BILL ANALYSIS SB 1072 Page 1 SENATE THIRD READING SB 1072 (Ron Calderon) As Amended August 30, 2010 Majority vote SENATE VOTE :Vote not relevant GOVERNMENTAL ORGANIZATION 18-0 APPROPRIATIONS 12-0 ----------------------------------------------------------------- |Ayes:|Hall, Anderson, Chesbro, |Ayes:|Fuentes, Conway, | | |De Leon, Evans, Galgiani, | |Bradford, | | |Hernandez, Hill, Lieu, | |Charles Calderon, Coto, | | |Ma, Mendoza, Nestande, | |Davis, Gatto, Hall, | | |V. Manuel Perez, | |Norby, Solorio, | | |Portantino, Silva, | |Torlakson, Torrico | | |Torres, Torrico, Tran | | | | | | | | ----------------------------------------------------------------- SUMMARY : SB 1072 is a horse racing measure that: 1) requires Thoroughbred racing associations and fairs to deduct an additional amount of the total handle on exotic wagering (e.g., exacta, trifecta, superfecta) for purse augmentation; 2) authorizes the California Horse Racing Board (CHRB) to license entities to operate "exchange wagering" systems, as defined, that accept exchange wagers from individuals residing either within or outside of this state on horse races run in California or other states; 3) states that exchange wagering shall not become operative until May 1, 2012; 4) authorizes the Thoroughbred racing industry to use monies from horse racing wagering pools to promote the Breeders' Cup, in order that California might be considered the permanent home of this championship series of races; 5) 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; and, 6) 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 CHRB for the purpose of maintaining a database of horse racing information, as defined. Specifically, this bill : 1)Makes various legislative findings relative to the economic SB 1072 Page 2 importance of the Breeders' Cup Championship series and declares that it is not only the desire of the Legislature to encourage the organization operating this prestigious international event to make California its permanent home but also the intent of the Legislature to provide substantial support towards that endeavor. 2)Makes additional findings and declarations relative to the fact that California has one of the lowest "takeouts" on wagering and concern that horse owners are not bringing their horses to California because of lower purses and horses are leaving the state in order to compete for higher purses. 3)Provides that every Thoroughbred racing association or fair that conducts a live race meet shall deduct an additional 2% of the total amount handled on exotic wagers requiring the selection of two wagering interests (e.g., exactas, quinellas) and 3% of the total amount handled on exotic wagers requiring the selection of three or more wagering interests (e.g., trifectas, superfectas). (The additional takeout is intended to augment purses.) 4)Provides that any Thoroughbred association or fair that authorizes betting systems located outside of this state to accept wagers on a race shall retain from the total amount received from the out-of-state betting system, less certain deductions made pursuant to existing provisions of law, the incremental amount received as a result of the 2% or 3% takeout referenced above on exotic wagers required by this measure, for distribution as overnight purses. 5)Grants the CHRB the authority to postpone or revoke implementation of the takeout increase, as specified. 6)Adds a new Article (Article 9.1) to the Horse Racing Law authorizing "exchange wagering" and declares that the Legislature has determined that the CHRB is best suited to oversee, license, and regulate exchange wagering in California. Declares legislative intent to promote the economic future of the horse racing industry in California and to foster the potential for increased commerce, employment and recreational opportunities by authorizing exchange wagering. 7)States that exchange wagering shall not become operative until SB 1072 Page 3 May 1, 2012. 8)Defines a host of new terms, as specified, for purposes of exchange wagering including the term "exchange wagering" which means a form of pari-mutuel wagering in which two or more persons place identically opposing wagers in a given market. 9)Stipulates that exchange wagering shall only be conducted by an exchange wagering licensee pursuant to a valid exchange wagering license issued by the CHRB. 10)Makes it explicit that no exchange wagering licensee shall accept exchange wagers on races conducted in California from a resident of California or a resident of a jurisdiction outside California, or conducted outside California from a resident of California, unless an exchange wagering agreement, as defined, exists allowing such wagers. Additionally, exchange wagering must be conducted pursuant to and in compliance with the federal Interstate Horse Racing Act of 1978. 11)Defines "exchange wagering agreement" to mean a written agreement by and among the applicable exchange wagering licensee, the applicable racing association or racing fair conducting live racing in this state and the horsemen's organization responsible for negotiating purse agreements for the breed on which exchange wagers are accepted, provided that the terms and conditions for the permitted use of signal by the exchange wagering licensee, and the compensation to the applicable racing association or racing fair and the horsemen's organization include certain specified provisions. 12)Requires the CHRB to promulgate rules and regulations governing the conditions under which exchange wagering may be conducted, including requiring an annual audit of an exchange wagering licensee. Also, would allow exchange wagers to be submitted and accepted by licensed exchange wagering systems in the same manner as is currently provided for Advanced Deposit Wagers (e.g., in person, telephone, or Internet). 