BILL ANALYSIS                                                                                                                                                                                                    



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          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  








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            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  








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            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  








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            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:









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             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.








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          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  








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            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  








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          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  








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          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  








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          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  








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          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  








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          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'  








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          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  








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          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. 









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          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  








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                                                                  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
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          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