BILL ANALYSIS Bill No: SB 899 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Roderick D. Wright, Chair 2009-2010 Regular Session Staff Analysis SB 899 Author: Denham As Introduced: January 26, 2010 Hearing Date: April 27, 2010 Consultant: Chris Lindstrom SUBJECT Horse racing: satellite wagering: out-of-country thoroughbred races. DESCRIPTION SB 899 deletes the statewide cap on the number of out-of-country thoroughbred races that a thoroughbred racing association or fair may import, simulcast and on which wagers may be accepted. Specifically, the bill strikes the following language from the Horse Racing Law authorizing the importation, simulcasting and wagering on out-of-country thoroughbred races: 19596.3. (b) The total number of out-of-country thoroughbred races on which wagers are allowed to be accepted statewide in any given year shall not exceed the total number of out-of-country thoroughbred races on which wagers were accepted in 1998. EXISTING LAW Article IV, Section 19(b) of the Constitution of the State of California provides that the Legislature may provide for the regulation of horse races and horse race meetings and wagering on the results. SB 899 (Denham) continued Page 2 Existing law provides that the California Horse Racing Board (CHRB) regulate the various forms of horse racing authorized in this state. Existing law authorizes a thoroughbred racing association or fair to distribute the audiovisual signal and accept wagers on the results of out-of-country thoroughbred races during the calendar period the association or fair is conducting a race meeting, without the consent of the participating horsemen's organization. Existing law limits the total number of out-of-country thoroughbred races on which wagers are allowed to be accepted statewide in any given year to the total number of out-of-country thoroughbred races on which wagers were accepted in 1998. Existing law provides that no thoroughbred association or fair may accept wagers pursuant to this section on out-of-country races commencing after 5:30 p.m. without the consent of the harness or quarter horse racing association that is then conducting a live racing meeting. Existing law authorizes the CHRB to approve the establishment of 15 mini-satellite wagering sites in each zone (for a total of 45) and defines "minisatellite wagering site" to mean a location where satellite wagering may be conducted, with the approval of the CHRB, provided that the wagering occurs in an area that is restricted to those who are 21 years of age or older. BACKGROUND Purpose of the bill . According to the sponsor, "There is an inconsistency in the current law with respect to the importation of other types of simulcast races. In the prior legislative session, the annual cap on imported out-of-state and out-of-country harness and quarter horse races was eliminated (B&P 16596.1). Similarly, the annual cap on imported out-of-state thoroughbred races was eliminated (B&P 19596.2); however, there was an unintentional oversight that left the annual cap on out-of-country thoroughbred races unchanged." Background . The scale and scope of horse racing is governed by statute. Any attempt to expand its market SB 899 (Denham) continued Page 3 requires legislative action. The California Legislature has attempted to address the racing industry's long-term viability through a number of legislative efforts to expand the exposure of horse racing to the general public and enhance horse racing's marketability. Current law limits the number of out-of-country thoroughbred races authorized to be imported for wagering purposes in any given year to no more than the total that were accepted in 1998. In 1998, legislation was enacted to provide for limited growth on the number of out-of-state thoroughbred races that may be imported and wagered upon when an association is conducting a race meeting. SB 27 (Maddy) of 1998, limited the number of imported races that may be wagered upon to 20 per day and 10,734 per year statewide. These restrictions were intended to address the Administration's concerns relative to the expansion of gambling and the fear that importing out-of-state races might cannibalize the live racing product in California. As a result of the restricted expansion authorized by SB 27, many California race tracks dropped international thoroughbred races that were once imported from Hong Kong and Australia and available in the evening market. Instead, they selected to import the daytime race cards from racing associations located in other states. Also, there was no cannibalization of the live racing product in California as feared. In addition to SB 27, there are a number of other notable measures that were enacted to help promote California's horse racing industry. In 1984 and 1987, respectively, legislation by Senator Maddy authorized and then expanded satellite