13)States prior to CHRB promulgating rules, regulations and conditions under which exchange wagering may be conducted in California, the board shall consider studies or comments submitted by interested parties on the impact of exchange wagering on pari-mutuel betting and the economics of the SB 1072 Page 4 California horse racing industry to assist the board in developing rules, regulations and conditions for exchange wagering that are in the best interest of the public and the California horse racing industry, as specified. 14)Provides that only persons 18 years of age or older could establish exchange wagering accounts and requires the CHRB to approve security policies and safeguards to ensure player protections, age verification and location. 15)Directs the CHRB to adopt rules prohibiting any owner, trainer, jockey, or stable employee from placing an exchange wager on any horse owned, trained, or ridden by any of those individuals. 16)Includes language (similar to Advance Deposit Wagering law) relative to supporting the contracting rights of pari-mutuel clerks that have been displaced due to the increased automation of the wagering process, in addition to a specific distribution to the existing jockey health and benefit welfare fund. 17)Provides that monies that would have been otherwise distributed to a purse account from the increased takeout on Breeders' Cup day(s) shall be available for the purpose of promoting and sponsoring the Breeders' Cup. 18)Requires the host track of the Breeders' Cup to enter into a written agreement with the Breeders' Cup, LTD, in consultation and cooperation with the California Tourism Commission and the statewide marketing organization relative to the manner in which the funds set aside to support and promote the Breeders' Cup are to be expended. 19)Requires that a written report be made to the CHRB detailing the manner in which the set aside funds were utilized to promote and support the Breeders' Cup. 20)Extends the sunset date from January 1, 2011, to January 1, 2014, in existing law relating to a private statewide marketing organization (CMC) to market and promote Thoroughbred and fair horse racing in California, including, but not limited to: SB 1072 Page 5 a) Establishment and maintenance of a Web site 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 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 that an initial amount of 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. State that in subsequent years the initial amount can be lowered/adjusted below 0.05% by CHRB. 5)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. EXISTING LAW : 1)Provides under Article IV, Section 19(b) of the Constitution of the State of California, that the Legislature may provide for the regulation of horse races and horse race meetings and wagering on the results. 2)Provides that CHRB shall regulate the various forms of horse racing authorized in this state. SB 1072 Page 6 3)Provides that "pari-mutuel wagering" is a form of wagering in which bettors either purchase tickets of various denominations, or issue wagering instructions leading to the placement of wagers, on the outcome of one or more horse races. When the outcome of the race or races has been declared official, the association distributes the total wagers comprising each pool, less the amounts retained for purposes specified in this chapter, to winning bettors. 4)Requires racing associations to pay out certain percentages of the total amount wagered and of the portion deducted from the pari-mutuel pool (i.e., the takeout), for state license fees, owner purses, racing association commissions, and breeding incentive programs. The amounts vary depending upon the type of breed bet upon (Thoroughbred, Quarter Horse, harness, etc.), the type of bet made (e.g., conventional or exotic), and whether the wager was made on-track or at a satellite wagering facility. 5)Authorizes a Thoroughbred association or fair, at the joint request of the association or fair and the organization representing the horseman, and subject to approval of CHRB, to deduct from the pari-mutuel pool for any type of wager, an amount of 10% to 25%, inclusive, of the total amount handled for the meeting of the thoroughbred association or fair that accepts the wager. Allows the distribution of funds from the amount deducted to be modified or redirected, subject to the approval of CHRB, as specified. 6)Permits CHRB to set the deduction for any new type of wager introduced after January 1, 2004, in an amount of not less than 10% nor more than 30% at the joint request of an association or fair and the horsemen's organization. 7)Authorizes a Quarter Horse association, subject to approval by the CHRB, and a harness racing association to deduct up to 2% more from the total amount wagered in the pari-mutuel pool for any type of wager, and, specifies how the funds shall be distributed to eligible satellite wagering facilities, owners' purses and racetrack commissions. 8)Provides that unclaimed refunds from horse racing are to be distributed to an organization that is responsible for SB 1072 Page 7 negotiating business agreements on behalf of horsemen, to be held in trust for the purpose of negotiating an agreement with a jockey's organization to provide health and welfare benefits to California licensed jockeys. 9)Authorizes racing associations, fairs, and the Thoroughbred Owners of California (TOC) to form a private statewide marketing organization to market and promote thoroughbred and fair horse racing. 