BILL ANALYSIS
SB 1072
Page 1
SENATE THIRD READING
SB 1072 (Ron Calderon)
As Amended August 20, 2010
Majority vote
SENATE VOTE : 34-0
GOVERNMENTAL ORGANIZATION 18-0APPROPRIATIONS 17-0
-----------------------------------------------------------------
|Ayes:|Coto, Anderson, |Ayes:|Fuentes, Conway, |
| |Blakeslee, Chesbro, Cook, | |Bradford, Huffman, Coto, |
| |Evans, Galgiani, Hall, | |Davis, De Leon, Gatto, |
| |Hill, Jeffries, Ma, | |Hall, Harkey, Miller, |
| |Mendoza, Nestande, | |Nielsen, Norby, Skinner, |
| |Portantino, Silva, | |Solorio, Torlakson, |
| |Torres, Torrico, Tran | |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. In addition,
provides that an amount not to exceed 0.05% of the total amount
handled by each satellite wagering facility shall be distributed
to the non-profit organization designated by the California
Horse Racing Board (CHRB) for the purpose of maintaining a
database of horse racing information, as defined. Specifically,
this bill :
1)Provide that the statewide marketing organization may use
funds to market and promote thoroughbred and fair horse
racing, including, but not limited to:
a) Establishment and maintenance of a website featuring
California thoroughbred and fair racing; and,
b) Establishment and administration of a players incentive
programs for those who wager on thoroughbred association
and fair races, and promotional activities at satellite
wagering facilities to increase their attendance and
handle, as defined.
1)Change the distribution amount that would normally be
SB 1072
Page 2
available for commissions and purses, from 0.4% to an amount
not to exceed 0.25% of the total amount handled by each
satellite wagering facility which in then distributed to the
marketing organization, as specified.
2)Delete a provision which provides that the statewide marketing
organization may use funds to defray the cost of workers'
compensation coverage for stable employees and jockeys of
thoroughbred trainers.
3)Provide that the marketing organization shall provide specific
reports to CHRB, as defined.
4)Provide an amount not to exceed 0.05% of the total amount
handled by each satellite wagering facility shall be
distributed to the non-profit organization designated by the
CHRB for the purpose of maintaining a database of horse racing
information, as defined.
5)State that the amount distributed to such non-profit
organization may be adjusted by CHRB, in its discretion.
6)Require the non-profit organization shall annually submit to
the CHRB at its November meeting its budget for the ensuing
calendar year and shall file quarterly financial statements
with the board.
7)Extends the sunset date from January 1, 2011, to January 1,
2014
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
SB 1072
Page 3
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
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).
6)Declares that cash vouchers that are not redeemed within 365
days of the close of the racing meeting at which the voucher
was purchased shall be distributed to a nonprofit organization
designated by the board for purposes of maintaining a data
base of horseracing information, as defined.
FISCAL EFFECT : According to the Assembly Appropriations,
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 : Background:
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.
SB 1072
Page 4
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.
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. This bill addresses many of
the concerns which were expressed by CHRB members.
Data base of horseracing information : The California Horse
Racing Information Management System, Inc (CHRIMS) is a
non-profit organization focused on providing technology
solutions for the pari-mutuel gaming industry. CHRIMS was
launched in 1990 to track all-sources handle on California races
and provide automatic breakouts of where each wagered dollar
SB 1072
Page 5
should be directed. Since 2000, every pari-mutuel facility in
California has relied on CHRIMS for consolidated wagering
information. Instead of having to log and calculate data on
their own, tracks can let CHRIMS handle such time consuming jobs
as figuring out money-room shifts, simulcast fees, taxes, and
workers' compensation payments.
CHRIMS specializes in accounting applications and pari-mutuel
settlement outsourcing, but also provide solutions for managing
customer loyalty programs and admission and wager tracking.
CHRIMS also provides customized reports and consulting services
to assist you with analyzing trends, budgets, projections, etc.
CHRIMS's customer base includes some of the most well respected
racetracks in North America, such as the Del Mar Thoroughbred
Club, Santa Anita Park, Hollywood Park, Keeneland and the NYRA
family of tracks as well as horsemen's' groups. By statute,
CHRIMS is the source of pari-mutuel wagering data for the CHRB
in discharging its regulatory responsibilities and monitoring
the integrity of pari-mutuel pools and distributions from those
pools. CHRIMS also manages the intrastate communications system
through which wagering data is transmitted both inter-track and
throughout the state's off-track wagering network.
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." The
bill also makes various modifications to the manner in which the
marketing organization may expend its revenue. Supporters note
that this adjustment takes into consideration current marketing
and promotion trends which will lead to fiscally responsible
business decisions.
In addition, the bill contains language which provides an amount
SB 1072
Page 6
not to exceed 0.05% of the total amount handled by each
satellite wagering facility shall be distributed to the
non-profit organization (CHRIMS) designated by the CHRB for the
purpose of maintaining a database of horse racing information,
as defined.
Supporters note, that the original funding for the development
of CHRIMS was provided by un-cashed vouchers (AB 1418 (Tucker),
Chapter 311, Statutes of 1994). As account wagering has
proliferated and on-track and off-track wagering have
experienced severe declines in handle due to economic conditions
the revenues from vouchers have declined dramatically. CHRIMS
has filled the funding gap through the deferral of equipment and
software upgrades, direct industry surcharges and through the
development of outside revenues from services provided to
customers in other states. However, voucher revenues have
continued to decline and are projected to decline by $125,000 in
2010. In addition, CHRIMS must repay capital equipment
financing provided by Oak Tree Racing Association which was used
to replace equipment on the verge of failure and replace
revenues from services previously provided to California
Marketing Committee (CMC) for its player rewards and database
marketing efforts. This bill will help to ensure that CHRIMS
remains a valuable technology and marketing tool for
California's Horse Racing Industry.
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 on Senate Floor)
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
2007. Extends the sunset date, from January 1, 2008 to January
SB 1072
Page 7
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.
AB 1418 (Tucker), Chapter 311, Statutes of 1994. Among various
provisions, stated that cash vouchers that are not redeemed
within 365 days of the close of the racing meeting at which the
voucher was purchased shall be distributed to a nonprofit
organization designated by the board for purposes of maintaining
a data base of horseracing information, as defined.
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531
FN: 0006438