BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1072
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          SENATE THIRD READING
          SB 1072 (Ron Calderon)
          As Amended  August 16, 2010
          Majority vote 

           SENATE VOTE  :34-0  
           
           GOVERNMENTAL ORGANIZATION  18-0 APPROPRIATIONS      17-0        
           
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          |Ayes:|Coto, Anderson,           |Ayes:|Fuentes, Conway,          |
          |     |Blakeslee, Chesbro, Cook, |     |Bradford,                 |
          |     |Evans, Galgiani, Hall,    |     |Huffman, Coto, Davis, De  |
          |     |Hill, Jeffries, Ma,       |     |Leon, Gatto, Hall,        |
          |     |Mendoza, Nestande,        |     |Harkey, Miller, Nielsen,  |
          |     |Portantino, Silva,        |     |Norby, Skinner, Solorio,  |
          |     |Torres, Torrico, Tran     |     |Torlakson, Torrico        |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Extends the sunset date from January 1, 2011, to  
          January 1, 2014, in existing law relating to a private statewide  
          marketing organization to market and promote thoroughbred and  
          fair horse racing in California, as described.  
           
          EXISTING LAW  :

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

          2)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. 

          3)Requires the marketing organization to annually submit to the  
            CHRB a statewide marketing and promotion plan and a  
            thoroughbred trainers' workers' compensation defrayal plan for  
            thoroughbred and fair horse racing.  A specified percentage of  
            the amount handled by each satellite wagering facility is  
            required to be distributed to the marketing organization for  








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            the promotion of thoroughbred and fair horse racing, and for  
            workers' compensation defrayal, as specified.  Existing law  
            repeals these provisions on January 1, 2011.

          4)Allows uncommitted surplus funds in the horse racing Marketing  
            Promotion Fund or the horse racing Workers' Compensation Fund,  
            to be reallocated to any other fund or account created  
            pursuant to the Horse Racing Law. 

          5)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).
           
          FISCAL EFFECT  :   According to the Assembly Appropriations  
          analysis, funding for the CMC comes from the in-state off-track  
          wagering handle.  0.4% of the amount wagered is provided to the  
          CMC for marketing horse racing in the state.  In 2009, the CMC  
          received approximately $5 million for marketing.  Extending the  
          sunset would result in continuing the annual redirection of the  
          handle.  Minor and absorbable costs for CMC to produce a  
          semi-annual report on receipts and expenditures and for CHRB to  
          audit and review the reports. 

           COMMENTS  :  

           Purpose of the bill  :  According to the author's office, "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 1736 (Governmental Organization), Chapter 444, Statutes of  
          2007, extended the sunset to January 1, 2011.  SB 1072 will  
          extend the sunset of the program until January 1, 2014."

           Background  :  

           Marketing horseracing  :  The popularity of horse racing as both a  








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          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.

          SB 27 (Maddy), Chapter 335, Statutes of 1998, creates a private  
          statewide marketing organization for Thoroughbred and fair  
          racing that is funded by 0.4% of the in-state off-track handle.   
          The funds generated from this distribution are used to market  
          California horse racing on a statewide basis.  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  
          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.  

          In addition, 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  








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          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.

           CHRB has concerns with CMC Fund  :  At a March 2010 CHRB board  
          meeting, both the Chairman and Vice Chairman repeatedly  
          questioned CMC representatives, about how decisions are made for  
          CMC budgeting and whether there is any long-term, coherent,  
          concerted marketing activity that benefits all segments of the  
          industry.  The board members asked for more information on this  
          subject for a future meeting if this program is to be extended  
          beyond 2010.  No further action has been taken by the CHRB at  
          subsequent meetings on this matter.

           Policy consideration  :  To provide a more specific overview of  
          the annual funds generated and expedited by the horse racing  
          industry within the CMC Fund, the author might want to consider  
          an amendment which would specify in law that the CMC shall  
          provide a verbal report each November to the board on the  
          statewide marketing and promotion plan for thoroughbred and fair  
          horse racing.  In addition, the marketing committee shall file a  
          written report with the board on a semi-annually basis which  
          accounts for all receipts and expenditures in the specified  
          fund.  
           
          Prior/Related Legislation  :  AB 2414 (John A. Perez) of 2010,  
          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.  This bill requires a minimum $2 million investment (CMC  
          funding) in the marketing and promotion of the Breeders' Cup  
          Championship.  (Pending in Senate G.O. Committee)
            
          SB 766 (Negrete McLeod), Chapter 616, Statutes of 2009.  Allows  
          uncommitted surplus funds in the horse racing Marketing  
          Promotion Fund or the horse racing Workers' Compensation Fund,  
          to be reallocated to any other fund or account created pursuant  
          to the Horse Racing Law.  

          AB 1736 (Governmental Organization), Chapter 444, Statutes of  








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          2007.  Extends the sunset date, from January 1, 2008 to January  
          1, 2011, on the provision in existing law authorizing any racing  
          association or fair that conducts thoroughbred racing to pay to  
          the owners' organization a    certain portion of the purses for  
          a statewide marketing program, as specified.

          SB 124 (Denham), Chapter 130, Statutes of 2005.  Extends the  
          sunset date, from January 1, 2006 to January 1, 2008, related to  
          a private statewide marketing organization to market and promote  
          thoroughbred and fair horse racing in California from January 1,  
          2006, to January 1, 2008.

          AB 2164 (Plescia), Chapter 80, Statutes of 2004.  Extends a  
          sunset date, from July 1, 2004 to January 1, 2006, related to a  
          private statewide marketing organization to market and promote  
          thoroughbred and fair horse racing in California.

          AB 2931 (Horton), Chapter 922, Statutes of 2002.  Authorizes  
          funds from a designated marketing program, and also funds used  
          for the purpose of stabling and vanning horses, to be used to  
          defray the cost workers' compensation insurance for jockeys of  
          thoroughbred trainers and stable employees, as specified.
                    
          AB 1093 (Briggs), Chapter 933, Statutes of 2001.  Extended the  
          sunset date, from July 1, 2002 to July 1, 2004, for the  
          statewide marketing organization to market and promote  
          thoroughbred and fair horse racing in California.

          SB 27 (Maddy) Chapter 335, Statutes of 1998.  Established, until  
          July 1, 2002, a private statewide marketing organization for  
          thoroughbred and fair racing, as specified. 
           

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



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