wagering statewide. AB 471 (Hertzberg), Chapter 198, Statutes of 2001, authorized until January 1, 2008, Advance Deposit Wagering (ADW) in California. AB 765 (Evans), Chapter 613, Statutes of 2007, extends ADW indefinitely. AB 509 (J. Horton), Chapter 235, Statutes of 2004 authorizes a thoroughbred or fair association to import out-of-country thoroughbred races during the calendar period that the association or fair is conducting a race meeting, as specified. AB 241 (Price), Chapter 594, Statutes of 2007, authorizes each fair to operate a satellite wagering facility off of the fair grounds as well SB 899 (Denham) continued Page 4 as up to 45 mini-satellite wagering sites to be operated by private industry throughout California. AB 3074 (Governmental Organization), Chapter 510, Statutes of 2008, eliminates the ceiling on the total number of out-of-state thoroughbred races that may be imported in a given year and increases, from 23 to 32, the limitation on the total number of out-of-state thoroughbred races that may be imported per day by a thoroughbred association or fair that is conducting a live race meet. Satellite wagering. Satellite wagering via an off-track facility has been legal in California since 1985. It 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 would make it more convenient for the existing patrons to wager more often. Simulcasting. Simulcasting is the process of transmitting the audio and video signal of a live racing performance from one facility to a satellite for retransmission to other locations or venues where pari-mutuel wagering is permitted. Simulcasting provides racetracks with the opportunity to increase revenues by exporting their live racing content to as many wagering locations as possible, such as other racetracks, fair satellite facilities and Indian casinos. Revenues are increased because simulcasting provides racetracks that export their live content with additional customers in multiple locations who would not have otherwise been able to place wagers on the live racing event. PRIOR/RELATED LEGISLATION AB 3074 (Governmental Organization), Chapter 510, Statutes of 2008 . Eliminates the ceiling on the total number of out-of-state thoroughbred races that may be imported in a given year. Increases, from 23 to 32, the limitation on the total number of out-of-state thoroughbred races that may be imported per day by a thoroughbred association or fair that is conducting a live race meet. AB 1736 (Governmental Organization), Chapter 444, Statutes of 2007 . Adds the Travers Stakes to the group of specific stake races which are exempt from the 23-race per day limit SB 899 (Denham) continued Page 5 on imported races, as specified. SB 379 (Denham), Chapter 443, Statutes of 2007 . Adds the Dubai World Cup race to a specified list of races that would be exempted from the 23 race per day limit on imported races for satellite wagering in California. AB 509 (J. Horton), Chapter 235, Statutes of 2004 . Increases the number of out-of-country horse races that California racing associations and fairs may simulcast and accept wagers by removing the limitation on out-of-country races. SB 590 (Perata), Chapter 936, Statutes of 2001 . Authorizes thoroughbred racing associations and fairs in the northern racing zone to increase the number of imported racing simulcasts available to be wagered upon if the reduces the number of live racing days. SB 263 (Perata), Chapter 219, Statutes of 1999 . Increases from 20 to 23 the number of thoroughbred race simulcasts that may be imported by racing associations and fairs on days when live thoroughbred or fair racing is being conducted in California. Exempts from this limitation: (1) any imported races that are part of the race card for the Kentucky Derby, the Kentucky Oaks, the Preakness Stakes, the Belmont States, the Jockey Club Gold Cup, the Breeders' Cup, or the Haskell Invitational; and (2) races conducted in either the northern or the combined central and southern zones, respectively, when no live racing is being conducted in the particular zone. SB 27 (Maddy), Chapter 335, Statutes of 1998 . In addition to giving the horse racing industry some $40 million in license fee relief, this bill also authorized thoroughbred racing associations and fairs, to import an amount not exceeding 20 out-of-state and or out-of-country thoroughbred races during the time the association or fair is conducting a racing meeting. SB 14 (Maddy), Chapter 1273, Statues of 1987 . Expanded satellite wagering statewide. SB 1499 (Maddy), Chapter 1698, Statutes of 1984 . Implemented satellite wagering in the central and southern part of the state, and made conforming and technical SB 899 (Denham) continued Page 6 changes in the northern part of the state. SUPPORT : None on file as of April 23, 2010. OPPOSE : None on file as of April 23, 2010. FISCAL COMMITTEE : No **********