BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 2414 (J. Perez) Hearing Date: 08/12/2010 Amended: 06/22/2010 Consultant: Maureen Ortiz Policy Vote: GO 8-0 _________________________________________________________________ ____ BILL SUMMARY: AB 2414 authorizes the thoroughbred racing industry to use monies from horse racing wagering pools to promote the Breeders' Cup, in cooperation with the California Tourism Commission. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund Marketing program -------------$2,000 annually--------------- Special* Admin expenses ------------------minor------------------- General *California Marketing Committee Fund _________________________________________________________________ ____ STAFF COMMENTS: SUSPENSE FILE. The horse racing takeout is the percentage deducted from all of the wagers before the winnings are paid out to bettors. These takeout rates vary among states and types of races. The current takeout rate in California is 15.43% for conventional wagers (win, place, and show) and 20.68% for exotic wagers (Exacta, Trifecta, and Pick-6). The money from the takeouts is used for owner purses, racing association commissions, and breeding incentive programs. In addition, funds are used for offsite stabling and transporting horses on race day, workers compensation program, pension and welfare fund for backstretch employees, and for funding the California Marketing Committee. While current law allows for the adjustment in the takeout rates upon approval of the California Horse Racing Board (CHRB), this bill will allow an increased takeout during the Breeders' Cup upon filing a written notice with the CHRB, but without the necessity of obtaining CHRB approval. Staff recommends an amendment to require CHRB approval of any changes in the takeout amount in order to be consistent with other provisions of horse racing law that provide the board with continued oversight of the industry. In 2009, $128 million was wagered on Breeders' Cup Championship races and the takeout was approximately $26 million. AB 2414 will give the industry flexibility in adjusting the takeout which could result in the takeout being anywhere from $13 million to $32 million. Page 2 AB 2414 (J. Perez) Specifically, AB 2414 does the following: 1)Contains Legislative findings and declarations that the Breeders' Cup Championship series of races is the preeminent series of horse races recognized throughout the world; that it is the desire of the Legislature to make California the permanent home of this series; and, that it is the intent of the Legislature to provide substantial support towards that end. 2)Authorizes a thoroughbred association, upon filing a written notice with the California Horse Racing Board (CHRB), to deduct from the total amount handled in the parimutuel pool for any wagers made during the days on which the Breeders' Cup races are held, an amount of not less than 10% not more than 25%. 3)Requires the existing private statewide marketing organization that markets and promotes the horse racing industry, with the cooperation of the California Tourism Commission, to enter into an agreement with the organization operating the Breeders' Cup in the years that the Cup is held in California. The agreement shall provide a minimum of $2 million in annual financial support to promote the Breeders' Cup. 4)Authorizes the CHRB to require that a percentage of takeout that is attributable to the Breeders' Cup races be made available to support the statewide marketing organization that promotes horse racing in California. The Breeders' Cup Championship races were held in California during 2008 and 2009 and resulted in bringing significant revenue and tourism to this state. The event is a year-end championship for North American thoroughbred racing and attracts top horses from other parts of the world. The Breeders' Cup is considered to be the richest two days in the United States for total purses paid to horse owners. In 2009, the Breeders' Cup was held at Santa Anita racetrack located in Los Angeles County where it was attended by over 96,000 fans and was telecast to over 130 countries. The Los Angeles Economic Development Commission concluded that the Breeders' Cup has brought $60 million in economic impact in each of the last two years through added tourism and has created over 500 jobs. The California Travel & Tourism Commission is a not-for-profit corporation formed in 1998 to work jointly with the state's Division of Tourism to implement an annual marketing plan which promotes California as a travel destination. While the commission and the division are two separate entities, they are commonly referred to jointly as the California Tourism Commission. Existing law authorizes racing associations, fairs, and the Thoroughbred Owners of California to form a private statewide marketing organization to market and promote thoroughbred and fair horse racings. The California Marketing Committee promotes Page 3 AB 2414 (J. Perez) horse racing in the state by developing and implementing a marketing plan to increase on-track and off-track attendance. Created by SB 27 (Maddy), Chapter 335, Statutes of 1998, the Committee is funded by 0.4% of the in-state satellite wagering facility handle, and is expected to receive approximately $4 million in 2010. The intent of this bill is to promote the Breeders' Cup in order that California might be considered the permanent home of this championship series of races. California is currently in competition with Kentucky and New York as permanent host states. The 2010 series will be held at Churchill Downs in Kentucky.