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. The CMC is required to submit an annual marketing and promotion plan to CHRB. These provisions sunset as of January 1, 2011. 10)Provides for the California Travel & Tourism Commission (CTTC). The CTTC is a not-for-profit, 501(C)(6) corporation formed in 1998 to work jointly with the State of California's Division of Tourism to implement the annual Marketing Plan, which promotes California as a travel destination. While these two partners (CTTC and Division of Tourism) are separate legal entities, they are commonly referred to jointly as California Tourism. 11)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. 12)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 : Unknown COMMENTS : Takeout : The "takeout" is the amount deducted from wagers SB 1072 Page 8 before winnings are paid out to bettors. The state, racetracks, breeders, and horsemen through purses, receive a distribution from the takeout. Currently, California's takeout rate on Thoroughbred races is 15.43% for win, place, and show wagers, and 20.68% for other types of wagers (i.e., Exacta, Trifecta, and Pick-6). Over the last couple of years, there has been a movement within the racing industry in other states to have greater flexibility to either lower or increase the takeout. For instance, Keeneland Racetrack in Kentucky and Saratoga in New York lowered their takeout structure while the Maryland Jockey Club increased their pari-mutuel takeout. The various racing jurisdictions experienced varied results after altering the takeout. Many within the racing industry have a view that moderating takeout rates on specific pools might stimulate handle as well as overall revenue for purses. Today's racing customer is not just a local resident who comes to a California racetrack but a patron sitting in a simulcast facility in another state with a wide choice of tracks to wager on. Ultimately, racing's patrons drive the pari-mutuel market and their response to an increased or decreased takeout on any type of wager will determine the rate of takeout. Many within the racing industry have a view that moderating takeout rates on specific pools might stimulate handle as well as overall revenue for purses. AB 1308 (Torrico), Chapter 410, Statutes of 2007, gave a racing association and the owners' organization flexibility, subject to CHRB approval, to set takeout rates at an amount of not less than 10% nor more than 25% from the pari-mutuel pool for any type of wager. AB 1308 provided the horse racing industry with greater flexibility to make adjustments to the takeout. This measure would expand on the concept contained in AB 1308 by directing the increased takeout (2% - 3%) directly to purses which benefits owners, trainers, and jockeys. This measure is intended to allow greater flexibility to direct the distribution of funds generated by a takeout increase to an area with the greatest economic benefit for the industry. This measure is also intended to enable the California racing industry to increase its competitiveness by establishing purses more consistent with purses in other major racing states (e.g., New York, Pennsylvania, West Virginia, Delaware, Iowa, Indiana, Louisiana, New Mexico, and Florida) that benefit from the SB 1072 Page 9 operation of slot machines and video lottery terminals, which are prohibited at California racetracks. Even with an increase in the takeout rate, California would still rank among the top twenty lowest takeout structures on specific exotic wagers in the country. Proponents indicate that the increased takeout revenue would be focused on an agreed upon strategy for stabilizing industry operations. SB 1072 would allow the CHRB to postpone and/or revoke the implementation of the takeout increase, as defined, if the board determines that the incremental amount received from out-of-state betting systems is insufficient to achieve the objective. Takeout Rate Comparisons : Currently, California has one of the lowest takeouts on rates on exotic wagering (20.68%) in the nation. Del Mar Thoroughbred Club, Santa Anita Park, Hollywood Park, and Golden Gate Fields rank in the top 10 nationally for offering the lowest takeout rate on exotic wagers. Examples of a higher takeout rate (Thoroughbreds) for an exotic wager (Trifecta) would be Fair Grounds in Louisiana at 25%, Monmouth Park in New Jersey at 25%, Pimilco in Maryland at 25.75%, Belmont Park and Saratoga Park in New York at 26%, and Penn National in Pennsylvania at 31% compared to California at 20.68%. Even with the takeout increase as proposed, California will still be in the middle-tier for its takeout on exotic wagers compared to other racing prominent jurisdictions across the country. Deteriorating Status of the Horse Racing Industry in California : The California horse racing industry's long-term health is threatened by a combination of factors, including competition from racing in other states, other forms of gaming within California, racetrack bankruptcies and the potential for higher return from development than operating revenues. As resources shrink, the industry is experiencing deficits in virtually every one of its revenue sources. Traditional take out, allocation and distribution formulas are no longer able to sustain ongoing operations. As the value of racing operations declines, track ownership is struggling to maximize shareholders' return on the investment and tempted by alternative uses of the property that yield higher returns. Consequently, the racing industry is SB 1072 Page 10 suffering unprecedented instability and capital flight. Tens of thousands of industry jobs are in immediate jeopardy, along with breeding farms and precious open space in urban centers