BILL ANALYSIS SB 1072 Page 1 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 ----------------------------------------------------------------- |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 SB 1072 Page 2 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 SB 1072 Page 3 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 SB 1072 Page 4 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 SB 1072 Page 5 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 FN: 0006016