          deducted to be modified or redirected, subject to the approval  
          of CHRB.   









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          AB 1308 (Torrico), Chapter 410, Statutes of 2007.  Authorized a  
          Thoroughbred association or fair and the horsemen's  
          organization, subject to approval by CHRB, to deduct an amount  
          of not less than 10% nor more than 25% from the pari-mutuel pool  
          for any type of wager.

          AB 1736 (Governmental Organization Committee), Chapter 444,  
          Statutes of 2007.  Extended "sunset" provisions in current law  
          relating to the marketing of the California Horse Racing  
          Industry.

          SB 103 (Maddy), Chapter 10, Statutes of 1998.  Required any  
          association, including fairs, that conducts thoroughbred racing  
          to pay to the owners' organization contracting with the  
          association an additional percentage for a national marketing  
          program, as specified, to promote thoroughbred racing unless the  
          owners' organization chooses not to contribute to the program.   
          The bill sunsets January 1, 2004.

          SB 27 (Maddy), Chapter 335, Statutes of 1998, among its  
          provision, created a private statewide marketing organization  
          for thoroughbred and fair racing that is funded by .4 percent of  
          the instate off-track handle.  The funds generated from this  
          distribution are used to market California horse racing on a  
          statewide basis.  The California Marketing Committee (CMC) is  
          generally responsible for promoting horse racing in the state by  
          developing and implementing a marketing plan that will increase  
          on-track and off-track attendance throughout the state.

          AB 2592 (Leno, Chapter 790, Statutes of 2006.  Modifies the  
          conditions and terms of appointees and elected members of the  
          CTTC, broadens industry segments which may voluntary participate  
          in CTTC programs, and clarifies certain assessment and  
          referendum procedures.  Additionally, the bill makes changes to  
          the way the passenger car rental industry is assessed by the  
          CTTC which will permit rental car companies to separately state  
          specified fees in advertising, quotes and charges for rental  
          cars which become operational only if the rental car industry  
          agrees to increase its Tourism Marketing Assessment (assessment)  
          to specified level.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           








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          Del Mar Thoroughbred Club
          Golden Gate Fields
          LA County Fair: Fairplex
          Oak Tree Racing Association
          Santa Anita Racetrack

           Opposition 
           
          None on file
           

          Analysis Prepared by  :    Eric Johnson / G. O. / (916) 319-2531