throughout California. Also at risk is a substantial amount of local and state revenue generated both directly and indirectly by the industry. Exchange Wagering: This measure would additionally authorize the CHRB to license entities to operate exchange wagering systems that accept "exchange wagers" from individuals residing either within or outside of this state on horse races run in California or in other states, so long as the process is conducted in compliance with the federal Interstate Horseracing Act. Exchange wagering is defined as a means of pari-mutuel wagering in which two or more persons place identically opposing wagers on a horse race. SB 1072 would require exchange wagering agreements to be entered into by the exchange wagering licensee, the applicable racing association or fair conducting live racing in the state, and the horsemen's organization representing the particular breed currently racing at the meet, and that provides for the contractual terms and conditions specifying the use of the racing signal and the compensation returned to the respective parties to the agreement, audit terms and conditions, and contractual remedies. Exchange wagering on horse racing is currently permitted in England, where it has been reported to have contributed to a double-digit increase in wagering handle as well as helping to appeal to a different segment of the betting public that generally did not gravitate to conventional pari-mutuel wagering opportunities. Similar legislation has been introduced and is moving through the New Jersey State Legislature as well. Wagering on horse races in California is conducted using the "pari-mutuel method" in which bettors are betting against each other, with no other entity having an interest or stake in the outcome of the race. In traditional pari-mutuel wagering, each bettor selects the horse or horses they choose to wager on an outcome (how those individual horses will finish in a race - Win, Place, and Show wagering) or the order of finish for multiple numbers of horses (exotic wagers such as exacta, trifecta, superfecta), and the amount which they desire to wager. The odds on any particular SB 1072 Page 11 horse are determined by the total amount bet on the race by the individual bettors. The bets made are pooled together and the pari-mutuel operator is responsible for paying the winning bets from that pool. In pari-mutuel "exchange wagering" (which involves bettors betting against each other, with no other entity having an interest or stake in the outcome of the race), each bettor again selects a horse, an outcome, and the amount the bettor desires to wager. Another bettor can match that wager, choosing to wager the opposite of the original wager. For example, if bettor "A" thinks a horse will win a race and would like to wager $2 to win on that horse at 1-1 odds, bettor "B" can match the wager for $2 at 1-1 odds if bettor B has the opinion that the horse will not win the race. When wagers are matched, they are pooled together and the pari-mutuel exchange wagering operator is responsible for paying the winning bettors out of the pool (just as is the case in all other forms of pari-mutuel wagering on horse races in California.) Pari-mutuel exchange wagering is limited to win, place and show wagering. The racing industry derives revenue from traditional pari-mutuel wagering from a "takeout" or "commission" that is charged on every wager placed in the pool, and from pari-mutuel exchange wagering from a "commission" that is charged only on a bettor's net winnings on a particular race. In either case, those revenues are shared among the horse owners (purses), the race tracks and the provider of the pari-mutuel wagering service. Promoting the Breeders' Cup: This measure is also intended to encourage the Breeders' Cup to consider locating its series of championship races on a permanent basis in California. The State of California is in competition with the states of Kentucky and New York to be the permanent home of the Breeders' Cup, which is actively looking at a permanent host location as a potential option as part of its ongoing strategic planning initiative. The Breeders' Cup Championship series of races were held in California in 2008 and 2009 and generated significant revenue and tourism for the State. It is a well known fact that the California horse racing industry is in distress and has lost favor with the public, primarily due to competition with other forms of gambling and declining popularity of its own product. Yet the horse racing SB 1072 Page 12 industry in this state remains an important segment of the economy, generating by some estimates almost 50,000 jobs. It is the author's belief that locating the Breeders' Cup on a permanent basis in California would generate $60 million in economic output and create over 500 direct and indirect jobs, according to the Los Angeles Economic Development Corporation's estimate in relation to the 2009 Breeders' Cup that was held at Santa Anita racetrack. To that end, this measure would stipulate that the monies that would have otherwise been distributed to a purse account from the increased takeout on Breeders' Cup day(s) shall be available for the purpose of promoting and sponsoring the Breeders' Cup. Arguments in Support: Proponents contend that SB 1072 is about self-reliance, re-investing in California for growth, and protecting jobs for the future. Proponents claim this measure would potentially increase purses by $25 million or more annually thereby placing California's purse structure on a competitive basis with other states. California has historically been a leader in thoroughbred breeding, training, and racing. In recent years, out of state racing circuits have increasingly supplemented their purses with funds generated from alternate forms of gaming. As a result, out-of-state owners are not bringing their horses to California and local horses - along with associated breeding, training and other support services - are leaving the state in order to compete for higher purses offered elsewhere. Furthermore, proponents believe there are adequate safeguards (checks and balances) in this measure to ensure that implementation of "exchange wagering" will benefit California's horse racing industry. Proponents note that exchange wagering is very popular in Great Britain where promoters claim it has attracted a younger audience for wagering on horse races. It is hoped that exchange wagering will attract a new clientele to California horse racing and lead to increased wagering that will benefit all segments of the industry. Proponents further note that language in the bill provides safeguards to the industry by explicitly stating that the applicable racetracks and horsemen must agree to the business model before exchange wagering can occur in California. The CHRB states, this bill will help stabilize the California horse racing industry by providing incentives for the Breeders' SB 1072 Page 13 Cup to come to California, increasing purses, and expanding wagering opportunities. The CHRB also supports the passage of this bill because it will conform to the principles set forth in the Horse Racing Law requiring the CHRB to assure protection of the public, encourage agriculture and the breeding of horses in the state, support the network of California fairs, provide for maximum expansion of horse racing opportunities in the public interest, and provide uniformity of regulation for each type of horse racing. Arguments in Opposition : Opponents are generally supportive of the provisions in this measure pertaining to the increase in the takeout on specified wagers as well as the provisions intended to improve California's ability to attract the Breeders' Cup World Championships however opponents have expressed concern with the provisions authorizing "exchange wagering." Opponents state that "exchange wagering actually allows bettors using the Internet to place bets that a horse will lose, rather than win. It is not currently authorized anywhere in the United States and is considered extremely controversial in the few foreign countries (England and Australia) where it is permitted and has been linked to well publicized race-fixing incidents. Opponents state that exchange wagering is a dangerous proposal that threatens the very integrity of horse racing in our state which is a multi-billion dollar industry, providing tens of thousands of jobs. This also has the potential of actually reducing on-track and off-track wagering activity in California and could negatively impact jobs in the future." Opponents believe that exchange wagering is a major policy change in horse racing law that warrants major study and discussion prior to adoption by the Legislature. Opponents further state, that even though there are amendments which specify that the racing association and horsemen must give their consent on meet-by-meet basis, this is not an adequate safeguard. Under the Interstate Horseracing Act of 1978, which contains the same consent language in this bill, situations have existed where horsemen have been financially shortchanged. Marketing horse racing in California : SB 27 (Maddy), Chapter 335, Statutes of 1998, creates a private statewide marketing organization for Thoroughbred and fair racing that is funded by SB 1072 Page 14 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. 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 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. SB 1072 Page 15 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 relating to CMC and CHRIMS : According to the author, "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 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 SB 1072 Page 16 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 : SB 517 (Florez), Chapter 636, Statutes of 2009, allows a Thoroughbred association or fair, subject to CHRB, to alter the amount deducted from horse racing wagering. Allows the distribution of funds from the amount deducted to be modified or redirected, subject to the approval of CHRB. SB 766 (Negrete McLeod), Chapter 616, Statutes of 2009, allows uncommitted surplus funds in the CMC 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 1308 (Torrico), Chapter 410, Statutes of 2007, authorizes a Thoroughbred association or fair and the horsemen's organization, subject to approval by CHRB, to deduct an amount of not less than 10% nor more than 25% from the pari-mutuel pool for any type of wager. AB 1736 (Governmental Organization Committee), Chapter 444, Statutes of 2007, extends "sunset" provisions in current law relating to the marketing of the California Horse Racing Industry. SB 103 (Maddy), Chapter 10, Statutes of 1998, requires any association, including fairs, that conducts thoroughbred racing to pay to the owners' organization contracting with the association an additional percentage for a national marketing program, as specified, to promote thoroughbred racing unless the owners' organization chooses not to contribute to the program. The bill sunsets January 1, 2004. SB 1072 Page 17 SB 27 (Maddy), Chapter 335, Statutes of 1998, among its provision, creates a private statewide marketing organization for thoroughbred and fair racing that is funded by .4% of the instate 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. 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: 0006847